277. Paper Prepared in the Department of State1


I. Indonesia’s Importance to the U.S.

The Indonesian leadership during the first half of this decade combined hyper-nationalism and Marxist-Leninist revolutionary doctrine in a formula for “nation-building” which in fact sought to destroy Western influence and deny the concept of peaceful change in Southeast Asia. In contrast, the current Indonesian government seeks to obtain economic and social development through the pursuit of pragmatic, non-doctrinaire policies in close cooperation with its neighbors and with multilateral assistance from international agencies and Free World governments.

Success for the new Indonesian approach would dramatically improve the economic and security environment in Southeast Asia, of which roughly half the population and area is Indonesian. It could also set a constructive example for other less developed nations. Conversely, an unhealthy Indonesia would pose serious problems for Asia and Australia and endanger U.S. policy objectives in the Pacific.

II. The Indonesian Setting for U.S. Policy

Indonesia has many of the key ingredients for successful development. Separation from mainland conflicts and an ability to handle all foreseeable internal threats permit concentration on economic stabilization and development. Only partially explored but apparently extensive mineral wealth promises future increase in income, and new rice technology may bring self-sufficiency in the nation’s basic food crop. Moreover, the performance of the Indonesian government to date has earned the increasing support from international agencies and Free [Page 600]World governments which is essential for the success of that nation’s development program.

Indonesia’s weaknesses, however, match its assets. Two decades of neglect have left Indonesia’s basic economic infrastructure in disrepair. Roads, railroads, ports, communications and power will require substantial investments to provide an adequate base for economic development.

Problems concerned with human resources loom even larger. A severe shortage of technical skills and managerial expertise limits absorption of economic assistance, and the educational system must be completely reoriented to meet this need. Even more basic impediments to progress are the traditional attitudes and values of Indonesian society, which can deflect foreign efforts to help. These include an emphasis on adaptation to rather than manipulation of the environment, a tendency to avoid rather than solve conflicts and problems, and a paternalistic social organization which places personal relationships above impersonal codes of conduct.

Indonesia aspires to a role in Southeast Asia commensurate with its size and population. With this goal in mind, it hopes to see a gradual lessening of the area’s dependence on major powers. It has fostered good relations with its immediate neighbors and has attempted to build up the Association of Southeast Asian Nations (ASEAN) into the primary vehicle for subregional cooperation. It has scrupulously followed a policy of non-alignment on international issues while pursuing rigidly anti-communist policies at home.

III. Current U.S. Policy Objectives

The absence of immediate security threats or of pressing bilateral issues has permitted United States policy to focus on the long-range goal of assisting in Indonesia’s modernization.

The United States has sought to strengthen Indonesia’s commitment to a pragmatic approach to development. Economic progress attained by such policies will in turn help prevent successful challenges to the regime from internal forces hostile to U.S. interests, promote Indonesian cooperation with the U.S. and other Free World powers, and contribute to the stability and prosperity of the region as a whole. U.S. policy objectives have respected Indonesia’s desire to maintain a balance in bilateral relationships which will preserve its non-aligned status.

IV. Current U.S. Posture

Past experience cautions against certain dangers attending American participation in Indonesian development: (1) too prominent a role can stimulate a fear common to Indonesia’s traditionalist masses that modernization is in fact “Americanization” which threatens Indonesia’s cultural identity and political independence; (2) assistance in certain [Page 601]

To avert these dangers the United States has: (1) adopted a multilateral approach in which the IMF, the IBRD and the Inter-Governmental Group on Indonesia assist in determining and meeting Indonesian aid requirements; (2) emphasized economic assistance, limiting military aid to non-combat materials tied to the development program and avoiding direct efforts to promote social or political changes; (3) encouraged private foreign investment; (4) maintained a “low profile”, restricting the number of American personnel in Indonesia to a bare minimum; and (5) quietly encouraged a regional approach to development through ASEAN, ECAFE and similar organizations.

V. Alternatives in Overall U.S. Approach

The options open to the United States in defining its overall approach to Indonesia tend towards two poles:

Maintaining (or accentuating) the multilateral, “low profile” approach with the short-term goal of keeping Indonesia on a friendly but non-aligned course and with a possible long-term goal of promoting Indonesia as the nucleus for a healthy, independent Southeast Asia.
Leading Indonesia into a close bilateral relationship in which the United States would take a much more direct and immediate role in helping meet economic and social problems endangering present Indonesian stability and in helping prepare Indonesia for a greater security role in the region; this relationship would, of course, involve greater obligations on our part.

The United States approach can be established at many points between these two poles. Movement towards a close bilateral relationship, however, cannot be easily reversed and can build up a momentum of its own.

VI. Policy Alternatives

There is no single issue of such importance that it alone will set the tone for U.S.-Indonesian relations. The United States is instead faced with alternative approaches in several broad sectors which will in combination define our overall posture.

The multilateral, “low profile” approach, for example, would be reinforced by decisions to: (1) restrict our Military Assistance Program to civic action, related transportation needs and professional training; (2) adhere strictly to a multilateral formula in which the level of our [Page 602]economic assistance is not allowed to exceed roughly one-third of that contributed by other nations; and (3) restrict technical assistance to current low levels.

Some of the advantages accruing from such decisions are: (1) Indonesia would be encouraged to focus its efforts on economic development; (2) pressure would be kept on other foreign donors to contribute; and (3) the United States would not incur the many risks arising from a conspicuous role and a large American in-country presence.

Among the disadvantages of this approach are: (1) failure to meet certain military requests could harm our relations with the Armed Forces, which provide the leadership and the political base of the current regime; (2) the multilateral framework gives less leverage for exacting quid pro quos, including self-help measures, and creates delays and uncertainties in meeting Indonesian needs; and (3) a low ceiling on technical assistance would tend to limit efforts to improve Indonesia’s absorptive capacity for foreign assistance.

At the other extreme, a close bilateral association would be promoted by decisions to: (1) assist in the modernization of Indonesia’s Armed Forces; (2) disregard the multilateral approach and match available American resources to Indonesian needs; and (3) provide technical skills wherever needed.

Typical advantages deriving from these decisions are: (1) Indonesia might be willing to share the current defense burden on the Southeast Asian mainland; (2) a greater assurance that its foreign assistance needs would be met would strengthen Indonesian confidence in the economic course we advocate; and (3) Indonesia would be directed more towards American markets for eventual military and civil purchases.

Disadvantages associated with such decisions include: (1) a significant increase in U.S. expenditures; (2) apprehension on the part of Indonesia’s neighbors over its increased military capabilities; (3) the danger that we might replace contributions from other countries or inhibit the growth of Indonesian initiative; and (4) a hostile reaction from Indonesia’s powerful traditionalist forces who could accuse the regime of abandoning Indonesia’s independent course in foreign affairs and permitting “Americanization” of the Indonesian society.

There are, of course, intermediary positions on most of these issues which would provide generally less negative and less positive results than the courses outlined above. Among these are: (1) increasing military assistance in non-combat equipment and training; (2) adjusting U.S. aid levels to meet the gap in Indonesian requirements while adhering to a multilateral framework; and (3) modestly increasing technical assistance.

(In the text of this study policy alternatives are discussed by individual problem areas, which have been grouped together in the discussion [Page 603]above for the purpose of brevity. There are other issues which cannot be grouped with those directly affecting our overall posture towards Indonesia but which will nevertheless require important policy decisions. Among these are: (1) whether to attempt directly to foster political and social progress or to avoid such sensitive and difficult activities; (2) the problem of finding a suitable mix between “program” aid and “project” aid; and (3) finding a means of settling the huge foreign debt inherited from the Sukarno regime which will ensure a continued flow of resources into Indonesian development and protect the interests of donor nations.)

  1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–041, SRG Meeting, Indonesia, Malaysia, Singapore, 12/22/69. Secret. Attached to a December 16 memorandum from Holdridge and Lord to Kissinger that explained that the summary was prepared for the Senior Review Group. A copy of the 29-page response to NSSM–61 is also attached but not printed. Holdridge and Lord stated in their memorandum that, “the President need only address the issues of military assistance and the U.S. role in maintenance of a Singapore base.” They added, “We don’t think that our policy towards these countries [the memorandum concerned Malaysia and Singapore, as well as Indonesia]requires an NSC meeting. However, a package should be forwarded to the President because of his personal interest in Indonesia.” The Department of State paper was included in that package.