323. Telegram From the Embassy in Japan to the Department of State 1

Conto 48/11325. Pass Treasury. Subj: Connally Visit:2 East Asia: Suharto.

Participants: H.E. General Suharto, President of the Republic of Indonesia; H.E. Ali Wardhana, Minister of Finance; Lt. General Alamsjah, State Secretary; General Sutikno, Presidential Secretary; General Sudarmono, Secretary to the Cabinet; Mr. Widodo, Interpreter; Secretary of the Treasury, John B. Connally; Ambassador Francis J. Galbraith, Nov 5, 1971, Istana Negara, Djakarta, Indonesia.
Following is the text of the memorandum of conversation of the meeting between Secretary Connally and President Suharto drafted by Ambassador Galbraith and approved by the Secretary’s party.
The Secretary conveyed President Nixon’s warm regards to Suharto and expressed his own pleasure at being able to visit Indonesia.
Suharto began by describing, in familiar terms, Indonesia’s economic development plans. He said these were modest in the first five years, covering merely the provision of the basic necessities of food, clothing and housing (the latter in the form of materials only). In the second five year plan some processing of the raw materials which constitute Indonesia’s main exports would hopefully begin, establishing an industrial capacity. In the third five year plan Indonesia would start to produce its basic industrial requirements. Suharto mentioned the development of oil, minerals and timber which would provide additional foreign exchange.
Suharto said that Indonesia manufactured about 80 percent of its requirements in textiles but produced very little of the raw materials required. Indonesia did not seem to be particularly favorable for cotton production and most of its cotton therefore, thus far, had to be supplied from abroad.
Suharto emphasized that Indonesia’s economic development depended mainly on its own efforts but, particularly in the present transition period, it also depended importantly on foreign aid. And in the provision of foreign aid, the position of the U.S. was key to the provision of foreign aid by others. He expressed some concern about the recent Senate actions;3 about the upcoming IGGI meeting where the U.S. pledge was of great importance;4 about the announced 10 percent cut in foreign aid; about the replenishment of IDA funds; and about Cambodian aid. Suharto stressed the importance of aid to Cambodia, a country which was not only threatened by subversion along with its neighbors, but by the presence of foreign troops. The defense of Cambodia was of major importance to the defense of Cambodia’s neighbors. Indonesia was weak and could do little to help Cambodia but it [Page 701]was trying to do what it could to increase Cambodia’s sense and capacity for national resistance.
Suharto suggested that the Secretary might wish to comment on both the short and long term outlook for U.S. economic and military assistance in the region.
The Secretary began by describing the basic reasons for the recent Senate action on the aid bill. He said this was not a case of sudden pique because of the vote in the UN on Taiwan, although that may have been the immediate cause for the particular timing. The underlying cause was the mood of the country and the conviction of the American people that the U.S. had too long been bearing all the burdens of foreign assistance and common defense to the neglect of its own national interests, while other countries, able to help, were not doing so to the extent of their capacities and were, moreover, taking unfair advantage of the U.S. in trade.
The Secretary said that President Nixon’s announcement of a 10 percent cut in foreign aid had been the most popular thing this administration had done. 83 percent of the people had expressed approval and only 6 percent had disapproved. The economic measures announced on August 15 had also met with strong public approval. This did not mean that the American people were returning to isolationism or would fail to share their wealth or to show compassion for the needs of others. But the administration had won public approval for its measures demonstrating that it was doing something about the U.S. balance of payments situation and about the lack of fairness which had grown into the currency and other financial and trade relationships between the U.S. and, especially, the industrialized countries. The Secretary said that in his view the Senate action was, as is often true, 60–75 days behind the mood of public opinion in the United States. That public opinion had already shifted, as a result of the administration’s action, in favor of the continuation of foreign aid, in the Secretary’s opinion. The Senate would be realizing this and acting accordingly.
The Secretary said he did not know what form the legislation would take but he was personally confident the Senate would act to continue aid—both military and economic. It was in the U.S. interest that it do so.
The Secretary stressed the common interests of Indonesia and the U.S. in Indonesia’s development. Indonesia produced raw and semi-processed materials for which the U.S. had an insatiable appetite. On the other hand, Indonesia’s population of 120 million provided a potential market of great interest to the U.S. We wanted a greater not a lesser relationship with Indonesia. It would make no sense for the U.S. to abandon Indonesia at this point; on the contrary it made good sense for the U.S. to expand Indonesia’s economic development and help assure its stability.
The Secretary also stressed the intentions of the Nixon administration, and in his opinion of the U.S., to remain in Southeast Asia in a military, economic, financial and cultural sense. The U.S. was withdrawing its troops from Vietnam and it was the U.S. policy to avoid involvement in further military action in Southeast Asia. But the U.S. would continue to exert an influence and to do its part in further strengthening the ability of the countries in Southeast Asia to defend themselves and to maintain their independence and develop themselves economically. Indeed it was the success of the efforts thus far of the counties of Southeast Asia in strengthening their own capacities and the success of U.S. programs in helping them do this that had made it possible for President Nixon to go to Peking and Moscow with the objective of reducing world tensions and misunderstandings that might lead to confrontation. This was also in the common interest of the free world.
The Secretary affirmed his strong personal belief that the U.S. would continue to help Indonesia and that it would make the pledge, as it had in the past, in the meeting of the IGGI December next. The Secretary stressed that he could not, of course, guarantee this but he was personally confident that it would take place.
With regard to the ten percent cut, which as he had already mentioned had served to strengthen the hand of the administration in continuing foreign aid as a principal policy tool, the Secretary said there was no requirement that it be leveled across the board and no certainty that it would affect the Indonesian program at all. He expressed the opinion that whatever aid monies the U.S. had would go first to those that supported the U.S. In this connection, the Secretary called attention to the recent vote in the UN on Taiwan, noting that Indonesia had supported the U.S. The Secretary told Suharto that he wanted to convey the special thanks of President Nixon for the support Indonesia had given the U.S. on the Taiwan issue. The Secretary said, “We lost, but our position was right.”
The Secretary also noted the fact that the replenishment bill for IDA funds had passed in the Senate and was now under consideration in the House. He thought that the outlook for this legislation was good.
With regard to Cambodia, the Secretary said the administration had every intention of continuing its assistance to Cambodia.
Comment: There was visible evidence in the faces of President Suharto and of those who sat in the meeting with him (Minister of Finance Wardhana, General Alamsjah, General Sudarmono, General Sutikno and others of the President’s staff) of their pleasure at the forthright way the Secretary had spoken on Indonesia’s favorable position in the eyes of the U.S. (the Secretary said that Indonesia’s accomplishments [Page 703]in stabilization and economic development had been little short of phenomenal.) Following the foregoing, President Suharto and Secretary Connally withdrew for a separate and private conversation of about twenty minutes duration.5
  1. Source: National Archives, RG 59, Central Files 1970–73, POL 7 US/Connally.
  2. Connally traveled to East Asia in November on behalf of President Nixon.
  3. The Senate rejected the House-passed foreign aid bill (HR 9910) on October 29, thus failing to authorize appropriations for both military and economic aid in fiscal years 1972 and 1973. The defeat of the bill constituted the first outright rejection of foreign aid legislation in the 24-year history of the program. (Congress and the Nation, Vol. III, 1969–1972, pp. 876–877) Telegram 202840 to Djakarta, November 5, reported Green’s efforts to reassure Indonesian Ambassador Sjarif Thajeb that “there would be a continuing aid program though likely at somewhat reduced levels.” (National Archives, RG 59, Central Files 1970–73, AID (US) INDON)
  4. In telegram 180503 to USUN, October 1, the Department reported Indonesian Foreign Minister Malik’s concern, expressed to Rogers at the UN General Assembly, that the United States might not follow its “recent practice by leading off with its pledge at December IGGI meeting. This would have an inhibiting effect on other potential donors.” Rogers responded that “he could not comment on the matter now since those aspects of the economic policy were still under study.” (Ibid., POL 7 INDON)
  5. No record of this private meeting was found. Records of Connally’s meetings with the Indonesian economic advisory team, telegram 11329 from Tokyo, November 12, and with Sir Sultan Hamengku Buwono IX, Indonesian Minister of State for Economic, Financial, and Industrial Affairs, telegram 11330 from Tokyo, November 12, as well as other reports concerning the Treasury Secretary’s visit, are ibid., POL 7 US/Connally.