|Foreign Relations 1964-1968, Volume XXVI, Indonesia; Malaysia-Singapore; Philippines |
Released by the Office of the Historian
225. Telegram From the Embassy in Indonesia to the Department of State/1/
225. Telegram From the Embassy in Indonesia to the Department of State/1/
Djakarta, October 27, 1966, 1030Z.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, DEF 19 US-INDON. Secret. Repeated to CINCPAC for POLAD.
2007. Subject: Need for Military Assistance Program in Indonesia.
1. Events of past several months clearly indicate that "new political order" in Indonesia will be army planned, army built and army sponsored and that it is army which will remain dominant political force in Indonesia for a long time to come. We are pouching airgram which discusses army plans for the "new Indonesia" in depth./2/ Following is summary of our analysis:
/2/Airgram A-210 from Djakarta, October 29. (Ibid., POL 2 INDON)
A. Army has reached firm conclusion (which we share) that at present it alone possesses the cohesiveness and leadership necessary to establish "new political order" in Indonesia. Army also believes that failure on its part to take initiative would lead to political dissension and direct threat to Indonesia's unity. Army has set itself deadline of slightly less than two years to establish "new order," which elections scheduled to be held by July 1968 will confirm.
B. Army's basic goal during interim period is to establish stable and responsible administration. It will seek to do this by broadening popular participation in government while maintaining strong central control. In short, it will attempt to find middle road between pitfalls of Sukarno's authoritarian regime and freewheeling political party activity of early 1950's. This task, it believes, will require tight hand on reins.
C. Even after "new order" established, army will continue to exercise what it regards as its "historical right" to remain in government arena as separate political force. Army already holds overwhelming majority of key posts in regional administration (in addition to powerful and wholly military pepelrada structure); it is also becoming increasingly evident in second echelons of central government and is moving deeper into key national enterprises.
2. We believe army's assessment of role it must play is valid and that its formula for "new order" is essentially right mixture for Indonesia. In fact, there appears to be no workable alternative short of outright military dictatorship which Suharto hopes to avoid. This means that USG must contemplate working with an army controlled government not only during two year transition period but well into "new order."
3. In addition to its essential function as architect of "new order," military must, for compelling political reasons, be given constructive role in new society. Suharto has repeatedly emphasized in his talks with me that the military must have a strong sense of mission directed towards improving conditions of life in Indonesia.
A. Useful activities must be provided for army personnel in order to help curb corruption and to prevent army personnel from engaging in hooliganism or unhealthy political activity. Constructive military outlets could also mitigate trend towards military moving into all sectors of government and economy.
B. Suharto must also produce some early and clearly visible progress towards improving people's lot in order retain their confidence and ensure his own dominant role over others who would move directly toward military junta. Civic action type projects, aside from ultimate economic impact, can yield immediate psychological profit demonstrating army's concern for public welfare. Army, which has clearest command channels, most equipment, most readily available manpower and one of largest pools of technical expertise, is in best position to undertake projects of this nature.
4. Suharto now lacks the resources, particularly equipment, to fold the military into such constructive operations in meaningful way. Meeting these requirements with Indonesia's own foreign exchange resources would cut into other vital projects and could easily create animosity toward the military for removing funds from civilian sector.
5. US assistance for Suharto's program would allow us to influence and strengthen the hands of those who will be running this country for the next several years and who, in harness with good civilian leaders, are best qualified to do so. In short, this program would give us multiple returns on a relatively small investment.
6. I therefore urge that a modest military assistance program be instituted for Indonesia soonest. Such a program would include:
A. Spare parts, replacements and technical advice for Indonesian military civic action program.
B. Military sales program to enable Indonesian military to buy certain additional items which are compatible with their present role.
C. Selective non-combatant items to help improve morale within army and strengthen position of General Suharto and his colleagues.
D. Training program along lines already envisaged to train key Indonesian officers, especially in civic action field.
226. Memorandum From the Chairman of the Joint Chiefs of Staff (Wheeler) to Secretary of Defense McNamara/1/
Washington, November 1, 1966.
/1/Source: Washington National Records Center, RG 330, OASD/ISA Files: FRC 70 A 6648, 000.1 Indonesia, 1966 (091.3 Indonesia). Confidential.
1. (C) Reference is made to a letter from the Acting Deputy Under Secretary of State for Political Affairs, dated 19 October 1966, to the Secretary of Defense, that recommends a FY 1968 Military Assistance Program (MAP) of $6 million for Indonesia./2/
/2/This letter is attached to a letter from Underhill to Robert A. Feary, CINCPAC's POLAD, October 24. (Ibid., RG 84, Djakarta Embassy Files: FRC 69 A 6507, Def 19 US-Indo)
2. (C) As stated in the reference, there is no direct military requirement for an Indonesian MAP. Nevertheless, it appears prudent to implement a small MAP to support the civic action endeavors of the Indonesian Armed Forces. In this regard, Secretary Thompson has presented a substantial case in support of his proposal.
3. (C) The illustrative program presented by the reference is adequate for its purpose; however, the actual content of the program should be subject to CINCPAC recommendation and review by the Joint Chiefs of Staff. Further, to provide $6 million in the FY 1968 MAP would in all likelihood result in the majority of the material and services being provided in CY 1968 with some items of material not being received until CY 1969. This two- to three-year delay is considered untimely and possibly detrimental to its intended purpose.
4. (C) To provide timely assistance to Indonesia, it would appear that requirements should be funded in FY 1967. It is believed that this can be done within funds that are, or will become, available to the FY 1967 MAP without reduction of individual country programs, provided add-on requirements for Laos are included in the FY 1967 Department of Defense supplemental appropriation. If this can be done, it is recommended that:
a. A $6 million material and services program be provided under the FY 1967 MAP and that, for planning purposes, the FY 1968 MAP dollar guideline for Indonesia be established at $6 million.
b. If necessary, Indonesia be included within the Mundt Amendment in lieu of one of the terminated countries, other than Japan.
Earle G. Wheeler/3/
/3/Printed from a copy that indicates Wheeler signed the original.
227. Telegram From the Department of State to the Embassy in Indonesia/1/
Washington, December 7, 1966.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1964-66, DEF 19-8 US-INDON. Confidential. Drafted by Underhill; cleared in draft by Nuechterlein and by Sherwood F. Fine, Officer-in-Charge of Indonesia, AID; and approved by Berger. Repeated to CINCPAC for POLAD and Algiers for Harriman.
98121. Ref: Djakarta 2565./2/
/2/In telegram 2565 from Djakarta, December 1, Green reported on a meeting with Malik on November 29 in which Malik made a "strong plea for immediate USG assistance to civic mission projects" on behalf of Suharto and the Cabinet. Green suggested that in view of the deteriorating political situation in Java, "major stakes are involved in our response to this request." (Ibid.)
1. There is general agreement here on desirability assisting Indonesian military at earliest feasible date in its civil reconstruction program. We are willing examine not only MAP but entire range U.S. assistance capabilities, and commit available resources where they will meet Indonesian priority needs.
2. As you have pointed out to Malik and military, our readily available resources are limited, and even if committed to utmost, they could not satisfy unrealistic expectations still apparently held in some quarters, nor have significant impact on vast complex of politico-social problems in East and Central Java. For psychological and political reasons, it is important that military leaders have some tangible evidence of our backing, but it seems realistic accept from outset that we cannot provide more than token support to an effort which must be essentially Indonesian in conception and execution.
3. Necessity for small program also meets Malik's request we keep program on modest scale and examine carefully what military is already doing in civic mission field. He appears reflect growing civilian concern that any substantial direct foreign assistance to dominant clientele group could strengthen forces tending separate military from civilian society.
4. Accepting necessity and desirability for small program, basic practical problem is relating feasible U.S. contributions to Indonesian needs. As it has emerged from your conversation with Malik and the Generals reported reftel, and in previous talks with ARMA and Chief DLG, Army's civic action program is still in blueprint stage with substantial support needs expressed in general terms unrelated to specific missions and projects. All conversations have carried unspoken but clear indication that implementation is awaiting commitment U.S. resources and U.S. planning assistance and feasibility studies. Difficult to reconcile this apparent inactivity with urgency reflected in Hartono statements. Indo Army has had 16 years experience and number of conspicuous successes in independently conceived and executed civic action projects, and needs little guidance in this field. Such projects are inherently labor intensive, and despite recognized shortages, there should be sufficient hand tools and other items of equipment available to get projects underway without outside assistance. Even modest beginning should bring desired political and psychological impact. Indonesian military has in past shown impressive level professional competence in coping with logistic support of two major military campaigns in most distant islands of archipelago, and we believe it should be able to begin program of road repair, irrigation works re- habilitation and other basic civil jobs on central island of Java that would not require extensive use of motorized equipment. Believe we should continue to underline strongly your statement (para 4 reftel) that Army should press ahead with needed programs regardless of outside help.
5. Experience in U.S. supported 1963-64 civic action program provides clear evidence that U.S. assistance was most effective when it backstopped and supported established individual projects already in progress. Participation in planning, or giving feasibility advice on plans still on drawing board, carries with it implied commitment, and when we become involved in either process, Indonesians tended to shift to us both the burden of providing resources as well as the responsibility for success or failure. Necessity of small program as well as desirability require Army move ahead on its own, indicate clearly that our initial assistance should be restricted to support of projects already underway, and that we should not become involved in planning or feasibility studies.
6. On basis foregoing you may reply to Malik along following lines:
a. We wish to do what we can to help military in its civic mission.
b. The resources that we can make available are limited and we believe they could best be utilized in support of projects already underway.
c. We would like to examine such projects, and in consultation with Indonesian military, attempt to relate priority needs with our capabilities to help. At an appropriate time, we would be prepared to send several military engineering specialists to survey equipment.
7. FYI--Before detailing TDY personnel, believe you should proceed soonest with plans for Chief DLG and AAO to visit on-going projects (Djakarta 2472)./3/ Based on their reports, we would plan send team composed of military engineering officer and non-coms to survey equipment, and such A.I.D. specialists (e.g. in Title II) as AAO considers appropriate. Other supporting evidence of Army civil activity would also be welcome, and all mission travelers should be alert to this interest.
/3/Dated November 25. (Ibid.)
228. National Intelligence Estimate/1/
Washington, February 15, 1967.
/1/Source: Department of State, INR/EAP Files: Lot 90 D 165, NIE 55-67. Secret; Controlled Dissem. The Central Intelligence Agency and the intelligence organizations of the Departments of State and Defense, and the NSA prepared this estimate, which was concurred with by all members of the U.S. Intelligence Board except the representatives of the AEC and FBI who abstained because the topic was outside their jurisdiction. In a memorandum to Rusk summarizing this estimate, Hughes indicated that there was wide agreement among the USIB members with its conclusions. (Memorandum from Hughes to Rusk, February 24; ibid.)
PROSPECTS FOR INDONESIA
To assess current trends in Indonesia and to estimate prospects over the next year or so.
A. Suharto and his anti-Communist military and civilian coalition are clearly in charge in Indonesia and are likely to remain so, at least for the next year or two. Although Sukarno's influence is declining steadily, he is still a major preoccupation of the regime, an obstruction in its daily work, and a source of political embarrassment. During 1967, however, he will probably be stripped of all effective political power, retaining at most the ability to offer occasional encouragement to frustrated leftist elements./2/
/2/In Intelligence Memorandum No. 0794/67, February 17, "Prospects for Violence in Indonesia," the CIA's Office of Current Intelligence, Office of National Estimates, and the Clandestine Services concluded that, "Isolated armed incidents by pro-Sukarno elements are likely if Sukarno refused to resign and was deposed by congressional action." The principal areas for opposition would be East Java where Sukarno still had support among the marines, police, and the general population, and possibly Central Java, North Sumatra and even Djakarta. Long-term dissidence was unlikely. (Johnson Library, National Security File, Country File, Indonesia, Vol. VII, Memos, 5/66-6/67) Ropa asked that the CIA send this assessment to the White House and he passed it to Rostow under cover of a February 17 memorandum. (Ibid.)
B. With the Communist Party already destroyed as an effective force in today's politics, the neutralization of Sukarno would greatly improve the outlook for political stability in Indonesia. Nevertheless, there will still be major problems of adjustment. Civilian politicians will be in conflict with military leaders reluctant to share power. And the mass parties of the Sukarno era will have to compete for influence with resurgent and reformist political elements closer to Suharto's "new order."
C. The Indonesian economy cannot quickly recover from a decade and more of ruinous mismanagement, but it is probable that economic conditions will at least cease to deteriorate and begin to improve within a year or two. If foreign assistance continues at high levels and government administration becomes more effective, an economic upturn could probably be sustained until 1970. The need for foreign economic assistance--which can only be expected to come from the US, Japan, and Western Europe--virtually assures continuation of Indonesia's new Western-leaning foreign policies.
[Here follows the Discussion section of the estimate.]
229. Memorandum of Conversation/1/
Washington, February 17, 1967, 2 p.m.
/1/Source: Johnson Library, National Security File, Country File, Indonesia, Vol. VII, Memos, 5/66-6/67, [2 of 2]. No classification marking. The meeting was held in Humphrey's office in the U.S. Capitol building. Humphrey sent this memorandum to Rostow under cover of an attached March 9 memorandum. Humphrey asked, "for reasons that will be apparent in the memo," that the record of his discussion not be circulated. Humphrey hoped that Green would be able to meet with the President on his next trip to Washington.
Ambassador Green reviewed the situation in Indonesia that led up to the revolution of 1965. He pointed out that American experts like Guy Pauker (Rand Corporation) had concluded by 1965 that Indonesia was definitely going Communist. Sukarno had announced in 1965 that Indonesia was going to form a Djakarta-Peking Axis. The Indonesian Communist Party (the PKI) launched its coup at the time it did in 1965 because although it was steadily increasing its influence in Indonesia, it feared the death of Sukarno, who was long rumored to be seriously ill. At that time it was estimated that the PKI had 3 million members and approximately 25 million supporters in various front groups throughout Indonesia.
In the coup the PKI aimed to eliminate seven top generals in the army. They ultimately succeeded in killing five of these, but two--the most important, Nasution and Suharto--escaped. The Communists had by 1965 penetrated the Air Force, Navy and some of the police. The Marines were also sympathetic. The Army was the staunch bulwark against the PKI, although certain parts of the Army had also been penetrated. Given this pattern of infiltration, the situation in Indonesia in 1965 was fragile and precarious. Had there been an external threat to Indonesia from the North, and had the United States not taken a strong position in Southeast Asia by that time, the PKI would have been strengthened. The generals who ultimately triumphed would have been gravely weakened in the estimate of Ambassador Green.
The reaction to the coup launched by the PKI was indeed a bloody one and most reliable estimates indicate that 300 to 400 thousand Indonesians were slain. The manner in which the generals of the Army were slain inflamed the peasants and the people. A special corps of PKI women had been trained to slash the generals to death--which they did. When photographs of the slain generals were circulated around the Island, the reaction against the local Communists was intense. They were already unpopular because of their harassment of religious groups such as the Moslems, and because they had taken over much of the power in local areas. The result was a blood bath in which many of the Communists were killed.
By November and December of 1965 the Army consolidated its position. But it decided to let Sukarno stay around. Sukarno made a counter-bid for power in January, February and March of 1966. It was at that time that the students went into the streets to demonstrate against Sukarno. During this period of demonstration the United States Embassy was attacked on March 8, 1966. At this time Suharto made a very shrewd move in the opinion of Ambassador Green. He informed Sukarno in March that his life was in danger because the students were marching on the Palace. He, Suharto, could not protect Sukarno's life unless Suharto was given full powers. Only then did Suharto get full powers. But he nevertheless did not remove Sukarno at that time in part because he feared a reaction in Java where Sukarno had a strong following. Also Sukarno provided a common enemy which welded all groups together.
By early 1967, however, Suharto and his colleagues had decided that it was time to get rid of Sukarno. They will try to remove him soon, but hopefully he will resign voluntarily before the meeting of the top leadership now scheduled for March 8th. Sukarno will fight back and of course will allege that many of those against him are implicated in a CIA plot. That is his standard routine. In the view of Ambassador Green, Sukarno is not likely to survive this time.
Viewing the members of the present Government, Ambassador Green commented that the Sultan of Djakarta is a nice man, but not too powerful. Suharto is astute and clever and works hard at governing Indonesia. Malik is one of the cleverest men he had ever met. He is particularly clever in tactics. Malik single-handedly brought an end to the confrontation on Malaysia and brought Indonesia back into the United Nations. However, he has no independent political base. He has a good relationship with Suharto, but he is nevertheless fearful of too great a military influence in the Government. This is a problem for him as Foreign Minister because too many of the Ambassadorships are going to military men, which weakened his own position in the Foreign Ministry.
There is an important problem of keeping the military happy in Indonesia. Because assistance was discontinued by most external powers, the Indonesian Navy has had to mothball the fleet. Many other installations have been cut back. The consequence is that there are many military men available who have to get jobs. Suharto knows that he has to modify the military set-up, but he doesn't want the military to absorb too much power itself. He is purging the Air Force slowly and is moving gradually to make certain of the loyalty of the Army. He wants to have an absolutely sure base in the Army first before moving to "purify" the rest of the armed forces. He also realizes the need at some point to form a political party, but he wants to develop a stable base in the Army first.
Suharto is intent on setting up civic action programs to divert the energies of the military in solving the problems of his own country. On May 26th Suharto asked Ambassador Green for assistance to do a long list of things in the civic action field. Ambassador Green suggested that foreign enterprise could do many of the things that Suharto suggested his own military do. He stated that some military assistance however is desirable, perhaps $6 million plus another $2 million for spare parts. In his view, as he reported it to Suharto, the Indonesian military should concentrate on the food problem. The military have grandiose ideas of what is needed. Nevertheless, although we cannot respond to their full request, we can give some assistance. In dispensing aid, timing is extremely important. He sensed that the Indonesian military are becoming impatient because we have not responded to their recent requests.
Responding to the Vice President's question, Ambassador Green said he talked to President Johnson about Indonesia in September of 1966. The Vice President described his contacts with the Indonesians going back to 1949. Malik was one of those who had visited the United States at that time. The Vice President had managed to keep in touch with Malik and some of his friends over a long period of time. The Vice President had talked to Prime Minister Sato of Japan about Indonesia when he visited Japan in January of 1966. He stated that he hoped Japan could be ready to help if needed, because the United States would not be able to move in there for political reasons. The Vice President said he had had further discussions about Indonesia when he went to Thailand in February of 1966, where members of his party had contacts with representatives of Suharto.
The Vice President said he understood perfectly well why a man like Suharto must keep the military happy. We must understand this fact and he was sure that the President was sensitive to it. He knew that the President had a very high regard for Ambassador Green and great admiration for the role he has played there in the last year and a half. He noted the great timidity in the United States Government on the question of Indonesia and a lack of interest in some circles. There had been a National Security Council meeting in the summer of 1966 on this subject, the meeting called chiefly at the request of Walt Rostow and the Vice President.
The Vice President said that he readily agreed with the Ambassador that the timing of our action is important just as the timing of inaction is important. He appreciates the "low posture" which the Ambassador and the United States Mission has taken in Djakarta in the past year and a half. If the Ambassador believes that further action is now needed, he must really press his case here in Washington. In the Vice President's view, he should make the case directly to the President. The President is very much interested in Indonesia, both for itself and also as a dividend of the stand that the United States is taking in Vietnam.
The Ambassador pointed out that United States influence is apparent in Indonesia and that our AID programs have borne fruit. For example, General Suharto regularly consults five economists in preparing for major economic decisions. All of these economists were trained in United States universities, three at Berkeley, one at Harvard and one at MIT. Similarly, our military training program has proved to be a great success and many of the people who both launched the coup and are in key positions of power today, were trained in the United States.
Ambassador Green stated that Indonesia must first deal with the resolution of its debt problem. Then we can focus on the foreign aid problem. There is a question of how much Indonesia can absorb at this time.
The Vice President agreed that the economic and social development program needs careful appraisal. We must not rush into a bilateral program before we have explored the possibilities of channelling aid multilaterally, before the consortium of nations has made its appraisal. Nevertheless, we must not lose sight of the fact that Suharto must take care of the Army. We must have a civic action program to put them to work and keep them busy. For this modest amount of goods and money is needed, and can do a lot of good in helping Suharto at this time.
Ambassador Green stated that Secretary McNamara had resisted this previously but was now prepared to change his mind. McNamara had sent out a team which would be bringing back an evaluation shortly.
The Vice President said he hoped the Pentagon would do better in regard to Indonesia than it did on Laos. It had taken an unconscionable amount of time to get aid in Laos and he hoped that this would not be true of Indonesia. Ambassador Green noted that nothing had been delivered yet in the civic action field although he expected something would be. As of this date, they are waiting for the report of the Pentagon team. He added that in his view the State Department had never fully understood the need for civic action assistance, such as quartermasters' supplies, and spare parts.
Discussing the AID program there the Ambassador stated that what is most important is not only how much we give but the way we give it. When we have a large AID staff and a large USIA staff this results in a huge presence which breathes down the neck of Indonesians. They feel they are being treated like a client. The Ambassador's policy has been to reduce the United States presence generally, not only with AID but with USIA and other agencies. He advocates having no libraries under USIA auspices. Given the situation there and the staff presence that would be necessary, this would be counter-productive. He would rather spend the money on the books and place them in Indonesian libraries leaving them with the responsibility.
In general, he would place more responsibility on the Indonesian Government. We have ways of checking up on them in the end. He said that Administrator Bill Gaud and his Deputy-designate Rud Poats agree. But the lower echelons of AID have other habits acquired over a long period of time. The question of style, of how one does this is so important. It is not just a question of policy. He believes that the success that the United States has had in Indonesia is due to the fact that we cut down on our profile. Also there were very few if any statements here by United States public officials about Indonesia. During the past year and a half he has tried to have his Embassy be just one more Embassy in Djakarta.
We are now starting again with a new slate. In his view we should have some aid but we want to begin right. He has four AID officials now and he hoped to go up to not more than 13. He definitely wants to hold it down.
The Vice President stated that this certainly coincided with his approach and that of the President of trying to emphasize a multilateral approach to foreign aid, trying to get others to help share the burden. Ambassador Green concurred, stating that our overwhelming presence in countries like Indonesia invariably creates resentment. Another reason why they have been successful in the past year and a half is because Indonesia has been spared the usual influx of visitors from the United States and other countries.
Ambassador Green stated that he was aware of the desire in February of 1966 of some officials in Washington (the Vice President included himself in this) to begin assistance to Indonesia then. The Ambassador stated that he was inclined to favor it at this time, but he was counseled by Malik "not yet." He checked it out and found that Nasution and Suharto concurred in that recommendation at that time. In May Malik informed him that the time was right and that they wanted aid. Ambassador Green reported that they were able to put together an emergency package and they got it out there on time. It made a terrific impact because it was on time.
The Vice President repeated that he hoped that the Ambassador would have a chance to talk to the President before he departed for Djakarta. He said he would contact Walt Rostow in this regard and if he had an opportunity would talk to the President about it himself.
230. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/
Washington, February 20, 1967.
/1/Source: Johnson Library, National Security File, Country File, Indonesia, Vol. VII, Memos, 5/66-6/67. Confidential.
Agriculture (Secretary Freeman) and AID (Bill Gaud) have asked your approval to pledge up to $40 million of additional PL-480 and up to $20 million of additional Support Assistance for Indonesia in 1967./2/ Their request has been endorsed by the Budget Bureau (Schultze) and Treasury (Joe Barr)./3/
/2/In a joint memorandum of February 16. (Ibid.)
/3/In a memorandum of February 18. (Ibid.)
This proposal is based on an estimate that Indonesia will require $210-$240 million in total aid this year if it is to carry out its stabilization program. Our portion of the total would be no more than one-third, up to a maximum of $85 million.
We have already committed $36 million in AID and PL-480 funds this year. The remaining $49 million would be a mix: $30-$40 million in PL-480 and $10-$20 million in support assistance. The amount, commodity composition and terms will be worked out in the interagency review.
AID funds will be limited to procurement in the United States to minimize any adverse effect on our balance of payments.
As you know, the new Indonesian leadership has been fighting an uphill battle to undo the damage of Sukarno's years of misrule. They have worked closely with the IMF in laying out their plans for the future. Our specialists consider those plans to be realistic.
But they do need help, from us and from others.
The potential aid donors will be meeting in Amsterdam on February 23-24. This is a follow-up to the debt re-scheduling conference in Paris last December.
Our delegation wants authority from you to discuss this with the Indonesians and others on the basis of a pledge from us of up to one-third of the total requirement, i.e. no more than $85 million (of which $36 million has already been committed).
The Amsterdam meeting is not, strictly speaking, a pledging session. But our State and AID officials believe that this vital aid program will not move as it should if we can make no pledges or talk in terms of what we can be expected to provide. They consider it most important that they have the authority as outlined above.
I asked for a reading of sentiment on the Hill. Bill Bundy discussed the Indonesian problem on January 18 with the Foreign Affairs Committee. He reports that the members viewed with understanding our efforts to help Indonesia and to take part in lending support to the new leadership. Ambassador Green had a 90-minute session with the Foreign Relations Committee on January 30. He said the members welcomed the multilateral approach in meeting Indonesia's needs and endorsed our participation in a program to afford Indonesia critically needed assistance. In separate sessions, Senator Mansfield, Congressman Morgan and Congressman Zablocki voiced full agreement to our giving timely assistance to Indonesia.
I believe the requested authority should be granted on the basis of the Agriculture-AID memorandum.
/4/Johnson wrote the following note: "W[alt]--Check out House & Sen Leadership. Also For Rel Com & For Affairs. Top 3 on each side and report reactions. L." In a memorandum to the President, February 23, Jorden reported that Katzenbach and Bundy spoke with Congressional leaders who were all in favor. The leaders were told that the United States was trying to convince Japan and the Europeans each to match the U.S. one-third offer. (Ibid.) Johnson wrote the following note on Jorden's memorandum. "O.K. on assumption Japanese and Europeans go 2/3 to match our 1/3. We will go on that basis. L."
231. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/
Washington, February 21, 1967.
/1/Source: Johnson Library, National Security File, Country File, Indonesia, Vol. VII, Memos, 5/66-6/67. Confidential.
On your instructions,/2/ I had a useful talk with Marshall Green. He underlined the following in discussing Indonesia today:
/2/In a February 20 memorandum Rostow asked the President if he wished to meet with Ambassador Green for "a quick but thorough outline of the problems we now face." Johnson instructed Rostow to "debrief him & give me 1 page memo on high points." (Ibid.)
1. Our efforts in Viet-Nam had a definite and favorable impact on developments in Indonesia. General Suharto could not have reacted as he did to the Sukarno-Communist coup if a serious threat from the North had existed. Our involvement in Viet-Nam is part of our total posture in the area--with favorable effects in Indonesia and elsewhere. However, we should avoid public discussion of the effect on Indonesian internal developments.
2. On Communist China, recent developments confirmed the Indonesian view that Peking's policy was wrong and "ideological absurd- ity" (Maoism). The Indonesians feel more secure. They also have more confidence in us, because only we really oppose Peking's policy.
3. Sukarno will be out of power, probably soon. Suharto has wisely followed the constitutional path in cutting back Sukarno's power. Sukarno has destroyed himself.
4. The new government is working for the people. Suharto and Co. feel they have to win; their lives are on the line. Failure will mean their destruction. The Communists will try to pay back the blood debt. Green sees some risk of the military overriding the civilians politically, and will advise against this course.
5. The government is pursuing a pragmatic economic policy./3/ Green notes that the five leading economists in Indonesia on whom Suharto and his colleagues rely were all trained in the U.S.
/3/In Intelligence Memorandum RR IM 67-8, February 1967, "Prospects for Economic Development in Indonesia," the CIA concluded that the economic situation in Indonesia would improve over the next 2 to 3 years. The speed of recovery depended "not only on the level of foreign aid but also on the progress in establishing an orderly state administration and a more stable environment for private enterprise." (Ibid.)
6. Main problems of the new regime:
--to maintain the unity of the new order;
--to get going on economic progress. Green notes progress is debt-rescheduling. Now, we should push economic assistance. (The plan for U.S. help, in cooperation with other donors, is on your desk;/4/ it will be discussed at Amsterdam later this week.)
Green thinks the proposal is minimal. It is important we be forthcoming with the Indonesians: (1) to give them needed assurance; (2) to stimulate others to help more.
Indonesia faces severe problems; prices have been rising. There is rising popular discontent. Any evidence we are going to help will be heartening in Djakarta.
Green was pleased that we are moving fast in the civic action field through MAP. This is "relatively minor, but crucial."
The Ambassador has two concerns about the immediate future:
1) Can we give enough fast enough to help the Indonesians out of their current troubles?
2) Can we help in ways that will minimize frictions and maximize our political advantage? The Ambassador would like to see less red tape in aid administration. He would put heavier responsibilities on recipient governments rather than looking over their shoulders at every turn. He understands Congressional pressure on this, and that we cannot make one country an exception. He notes that present procedures require large AID missions, which he considers self-defeating politically.
Overall, Green thinks:
--there have been tremendous changes in Indonesia;
The Japanese Government wants to play a more important role in Indonesia. There is resistance in the Finance Ministry and the Diet. He is worried Japan won't do as much as it should. He will consult with the Japanese on his way back to Djakarta.
There is significant Japanese private interest in investment. The Indonesian and Japanese economies are complementary.
The Australians should be doing more in Indonesia.
The Dutch are playing the most constructive role of all the Europeans.
During his leave, Green spoke to 30 important private groups around the country, audiences up to 500. He spoke "off the record" for the most part, and was able to stress the importance of our Viet-Nam action for Indonesia and for Asia. He strongly supported our policy in Viet-Nam.
He leaves tomorrow morning, unless you wish to see him.
232. Memorandum From Secretary of Defense McNamara to President Johnson/1/
Washington, March 1, 1967.
/1/Source: Washington National Records Center, RG 330, OSD Files: FRC 72 D 2468, Indonesia, 1967, 091.31MAP. Secret. Drafted by Steadman. Rostow transmitted this memorandum to the President under a March 3 memorandum, in which he noted that, "the 'New Order' leaders in Indonesia have given high priority to military civic action. They regard Ambassador Green's assurances of expanded MAP and our help in debt rescheduling and new foreign aid as votes of confidence, which they are, in their efforts to bring order out of chaos." There is an indication on Rostow's memorandum that the President saw it. (Johnson Library, National Security File, Country File, Indonesia, Vol. VII, Memos, 5/66-6/67)
General Suharto's assumption of the powers of the Presidency has dramatized the significant shift in Indonesia's political orientation that has been taking place during the past sixteen months. This shift began on October 1, 1965, when the Indonesian Army, led by General Suharto, put down a Communist-inspired coup d'etat and then proceeded to eliminate the three million member Indonesian Communist Party (PKI) as an effective political organization. Having crushed the PKI, the Army turned to the more difficult job of stripping President Sukarno of political power and reorienting Indonesian foreign policy away from close association with Peking and toward accommodation with its neighbors and the United States. This process appears now to be entering its final stage; the Indonesian Army is nearing complete control of the Indonesian Government.
I believe that our Military Assistance Program to Indonesia during the past few years contributed significantly to the Army's anticommunist, pro-U.S. orientation and encouraged it to move against the PKI when the opportunity was presented. That the PKI was acutely aware of this instinctive opposition in the Army is shown by the fact that five of the six Army generals assassinated by the PKI on that fateful October 1 had received training in U.S. Army schools and were known friends of the United States. Moreover, after the Army had put down the revolt, the key jobs went to U.S.-trained officers. Suharto himself is not U.S.-trained, but all thirteen top members of his staff, the group that now governs Indonesia, received training in the United States under the Military Assistance Program. In my judgment, our decisions to invest roughly $5 million to bring some 2100 Indonesian military personnel to the United States for training, and to continue the program even during the bleak years 1963-65 when Sukarno was carrying on confrontation against Malaysia and working closely with Peking, have been very significant factors in determining the favorable orientation of the new Indonesian political elite.
Our total MAP to Indonesia from 1950 through 1965 was $63.2 million. Roughly $59 million was given in the years 1959-1965. Two-thirds of this ($40 million) went to the Army and included over 100,000 small arms, some 2,000 trucks and other vehicles, and tactical communications equipment. When Sukarno began his confrontation against Malaysia in 1963, we eliminated from the program items that contributed to Indonesia's offensive capability, but we continued to supply small arms for support of the Army's internal security capability.
In 1962 we expanded the MAP to include engineering equipment for the Army's civic action program. A total of $3 million of such equipment was delivered between 1962 and 1964. The civic action program was the brainchild of General Nasution (now Chairman of the Consultative Assembly) and General Yani (one of the generals killed by the Communists in October 1965) who believed the Army needed programs that would improve its image with the Indonesian people vis-à-vis the PKI. Another aspect of the civic action program was to bring key younger Army officers to the United States for training (at Harvard, Syracuse, and several other institutions) to prepare them for high level management responsibilities. This training proved to be of great value when the Army assumed control of the government.
We suspended shipments of new equipment to Indonesia in September 1964. In March 1965 we cancelled the remainder of the program, except the training of those Indonesians already in the United States. Roughly $23 million for equipment, services, and training was cancelled, and the funds were subsequently recouped. However, we maintained close contact with the Indonesian Army leadership through our military attaches and our Defense Liaison Group, which was retained on a skeletal basis even after the termination of MAP.
In September 1966, when the Army had isolated Sukarno and formally ended confrontation against Malaysia, we resumed the military training program for Indonesian officers (at a cost of $400,000 in FY 67). The primary emphasis of this training is on increasing the civic action capability of the Indonesian Armed Forces. During this past week, we have decided to increase the FY 67 MAP by $2 million in order to provide spare parts for previously supplied engineering equipment and also some new equipment--all for the civic action program. In FY 68 we plan to give Indonesia $6 million in MAP, primarily for support of the civic action program.
It would be presumptuous to claim that our military assistance and training were solely responsible for the anticommunist orientation of the Indonesian Army, or even that they were the major factors in causing the Indonesian Army to turn against the PKI and swing Indonesia away from its pro-Peking orientation. Nevertheless, I firmly believe that these programs, together with our continued sympathy and support for the Army, encouraged its leaders to believe that they could count on U.S. support when they turned on the PKI and, later, against Sukarno. Our firm policy in Vietnam has also played a part in forming Army attitudes favorable to our objectives in Southeast Asia. A year and a half ago, Indonesia posed an ominous threat to the U.S. and the Free World. Today, the prospect is dramatically altered for the better. General Suharto's government is steering Indonesia back toward a posture that promises peace and stability in Southeast Asia.
Robert S. McNamara
233. Telegram From the Embassy in Indonesia to the Department of State/1/
Djakarta, March 15, 1967, 1105Z.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 15 INDON. Secret. Repeated to Bangkok, Canberra, CINCPAC for POLAD, Hong Kong, Kuala Lumpur, Manila, Medan, Singapore, Surabaya, Tokyo, and Wellington.
4287. Subject: Post-MPRS Political Situation.
1. MPRS session just concluded represents what is probably significant turning point for Indonesia. Not only has all effective power been formally removed from Sukarno/2/ but of even greater importance for future of this country, basis has been laid for more healthy relationship among political elements. Civilians stood up and fought for what they believed in and military, to its credit, let them do so and in fact met many of their demands. Victory of civilian forces and "hawks" within military was not, however, so lopsided as to encourage them in future to challenge executive without good cause. Through it all, Suharto again showed his sincere dedication to democratic means (at any point he could have moved in and imposed solution), his ability to juggle political forces and his skill in gaining consensus for his actions. These traits will be invaluable as he tackles difficult tasks ahead. Following is our estimate of major political steps in months ahead as Indonesia moves toward elections scheduled for mid-1968.
/2/According to telegram 4239 from Djakarta, March 13, Suharto was sworn in as Acting President at 10:45 p.m. on March 12 after the People's Consultative Assembly--Provisional (MPRS) accepted by acclamation that afternoon a decree withdrawing Sukarno's mandate. (Ibid.)
2. We do not foresee an early crystallization of political forces into lasting coalitions on order of that evolving in MPRS session. On contrary, we expect constant shifting of political alliances as issues succeed each other. Moslems may at points be pitted against secularists and Christians. Two giant Javanese parties (NU and PNI) may form tactical and temporary alliances against outer-island organizations. Political parties will find themselves united at times against military with action fronts in swing position. Finally military itself will probably divide occasionally on certain issues with each faction picking up different civilian allies. This type of political kaleidoscope suits well Suharto's political technique. He works largely as "loner" and in anti-Sukarno campaign proved himself adept at juggling political forces.
3. Sukarno, of course, represented only first of many issues which will eventually determine nature of new regime. In his speech accepting MPRS mandate, Acting President Suharto placed most emphasis on general elections as culminating test for new order. We suspect that both political and economic activities will now focus in large part on this distant event.
A. First on agenda for parliament is government's electoral package (bills on parties, parliament's composition and election system). These bills will probably stimulate heated debate. NU will join PNI in fighting single-member constituency system, and parties as whole will probably seek maintain unaffiliated functional group representation in general and military contingent in particular at present level. MP's attached to action fronts may side with military on some of these issues. We expect that customary Indonesian compromise will be reached involving perhaps combination of single member constituency and proportional representation systems.
B. Parties will press hard for portfolios in cabinet, which are important source of funds and patronage needed to wage election campaign. Although Suharto may be forced to give a little, we suspect that he will maintain principle of "working cabinet" leaving parties largely restricted to representative bodies. Cabinet reshuffle may well occur within next few months but will probably be aimed more at increasing cabinet's efficiency than satisfying political party demands. Such figures as Malik and Sultan seem safe, although latter may be bolstered by appointment of qualified technicians to some economic portfolios.
C. Suharto in particular and armed forces in general are also "running" in coming election. Their showing, as Suharto is well aware, depends on success of Ampera cabinet. We can expect NU, PNI and other parties to attempt discreetly exploit any lack of progress in economic sector, particularly if they have been unsuccessful in obtaining cabinet posts. Suharto will thus continue concentrate on his economic program, increasing pressures on foreign governments to contribute. Ironically, lack of progress in this sector may well prolong cabinet's life as Suharto and military will be unwilling face election unless and until adequate progress has been made.
D. We expect election to be postponed for six months or year at least, ostensibly on administrative grounds, and few should genuinely object. Postponement will apparently require reconvening of MPRS, probably month or two before present election deadline (July 1968).
4. General Suharto's primary political base will remain the armed forces and we believe that he will [do] more to strengthen his hold over military services.
A. Changes in top navy and police leadership is high on agenda. Suharto perhaps hopes that Navy Minister Muljadi, Marine Commandant Hartono and Police Minister Sutjipto will fall of their own weight once their underlings assess their failure to influence significantly outcome of MPRS session. After cooling off period, Suharto might personally take hand in their ouster and perhaps ask Adam Malik to cough up more Ambassadorial positions.
B. Suharto may also seek reduce political power of army hawks. He is especially wary of allowing regional commanders to build up powerful political bases in non-Javanese areas. General Dharsono is doing just that in West Java as is General Solichin in South Sulawesi. They may be assigned to staff positions along with Kostrad Chief of Staff Kemal Idris and RPKAD Commander Sarwo Edhie. These shifts will probably be done gradually and in manner not unduly harmful to their military careers or alarming to their supporters.
C. Pressures will continue, especially from political parties, to persuade Suharto to relinquish one or both of his military portfolios. We suspect that he will not do so at least until he has accomplished measures mentioned above.
5. Students may pose occasional problem for Suharto. Military will now wish to put them back into classes but they are understandably reluctant to disband successful action front organizations. Accustomed to regarding themselves as voice of people's conscience and cognizant that some cause is necessary to keep their organizations intact, students may be tempted to take to streets again to protest unpopular measures. In this eventuality they would be pitted directly against the military and we do not rule out clashes such as occurred on October 3. This threat, however, will probably subside with time.
6. Suharto's long range concern is latent threat from left. Additional military operations against isolated neo-PKI forces in Java as that conducted against Mbah Suro (Djakarta 4183)/3/ will be undertaken, either at Suharto's command or at initiative of individual army commanders. PNI also continues to worry Suharto. He may make another big effort to clean up this party, perhaps dictating further changes in its leadership, Suharto's overall goal is not tonjoiveanese [to increase Javanese?] secularist voice to balance rising Moslem-outer island coalition.
7. We do not foresee any significant changes in GOI foreign policy, which has proceeded for most part unobstructed by struggle with Sukarno.
8. In sum, Suharto's expert handling of leadership question has placed him in good position to face multitude of problems which have been awaiting termination of anti-Sukarno campaign to surface. Statements of support voiced at Amsterdam meeting and indications of US willingness to mount modest civic action program have proved to be well timed expressions of free world interest which may encourage Suharto's government to move forward.
234. Letter From the Ambassador to Indonesia (Green) to the Deputy Assistant Secretary of State for East Asian and Pacific Affairs (Berger)/1/
Djakarta, April 25, 1967.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 15-1 INDON. Secret; Official-Informal.
Many thanks for your letter of March 31/2/ which set down in helpful and stimulating style a series of formulations on the emerging Indonesian political scene. We seem to be on the same wave length but with enough tonal variations to stimulate further exchanges.
/2/Berger's letter has not been found, but the substantive points he made are repeated by Green.
In the interests of easy reference I have repeated each one of your lettered paragraphs together with my comments on that paragraph.
a. Suharto has shown an uncommon political wisdom and shrewdness, as well as remarkable sense of timing in handling Sukarno and other main problems of the last twenty months (confrontation, UN, the trials, etc.). He is the dominant personality on the Indonesian scene and we see no one of comparable stature who could lead Indonesia in the difficult months and years ahead.
Comment: Suharto had to be pushed by Malik on handling confrontation, returning to the UN, and other matters, although the handling of Sukarno was completely in accordance with Suharto's guiding genius. I agree that Suharto has an inborn political sense which has made him the man for the job these past 18 months, and I see no one who is now capable of replacing him or who in fact aspires to do so.
b. His next effort must be to put together a more effective and honest government to deal with the economic mess and to lay the foundation for Indonesia's political future.
Comment: I agree. However, we should not expect wholesale cabinet changes which would open up new problems of political party representation in the cabinet. It would be in Suharto's style to avoid this until after elections, meanwhile making changes from time to time in cabinet and sub-cabinet positions to remove the more obvious corruptionists or incompetents. But I see no cleansing of the Augean stables on the heroic Herculean scale.
c. An early return to "normal politics", i.e., to more or less the old political parties, to an election based on them, and to a government created from them, would solve no problems in Indonesia. It would not give Indonesia effective government, would only lead to disgust with the democratic process, produce more chaos, and probably end in a complete takeover by the military.
Comment: Concur. I am sure that elections will not be held until Indonesia's rehabilitation is well under way and Suharto is certain that the outcome of the elections will not overthrow the "new order" or seriously challenge its progress. On the other hand I do not see Suharto removing the old parties. He may in fact seek a political solution that involves efforts to gain support of old parties or major elements thereof for his "New Order".
d. For Malik to assume that he can build a new political party on a civilian base with any chance of success, is sheer romancing. He is not that strong politically, nor is he likely to become so in view of his enemies and opposition in religious, military, national and political circles.
Comment: This may underrate Malik's potential and also contradicts to some extent the thrust of your paragraph h. Malik has been counted out before, only to bounce back to a position of prominence. He may be weak as an organizer but I can conceive of a number of circumstances under which he might rather quickly emerge as a prominent political force within a coalition of progressive elements.
e. For the military to withdraw from a major and active role in political life would be as disastrous for Indonesia as for the military to take over all power. However, it is not likely that the military will either want to give up power, or dare to give up power, even if they so desire. On the contrary, the greater danger is that the military will push for more and more power. The problems for Suharto are to keep a strong rein on power, enlist civilian cooperation, resist the pressures toward exclusive military power, and weld a military-civilian team to govern Indonesia.
Comment: I fully agree.
f. In short, the key to the future, to political stability, to effective government, to a successful transition to elected government, is in Suharto's hands. If he can make a success of the next year or two his government becomes the embryo of the successor government, and he becomes the natural person to lead the subsequent government. Whether Suharto realizes it or not, it would seem that this would eventually require the creation of a new political party which only he can lead. (This was the experience of General Papagos in Greece in 1952, and General Pak in Korea in 1963.)
Comment: This is a possibility but there are others. Ed Masters, for example, has suggested that Suharto may feel he can find a civilian base for his government in a cleansed PNI. I rather suspect that Suharto has not yet made up his mind on how to organize political forces in order to insure perpetuation of his New Order. Most signs at present would tend in the direction of his trying to achieve this crucial goal through a combination of (a) guaranteed seats in the Parliament for his military and Action Fronts on whose support he can absolutely count, and (b) trying to gain the support of as many of the political parties or factions thereof as possible. The political party element is nevertheless likely to maintain a relative independence, being prepared to vote either for or against government bills in accordance with party interests.
As to your parenthetical comment about the Greek and Korean examples, I am not sure how relevant Suharto would consider them to be. Would he be willing to take the risk which Pak took in 1963 when Pak would have lost to a more united opposition? I doubt it.
g. A new political party must have military support and a civilian base. It must be able to draw in the new, young, eager, progressive civilian and military forces who want change. It must also draw on the younger and more progressive elements of the old nationalist and religious parties.
Comment: It would be ideal if the new party would attract the support of those groups you mentioned, but this is Indonesia where actual performance would likely fall far short of that ideal. Comments on paragraph f. above also relevant.
h. Malik is the natural leader of the young civilian progressive elements, but he cannot get very far without Suharto and military support. He must therefore aim at an alliance under Suharto. If Suharto begins to think of Malik as a competitor, or if Malik is unwilling to play a supporting role to Suharto, we see little possibility of a collective leadership emerging that combines the essential and most hopeful political elements, or one that offers promise of avoiding the dangers.
Comment: I agree. To all appearances Malik realizes he needs Suharto more than Suharto needs him. Yet Malik aspires to eventual greater power than he now has, and if he is frustrated in achieving such power there may be some question of whether he would be content to remain in harness with Suharto. At present relationships between Suharto and Malik are good and one would hope that the inevitable reactivation of politics will not destroy their remaining in harness together. One step that might be helpful in preserving such a relationship would be to name Malik as First Minister under Suharto, which would in effect make Malik Suharto's Deputy for all affairs, including economic. (You will recall that Hassan mentioned this idea to me and that I said I thought the idea very sound.)
i. One question is whether Suharto sees the shape of the future and his role in it. We suspect that he already does. But if he does not, it seems from here that he must eventually come to see his role, and the course he must follow, because we see no alternatives that offer a better hope for Indonesia. The second question is whether Malik understands it and is prepared to play a subordinate role.
Comment: These are both key questions on which I can only grope for answers. In the economic field Suharto has acted as a pragmatist, being single-minded and determined in the field of stabilization, making no typical Javanese concessions or engaging in musjawara. In the political field, however, he seems quite typically Javanese in his approach, judging his position after allowing the various political groups to show their hands and then looking for the most comfortable point between extremes, provided that that point is not inconsistent with his own longer range goals. So far, Suharto's political strategy has also involved: first, gaining the full united support of the Army; secondly, winning the support of the other three Armed Services, or at least neutralizing armed force elements like the KKO which were more loyal to Sukarno than to Suharto.
As Suharto moves towards the promised elections, his tactics for insuring continuation of his new order will be clarified. Right now, he lays primary stress on improving the economic climate, but beyond that, he may not yet have formulated any definite ideas. Since he cannot afford to let the Sukarnoists back in, and since he has shown himself to be highly adept in political strategy this past year, I am reasonably certain he will come up with a plan of action best suited to gaining his goals of retaining power while also maintaining as much unity as possible amongst the highly diverse and squabbling political groups and elements that for so long have plagued Indonesia. It seems to me that Suharto's style will continue to be marked by efforts to minimize abrasions and divisiveness, but I do not think he will carry compromise so far as to endanger continuation of basic New Order policies and programs. The penalty would be too great.
Just one or two additional points:
1. Suharto seems increasingly relaxed and to be enjoying his new role as Acting President. I regard this as an additional reason why he may want to stay on in power. He has some weaknesses (e.g. keeping on too many second-rate military cronies; lack of adequate direction on the Chinese resident issue) but he has strengths that are peculiarly relevant to leadership of a united Indonesia in the post-Sukarno era.
2. You mention the complicated relationship between Suharto and Nasution. I believe that Nasution will be content to play second fiddle to Suharto, and he seems to have little potential for effective organization including those from the most extreme nationalist and religious groups. If this analysis is wrong and Nasution should make a bid for power, I fully share your views about where we should stand.
3. With further reference to paragraph h., I do not rule out the possibility that Malik might lead a party which supported Suharto's New Order and in that capacity Malik might continue on in Suharto's post-election government as a principal deputy.
The above amplifies Djakarta 5027/3/ on Suharto's performance as Acting President, a telegram that was in part inspired by your much appreciated letter.
/3/Dated April 22. (National Archives and Records Administration, RG 59, Central Files 1967-69, POL 15-1 INDON)
235. Telegram From the Department of State to the Embassy in Indonesia/1/
Washington, June 27, 1967, 11:27 a.m.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL INDON-US. Secret; Priority. Drafted by Underhill, cleared with AID Assistant Administrator for East Asia, John C. Bullitt, in substance with Nuechterlein and the Associate Administrator of the Foreign Agricultural Service, C.R. Eskildsen, and in draft with Berger; and approved by Barnett.
216750. Subject: Suharto Call. Ref: Djakarta 6291, 6289./2/
/2/Telegrams 6291 and 6289, June 24 and 23, asked for the Department's views on issues to be raised with Suharto and suggested that this meeting might be the start of a useful dialogue on issues of mutual concern. (Ibid.) In Indonesia: Crisis and Transformation 1965-1968, p. 103, Green recalled that during the first half of 1967 he was denied access to Suharto in part because the U.S. Government was unwilling to provide uniforms and shoes to the Indonesian armed forces as part of the civic action program. Green stated that he was privately informed that he was only welcome to meet with Suharto as the "bearer of good news" and suggested that this might have been the view of Suharto's aide rather than Suharto himself. Green is apparently referring to a conversation with General Alamsjah as reported in telegram 5771 from Djakarta, May 26. (National Archives and Records Administration, RG 59, Central Files 1967-69, AID (US) INDON)
1. Strongly endorse your view that main objective of your forthcoming conversation with Acting President should be to form basis for frequency and continuing exchanges of views. If Suharto at any point has doubts or questions about U.S. policy it is desirable that he resolve them directly with you rather than using complicated and unreliable mechanism of intermediaries whose personal interests may not always coincide with clear transmission either your or his thoughts. Following paragraphs suggest lines you may wish to use.
2. U.S. Assistance: Presume Suharto will use discussion internal political situation as lead-in for plea for U.S. aid. One possible line of reply would make following points:
a. Indonesia received resounding vote of confidence at Scheveningen meeting where intergovernmental group agreed to provide $200 million gap in Indonesia's balance of payments as projected by IMF./3/ Donor countries attentions will now be focused on 1968 debt relief and assistance needs, and IBRD will shortly have a team in country surveying priority development requirements. (Suharto might be reassured to know that Widjojo is now in Washington seeing Walt and Eugene Rostow, Bundy, Poats, Linder, and other senior officials, as well as members Senate and House.)/4/
/3/The Scheveningen meeting of mid-June 1967 was the second gathering of the Inter-Governmental Group on Indonesia (14 Western donor countries and 5 international organizations--IMF, IBRD, UN Development Program, and Asian Development Bank) that met in mid-June. The first meeting was held in mid-February 1967 in Amsterdam.
/4/A record of the meeting between Professor Widjojo Nitisastro, Economic Adviser to Suharto, and Barnett and Berger and other Indonesian experts from State and AID on June 27 is in a June 27 memorandum of conversation. (National Archives and Records Administration, RG 59, Central Files 1967-69, E INDON)
b. Indonesia's primary asset in dealing with international community is support of International Monetary Fund. This support stems in turn from confidence this international organization has in economic team that developed and is now executing New Order economic policy. Performance Indonesian team at Scheveningen meeting continued very high standard established by this group at previous meetings, and continuing support of Suharto and Presidium to this highly competent group of economic advisers is best way, in our judgment, maintain and expand flow of foreign assistance to Indonesia. Donor countries will also be looking for progress during coming months along lines noted Scheveningen Chairman's report (septel)./5/
/5/Not further identified.
c. There has been circulating in Djakarta criticism that U.S. support of Indonesian stabilization effort has been slow and niggardly. This criticism difficult to understand in light of following facts. Since April 1966 U.S. has postponed payment of $51 million of debt falling due in 18 month period 1 July 1966 through 31 December 1967, and provided $77 million in new aid. Included in this figure is direct assistance to the Indonesian Armed Forces for its civic mission. The U.S. is further committed to provide an additional $32 million as part of its share in meeting its commitment at Amsterdam and Scheveningen. Total through December 1967 of assistance to New Order will be therefore roughly $160 million.
3. Rice: We have for number of weeks been working on Indonesia's anticipated rice requirements in the fall of 1967. At this stage the most we can do is to assure Suharto that we are keenly aware of Indonesia's requirements, that Indonesia has a high priority, and that as early as possible in the new crop year (beginning in July) we will let him know whether we can help.
4. Private Investment: If in discussion this topic opportunity pre- sents itself you might note confusion which we observe in American business community created by contracts concluded by various officials of Indonesian Government whose relationship to over-all economic development plans are not entirely clear. (Barre's CEDO would be prime example.) To sustain U.S. interest in investment Indonesia, now at high level, GOI must (a) arrange to deal with businessmen in orderly, responsible way, and (b) continue to maintain the generally promising investment climate created by effective performance on stabilization goals, MPRS new investment law, and US-GOI investment guarantee program.
5. You may inform Suharto of our affirmative response to Hartono's request for fatigue uniforms and jungle shoes (State 211544)./6/ FYI. Widjojo quizzed Underhill on our judgment of Hartono's perform- ance in dealing with DLG. Latter said that Embassy/DLG's relations with Hartono excellent, and that we had high regard for his professional competence. Widjojo then explained that unspecified persons were circulating story that Hartono was ineffective in dealing with Americans and that others could extract more MAP from US. Persistence his questioning suggested that he also may be target of similar campaign. Boosts for Widjojo, Sadli and Company as well as Hartono therefore seem appropriate. End FYI.
/6/Dated June 15. (National Archives and Records Administration, RG 59, Central Files 1967-69, DEF 19-8 US-INDON)
6. Suggested points on Viet-Nam and Middle East follow septel. Middle East situation changing rapidly, and we will send current message in time for your meeting. Please advise time of appointment.
236. Telegram From the Embassy in Indonesia to the Department of State/1/
Djakarta, July 7, 1967, 0930Z.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 15-1 INDON. Secret. Repeated to CINCPAC for POLAD, Kuala Lumpur, Medan, and Surabaya.
114. Subject: Meeting with Suharto.
1. Well over half of my three hour meeting alone (except for interpreter) with Suharto last night was involved in trying to dispel Suharto's concern over US aid prospects for this and next year. Balance of conversation was taken up with other aid matters, MAP, foreign investment and foreign policy issues. Our discussions on Vietnam and other sensitive points already reported septel./2/ Suharto supports our policies in Vietnam and, I would judge, other areas as well. At no point was Suharto anything but moderate, agreeable (though somewhat reserved) and matter-of-fact. Main objective of my conversation was to form basis for frequent continuing exchanges of views with man who is almost certainly going to lead GOI for sometime to come. Uncertain whether I succeeded in that objective. To some extent this will depend on practical results of our talk: i.e. our responsiveness to his requests.
/2/Reference is to telegram 100 from Djakarta, July 6, in which Green reported that Suharto briefed Green on the meeting that his personal representatives had with North Vietnamese Ambassador to Indonesia Pham Binh who was currently in Hanoi. Suharto hoped that Pham Binh would return with "something of interest to convey" and he would pass it on to Green. Also discussed was the Middle East and Indonesia's relations with the Soviet Union. (Ibid., POL 27 VIET S)
Suharto's Plea for US Support
2. Suharto began by saying that he wanted to make it clear that he did not question our goodwill towards Indonesia. He also recognized our world-wide commitments and the problems every US administration faces in getting aid through Congress. He seriously questioned, however, whether we attached sufficiently high priority to Indonesia, bearing in mind its enormous problems including challenge from Sukarnoist forces. Country faces a real emergency where unusual steps are needed and where assistance of US, above all, vitally needed. However there have been number of disturbing indications that US does not see problems of Indonesia in same light. Certain recent US actions did not reflect views expressed by high-ranking visitors from Washington who had called on him this past year. Suharto had now just learned from Widjojo, on his return from Washington, that no further dollar loans likely this year, that US seeking to force unneeded and unwanted PL480 sales on Indonesia in CY'67, and there was likelihood that US assistance to Indonesia in FY'68 will be limited to only $20 million in import loans with balance being in PL480.
3. Suharto continued that Ampera cabinet program was drawn up on expectation of continuing US assistance. "I have regarded US as potentially our greatest friend, but if I cannot be sure of your assistance then I will have to make another plan." Suharto did not imply that he would sell out to the Russians or anything like that, but he stated bluntly that he would have to make some major adjustments in government budget plans and programs which, coming to attention of Sukarnoists and other hostile forces in Indonesia, would expose government to grave danger. Damage could be irreparable.
4. I said I was glad he was not questioning our motives or good faith. I knew there had been many completely false rumors floating about regarding our position. I had long wanted to see Suharto, if only to make clear to him that we fully support his government and that our efforts directed at maintaining unity of new order under his able leadership. He was the one man who could [garble--pull?] country together in these troublesome times, and we admired his moderation, pragmatism, dedication to needs of the people, and desire to maintain balance between military and civilian elements in government. I also spoke of our high regard for his leading economic and foreign affairs advisors. I said there were bound to be differences amongst friends but that these were minor compared to our broad areas of common interest and cooperation.
CY'67 Aid Mix
5. As to specific points which Suharto had raised re composition of our CY'67 program, I reminded him of our Amsterdam statement forecasting that US assistance would involve both PL480 and import loans. I was sure we would not force unneeded PL480 on his government, but it nevertheless had been our conclusion that raw cotton would be needed by the end of this year. If GOI disagreed, this matter should certainly be discussed further between our experts. As far as rice was concerned, I was authorized to tell him that we keenly aware of Indonesia's requirements, that Indonesia had high priority and that as early as possible in new crop year, beginning this month, we would let him know whether we could help.
6. Suharto again urged--as he had two weeks ago through General Sudjono--that we provide as much PL480 rice this calendar year as possible. This was critically needed. (He did not mention possibility of receiving 76,000 tons of pearl rice which had been communicated to Widjojo during latter's Washington talks.)
7. Suharto said he wanted to make it clear that GOI welcomes PL480 sales, not only rice, but also cotton and he even interested eventually in possibility of wheat. In latter regard, he hoping to change national diet habits, starting with Djakarta, so that bread is substituted for rice on breakfast menu. He also keenly interested in reports of rice substitutes which can be prepared in such way as to have appearance of rice. However it was considered view of his government that for balance of CY'67, Indonesia requires only PL480 rice and dollar import loans. It will need 150,000 bales of raw cotton but not to arrive before April '68. He was opposed to finished textiles since this would depress local spinning and weaving industries. I said that our aid representative returning from Washington July 6 and that we would pursue these questions further with his economic team. (Sadli subsequently phoned to say that he and Widjojo, at Suharto's request, wish to see me July 8.) Suharto again underlined crucial importance he attached to our aid mix being along lines determined by Indonesia's needs rather than by our desires to dispose of agricultural commodities but he recognized the need for and usefulness of PL480 commodities in the aid mix.
CY'68 Program, Including Civic Mission
8. In responding to Suharto's questions regarding prospective US aid in CY'68, I took occasion to run down briefly our programs in CY'66 and CY'67, including debt relief, budget support, other bilateral assistance and prospects for regional assistance. As for CY'68, I said we would presumably be following same formula with regard to coordinating with IGG countries on debt relief and providing our share of total aid requirements as determined by IMF. Additionally I thought we could look for an expansion in our support for Suharto's civic mission program, for food for work and technical assistance programs. I took this occasion to give Suharto two papers outlining our civic mission support for FY'67 and FY'68, broken down by services (omitting dollar amounts)./3/ I told him that, directly responsive to request he made last autumn, I now authorized to state we will furnish "2,000 sets of uniforms and 32,000 jungle boots" for equipping all of military involved in civic mission program. I spoke of our high regard for General Hartono and outstanding manner in which civic mission program is now getting off the ground. I shared Suharto's keenness for expanding civic mission program and I, for one, would do all possible to help increase our assistance for civic mission, assuming program continues to be pursued with same effectiveness as had been shown so far.
/3/Neither paper is identified further.
9. Suharto expressed appreciation for all we had done with regard to civic mission program, including shoes and uniforms. There were two particular points, however, he wished to stress regarding our overall aid program for CY'68: First, his hope that we could provide sufficient import loans and PL480 rice; and second, that we would be able to expand our food for work program, but this would depend upon finding rupiahs for financing local costs of program. He urged that we assist through providing additional commodities for sale in Indonesia to help cover costs of transportation and other expenditures related to program.
10. On foreign investment, I provided Suharto with a paper the Embassy had prepared on progress of US investment in Indonesia,/4/ showing agreements concluded in first half of 1967, letters of intent exchanged, and other investment proposals, together with some general comments. I congratulated him on wise course he had taken to attract foreign investment which, I felt offered main hope for economic development. I nevertheless referred to problems some American investors had encountered in their dealings with Indonesian authorities and pointed out importance of straight-forward direct dealings between investors and properly appointed authorities in Indonesian Government (Suharto got the point without my having to belabor it). I also spoke of two major meetings, in August and November, organized by Stanford Research Institute and Time-Life, which already attracting large number of top flight executives from North American-Asian-European companies having real interest in Indonesian investment. Suharto said he attached great importance to these meetings, that he wanted to talk directly with those attending August meeting. We touched on need for rehabilitation of fishing and tin industries.
/4/Not further identified.
11. Miscellaneous points covered in our talks: (a) Suharto stressed need for comprehensive aerial as well as mineral survey of Indonesia, confirming his earlier request for US assistance in aerial survey but stating that mineral surveys best done by prospective investors; (b) I raised subject of family planning, pointing out how we could be of assistance (Suharto agreed but showed little sense of urgency on this critical problem); (c) I spoke to points in Deptel 216750/5/ re Scheveningen, importance of GOI preserving its close links with IMF, and IBRD survey of resources which GOI had requested. I left with Suharto an Indonesian translation of Bullitt statement at Scheveningen/6/ which I consider excellent.
/6/Not further identified.
12. Balance of discussion related to foreign affairs which covered septel./7/ We will also send septel comments on Suharto's specific requests re '67 aid-mix, '68 assistance, and Title II./8/
/7/See footnote 2 above.
/8/Telegram 164 from Djakarta, July 10. Additional comments are in telegram 284 from Djakarta, July 17. (Both National Archives and Records Administration, RG 59, Central Files 1967-69, AID (US) INDON)
13. I was struck by how Suharto's views have matured since first we met privately on May 27 , 1966./9/ His program for Indonesia at that time seemed exclusively related to grandiose military civic action schemes for development of outer islands and to wholesale transmigration of people from overcrowded Java to these projects. In our discussions last fall, he had come to accept the need for foreign investment as principal means for developing outer islands, and, by that time, he had come to subscribe fully to stabilization program as backbone of national economic policy. His remarks at that time nevertheless reflected army-centrism and were replete with expressions of concern re Communists but never re Sukarnoists. In our long discussion last night, Suharto spoke as a national leader rather than as an army leader. He did not present oversimplified view of PKI as immediate threat, but, more realistically, directed his concerns towards lingering Sukarnoism, disunity and defeatism. He did not reflect, as he has in past, exaggerated expectations of US assistance. His stated views generally parallel our own.
/9/See Document 209.
14. I am convinced that Suharto entertains no suspicions about our alleged support for Nasution, an Islamic state, and other such nonsense. These fears and suspicions, undoubtedly exaggerated by self-seeking officers on Suharto's personal staff, seem to have been dispelled by my recent talks with Generals Sudjono, Sumitro and Hartono. I can see the possible beginnings of a personal rapport with Suharto though I do not wish to exaggerate where this could lead, bearing in mind that it may take some time for Suharto to break out of his Javanese mold which includes doing things through intermediaries and by indirection. A responsive reaction to his reasonable requests would, however, do much to assist in our problem of communication with Suharto.
237. Memorandum From Vice President Humphrey to President Johnson/1/
Washington, July 14, 1967, 5 p.m.
/1/Source: Johnson Library, National Security File, Country File, Indonesia, Vol. VIII, 6/67-8/68. Secret; Exdis. Initialed by Humphrey. Johnson wrote the following note on the memorandum: "M.[Marvin Watson?] Send to Walt [Rostow] & to Gaud for memo of comments back to me. L."
As I noted in the report on my trip to Korea,/2/ one of the subjects I discussed with Prime Minister Sato of Japan was aid to Indonesia. On my return, I noted Ambassador Marshall Green's report (attached) on his three-hour discussion with acting President Suharto./3/ Because this was Ambassador Green's first substantive discussion with Suharto in five months, his report merits more than the usual attention.
/2/The July 6 report contained Humphrey's impressions based on his discussions with those East Asian leaders attending the inauguration of Park Chung Hee as President of the Republic of Korea, June 29-July 3, 1967. The report, July 6, is ibid., Name File, Vice President, Vol. II.
/3/See Document 236.
Most of Suharto's discussion is focused on Indonesian internal problems and on his hopes for considerable foreign assistance from the United States. Suharto explicitly stated his belief in the goodwill of the United States towards Indonesia, but expressed doubt as to whether we attached sufficiently high priority to Indonesia. He sees a discrepancy between the views expressed by high ranking American visitors and our response to his specific requests for foreign aid. He expressed disappointment over the amount of program assistance planned for 1968, and pointed out that most of the projected assistance is in the form of PL 480 food supplies. Although he regards the United States as "potentially our greatest friend", he went on to state that "if I cannot be sure of your assistance, then I will have to make another plan".
While I would not pretend to know what level of assistance we should be providing to Indonesia, I am convinced that Indonesia should enjoy a very high priority in our overall foreign assistance considerations. These commitments should be made within a multilateral framework that encourages substantial commitments from Japan and European nations. But when one considers the size and potential wealth of the country and the concentrated attempt of Suharto to restore stability and order in the face of continued Sukarnoist opposition, it would be shortsighted if we were to give an inadequate response to the requests of the present government.
Ambassador Green also indicated that Suharto expressed considerable interest in the Vietnam problem,/4/ expressed his continued support for our policy there, and hinted that we should not exclude the possibility of causing "floods" by bombing the dikes in North Vietnam. Suharto comments that the Indonesians will continue to be helpful in communicating any information they receive on North Vietnam, but he pointed out that although they have contacts with North Vietnam, the North Vietnamese "don't exactly trust us".
/4/See footnote 2, Document 236.
238. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/
Washington, July 22, 1967, 1:30 p.m.
/1/Source: Johnson Library, National Security File, Country File, Indonesia, Vol. VIII, 6/67-8/68, [2 of 2]. Confidential. There is an indication on the memorandum that the President saw it.
Earlier in the week I was visited by two Indonesian army officers, both of whom are in Suharto's inner circle of advisers. They stated very frankly that their purpose was to establish a personal channel of communications between General Suharto and you. They said that although American officials were invariably sympathetic to Indonesia's stated need for assistance, follow up was disappointing. They said Suharto hopes that you will breathe a greater sense of urgency and generosity into the American response to Indonesia's aid requests.
It is not clear to what extent they were actually speaking for Suharto. There are reasons to suspect they were simply trying to enhance their own influence by proving they can bring home the bacon.
In any event, I think it is time that we take another look at the rather restrained approach we have taken thus far to Indonesia aid requests. I also think it is time to consider whether some initiative on our part could not be used to start the foundation of a personal relationship between you and General Suharto. With that end in mind, I have asked Marshall Wright/2/ to go into the whole problem of Indonesian aid deeply and urgently.
/2/Rostow added the following footnote at this point: "Bill Jorden's new No. 2."
I am attaching a memorandum of my meeting with Suharto's representatives./3/
/3/A July 19 memorandum for the record of Rostow's meeting with Generals Humardani Sudsjono and Colonel Ali Murtopo on July 18 prepared by Marshall Wright of the NSC staff is in the Johnson Library, National Security File, Country File, Indonesia, Vol. VIII, 6/67-8/68, [2 of 2]. A record of Sujorno's and Murtopo's July 17 meeting with Vice President Humphrey, prepared on July 19, is ibid., Name File, Vice President, Vol. II. An account of their meetings with Berger on July 17 is in telegram 10175 to Djakarta, July 20. (National Archives and Records Administration, RG 59, Central Files 1967-69, POL 7 INDON) A summary assessment of their visit and all their meetings including those with key members of Congress is in telegram 10759 to Djakarta, July 21. (Ibid.)
239. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/
Washington, July 22, 1967, 2:30 p.m.
/1/Source: Johnson Library, National Security File, Country File, Indonesia, Vol. VIII, 6/67-8/68, [2 of 2]. Secret; Exdis. There is an indication on the memorandum that the President saw it.
/3/In a memorandum from Gaud to the President, July 17. (Johnson Library, National Security File, Country File, Indonesia, Vol. VIII, 6/67-8/68, [2 of 2])
The Vice President's memorandum argues that Indonesia should have a very high priority claim on our foreign assistance resources. Bill Gaud agrees, but points out that, for a variety of reasons, we face serious problems in meeting the commitments we have already made to Indonesia for this year. Moreover, there is every reason to think we will have even greater problems next year.
In other words, we are having trouble performing satisfactorily on what we have already agreed to do, and we are beginning to doubt if we have agreed to do enough.
To meet the immediate problem of our commitments during Calendar Year 1967, we must get at least 100,000 tons of rice for Indonesia. That will leave almost $10 million of our current commitment unsatisfied. The solution that would best meet Indonesian needs is to use some of our FY 68 Indonesian money as a cash loan. That, however, is borrowing from Peter to pay Paul, for it leaves us more than ever short of the resources required to meet our commitments to Indonesia in CY 68. Basically, it looks as if we are going to have to find more resources.
Indonesian expectations of American aid vastly exceed anything we are going to be able to come up with. Whatever we do, they will be disappointed. It is essential, however, that the gap between what we give and what they expect not be so broad that their disappointment turns into despair and disillusionment.
There is a way out of this. We will keep digging until we find it.
240. Notes of Meeting/1/
Washington, July 25, 1967, 2:47-3:47 p.m.
/1/Source: Johnson Library, Tom Johnson's Notes of Meetings, 7/25/67. Top Secret; Eyes Only. The time of the meeting is from the President's Daily Diary. (Ibid.)
Notes of the President's Luncheon Meeting with Secretary Rusk, Secretary McNamara, Walt Rostow and George Christian, July 25, 1967, in the Mansion The President read several memoranda which Secretary Rusk brought with him to the meeting./2/
/2/Not further identified.
The President asked what this country was going to do about Indonesia. Mr. Rostow said that a meeting would be held on this problem tomorrow./3/ Secretary Rusk said that $200 million was planned within the consortium. Mr. Rostow said Indonesia is going through a typical readjustment period. He said there was a need for basic transportation and communication facilities. Secretary Rusk then discussed foreign assistance. He said the Foreign Relations Committee would be asked to specify which countries it would eliminate if there is a cut back in foreign assistance funds.
/3/No record of this meeting has been found.
[Here follows discussion unrelated to Indonesia.]
241. Paper Prepared in the Department of State for the National Security Council/1/
Washington, August 4, 1967.
/1/Source: National Archives and Records Administration, RG 59, Central Files 1967-69, POL 1 INDON. Secret. A covering memorandum from Deputy Executive Secretary of State John P. Walsh to Bromley Smith indicates that the paper was prepared for the NSC meeting on Indonesia on August 9 and had "the working level concurrence of the Treasury, CIA, DOD, and JCS and was approved by Katzenbach and the Under Secretary of State for Political Affairs, Eugene V. Rostow.
1. On August 4, 1966, the National Security Council considered a paper on Indonesia which made cautiously hopeful forecasts for the coming year./2/ These forecasts have proved realistic. Economic and political progress was perhaps slightly better than expected a year ago, and the contributions made by the United States and other major Free World countries to economic stabilization followed the predicted pattern.
/2/See Document 215; for an account of the meeting, see Document 217.
2. This paper reviews the current situation, projects a program of action, and looks ahead to the prospects for the coming year.
3. Sukarno has been eliminated as a political force. The "New Order" led by General Suharto is well established in power, and is neutralizing gradually "Old Order" hold-outs in the police, marine corps, and parts of Central and East Java. Suharto and his associates showed sophistication and a fine sense of timing in managing the transition. The thread of legitimacy was never broken. Sukarno was denied martyrdom. Instead, the pernicious irrelevance of his leadership was gradually exposed, and the hollow shell of rhetoric and revolutionary romanticism allowed to crumble of its own weight. "Engineer" Sukarno now lives in internal exile in Bogor, a pathetic old man transformed in eighteen months from the incarnation of the Indonesian State into a historical relic.
4. This process of political transition was completed only in March of this year, and a post-Sukarno political structure has not yet emerged. Suharto keeps his own counsel, and is inclined to caution and gradualism. He is feeling his way among the conflicting pressures of New Order activists advocating rapid, wholesale change, and entrenched traditional political leaders defending the status quo. Military-civilian distrust and suspicions add another element of stress. There is some public criticism of the slow pace of change, but Suharto has shown in the past a good sense of timing and an ability to recognize and exploit a developing national consensus. The new election law is not yet passed and, with a minimum of eighteen months lead time between passage and elections, it is unlikely that the Indonesians will go to the polls before late 1969 or 1970.
5. The past year has been one of solid accomplishment in the international field. Indonesia settled its quarrel with Malaysia and rejoined the United Nations and its associated organizations and agencies. It has supported the concept of regional cooperation, and will be meeting with its neighbors in the coming weeks to create a new Southeast Asian regional organization. It has continued to adhere to a non-aligned policy, and has maintained correct relations with the Soviet Union and the States of Eastern Europe. Its relations with Peking, however, are under severe strain, but both the Chinese and Indonesian Governments appear desirous of avoiding a complete break.
6. Progress in domestic economic reform has been considerably greater than was anticipated in August of last year. An ambitious and reasonably effective stabilization program was put into effect. The pace of wild inflation has been checked. Prices on major consumer items leveled off. A stultifying jungle of licenses and controls was swept away and replaced by a system that relies in large measure on free market forces to determine import priorities. Government corporations were cut off the dole and told to produce effectively or perish. Budgetary stringency was introduced, and the military share of the budget cut in half. Political risks were faced and highly subsidized prices for gasoline, electricity and rail travel were raised to meet the costs of production. The Central Bank, which under Sukarno was a fiscal mockery of that term, is now beginning to exercise control of foreign exchange earnings and domestic credit. A new investment law designed to attract foreign capital was passed.
7. These accomplishments are largely the results of the leadership of a group of young economists from the University of Indonesia trained at the University of California at Berkeley, MIT and Harvard. These men have not only been responsible for determining economic policy and overseeing its execution, they have also participated in the international negotiations leading to debt rescheduling and new aid. Most important of all, these economists have won the unqualified support of General Suharto who has backed them without reservation in the politically painful belt tightening of the stabilization program.
8. These gains were achieved from a degree of economic collapse unparalleled for a major nation in modern times, and much still remains to be done. A substantial volume of trade still moves in irregular channels. Government revenue is overly dependent on taxation of foreign trade, and tax collection as a percentage of gross national product is the smallest in Southeast Asia. Corruption and influence peddling continue at all levels of government. The Suharto regime, however, acknowledges the seriousness of these problems, and spurred by strong pressures inside and outside the government, is moving to deal with them.
9. With these political and economic changes have also come important changes in attitudes and values. The baby boom of the 1950's has produced a new post-revolutionary generation, a stranger to both the heroics of the independence struggle and the spiritual indignities of colonialism. This generation has taken the lead in a general rejection of the slogans and ideology of the Sukarno period, and pragmatism, rationalism, and performance have become the new watchwords. A sober, objective judgment of national self-interest is now more often the basis for decisions, and Indonesian actions, if not always satisfactory, have at least become more predictable.
10. Moving in response to the steps taken by Indonesia to put its house in order, the United States and other friendly countries of the non-Communist world cooperated in a joint effort to help Indonesia. They agreed in Paris in December to reschedule somewhat over $300 million in debts in arrears and falling due in the 18-month period ending December 31, 1967. They later agreed in Amsterdam to provide $200 million of new assistance in CY 1967 to meet the foreign exchange gap estimated by the IMF staff. The United States committed itself to provide one-third of the total requirement if Indonesia continued to make reasonable progress in its stabilization performance and if the other donor countries made up the remaining two-thirds. The meeting in The Hague in June announced the successful pledging of the full amount (attached table sets forth the specific contributions)./3/ The Japanese contribution of approximately one-third is noteworthy.
/3/The table indicates the following breakdown for $197 million pledged or furnished: United States--$65 million; Japan--$60 million; Netherlands--$28 million; Germany--$29 million; India--$13 million; others (Australia, Canada, UK)--$2 million.
11. The Soviet Union refused to participate in these conferences, but Indonesia reached, through bilateral negotiations, a preliminary understanding that would lead to rescheduling, under approximately the same terms, the debt due the USSR and other Communist states. However, the Soviet Union and the countries of Eastern Europe have thus far made no contribution of new aid.
12. The International Monetary Fund has played a central role in advising the Indonesian Government on its stabilization program. It maintains a representative in Djakarta, and has taken part in all of the international meetings on debts and new aid. The International Bank for Reconstruction and Development made a preliminary survey of Indonesian priority import requirements for CY 1967 and, at the Indonesian Government's request, has a mission now in Indonesia studying the question of transition from stabilization to the development phase. Both the United Nations Development Program and the newly formed Asian Development Bank have dispatched missions of experts to advise the Indonesian Government on critical development efforts.
II. Action Program
13. We seek the development of a politically stable Indonesia, responsive to the needs of its citizens, and playing a responsible and constructive role in Southeast Asia and the world. This objective coincides with the goal of the present Government of Indonesia.
U.S. Strategy for the Future
14. Our strategy contains the following major elements:
A. Central Role of the International Agencies
The international agencies must continue to play a central role in Indonesia's economic recovery. The IMF has made an invaluable contribution in the areas of stabilization planning, debt rescheduling, and mobilization of new aid. The IBRD is now moving in to advise Indonesia on reconstruction and development planning. The Asian Development Bank appears certain to become an important contributor to the development effort. These organizations provide Indonesia with sound professional advice, act as a clearing house of economic information, and serve both as impartial judges of achievement and as politically insulated forces for encouraging minimum standards of performance.
B. Maximum International Participation
Indonesia's needs for foreign assistance are so great that only the pooled resources of many nations can provide the necessary help. Indonesia's continuing debt problem can be dealt with only on an international basis. A multi-national approach is therefore both desirable and necessary. All the major trading nations of the world have a stake in the economic recovery of a nation with abundant natural resources and a political economy of over 100 million people. We should ensure that they bear their fair share of the burden, and avoid a division of labor in which, in effect, we feed the cow and they milk it.
C. Maximum Role for Private Investment
Private investment from all of the developed countries must play an important role in Indonesia's transition from the stabilization to the phase of rehabilitation and development. We should continue to encourage Indonesia to maintain a favorable environment for foreign investment.
D. Support of "Modernizers"
One of Indonesia's greatest assets is the cadre of young men trained in American and Western European universities. These are the people that form the cutting edge of Indonesia's drive to develop its economy and its political institutions. They are our allies and our actions should support them.
E. "Low Profile"
The United States must make a major contribution to Indonesian recovery. The principal elements of our strategy--international agency involvement and multi-national participation--require, however, that we play a supporting rather than a central role.
F. Bilateral Program
While making our major contribution in the multi-national context, we should also continue small, intensive bilateral programs.
III. U.S. Actions
15. A. Debt Rescheduling
The United States will join other creditor countries in Paris in October to deal with the problem of Indonesia's debts falling due after January 1, 1968. We should build upon understandings already established in past reschedulings and, in determining changes, take due account of Indonesia's capacity to service its debts. Whatever the outcome, the fact will remain that Indonesia in the near term will have no resources to devote to the reduction of a growing external debt of over $21/2 billion.
B. New Aid
The donor countries will meet in Amsterdam in November to consider the IMF's estimate of Indonesia's requirements for new assistance during CY 1968, and to discuss the IBRD report on development planning. We can reasonably expect to be called on to contribute at least the $65 million pledged for CY 1967 and possibly one-half again that amount.
C. Bilateral Programs
We plan to continue to provide non-combat equipment under MAP for the civic mission program of the Indonesian armed forces. This assistance permits the Army to strengthen its ties with the civilian sector, and at the same time provides high priority services in the field of road construction, flood control and irrigation system maintenance. The training of Indonesian officers in our Service schools in economically beneficial management and technical skills will continue. On the civilian side, we intend to support under PL-480, Title II, food for work programs which increase agricultural production. We intend also to provide technical assistance, and a program of educational exchange has been resumed and will be expanded.
IV. Anticipated Problems
Unreasonable Requests for Aid
16. While the Indonesian Government accepts and supports the concept of a multi-national approach to Indonesia's economic problems, there has been in the past a tendency, particularly on the military side, to look for easy solutions in an outpouring of large quantities of American assistance. The new Indonesian leaders have gained, during the past year, a more realistic understanding of U.S. capabilities and aid procedures. We must anticipate, nevertheless, some further random, uncoordinated requests for substantial bilateral assistance.
17. Two-thirds of the population of Indonesia live on one-fourteenth of its land area. Economic recovery and political stability cannot in the long run be achieved without population control and family planning on the central island of Java. The Indonesian leaders are beginning to turn in a tentative fashion to face this problem. This is a sensitive issue on which heavy-handed pressure would be self- defeating, but we should be quietly persistent in encouraging a vigorous program of family planning.
Volume and Nature of Our Assistance
18. The most difficult problem confronting the United States during the coming year will be providing the volume and type of assistance to meet our fair share of Indonesia's needs. The principal elements of this problem are:
A. Meshing Capacity With Needs
If major cuts in the AID appropriation are made this year, the amount which we can lend to Indonesia will be reduced. Indonesia needs rice, but must compete with the preemptive requirements of Viet-Nam. Cotton, through PL-480, could be a major element in our aid, but Indonesia's broken down textile industry has not been able to compete with cheap Hong Kong imports. When idle capacity is restored, Indonesia can absorb increasing amounts of our raw cotton.
As a member of a group working on a common problem, we are under special obligation not only to carry our share of the burden, but also to make our assistance available on terms no less generous than those offered by other countries. In addition, as Indonesia moves from the stabilization to the development phase its needs will increase. Japan and Western Europe may find it difficult to increase significantly their current levels of assistance to Indonesia, and we may be unable to limit our share to one-third or to achieve a rigid matching formula.
C. Inadequate Resources
Even assuming the best possible AID-PL-480 mix, it is almost certain that we will not be able to meet from anticipated resources one-third of Indonesia's 1968 requirements. It may therefore be necessary to go to Congress early next year for supplementary funds. We have been in close touch with key members of Congress on the Indonesian situation, and have found them favorably disposed both towards assistance to the Suharto government and to our multi-national method of approach.
19. Indonesia has been led to believe that if it faced up to its economic problems, took the politically difficult steps to stabilize its economy, and adopted sensible policies of self-help, it could expect support from the world community. Indonesia's leaders have started down this difficult road, and for them there is no turning back. The pace of change must be maintained. We have seen at home and abroad how improving conditions create expectations which become explosive if not fulfilled. The Indonesians are performing on their side of the bargain, and the United States and other countries of the Free World are confronted with the challenge of dealing not with a failure, but with a prospective success. We should not fail them.
242. Memorandum From the Administrator, Agency for International Development (Gaud) and Secretary of Agriculture Freeman to President Johnson/1/
Washington, August 8, 1967.
/1/Source: Johnson Library, Meeting Notes Files, Briefing Papers for NSC Meeting, 8/9/97. Confidential.
Helping the Suharto Government get its economic house in order involves two separable problems:
(1) How to fulfill the U.S. share of the Inter-Governmental Group support of the Indonesia stabilization program for Calendar Year 1967, on which we are still $27 million short of the $65 million U.S. commitment; and
(2) How to help stimulate rapid enough developmental progress in Indonesia to sustain public and army support of the promising new trend in Indonesian political orientation and leadership without loosening the economic stabilization discipline which is essential to long run solution of Indonesia's problems. The second of these two matters will be the subject of studies being undertaken by the World Bank and Asian Development Bank, which will not be available even in preliminary outline until about the end of this year.
This memorandum deals with the first item. A.I.D., with the concurrence of State,/2/ proposes to meet the U.S. commitment this year in the following way:
/2/On July 26 officials at the Under Secretary/Assistant Administrator level from State, Agriculture, and AID met to discuss aid to Indonesia. The issues to be discussed at the meeting were previewed in a memorandum from Wright to Rostow, July 27. (Ibid., National Security File, Country File, Indonesia, Vol. VIII, Memos, 6/67-8/68, [2 of 2])
Actions already taken:
A.I.D. loans--$30 million
P.L. 480 rice credit--$20 million
The balance of $5-$7 million, to be covered in November by either P.L. 480 cotton credit (if demand for raw cotton has by then revived) or by an A.I.D. loan.
Agriculture concurs in the rice component of this package if it is decided as a matter of policy that Indonesia is of sufficiently high priority to risk diversion of rice from cash exports. Whether such diversion will actually be necessary depends on the size of this Fall's U.S. rice harvest, the trend in Vietnam rice requirements and the behavior of the world rice market. With a bumper U.S. crop, we might get by without any visible diversion at all. But if we didn't--and if the diversion were fairly obvious--we could expect criticism on the Hill. Secretary Freeman is prepared to take the risk if you concur with the State/A.I.D. proposition that Indonesia is important enough to be worth it.
Specifically, this package requires your approval to commit 100,000 tons of P.L. 480 rice to Indonesia, as a priority claim on a supply which otherwise could be fully absorbed in Vietnam, Africa, and in commercial exports. This would not mean a rice shortage in Vietnam. It would still permit providing Vietnam 550,000 tons under P.L. 480 from the current U.S. crop. In addition, we would still be able in the Spring to provide an additional 100,000 to 200,000 tons to Vietnam from the current crop (to be divided between P.L. 480 and cash sales, depending on the Vietnamese foreign exchange situation), plus small amounts to fulfill outstanding commitments to the Congo, Ghana and Liberia.
However, the above allocation totals more than the minimum of 670,000 tons Agriculture now expects to be available for P.L. 480 from this year's crop. Although our crop may turn out to be large enough to cover it, we won't know until October. But it makes very good foreign policy sense to let the Indonesians know now. The price of telling them now is that if our crop is not any larger than the low end of Agriculture's range, we will have to choose between lowering P.L. 480 rice shipments to Vietnam and cutting into U.S. commercial rice exports.
Even with a very large U.S. crop, this rice commitment to Indonesia would probably foreclose the possibility of meeting 100,000 tons of Vietnam rice requirements from the United States, and cause Vietnam to turn to Thailand or Taiwan for purchases with Vietnamese-owned foreign exchange for that amount. We believe this will cause minimum domestic political difficulty here if the commitment to Indonesia is made at the beginning of the U.S. crop, i.e., this month, and any further Vietnamese purchases are made from Thailand/Taiwan next spring when the U.S. exportable surplus of rice is fully committed elsewhere.
The extreme tightness of U.S. rice availabilities, despite a record crop, and the growing shortage of rice in Southeast Asia to meet the world demand indicate need for reconsideration of existing restraints on U.S. rice acreage allocations for the future. This question will be addressed by the Department of Agriculture, State, Budget Bureau and A.I.D. in the near future looking toward budget decisions affecting the 1968-69 crop year.
We may need to return to you later concerning the $7 million of our 1967 commitment which will remain to be met beyond this 100,000 tons of rice. This will have to be put together through some combination of non-grain P.L. 480 and A.I.D. loans. But you need not make that decision now.
/3/There is no indication of Presidential approval on the memorandum.
That you approve a priority claim of Indonesia for 100,000 tons of the P.L. 480 rice program, on the terms proposed above, subject to the development of an agricultural self-help commitment by the Indonesians satisfactory to Secretary Freeman and Administrator Gaud.
William S. Gaud
243. Memorandum From the President's Special Assistant (Rostow) to President Johnson/1/
Washington, August 8, 1967, 6:10 p.m.
/1/Source: Johnson Library, Meeting Notes Files, Briefing Papers for NSC Meeting, 8/9/67. Confidential.
The NSC meeting is on Indonesia; but, because the heart of our Indonesian aid program for the remainder of this year is 100,000 tons of rice, I am submitting to you the attached action documents on the PL 480 rice programs for Viet Nam and Indonesia (Tab A)./2/ Because there are domestic implications, we are inviting Orville Freeman to the meeting.
/2/At Tab A is an August 8 memorandum from Rostow to the President (ibid.) and Document 242.
The NSC meeting need not--and in my view should not--be the occasion for your deciding on the rice question; but it is a good occasion for debate and cross-examination.
I suggest the following procedure for the meeting itself.
I. Introduction. You should state that the progress made by Indonesia in the last year is heartening. Within the possibilities of our resources, you want us to do our share in an Indonesian aid program which brings the Suharto government forward to stability and success.
II. You might then ask Under Secretary Katzenbach to review briefly what has been accomplished since our last NSC meeting a year ago (see Tab B for State paper on top of which is a summary we have prepared)./3/
/3/At Tab B is Document 241 and a White House summary of it. (Johnson Library, Meeting Note File, #4, 1/67-11/67)
III. Under Secretary Katzenbach will ask Bill Bundy to amplify and define major action problems now before us.
IV. You may then wish to go round the table and get comments from:
--Gaud on the development picture and prospects in Indonesia;
V. You may then wish to put these questions:
--What are the 1968 prospects for assistance from all sources for Indonesia?
Bill Bundy and Bill Gaud might be asked to speak to these questions.
VI. (FYI: The World Bank and the Asian Development Bank, as well as a number of private enterprises, will be examining Indonesian development possibilities in the months ahead.) You may wish to conclude by asking that a development program for 1968 and beyond be prepared and submitted to you by, say, October 31, including:
--major Indonesian efforts;
244. Memorandum for the Record/1/
Washington, August 9, 1967.
/1/Source: Johnson Library, National Security File, NSC Meetings, Vol. 4, Tab 55, 8/9/67, Indonesia. Secret. Drafted by Jorden. Tom Johnson also prepared a record of this meeting, see footnotes below for significant additional information from his notes on the discussion of Indonesia. (Ibid., Tom Johnson Meeting Notes, 8/9/67)
The meeting was held in the Cabinet Room. It began at 12:15 p.m. and ended at 1:10 p.m. Those present were:
The President opened the meeting by noting the great importance of Indonesia and by recalling the meeting on this country one year ago in the same room. He asked Under Secretary Katzenbach for a review of developments over the past year.
Katzenbach summarized the State paper which had been prepared for the meeting./2/ He said that our problems were those of progress. He forecast a need for perhaps $100 million as the U.S. share of Indonesia's requirements in 1968.
Mr. Bundy noted that Indonesia had just joined with neighboring states in the Association of Southeast Asian Nations which met in Bangkok. Regarding the $100 million, he said that at present $20 million might come from AID, $20 million in rice, $20 million in cotton. This left a shortfall of $40 million./3/
/3/Tom Johnson's notes report that Bundy stated: "I would say that Indonesia is one-third of the way up the slope. There has been much promising economic activity. They have some resources of great value. For instance, they have oil of low sulfur content which would be useful in our cities." Bundy also "did not see how we can handle one-third" of $300 million.
Gaud spoke on the need for priorities in Jakarta. He said they should focus on: (1) Exports (especially oil and rubber), (2) agriculture (rice production, transport, price supports), (3) a broader tax base, and (4) technical training (business administration, etc.).
The President asked why only $20 million was programmed for 1968 aid to Indonesia./4/ Gaud said it was the general judgment that more was not possible from Congress, and that the additional should be requested in a supplemental request after January 1.
/4/According to Tom Johnson's notes, the President asked: "Should we lend more money? Here is a country which has rejected communism and is pulling itself up by its bootstraps. Should we ask for an additional $100 million in this year's request?" Katzenbach answered. "No, I do not think so. I do not believe the Congress would give us a net gain. They would probably take it out of some other area such as Latin America."
Helms spoke admiringly of the quality of the U.S. team in Jakarta./5/
/5/According to Tom Johnson's notes, Helms also stated that the excellence in Indonesia started at the Ambassadorial level and went right on down, and added that "It's all low key. Our presence is not prominent."
Marks said USIA was carrying out a low-key operation and that it might expand a little, but not dramatically.
Freeman said that present estimates indicated that an additional 50-80,000 tons of rice might become available in this year's crop. He thought Indonesia could do a great deal more in agricultural production and said it should be a rice exporter.
The President said he would like to see Indonesia become a "showcase." It has great potential./6/ It is one of the few places in the world that has moved in our direction. He asked if we were doing all we could to boost oil production. Gaud and others assured him that the American companies (Caltex and Stanvac) were moving ahead and production was up.
/6/According to Tom Johnson's notes, the President also said: "We should take some of our ambitious plans which haven't been working in other countries and put them into action in Indonesia."
The Vice President said Japan could buy more oil, with minor changes in its refineries. The Japanese were worried about over-dependence on Middle East supplies. He recalled his long acquaintance with Foreign Minister Malik. He said military rule continued and was likely to for some time. He said that additional resources after January 1 might have to be drained off from other sources rather than our looking to new funds.
Fowler said he disagreed with one sentence in the State report, which was the suggestion that we might have to do more than one-third in the year ahead if Japan and Western Europe didn't come through. He urged that we stand fast on the one-third share formulation.
Rostow spoke of the importance of textiles and the need to rehabilitate the Indonesian textile industry. This would provide a large market for our cotton.
General Wheeler spoke of the Indonesian military forces. He said the Army was U.S.-oriented; the Navy and Air Force were Soviet-oriented. The military is capable of maintaining internal security. He saw no need for "fancy" military equipment. The main need was for civic action support and training equipment./7/
/7/According to an August 25 memorandum from Helms to the President, the latter asked at this meeting if Indonesian troops might be available for service in South Vietnam. (Johnson Library, National Security File, Country File, Indonesia, Vol. VIII, 6/67-8/68) The President received an oral answer, but CIA also prepared a study, Intelligence Memorandum No. 1382/67, August 25, which concluded that Indonesia would refuse to send troops to South Vietnam because notwithstanding its anti-Communism, its overall attitude toward the war in Vietnam was ambivalent. Furthermore the Indonesian army was primarily an infantry force, defensively oriented, and generally overage. (Washington National Records Center, RG 330, OSD Files: FRC 72 A 2468, Indonesia, 1967)
McNamara said Indonesia was getting about $6 million in equipment and training. The country should have high priority. He questioned whether any supplemental would be possible after January 1, that the needed resources would have to come from other programs. He said he thought the Philippines and Thailand should have lower priority than Indonesia. The priorities should be determined in Washington, not the field.
The President asked for the total AID outlays last year and this.
Gaud said the figures were about as follows:
There was a brief discussion of Turkey and its agricultural development.
The Vice President noted his talks with Murtopo and Sudjono, two of Suharto's leading advisers. Both stressed the vital importance of internal transport and need for spare parts. Italy and other suppliers should be pressed to make parts available.
There was a short discussion of the Congo situation.
The President adjourned the meeting.