121 Chifley  to Dedman
Memorandum CANBERRA, 6 October 1948
It has been the practice in the past for the Department of External Affairs to prepare at regular intervals for the Higher Defence Organisation reviews of the world situation to assist in the preparation of defence plans and appreciations. Such a review was prepared in 1947 and ultimately came before a meeting of the Defence Council last April in a somewhat amended form.
I feel that this procedure is not entirely satisfactory, especially as there is inevitably a lapse of time between the preparation of a review by the Department, and its assimilation, and preparation by the High Defence Organisation of consequential appreciations which ultimately go before the Defence Council.
The Department has now completed a survey of political events and trends in South-East Asia which I forward herewith for your perusal. This survey proceeds from the principle that Australia's predominant political interest and defence preoccupation must be in the South-East Asia area, and sets out an active political programme which might be developed by the Australian Government for closer relations with countries in South-East Asia. The development of such a programme would be a practical means of stabilising this potentially dangerous area. I do not think that this statement is entirely appropriate for consideration by the Council for Defence as it is essentially political. The proposals, however, should be considered in a defence context and I should therefore welcome your comments on it.
1 Chifley was acting Minister for External Affairs while Evatt was overseas, from July 1948 to January 1949 as President of the General Assembly.
CANBERRA, 30 September 1948
This appreciation deals with the position of Australia, as a South-East Asian country, in the event of a conflict between one or more of the Western powers and one or more of the Eastern European countries.
1. Position of China For Australia, one of the most crucial factors in the event of such a conflict would be the attitude of China.
It is quite impossible to forecast which, if either, of the two Governments at present exercising authority over parts of China will ultimately prevail. Presumably, in the event of conflict, there would be fierce competition between Eastern and Western powers for Chinese support. Presumably there would be large-scale assistance given to the Government of the north of China from the Eastern powers, and similar assistance to the Government of the south of China from the Western powers. The result might be to divide Chinese support between the two conflicting groups of powers.
Whichever Government ultimately prevails in China as a whole, or whichever Governments ultimately prevail in North and in South China, Chinese longstanding ambitions in South-East Asia, outlined below, which were temporarily thwarted by similar Japanese ambitions, will still be pursued. In the event of a European dispute in which China plays some part, the involvement of South- East Asia is certain, regardless of the character of the Chinese Government or Governments, and regardless also with which side China aligns itself Australia, whether directly involved in the main conflict or not, will be no less concerned than during Japanese aggression in South-East Asia and the Pacific.
If the present Central Government of China becomes involved in war, either with the government exercising authority in the north, or with other powers, it will endeavour to mobilise the quite vital resources of South-East Asia for its own war purposes. These are the resources which Japan sought to acquire, and they are even more vital to the Chinese economy. (See Appendix 'A' for a list of the resources of South-East Asia in relation to the resources of the Chinese economy. ) It has been argued (see paragraph 20 of Appreciation of Joint Intelligence Committee No. 1/47 ) that China offers no threat to Australia because she has become impoverished by many years of war. But this is wrong reasoning. China always was and always will be impoverished because of the poorness of her natural resources.
(See Appendix 'B' for description of resources of China and of her export and import trade.) Her poorness supplies a pressing reason for interest in the vastly rich areas of South-East Asia.
It is for this reason that it has been the consistent policy of all Chinese Governments to retain the national sympathies of Chinese throughout South-East Asia and the Pacific. China depends for its future development on the remittances to home and other assistance it can obtain from its overseas nationals. (See Appendix 'C' for the number of Chinese in each of the countries of this area.) Sir Frederic Eggleston wrote in May 1948:
'The Chinese Government is using its overseas nationals as a spearhead of Chinese advance into other countries. China has adopted a policy which endeavours to prevent her overseas nationals from assimilating into the communities of the countries to which they migrate. These overseas nationals are organised politically, they elect representatives to Chinese political bodies, and a comprehensive educational policy is being organised from China; they are staffed by teachers trained in China, inspected by officials of the Chinese Government, and employ text books written in that country. Chinese abroad are encouraged to resist compulsory education in the countries to which they migrate.
It is quite clear that the Chinese abroad aim to become a separate community not taking part in the life of the State but organising and maintaining their own political status. The Chinese take as a basis of nationality jus sanguinis so that Chinese overseas are always regarded as subject to Chinese law.' (See Appendix 'D' for a despatch by Sir Frederic Eggleston on Chinese overseas policy.) In Malaya there is a majority of Chinese, and in almost all other countries of South-East Asia and the Pacific there is a minority which, because of its monopoly influence over trade and commerce, has the effective influence of a majority. As Sir Frederic Eggleston has pointed out, the Chinese Government has not only encouraged these Chinese to retain their nationality, but has also arranged for elected representation of overseas nationals in the National Assembly. Recently, even in Australia, attempts were made to hold elections for an Australian representative to the Chinese National Assembly. British, Siamese, Indian and Philippine Governments have had to protest at Chinese attempts to organise elections for the National Assembly and Legislative and Central Yuan amongst Chinese resident in their territories.
Moreover, throughout the area there are Chinese secret societies which are essentially political movements and can be powerful forces if directed. These societies are at the back of much of the present trouble in Malaya. (See Appendix 'E' for further information on these societies.) Whatever Government is in power in China, therefore, whether it be a Communist Government or the present Central Government in its present or in a changed form, Chinese policy and interest in South-East Asia win not change. Any open conflict between North and South China, or any involvement in a broader global conflict, will lead to increased interest in South-East Asia. A Communist- dominated China, which could result from the present confused political situation in China, and which could follow quickly on the commencement of an East-West conflict, would certainly aim at acquiring the use of the resources of South-East Asia, not by a military action, as was the case with Japan, but by internal action, using Chinese populations and the already organised political groupings of secret societies. Presumably, too, assistance in arms and munitions, at present lacking, would reach the peoples of South-East Asia.
2. The Governments of South-East Asia Already there are signs of movements along these lines. The present Governments of South-East Asia are showing their concern, as was evidenced by the protests regarding elections referred to above. Some are already faced with organised revolution, or organised sabotage. (See Appendix 'F' for a list of the Governments with a brief description of their political philosophies.) Australians visiting the area find a position which can be summarised briefly as follows: almost everywhere there are moderate governments with strong left-wing groups threatening their position. These groups are either included in the government or are a recognised opposition party. The moderate governments, but still more the left-wing minorities, are resisting French, Dutch, British, or any other colonial influence. They are equally opposed to being tied up with conditions which might be imposed in consideration for American financial assistance. They are, at the same time, conscious of the urgent need for capital equipment, technical and scientific advice, and more especially administrative experience. They therefore are inclined to look to Australia, which is not a colonial power and has not the financial resources to threaten them, for their required assistance and advice. Failing such help, they feel they have no alternative but to turn to the Soviet, which is prepared to offer on an almost unlimited scale the technical and administrative advice they need.
The moderate Governments do not wish this, particularly as they realise it is the end of their own Governments, but they have no grounds for opposing closer Soviet relations in the absence of assistance from elsewhere.
Perhaps one of the clearest examples of this process is in Indonesia where we have been able to watch developments step by step. Australia was able to uphold the moderate Government in the Republic by holding out hope of the success of the Committee of Good Offices. As time has gone on, the Republic has more and more been forced to the view, which has been put forward by Russia, that Australia has been acting in effect for the Dutch and the Republic can achieve no results from the Committee. When this point of view was beginning to carry weight, an Indonesian, who had been in Czechoslovakia, returned with a Communist organiser.
Shortly after, the moderate government was faced with armed opposition.
3. India India, the only other power in South-East Asia with resources and organisation capable of offering any threat to Australia in association with a military power, is in a very different category from China. She has minority populations in the area, especially Burma and Ceylon, but they have not been organised in the same way as the Chinese communities and do not constitute the same danger to security. India's recent emergence as a self-governing nation and her pressing political difficulties domestically have so far prevented her from developing a coherent foreign policy in relation to South-East Asian countries, save the vaguely expressed aspiration to leadership in South-East Asia and the Indian Ocean zone. She is therefore potentially a rival of Chinese ambitions in South-East Asia and, while unlikely in the near future to initiate any active steps towards asserting herself in that region, India would certainly be very reluctant to see China established in a predominant position there. Australian foreign policy should therefore be directed towards encouraging this trend in India's foreign policy and using it as a check to Chinese activities (whether or not disguised as Pan Asiatic movements). The views expressed in Appreciation 1/47 need amendment from this point of view.
4. U.S.A. Interest The United States Government has, until recently, taken little interest in political developments in South-East Asia. In Indonesia alone, after many many warnings and representations, is the United States taking an active interest. The United States Government has been interested financially and politically almost exclusively in European developments. Meanwhile, the situation in South-East Asia rapidly deteriorates. The 'Beat Hider First' philosophy still prevails-Europe receives not only first, but almost exclusive, attention. This in itself, together with a forced withdrawal of French, Dutch and British influence, tends to invite the interest in South-East Asia of those powers being held or thwarted in the European area. Paragraph 18 of Appreciation 1/47, which postulates no Soviet activity in SouthEast Asia, requires reconsideration from this point of view.
5. Defence Implications In summary, the facts seem to indicate that neither China as such, nor Communist influence as such, offers any threat to South-East Asia, and hence to Australia, which will not be offset by other national developments in India and South-East Asia. A combination of communist influence, working through Chinese nationals and taking advantage of Chinese policy, can threaten the security of the whole area. The methods used in the initial stages, moreover, would not be such as could be combatted by ordinary military manoeuvres.
This broad picture, read in conjunction with the factual appendices attached, has some important considerations from a strategic and defence point of view. For instance, the conclusions of Appreciation 1/47 would require, if it is held to be a valid picture, substantial revision. Conclusion (b) that the U.S.S.R. is the only major power against whom the British Commonwealth of Nations is likely to be involved in a war, if implying no direct threat from China or Chinese in South-East Asia, is misleading.
The conclusion (e) that likely areas of Australian participation would be the Middle East and the Far East seems to ignore the facts of South-East Asia.
Moreover, this picture has implications for defence preparations:
the type of equipment which might be required for South-East Asia warfare: the preparations necessary to combat the undeclared warfare of Chinese minorities: the degree to which Australian resources can be committed outside South-East Asia.
6. Political Policy Implications There are also implications which are relevant to foreign policy, having in mind long-term strategic requirements. It is these which are the main concern of the present appreciation.
In particular, the picture outlined above points to the need, in strategic interests, of early and determined action along lines such as the following:-
(a) A deliberate financial and industrial policy to meet the developmental needs of the area: for example, the manufacture in Australia of the specialised agricultural and other hardware urgently needed in the area, the preparation of foodstuffs for tropical areas, the processing in Northern Australia of the raw materials of the area;
(b) The development of Northern Australia by the increase in its population, and by the use of its resources for the benefit of the near-north area;
(c) A deliberate policy to continue and extend the present arrangements for giving scholarships and establishing libraries throughout South-East Asia;
(d) A deliberate policy to make available technical and administrative advice wherever required in South-East Asia;
(e) The provision of every possible facility for technical training of apprentices and craftsmen from Eastern countries in Australia's technical schools, workshops, foundries, etc.;
(f) A detailed examination of the resources, particularly the minerals, of South-East Asia;
(g) A development of air routes to points in South-East Asia, and the study of alternative air routes to Europe in the event of present air routes not being practical because of local political changes;
(h) The careful development of Radio Australia, based on a policy of encouraging genuine nationalistic developments, and national movements to combat foreign influences. (The production in Australia of radios suitable to the tropical conditions is a necessary accompanying action.);
(i) Treaty relations with Portuguese Timor and perhaps New Caledonia by which air base facilities might be obtained, and by which, at the same time, assistance might be given to these countries (to the financial benefit of Australia) by the development with Australian resources of products such as coffee, cotton, rubber, oil and timber. Shipping is another problem of concern to both places. (See Appendices 'G' and 'H' for summaries of our economic relations with these two countries and for detailed proposals.);
(j) Acting in Australian Territories to forestall any attempt to exploit situations brought about by inadequate food, health, wage or other standards;
(k) Consultation with United States authorities to enliven interest in the problems of South-East Asia;
(l) An extension of Australian Consular posts in South-East Asia.
At present there are Australian Consuls at Timor, Batavia, Singapore, Bangkok, the Philippines, and China. Gaps exist in Borneo, Sumatra, French Indo-China, and Burma.
Along with this extension there should be arrangements to include on the Consular staff observers with Defence background;
(m)Ministerial and Parliamentary missions to this area would encourage the Governments and peoples concerned to believe that Australia is willing and able to stand behind them in their requirements and to make unnecessary the turning to any other power;
(n) The encouragement of missions, officials, and businessmen to visit Australia to obtain advice and materials and goods.
Such matters as these, which vary in importance and in practicability, have an important long-term defence aspect, and are best considered (though not executed) in a defence context. A definite Government direction with respect to these matters would make possible the necessary administrative action by the appropriate civil or defence bodies within the existing administrative framework. 
[AA:A1068/7, DL47/5/1, i]
2 Appendixes not published.
3 Volume 12, Document 160.
4 In a file note dated 29 December 1948, Moodie expressed hope that authority would be given 'for energetic prosecution' from the beginning of the new year of the 'practical 14 point long-term programme to implement a. active Australian policy in South East Asia'. He added that the defence aspects were 'of secondary importance (except in the widest sense-of its aim to stabilise a potentially dangerous area) since the matter is primarily political'.