515 Critchley to Department of External Affairs

Cablegram C26 THE HAGUE, 22 October 1949, 6 p.m.

RESTRICTED

The main problems outstanding are still those set out in paragraph 3 of my C.23. [1] Intensive high level discussions are continuing and it is expected to conclude the Conference on or about the 1st November.

2. The Steering Committee has established a Debt Commission (see paragraph 10 of my C.23) consisting of one representative from each of the Netherlands, Republican and B.F.O. delegations and one representative from the Commission (Cochran). The task of the Commission is to propose the amount of the debt which will be accepted by the R.I.S. at the date of the transfer of Sovereignty.

In determining this amount due consideration will be given to- (a) The amount of extra military expenditures (b) The amount of other expenditures which the Commission may attribute to military action.

3. The Commission can also make proposals with regard to- (a) Interest and amortisation of the recognized debt (b) Undertakings required by the creditor from the debtor.

(c) Escape clause.

4. The Indonesians and Netherlands delegations agree they will accept the proposals of the Commission, and if unanimity cannot be obtained the delegations are ready to accept proposals from the representative of the U.N.C.I. The Debt Commission will report by 24th October.

5. The undertakings (paragraph 3(b)) will be limited to generalities such as an undertaking to follow economic and monetary practices approved by international standards and to seek a sound economic and monetary system. It has been agreed that there will be no specific guarantees such as a continuation of the 'tin pledge' but the Netherlands delegation has reserved the right to raise this question elsewhere.

6. The escape clause (paragraph 3(c) above) refers to the possibility of providing for mutual consultation and readjustment in the event of the debt service proving too heavy. The Indonesians are also anxious for a right to reopen the question of the size of the debt if figures which become available subsequently show that the decision of the Commission was wide off the mark.

1 Document 509.

[AA : A1838, 403/3/1/1, xxv]