527 Draft Cabinet Submission by Evatt [1]

CANBERRA, 4 November 1949

SECRET

Political Settlement in Indonesia The recently concluded Round Table Conference at The Hague has resulted in the agreement of the parties to:

(i) Charter of Transfer of Sovereignty (ii) Statute of the Netherlands-Indonesian Union.

2. These Instruments require ratification by the Netherlands and Indonesian constitutional authorities and a draft Constitution for the future Indonesian federation has yet to be ratified by the component States. If ratification takes place there will be a transfer of sovereignty to the United States of Indonesia not later than December 30th, 1949.

Australian Interests 3. The prospective emergence of a new sovereign State in this area is of great future significance to Australia. Australia has earned great goodwill among the Indonesian leaders and people by the part we have played in bringing their dispute with the Dutch before the United Nations and by the constructive work of Australian representatives on the United Nations Commission for Indonesia, which has played a vital role in moderating the attitudes of the parties and, through conciliation, bringing them towards an agreed political settlement.

4. It is desirable that Australia take prompt action, as and when the new State comes into existence, to exchange diplomatic representatives at the appropriate level.

Economic Relations with Indonesia 5. At a time when an attitude of great goodwill exists towards Australia, it is also desirable that we take prompt action to discuss our mutual economic interests and endeavour to overcome any difficulties which have impeded close economic relations in the past. At the same time, it may prove desirable for Australia to make a tangible contribution towards solving the immense rehabilitation problems of the area through provision of further supplies for relief and rehabilitation and, more particularly, through the provision of direct technical assistance. Such assistance should be in addition to any contribution which Australia may make to international technical assistance afforded through the medium of the United Nations and associated organisations.

6. It will be recalled that on July 9th, 1947, with the approval of the Prime Minister, I made a public statement [2] to the effect that 'the Australian Government would be happy to give the interim Federal Government of Indonesia, when it is established, advice and assistance in such matters as trade, finance, communications, and economic rehabilitation and development'. At that time, the Treasury was considering the possibility of an extension of credit to the interim Government of Indonesia, as and when it was established, accompanied by technical advice and the direct supply of equipment and materials needed for economic rehabilitation in the area. I understand that, at that time, the Treasurer [3] was disposed to consider favourably an arrangement of this kind.

Further consideration of the question ceased when the Dutch took military action.

7. It is therefore suggested that the various Commonwealth Departments who are concerned with future economic relationships with this area should examine promptly any questions which appear to deserve direct discussion with the new Government of the United States of Indonesia, when it is established, with a view to the sending of an Economic Mission to the area after exploratory discussions with the Government.

Recommendation 8. Accordingly, I recommend to Cabinet:

(a) that the Government agree to an exchange of diplomatic representatives, as and when it becomes appropriate;

(b) that the Government agree in principle to afford further aid to the United States of Indonesia in the form of supplies and technical assistance, subject to presentation to Cabinet of detailed proposals with financial estimates before any final decision is taken;

(c) that the Departments of the Treasury and External Affairs, together with other Departments, examine the feasibility of Australia affording financial assistance to the United States of Indonesia by way of loan and assistance in procurement of supplies for export;

(d) that the Departments of Commerce & Agriculture, Trade &

Customs, Shipping & Fuel, Civil Aviation, Treasury and any other Departments which are concerned, investigate questions to be taken up with the new Government of the United States of Indonesia;

(e) that those Departments which find that there are questions deserving discussion with the United States of Indonesia, communicate with the Department of External Affairs, giving a preliminary communication of their views; and (f) that the Department of External Affairs convene an inter- departmental meeting, if possible within four weeks, to consider what further action is necessary and to make preparations for the sending of an Economic Mission to the area in early 1950.

1 The draft submissions was annotated: ' Considered but not taken further'. The submission was presumably postponed because of the forthcoming General Election.

2 See Document 110 in Volume XI.

3 J.B. Chifley.

[AA : A1838, 381/3/1/2, i]