529 Embassy in Washington to Department of External Affairs

Cablegram 1110 WASHINGTON, 10 November 1949, 3.15 p.m.

CONFIDENTIAL

In discussion with Lacy, State Department, following ascertained.

(1) E.C.A. has released 40 million dollars which likely to be allocated textiles 27 million dollars, rice 10 million dollars, motor transport 3 million dollars. Textiles probably come from Japan, rice and trucks from United States.

(2) No other offer of economic assistance will be made until Indonesia asks for it. No application yet made for loan from Export-Import Bank. It has been made clear to Indonesian representatives that such a loan would be on purely business basis and would not be a political loan. Bank would require loan to be used for some specific project and to be self-liquidating.

(3) Assistance under point four [1] will have to await Congressional action. It has been pointed out to Indonesia that they should not expect much from United States. Indonesians have been encouraged to look particularly to Dutch and also to other countries such as Australia for services of technical experts as United States is short of such persons particularly having in mind world-wide demand. High cost of United States exports also emphasised.

(4) Lacy was anxious to learn what assistance Australia would be able to give in the way of technical experts and supplying of economic needs. Glad any available information on your ideas.

(5) Regarding Communist influence Lacy considered that Dutch had in the past over-emphasised this aspect. However, he was concerned by present growth of influence in T.N.I. The prospect of controlling Communist influence would depend on many factors including both the translation and solution of economic issues etc.

(6) Cochran likely to leave U.N.C.I.

(7) Lacy said that Department strongly supported the view that attempts should be made over a period to persuade the Indonesians to give up claims to New Guinea. It was felt that Indonesians had slender claim and that Dutch more likely to develop its resources.

Such cushioning of the blow to the Dutch also desirable. Economy of Holland required such a colony. Dutch colonialism probably better than Indonesian colonialism. Glad of your views on this issue.

1 As the fourth point of his inaugural address on 20 January, the US President, Harry Truman, had announce that the United States, in co-operation with other nations, 'should foster capital investment in areas needing development'. 'Point Four' developed into a program, encouraged by the US Government, to provide technical assistance and private investment for the under- developed world.

[AA : A4357/2, 252, ii]