PORTUGUESE TIMOR

L. With reference to your memorandum of 12th January 1938 [1] and
previous correspondence on the subject of the development of
Australian influence in Portuguese Timor, it is noted from your
memorandum of 29th September 1937 [2] that the Government has been
seized for some time with the desirability of precluding Japanese
interests from obtaining a predominant control over Portuguese
Timor. From the point of view of the development of air
communications to this end, it is now clear that it is
impracticable to extend the Empire Air Mail Scheme to include
Dilli. It would be possible to provide an air service from
Australia, terminating at Dilli at an estimated annual cost of
5,000, but although such a service would be of advantage as a
factor in the extension of Australian influence in Portuguese
Timor, there appears to be little prospect of the service becoming
self-supporting.

2. The Defence Committee consider that from the aspect of
Australian Defence, there are no features which would make it
desirable to expend on this service, monies otherwise available
for our own Defence needs and which are required for the
maintenance of our defences on a satisfactory basis.

Nevertheless, it is appreciated that on broader political grounds,
any action which would be instrumental in the development of
Australian influence in Portuguese Timor should be encouraged, and
this memorandum might be read in conjunction with my secret letter
of 6th December 1937 (concerning Yampi Sound Iron Ore Deposit)
[3], which touches upon the question of Japanese penetration in
North Australian waters. [4]

F.G.SHEDDEN