Copies to Mr J. A. Lyons, Prime Minister, and Director of Naval
Intelligence, Melbourne

Dispatch 98E (copy) BATAVIA, 14 July 1937
Received in Canberra n.d.

SECRET [on or before 18 August 1937]

I have the honour to invite your reference to my despatch No. 84E
of the 17th June [1] and earlier correspondence relating to
reports of Japanese efforts to secure a concession in Portuguese
Timor.

2. In this connection, I have recently been informed in strict
confidence by the Adviser for Far Eastern Affairs (Mr Lovink) that
an employee of the Nanyo Kohatsu Kaisha lately stated to him that
his company had come to an agreement to take over lands of the
SOCIEDADE AGRICOLA PATRIA TRAVARYO of Dilli covering about 15,000
hectares, including 3,000 hectares of coffee lands, about 1,000
hectares said to be planted with rubber, and other lands suited
for cotton cultivation. This Japanese informant was apparently
about to be appointed Manager of a new filiale of the Nanyo
Kohatsu Kaisha in Timor, to be known as the TIMOR GUNTO KOHATSU
KAISHA (=Timor Archipelago Development Company).

3. In addition to agricultural activity, this Japanese informant
stated, it is intended to make efforts to develop trade on the
route Japan-Macao-Dilli. It is also, he said, intended to make
Dilli a base for Japanese fisheries in this neighbourhood. This
tends to confirm the anticipation made in paragraph 4 of my
despatch No. 84 already quoted.

4. In connection with the present project for making Dilli a
fishery base, Mr Lovink tells me confidentially that, some little
time ago, a leading Japanese employee of the Nanyo Kohatsu Kaisha
threw out a suggestion in conversation with a Dutch official that
it would be useful for the development of Dobo if Japanese
fishermen could establish a settlement there. The Japanese was
advised not to pursue the suggestion seriously, and the matter
dropped. From this fact, combined with the rapid increase of
Japanese fishery activities in these seas in the last year or two,
it may be assumed that much importance is attached by Japanese to
the establishment of a fishery settlement, and it seems highly
probable that an effort will now be made to make such a base at
Dilli.

5. In view of the trouble which the activities of these fishermen
have already occasioned to the Government of the Commonwealth of
Australia, the prospect of a fishery base at Dilli furnishes a
strong additional reason for the Government of Australia to take
some such action as I have already suggested to secure a footing
in Portuguese Timor.

6. In this connection, I may mention that, shortly after writing
my despatch No. 84E, I took the opportunity afforded by the
presence in Batavia on June 19th of Lord Huntingfield, Governor of
Victoria, to have a confidential talk with him on the subject. Mr
Staughton [2], the Australian concessionaire mentioned in previous
correspondence, is incidentally a citizen of the state of
Victoria, and is known to Lord Huntingfield. While Lord
Huntingfield pointed out, naturally enough, that the matter was
not one which a single state could well take up, he showed some
sympathy with my suggestion, and said he would speak of it to the
Commonwealth authorities on his return to Australia.

7. I have also sounded the Consul for Portugal at Batavia (Mr J.

A. van Staveren) on the general subject of Japanese activity in
Timor, but he is clearly not very well informed on the subject. He
is, indeed, inclined to discredit the press rumour quoted in my
despatch No. 84E of the proposed establishment of a Japanese-
Portuguese concern at Dilli, on the ground that a foreign company
could not obtain a land concession in a Portuguese colony. In
illustration of this, he says that Dr Cruz, the late Governor of
Portuguese Timor, got into trouble with the Portuguese for
promising so much to the Allied Mining Corporation.

8. Mr van Staveren further told me that, on a visit he paid to
Timor some 6 or 8 months ago the subject of Japanese interest in
Timor had come up in the course of a conversation he had with the
Acting Governor. [3] Mr van Staveren had tried to impress on the
Acting Governor the difficulties which, as experience in the
Netherlands East Indies had shown, were almost certain to follow
if Japanese were allowed to gain a footing.

9. As I have already reported, Dr Cruz will not return to Timor,
and will be succeeded as Governor by Major Alvaro da Foutaura.

[sic] [4], who, as Mr van Staveren informs me, is due to reach
Batavia on August 26th on his way to Timor. I have told Mr van
Staveren that I should much appreciate a talk with the new
Governor when he is on his way through, and should be glad if his
stay in Batavia is sufficiently long to give me a chance to
entertain him, in recognition of the hospitality shown to me at
Dilli in 1935.

10. I am sending a copy of this despatch to the Department of
Overseas Trade.

H. FITZMAURICE