CANBERRA, [15 April 1948]

AUSTRALIAN POLICY ON INDONESIA

The fundamental considerations underlying Australian policy
towards the Indonesian dispute are that there should be order and
stability throughout Indonesia and that oil and other Indonesian
products should as soon as possible become available to relieve
current world shortages. This second consideration has particular
relevance to the dollar problem.

2. The salient fact is that Dutch colonialism in Indonesia is
passing away. Nationalism has taken root too firmly and developed
too far to be held in check much longer, let alone eradicated. The
Dutch themselves recognise this. It is only on the method and on
the speed of the transition from Dutch to Indonesian sovereignty
that conflict occurs. The question incidentally arises whether
from a hard-headed Australian point of view, it might not be
preferable for the Dutch, while giving way to local nationalist
movements as they take shape throughout the archipelago, to remain
indefinitely in full control in outlying and more backward areas.

While such a course might end in the balkanization of Indonesia,
it would at least contemplate a gradual and systematic transfer of
power, whereas it is by no means certain that the federal
framework proposed by the Dutch offers much of a guarantee of
stability and ordered political and economic progress in an
archipelago so widely extended and embracing such extremes of
living standard and of culture. As it is, the Dutch stand
committed to establish a sovereign federation extending throughout
Indonesia, and the practical course for Australia is to try to
identify and prepare to help the people who will be trying to make
it work.

3. The leaders of the Republican movement in Java and Sumatra,
while they have not yet had a fair chance to show their
capabilities under normal conditions, have given indications that
they can conduct government competently and even democratically.

They have apparently not had much administrative experience-they
are politicians by inclination rather than administrators-and they
lack training in the economic and commercial field. They are also
politically divided; the influential Masjoemi party has recently
shown signs of breaking away from what had been a united
nationalist front. But Republican leaders are at least aware of
their difficulties, and recognise frankly that they must continue
to rely on technical help from the Dutch and other outside
sources.

4. By their acceptance of the 'Renville' principles as the basis
for a settlement with the Dutch [the] Republicans have
acknowledged in principle that sovereignty throughout Indonesia is
vested in the Dutch until it is transferred to the future United
States of Indonesia. For the time being at least they have given
up any idea of an independent sovereign Republic of Indonesia. It
is reasonable to expect that if they follow their present declared
intention and join the federation they will dominate the federal
government. This prospect alone is enough to justify Australia in
maintaining a sympathetic and helpful attitude towards the present
Republican leaders. Furthermore, since this group on present
appearances offers the best prospect of a stable regime throughout
Indonesia it is contrary to Australian interests that the Dutch
should be given the opportunity of weakening it before its future
position can be assured under a firm agreement.

5. It follows that pressure should be maintained on the Dutch to
reach agreement with the Republicans as soon as possible. They
have been obstinate and rigid at times when a little flexibility
and willingness to compromise might have helped them with
Australian and world opinion. But the fact remains that they have
declared repeatedly that they are committed to the establishment
of a sovereign United States of Indonesia. Whatever reservations
they may have, and however reluctant they may be to hasten the
process, their assurance is unequivocal.

6. The position of the Dutch in Indonesia cannot be considered
separately from that of the Netherlands in Europe and in the
United Nations. At the present time reports from The Hague suggest
that the Netherlands Government is under strong pressure from
hostile public opinion because of its failure to settle the
Indonesian situation. Apart from its possible effects within
Europe itself, a political crisis in the Netherlands which
produced a change of Government would probably be reflected in the
adoption of a more intransigent Dutch attitude in Indonesia.

7. The time has arrived when both Dutch and Republicans should be
urged to abandon recrimination and bitterness over the past and
concentrate on the establishment as soon as feasible of the United
States of Indonesia. The difficulty at present is that while both
sides are agreed on the ultimate objective they cannot see the
wood for the trees. They have lost sight of the common goal in
their preoccupation with matters of immediate gain or loss.

8. The Dutch, for example, are tending to reinforce a natural
reluctance to shed political and economic control with an
obstinate refusal to be hurried. The danger is that they will
interpose obstructions and delays, particularly if the spotlight
moves off Indonesia. Australia has a legitimate interest in seeing
that they do not try to prolong the prewar status quo in
circumstances which make it impracticable and by means which can
only make for continued unrest and disorganisation in an area of
prime importance to Australia.

9. There are a number of issues which however important they may
have been to the Republicans in the past now seem relatively
unimportant on a long term view, but which at the same time may
hold up a settlement and so delay the transfer of sovereignty
unless the Committee of Good Offices can help resolve them.

10. The matter of the Republic's right to conduct its own external
trade is one of the most contentious issues. There is no reason
why the Dutch should not be urged to adopt a more liberal attitude
on matters of trade and commerce, but from a practical point of
view it seems more important that internal trade channels in Java
and Sumatra should be loosened and that the Republic should
receive fair and full return for its products than that the right
of the Republicans to conduct trade through their own ports should
remain a fundamental point of disagreement.

11. The question of the Republic's representation abroad should
not be allowed to cause difficulty. The Republic clearly cannot
maintain full diplomatic representation abroad. If, on the other
hand, they insist on maintaining unofficial representation outside
Indonesia e.g., Dr. Usman in Australia, the Dutch cannot prevent
their doing so.

12. The Republicans have also objected strongly to the Dutch
practice of sponsoring the establishment of so called provisional
governments in areas throughout Java and Sumatra. The impression
has been given that this is further weakening the Republic. If it
were the case that the political structure of Indonesia were being
immutably fixed in this way, there would be valid objections. The
'Renville' principles provide however that the delineation of
states and their relationship with the Republic of Indonesia are
to be decided by plebiscite. This suggests that the setting up of
provisional local governments now is less important than that the
Committee of Good Offices should be on hand to supervise the
plebiscites. This again reinforces the need for an early political
settlement which would prohibit the Dutch from setting up new
states within Republican territory and from using propaganda and
other pressures to wean local populations from their allegiance to
the Republic.

13. The structure, composition and power of the proposed interim
federal government of the United States of Indonesia will also
play a prominent part in the negotiations for a settlement. While
the Committee should do what it can to ensure that the Dutch give
the interim government some real power, if only to give the
Indonesians experience in the use of responsibility, the matter
does not seem sufficiently important to remain in dispute. The
Governor-General is certain to retain some power of veto over the
decisions of the interim government; and whether the government
works satisfactorily or not is likely to depend more on the
atmosphere in which it works than on a precise definition of its
powers. Meanwhile there seems to be no particular advantage to the
Republicans in their hastening to join the new Provincial [2]
Government until they have reached a satisfactory political
settlement with the Dutch and can come in on better terms.

14. Australia can use its influence to persuade both parties to
concentrate on the larger issues. It can urge the Dutch to reach
an early agreement with the Republic on the basis of the
'Renville' principles, and to carry out with the least possible
delay their undertaking to set up a sovereign federal Indonesia.

At the same time, regard should be had for the difficulties of the
Dutch in Europe, and particularly with their public opinion at
home. To the Republicans Australia can continue to point out that
the opportunity to dominate the United States of Indonesia is
theirs if they are prepared to exercise a little patience and
forget about minor questions in dispute with the Dutch.

15. Australia can exercise its influence along these lines both
directly with the parties and indirectly through the Committee of
Good Offices. The overriding consideration is that the Committee
should continue to assist the parties to reach an early settlement
and remain on in Indonesia to supervise establishment of
federation, if possible right up to the transfer of power.