The Economic and Financial Committee met on April 22.

A. CORRIDORS FOR CIVIL TRAFFIC AND JOINT USE OF PUBLIC WORKS
Sub Committee 2 presented preliminary technical reports on
Highways, Irri-gation, Railways and Public Roads and Bridges.

These show a large measure of agreement on principles. Details are
still to be worked out.

B. RESTORATION oF ECONOMIC INTERCOURSE ACROSS THE STATUS QUO LINE
The report of sub-committee 4 expressed the agreement of both
parties that the existing regulations of the Netherlands Indies
Government and the Republican Government remain in force. These
regulations provide for
(a) prohibition on the movement of currency over a certain value
and of military stores.

(b) special arrangements for border trade.

(c) licencing control of other trade.

The Republic will not permit the export of textiles nor will the
Netherlands as a rule permit trade in estate products. Traffic
will be conducted along routes agreed by the respective
governments. Trade will normally be on a barter basis. Regulations
for movement of persons are also being considered.

2. The Republic has stressed the the urgency of a liberal
implementation of the agreement. The Netherlands agree but are
prepared to modify existing regulations. Only gradual improvement
in trade can be expected.

3. At the suggestion of the Committee of Good Offices the parties
also agreed
that
(a) sub-Committee 4 should continue throughout the truce period as
a sub-Committee for the 'reopening of trade and communications'.

(b) the parties should take up with their respective governments
all matters of implementing of the agreement.

(c) naval experts from the parties should assist the sub-Committee
in working out regulations for sea traffic so as to facilitate
trade by sea.

4. From informal talks I learn the Republic is optimistic about
the reestablishment of internal trade between the areas controlled
by the two governments. They are not so hopeful of obtaining a
free movement of persons which is important to relieve
overcrowding in the Republican areas and to spread Republican
sympathizers in Netherlands held territory.

5. Main Republican concern however, is with foreign trade. The
Republic urgently requires reconstruction and transport goods.

Reconstruction minister Laoh who has just returned from America is
reported to have made arrangements there for the purchase of
suitable goods in exchange for native produce such as kapok and
rubber. Outside pressure or a political settlement will be
required before the Netherlands permit Republican foreign trade.

Perhaps the approach of your telegram No. 18 [1] could be followed
up. Once the principles were established it would be comparatively
easy to arrange trade with Australia. Meanwhile it is too early to
get a satisfactory reaction to proposals on the lines of your 77.

[2] informally both parties have shown interest in the suggestions
particularly of course the Republic. Van Hoogstraten thought trade
with Australia might begin in September. He obviously had in mind
the conclusion of a political agreement satisfactory to the
Netherlands. I shall take the proposals further with both parties
as opportunities arise.

C. GENERAL ECONOMIC PROBLEMS CONNECTED WITH THE FUTURE POLITICAL
SETTLEMENT

Sub Committee 3 reported agreement on the general purpose of a
future settlement, namely: an economic unity of the future
federation-which will be strong externally and which will permit
internally the greatest possible freedom of economic intercourse.

The following principles were also agreed upon:

(a) Unity of currency for the whole of Indonesia and a central
bank of issue. (The Javasche Bank' subject to necessary
modifications in management and supervision would act as a central
bank of issue as long as no other bank were appointed by the
United States of Indonesia).

(b) Unity of trade policy.

(c) Unity of foreign exchange regulations and a central foreign
exchange fund for the whole of Indonesia.

(d) Unity of customs territory and of customs regime.

(e) Unity of policy with regard to the supply of goods, especially
for primary commodities and with regard to price control for the
whole of Indonesia as long as this is considered necessary.

2. Difficulties are arising over the implementation of these
principles. The Republic not unjustly claims the Netherlands is
preoccupied with looking backward to the pre-war regime.