NETHERLANDS-INDONESIAN NEGOTIATIONS

PRESENT POSITION

Though agreement has been reached on a large number of problems
previously thought to present serious threats to the success of
the round table conference, the atmosphere is not as cordial as in
the earlier stages, nor prospects of a fully acceptable settlement
so bright. There are a number of reasons for this.

1. The Dutch have consistently pressed for detailed agreement on
all points. The Indonesians would prefer only agreement in general
terms, leaving details for negotiation after the transfer of
sovereignty. The prolonged wrangling is causing ill-feeling at The
Hague and raising doubts in Indonesia lest the Indonesian
delegation be out-manoeuvred by the Dutch.

2. The Dutch appear to have been prepared to make considerable
political concessions, but in current negotiations in respect of
financial and economic matters their attitude is less
conciliatory. The major problems in this connection are-
(a) whether or not the R.I.S. (United States of Indonesia) should
assume responsibility for liabilities incurred by the Dutch in
military operations against the Republic.

(b) the actual size of the debt owed by Indonesia to the
Netherlands when the cost of the military campaigns has been
deducted.

Compromise proposals [1] offered by Cochran, U.S. representative
on the U.N.C.I., were rejected by the Netherlands. A 3-man
committee including Cochran in his personal capacity has now been
established to investigate the position. Cochran's move is seen by
the Indonesians as prejudicing the potential influence of the
U.N.C.I. and the Security Council. The Indonesians who value these
influences are now attempting to rectify the situation.

3. The question of Dutch New Guinea has been raised. The
Indonesians demand its inclusion in, the Netherlands its exclusion
from, the R.I.S.

4. The Netherlands want 'national' treatment in economic matters
in the future R.I.S. The Indonesians are only prepared to concede
them 'most favoured nation'
treatment.

5. Military problems In particular-
(a) period for withdrawal of Netherlands forces.

(b) the question of a naval base and the force of the Netherlands
Navy.

(c) the future of the K.N.I.L. (Royal Netherlands-Indonesian Land
Forces).

6. The Netherlands are demanding special arrangements for the
exercise of the right of self-determination by Minahassa and
certain Netherlands-sponsored States in Sumatra at present not
represented in the B.F.O. (Federal Consultative Assembly).

7. The position in Java is deteriorating owing to the continued
freezing of the position as at the cessation of hostilities.

Administration and supply is breaking down and civil discontent
increasing. Political tension is growing following reports of
Netherlands intransigence at The Hague. Military tension is rising
in view of the Dutch belief that the Republican forces are
improving their positions in the cease-hostilities interval. The
Dutch put forward proposals [2] to relieve the situation on 20th
September. The Republic was unwilling to accept the proposal that
Republican forces (T.N.I.) be withdrawn from the Negaras, claiming
such a withdrawal would permit the free development of extremist
organisations. They agreed, however, to accept the proposals as a
basis for discussion. The Dutch have now apparently altered their
proposals with the intention of driving a harder bargain. In the
Semarang and East Java areas their arrest of numbers of Republican
troops and civil officers has caused a critical situation to
develop. Fighting is reported to have broken out in the last 24
hours. The Central Joint Board is attempting to restore the
position.

In general the deteriorating situation in Indonesia, itself
already made worse by failing confidence at The Hague talks, is
itself contributing substantially towards the frustration of the
round table conference.