ECONOMIC AND FINANCIAL
Complete agreement has now been reached on items for inclusion in
the Economic and Financial Agreement. [1] The Netherlands
Delegation has given up its claims for interference in the
Internal Economic Policy of the R.I.S. and the Indonesians have
agreed to consult with the Netherlands before taking decisions on
important matters in the Monetary and Financial field.

The following text has been agreed upon in connection with the
most favoured nation and national treatment:-

'Netherlands Nationals, Corporate Bodies, Products, ships and
other objects shall enjoy in Indonesia a treatment not less
favourable than the one granted any third country. Foreigners of
all nationalities shall enjoy equal rights in the participation in
trade with Indonesia and in the economic activity and industrial
development in that country. However, the R.I.S. recognises that
full account must be taken of the special interests of Netherlands
Nationals and Corporate bodies within Indonesia and recognises
further that there shall be no discrimination against said
interests without prejudice to the right of the R.I.S. to take
such measures as will be necessary for the protection of National
interests or for protection of economically weak groups.' [2]

The Netherlands Delegation continues to press the Indonesians for
guarantees [3] in respect of their financial commitments to the
Netherlands in the form of an Annex or covering letter to the
economic and financial agreement. The Indonesians have made it
clear that such guarantees as the 'tin pledge' are entirely
unacceptable. [4] Hatta has assured the Netherlands, however, that
as a union partner, he will discuss reasonable ways and means of
relieving the Netherlands of the risks associated with the
guarantees they have given on behalf of the R.I.S. The problem is
largely one of face-saving for Lieftinck, the Netherlands Minister
of Finance, who has been insisting on a continuation of the tin
pledge and Hatta, and some of the other Indonesians will have
personal discussions with him.

PART II MILITARY
The following summarises the agreements5 on the main Military
matters following compromise proposals by the Commission Surabaya
Naval Base:

(1) The base belongs to R.I.S.

(2) Property rights will go to the R.I.S.

(3) Political, Military and Territorial responsibility will rest
with the R.I.S.

(4) A Netherlands Naval Officer will be chosen by the R.I.S. from
a panel of names to undertake technical management of the base
with direct responsibility to the R.I.S. Minister of Defence.

(5) This Officer will be responsible for security within the base
and will have under his direction a special R.I.S. Police Force
which will function in accordance with Indonesian laws.

Netherlands Navy [5]

(1) Netherlands small craft and Corvettes will remain for the time
being in Indonesia and a proportion of these will be transferred
immediately to the R.I.S.

(2) Three Netherlands Destroyers will stay in Indonesian waters
under the authority of the R.I.S. Government but under Netherlands
command and under the Netherlands flag.

(3) Advantage will be taken of the presence of the Destroyers to
train Indonesian crews as quickly as possible.

(4) At the end of one year, following the transfer of sovereignty,
one of the Destroyers will be transferred in ownership and under
the flag of the R.I.S.

Withdrawal of Netherlands Forces [6]

(1) Netherlands troops will be withdrawn from Indonesia within as
short a time as possible after the transfer of sovereignty and
advantage will be taken of all means available.

(2) Should it become evident as the Netherlands Government
regretfully foresees that lack of shipping or other technical
difficulties will prevent completion of the withdrawal within six
months after the transfer of Sovereignty, the Netherlands
Government will gladly give the R.I.S. authorities free access to
details of the arrangements and endeavours of the Netherlands
Government for repatriation of the troops.

(3) A Joint Technical Committee might be established to study the
technical possibilities of repatriating the Netherlands Forces and
ways and means of overcoming the difficulties.

(4) Under its terms of reference and as anticipated by agreement
in the 22/6 memorandum [7] the U.N.C.I. or its successor should be
in a position to assist.

Reorganisation and financing of K.N.I.L. (Royal Netherlands
Indonesian Army) and transfer of K.N.I.L. Materials
The Military Committee has agreed that K.L. (Royal Army) and
K.N.I.L. troops should be concentrated in certain areas and that
this should begin during the transitional period immediately after
the termination of the R.T.C. The Netherlands Delegation has,
however, pointed out that decisions on measures to be taken prior
to the transfer of sovereignty are not the concern of the RTC. It
has, therefore, been agreed that the leaders of the Delegations
will discuss the matter outside the R.T.C. in the near future. Van
Maarseveen has been consulting the High Commissioner of the Crown
in Indonesia and will refer the proposals to Cabinet probably
tomorrow. The Commission is maintaining pressure to have this
issue settled as quickly as possible.

PART III POLITICAL
Only two difficult political issues remain, the right of self-
determination and New Guinea.

New Guinea
This problem was discussed in detail in the Steering Committee
yesterday afternoon and evening. A complete deadlock was reached,
with the Netherlands Delegation emphatically protesting that
sovereignty over New Guinea could not be transferred, and with the
Indonesians in the mood to break off negotiations. To prevent a
breakdown, the Commission informally and on its own initiative,
made the following proposal:

'It is recommended:

(a) In view of the desirability of the Round Table Conference
concluding successfully on 2nd November, 1949.

(b) In view of the important factors which should be taken into
account in settling the question of New Guinea.

(c) In view of the limited research that has been undertaken and
completed with respect to the problems involved in the question of
New Guinea, and,
(d) In view of the heavy tasks with which the Union partners will
initially be [con]fronted,
That the residency of New Guinea continue under the Government of
the Netherlands with the stipulation that, by the end of the first
year of sovereignty of the R.I.S., the question of the future
political status of New Guinea be determined by negotiations
between the R.I.S. and the Netherlands.'

None of the Delegations is happy with the proposal, but there is a
good prospect that it will be accepted. Netherlands Trusteeship
would have been a preferable arrangement but this seems
politically impossible for the Indonesians. In any event
postponement seems likely to lead to Netherlands Trusteeship as a
final solution.

Self-Determination
The Netherlands have put forward detailed proposals and indicated
informally that they regard this question as politically most
important. Romme will attend the Steering Committee discussions
which will probably begin this afternoon.

PART IV PLENARY SESSION ARRANGEMENTS
The final Plenary Session has been officially fixed for 2/11/49.

The Draft Resolution covering agreements reached at the R.T.C.

will provide for a transfer of sovereignty to take place at a
formal ceremony at Amsterdam not later than 30/12/49.