Attached is a copy of the Working Paper referred to in my C.23 [1]
of today.

Developments of this week have already been dealt with by
telegram.

ATTACHMENT

DRAFT WORKING PAPER

DRAFT PROPOSALS TO ASSIST IN AN EARLY SETTLEMENT OF THE MAIN
ISSUES OF THE ROUND TABLE CONFERENCE

This paper is submitted with two important considerations
regarding U.N.C.I. participation in the Round Table Conference in
mind. In the first place the Commission has up to the present
scrupulously avoided any suggestion of interference and has only
made proposals to the parties at their specific request. This is
in keeping with the fact that the Conference is not under U.N.C.I.

auspices and with the obvious advantages to be derived from a
settlement achieved on the initiative of the parties themselves.

In the second place, however, the Commission has a responsibility
to the Security Council to take the initiative to prevent a
failure of the Conference. In view of the developments in recent
weeks the Commission must consider whether it would not be timely
to take such positive action now.

The members of the various delegations have been in the
Netherlands for two months, and seven weeks have passed since the
opening of the Round Table Conference. Although progress has been
made towards reaching agreement on the Statute of the Union, all
other basic issues of the Conference are still undecided.

Since the participants in the Round Table Conference undertook in
Batavia to strive for the completion of the Conference within two
months, it is clear that the Conference is behind schedule. Far
from making up time, the Round Table Conference appears to be
slowing down. Certain basic difficulties particularly with regard
to economic and financial problems and the status of New Guinea
have clearly emerged.

On the other hand, while the Round Table Conference has been
slowing down, the work and progress of the United Nations General
Assembly has been accelerating. The Indonesian Question may
shortly be debated in the Assembly and there is a possibility that
the Commission might be called on by the Security Council to
report on the progress of the Round Table Conference in order to
facilitate the debate.

Republicans have also publicly stressed that it will be necessary
for the leaders of their delegation to return to Indonesia at the
end of October. The slow progress of the Conference and the
approach of the end of two months' discussion without tangible
results create grave dangers to the success of the Conference. The
present slow progress cannot but weaken the position of the
delegations respectively in Indonesia and Holland. In Indonesia in
particular an explosive situation exists. Further delays will
undoubtedly imperil the cease-hostilities agreement and a peaceful
solution of the Indonesian question.

In this difficult situation the Commission has a responsibility
within its own terms of reference as laid down by the Security
Council on the 28th January, 1949. [2] So far it has taken no
positive action in the Round Table Conference but has given the
participants every opportunity and encouragement to come to an
amicable agreement. In view of their failure so far to approach
such an agreement and in view of the pressing urgency of a
solution there is a need for an initiative from the Commission.

Such an initiative can now be taken without fear of any justified
accusation that the U.N.C.I. is interfering in the Conference.

Indeed, if such action is not taken, the Commission could
justifiably be associated with any breakdown in the discussions
whether it originated in the Netherlands or in Indonesia.

There are two possible ways in which the Commission might take the
initiative:-

(a) It could call a conference of the parties under U.N.C.I.

auspices.

(b) It could make proposals in the form of an oral note to the
parties or in a Working Paper to the Steering Committee of the
Conference.

Of these two possibilities the latter is preferable at this stage,
although in presenting an oral note or a Working Paper the
U.N.C.I. could remind the parties that it might have to take an
initiative outside of the Conference, should the outstanding
difficulties continue.

In view of the time factor, immediate proposals by the Commission
should be narrowed to seeking a solution of the basic problems.

Such problems might be considered to include:-

(a) The status of New Guinea
(b) The Indonesian debts
(c) National and most favoured nation treatment.

There are still other problems of a political and military nature
which will have to be solved before the Conference can be
successfully completed. It might be necessary for the Commission
to consider these problems at a later and more appropriate time.

It is therefore suggested that the Commission should now endeavour
to formulate views on the major points at issue on the foregoing
subjects as the basis for an oral note or Working Paper to be
presented to the parties through the Steering Committee of the
Conference.

The attached draft contains a number of tentative suggestions for
overcoming the main difficulties. No attempt has been made to
elaborate these suggestions since it is felt that this should
depend upon discussion within the Commission. The proposals are
therefore submitted as a basis for discussion.

A. NEW GUINEA
The Indonesian and Netherlands delegations have already taken
strong and diametrically opposed positions regarding the future
status of Dutch New Guinea-positions from which it may be very
difficult for prestige and political reasons to retreat. The
Commission must therefore consider compromise or face-saving
solutions which might help to prevent this issue leading to a
breakdown of the Conference.

Two suggestions might be made:

1. An international trusteeship under either the Netherlands or
Indonesia or the United Nations as administering authority.

2. A postponement of the issue.

It is unlikely that the delegations would readily agree to either
of these suggestions, but perhaps the latter would be the most
practicable way of avoiding long and fruitless dispute and in any
event may come to the fore by force of circumstances. With such a
compromise the Statute of the transfer of sovereignty could
specifically exclude New Guinea with the proviso that its status
would be the subject of further negotiations to be conducted
within a specified time. This proposal would have the advantage
that discussions over the status of New Guinea could eventually be
held in an atmosphere in which political problems might not be so
important and in which the real problems of administration and
development could be given special consideration.

It might be argued that such a postponement would favour the
Netherlands in so far as sovereignty and responsibility would for
the time being continue to rest with the Netherlands. On the other
hand there may be other issues, particularly of an economic and
financial nature which may have to be negotiated after the
transfer of sovereignty and in these cases it might equally be
argued that postponement would favour the Indonesians.

B. INDONESIAN DEBT
The obvious compromises to the opposing positions of the
Netherlands and Indonesian delegations are:-

1. Agreement on an arbitrary figure for the external debt of
Indonesia.

2. Agreement to leave the issue to a debt-commission which would
negotiate the figure of the debt and arrangements for servicing
after the transfer of sovereignty and with the assistance of an
independent tribunal.

1. A compromise figure:

Any figure proposed would necessarily be arbitrary. A compromise
satisfactory to the Netherlands might be a reduction of an
estimated external debt of 3.3 billion Netherlands guilders to
approximately 2 billion Netherlands guilders. A compromise
satisfactory to the Indonesians would be a reduction of the
external debt by 2.9 billion Netherlands guilders leaving a
balance of 400 million Netherlands guilders. A middle course would
be to write off all external debts since 1942 leaving only the
consolidated debt due to the Netherlands since before the war of
900 million Netherlands guilders or perhaps to add to this the 400
million Netherlands guilders of foreign debt guaranteed by the
Netherlands. It would be necessary for Indonesia to accept the
internal debt although it is possible that the servicing of this
debt after consolidation may involve considerable transfers to the
Netherlands.

Consideration of Indonesia's capacity to pay and the political
situation in Indonesia favours a low figure. Consideration of
public opinion and the political situation in the Netherlands
favours a high figure. Any proposal by the Commission, would, in
view of its arbitrary nature, be tentative. It would also be
necessary in view of Indonesia's economic difficulties to suggest
provisions which would relieve Indonesia of financial obligations
in the first years after the transfer of sovereignty.

2. A debt-commission:

This is a more logical alternative which would have the advantage
of avoiding highly emotional discussions at a difficult time
politically and of enabling the real economic issues of the debt
to be considered carefully. On the basis of agreed principles the
debt- commission would assess the external indebtedness of
Indonesia to the Netherlands and work out an arrangement for
servicing the debt. It would be necessary for both parties to
agree to commit themselves in advance to accept the findings of
the commission or the arbitration of an independent tribunal such
as might be sponsored by the International Bank.

C. NATIONAL AND MOST FAVOURED NATION TREATMENT
The following draft proposals might provide a reasonable
compromise:-

1. With the exception of such measures as are necessary for
economic development and security in the national interests, the
nationals of one member whether natural persons or corporate
bodies present within or carrying on business in the territory of
the other member shall be accorded by such other member legal
status and rights and obligations including liability to taxation
no less favourable than those accorded to its own nationals. The
right to acquire ownership of land need not, however, be granted
under this principle.

2. Without prejudice to the provisions contained in the foregoing
paragraph there shall be no discrimination between the citizens of
both members in respect of:

a) residence and travel
b) trade, business and profession
c) private property
d) labour
e) education.

3. Without prejudice to the provisions contained in paragraph 1,
the nationals of one member whether natural persons or corporate
bodies shall receive in the territories of the other member equal
treatment to that of the subjects of third countries.

4. The foregoing agreement shall extend for a period of 15 years
and be renewable by mutual agreement thereafter.

5. The Government of the R.I.S. shall honour for their full term
contracts and agreements entered into with non-Indonesians by the
Government of Indonesia prior to the inauguration of the R.I.S.

and shall restore to non-Indonesian owners physical assets located
within the territory of the R.I.S., which have not yet been
returned to such owners. Where in the national interest or for
other reason existing property and contractual rights and
franchises cannot be recognized full indemnification shall be made
by the Government of the R.I.S. Nothing in the foregoing shall
protect the property rights of ex-enemy nationals.