I have read with interest your Top Secret Despatch (Hag.26/47) of 8th October, 1947 , concerning a proposed arrangement between the Dutch and Portuguese to counter nationalist movements in their respective portions of . . . Timor.
Reports of nationalist movements in any part of the East Indian archipelago are always of interest to us: in addition, we have been concerned since the end of the war to bring about close and cordial relations with the Government of Portuguese Timor. By establishing a Consulate there and later by inviting the Governor of Portuguese Timor to Australia for informal talks  we have, I think, largely succeeded in attaining our objective. The important thing now is to maintain those relations and for this reason your despatch was of value to us.
We have up till now received only very fragmentary reports on Dutch-Portuguese relations. In general, but particularly at higher levels, they appear to have been cordial.
It is known that in April of this year the Governor of Portuguese Timor was concerned at the possibility that nationalist agitation in Dutch Timor should spread to his own territory. Special steps were taken to strengthen the frontier province guard which in its zeal evidently crossed into Dutch territory and clashed with Dutch guards. Strongly worded notes were then exchanged between the Portuguese Governor and the Dutch Resident at Koepang. 
I do not of course regard this incident as important in itself or as being in any way inconsistent with an agreement between the two parties to take joint measures against what nationalist agitation may occur in Timor.
Eaton, while Consul at Dili, paid two visits to Koepang  and had talks with the Dutch Resident and other officials there. His reports indicated that while there existed a good deal of confusion resulting from the inclusion of Dutch Timor in the State of East Indonesia, the trouble was administrative and not political. In May he reported:
'At the present time, the administration is in a state of flux and the governing of Timor and other islands is being handed over to the local councils. The Resident, Assistant Residents and Controllers are acting as advisers and at the same time, representatives of the Dutch Government, whereas previously the Resident was the controlling administrative authority under the N.E.I. Government with Assistant Residents in Timor, Flores and Soembawa and their Controllers as his subordinates. Certain minor powers were given over to the Rajahs.
The Resident told me that he was in a most unenviable position. He is honour-bound, by the orders of the Queen, to get the new system going but it is most difficult for him to carry out orders received from the East Indonesian Government at Makassar and to meet the wishes of the Dutch Lieutenant Governor-General at Batavia. He said his position is most invidious as he has to act as both an adviser and a Dutch Ambassador to the [East] Indonesian Government. All instructions he receives from Batavia have to be passed to the East Indonesian Government. The orders he receives from Makassar are passed on to the Council of the Rajahs and representatives and he advises accordingly. For Timor and the Sunda Islands there is a Rajahs' Council consisting of 11 members and a Representatives' Council of 14 members. The Rajahs' Council acts as the Upper House and both Councils meet together three times a year. All financial matters still have to be approved by the Dutch Lieutenant Governor-General. The N.E.I. Government as before meets the cost of administration and official wages.'
In the same report Eaton added:
'There is no actual outward political trouble in Timor itself but I was told that political trouble has extended to Soembawa.'
It may be, of course, that agitation has to some degree extended East since that time but I do not think that, apart from a limited amount of Republican inspired propaganda, we have at present to anticipate any considerable nationalist movements in Timor, or indeed in those Islands cast of Lombok which fall under the Residency of Timor.
Nevertheless the question is of the very greatest importance to Australia and must be watched closely.
If you are able to obtain any further information on the final outcome of the Dutch approach to the Portuguese in regard to the matter dealt with in your despatch or on other aspects of Dutch- Portuguese relations, it would be very valuable to the Department.