262 Critchley to Department of External Affairs

Cablegram K167 BATAVIA, 3 October 1948

SECRET

Madiun fell to Government forces on the afternoon of the 30th September. There was little fighting in the final stages, the Communists having retreated to the mountainous areas 15 km south east of Madiun taking with them radio transmitters, printing materials and Government stocks of provisions.

2. Although most important psychologically the fall of Madiun does not mean the end of the coup d'etat, either militarily or in its economic or social aspects.

3. Militarily several strong points such as Patjitan, Poerwodadi and Ponorogo are still in the hands of the insurgents and much isolated resistance still has to be quelled. Because of the transport shortage it may take the Government as long as two months to clear up thoroughly all remnants of the insurrection.

4. On the credit side the failure of the Communists has shown that the popularity of President Sukarno and the ability of Hatta to take firm action were greatly underestimated by the Communists.

Secondly, although there has been little frontal fighting Republican troops appear to have been handled well and acquitted themselves creditably. Finally there may be international advantages but this depends on whether international sympathy can be consolidated in more material benefits.

5. On the other hand the delay in reaching a settlement with the Dutch and the continuation of the blockade are felt in the Republic to be a greater menace than the Communists. Had the Communists waited until November as originally planned before attempting their coup the increased economic pressure and social disintegration might by that time have made the position of the Hatta Government untenable.

6. Added to the rapid inflation and serious deterioration in economic and social conditions in the last few months there is now the damage produced by the insurrection. This will increase the difficulties of carrying through successfully the reconstruction and rationalisation programs. The shortcomings in these programs which have been the main points of communist propaganda are a real source of discontent. If the stand-still in the negotiations and the economic restrictions continue the internal position of the Republic may be expected to grow steadily worse.

7. To sum up, the position of the Republican Government has been temporarily strengthened and this may provide an opportunity for settling the Indonesia dispute. But it cannot be emphasized too strongly that the overall internal position of the Hatta Government remains precarious and it may have at the outside two more months unless the GOC negotiations produce something positive. A new Government would almost certainly not be a moderate one. It should therefore be stressed with the State Department and interested Governments that the present military success of the Hatta Government should be consolidated by progress in the negotiations with all possible speed.

[AA:A4357/2, 48/260/1, iii]