136 Burton to Shedden

Memorandum,

CANBERRA, 30 November 1949

TOP SECRET I refer to recent discussions in Canberra with overseas representatives of this department, to which you were good enough to send a representative of your department.

2. The discussions covered a wide range of subjects and it is now proposed to prepare a paper for consideration by the Government early in the New Year [1], setting out practical ways of developing an active Australian political and economic programme in South East Asia. In this connection I assume that the views of the Defence authorities remain as stated by the Minister for Defence in his letter, dated 22nd April, 1949 [2], addressed to the Acting Minister for External Affairs, when he said:-

'To meet our strategic requirements, it is necessary that appropriate political and economic measures should be taken to arrest the spread of, and ultimately eliminate, Communism throughout South-East Asian countries'.

3. Having this in mind, it would be most helpful in the preparation of the proposed paper if we could have as early as possible the views of the Defence authorities on the following propositions:-

(a) The restoration and maintenance of stability throughout South- East Asia is at the present time a matter essentially for political and economic action, the successful use of which would help to ensure that military commitments in South-East Asia can be kept to a minimum.

(b) An extension of Australian representation throughout the area would be desirable.

(c) With the limited resources at present available in Australia, it will be impossible to develop a really effective economic and financial programme of assistance throughout the whole area. We should, therefore, concentrate our efforts on Indonesia and give priority of treatment to the economic and financial needs of that country.

(d) Selected officers of the Australian Services or of the Defence Department should be allotted for service at suitable diplomatic or consular posts in South-East Asia, particularly in the first instance in Indonesia. So far as deemed appropriate by the Defence and Service authorities, they would act as sources of military intelligence, and would in particular familiarize themselves with local conditions and undertake study of the local languages.

(e) With a view to helping Indonesia to strengthen its defences, assistance should be given in training Service personnel from Indonesia, especially by their admission to Australian Service Colleges and training establishments. This practice might be extended to other countries in the area as and when practicable.

(f)Existing Australian policy in regard to the supply of weapons and warlike equipment [3] should be reviewed by the Departments of Defence and External Affairs so that the legitimate defence needs of Indonesia may be met wherever possible from Australian sources.

4. I should be glad to have your early comments and to know whether you would agree in principle to the desirability of implementing propositions (d) and (e) above.

1 A draft paper for Cabinet was prepared by McIntyre in December 1949 and discussed with Burton, Tange and Moodie.

2 Document 127.

3 See Document 115

[AA:A816/37, 19/301/1207]