353 Tange to Burton

Minute CANBERRA, 12 April 1949

REQUEST BY REPUBLIC OF INDONESIA FOR A LOAN

1. The subject is to be discussed in New Delhi tomorrow.

2. The Minister's statement [1] (approved by the Prime Minister) on July 9, 1947, made an offer of the 'good offices' of the Australian Government on economic and political matters and also said 'the Australian Government would be happy to give the interim Federal Government of Indonesia, when it is established, advice and assistance in such matters as trade, finance, communications and economic rehabilitation and development'. I doubt whether this is sufficient authority to commit Australia in general to increased assistance over and above the shipments yet to be made to Indonesia under the Post-UNRRA Relief Scheme ( ).

3. I suggest that the Australian response ought to follow these stages:

i. The Prime Minister's approval to indicate at New Delhi that we are prepared to consider economic assistance.

ii. Stress that it is the responsibility of the Dutch under the Security Council resolution [2] to remedy many of the disabilities which the Republican emergency government foresees if the Government should be restored at Djockjakarta.

iii. As and when the Government is restored at Djockjakarta the appropriate course would be for the Republicans to invite a commission of interested Governments to examine their economic problems. This examination should be directed to- (a) the kind of supplies which are urgently needed and whether the better course is to endeavour to make them available by contributions in kind by donor Governments rather than by way of a loan in financial terms;

(b) the prospects of restoration of overseas trade;

(c) whether there are any considerations which justify a monetary loan as well, for example, for stabilization of the local currency, to replenish foreign exchange reserves available to make purchases overseas which are unlikely to be met by ad hoc gifts in kind.

4. The above procedure would ensure proper programming of any aid.

The Republican letter [3] is quite speculative as to needs;

moreover the monetary value estimated by the Republicans (46 million rupees) should not be considered more than a guide as to the total commitment involved and useful discussions can only proceed on the basis of actual supplies required.

5. Before we go into this we should recognise the possible implication that inter-national economic aid might eventually have to be extended to the whole of Indonesia, as and when a political settlement is achieved, in order to avoid any charge of unjustified discrimination in favour of one sector of the Federation.

1 Document 110 in Volume XI.

2 Document 168.

3 Document 348.

[AA : A1838, 854/10/4/3, iv]