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.