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11 Brief for Cabinet for Commonwealth Conference, Colombo

Canberra, December 1949

Top Secret [matter omitted]

Australian Policy in South-East Asia

A. INTRODUCTION

A series of informal meetings took place at Canberra, beginning on 10th November and lasting throughout the ensuing week, to discuss recent developments throughout East and South-East Asia and to consider Australian policy in relation thereto.

During the first two days discussions were held between the Minister and officials of the Department of External Affairs, senior officials of the United Kingdom and New Zealand Governments, and Australian representatives in China, Japan, the Philippines, Thailand, Malaya and Indonesia. The United Kingdom Government was represented by Mr. M.E. Dening, Assistant Under Secretary in charge of Far Eastern Affairs at the Foreign Office, who had just beforehand attended the conference of United Kingdom Far Eastern representatives at Bukit Serene, Malaya, under the chairmanship of the Rt. Hon. Malcolm MacDonald, Commissioner-General for South-East Asia. The New Zealand representative was Mr. A.D. McIntosh, Secretary of the Department of External Affairs.

Subsequent meetings took place between the Department of External Affairs, the Australian Far Eastern representatives, and representatives of the Departments of Defence and Commerce and Agriculture.

In the course of the meetings consideration was given to ways of bringing Australian policy into accord with changes that are taking place throughout South-East Asia at the present time. After a full review of conditions in all countries of the region, and of external factors likely to have a bearing on them, the following broad conclusions emerged:

(1) The influence of Communism represents the main threat to the stability of South- East Asia.

(2) The victory of Communism in China, which must be accepted as virtually complete, is bound to strengthen the hand of Communist elements in South-East Asian countries.

(3) Unless these countries are given help and encouragement from outside they are likely to fall easy victims to Communism.

(4) The problem of strengthening their resistance to Communism is political and economic rather than military.

(5) Communist control of South-East Asia would threaten the security of Australia.

(6) Australia should give whatever political and economic assistance she can to help maintain stability in South-East Asia and increase resistance to Communism.

(7) Material benefits would accrue to Australia from an increase of trade with South- East Asia.

These broad conclusions, together with all the considerations brought to light in the course of the discussions, provide the basis of the following analysis and of the recommendations that accompany it.

Importance of South-East Asia

The importance of the South-East Asian region to the future security of Australia was amply illustrated during the last war. The Japanese advance southward towards Australia, using the countries of the Asian mainland and the adjacent island chains as steppingstones, brought home to us the extent of our geographical relationship with Asia and of out geographic isolation from our traditional points of cultural and economic contact in Europe and America. Current developments serve to remind us of the significant role that South-East Asia is bound to play in Australian security, and make it clear that from an economic and from a security point of view there must be a permanent re-orientation of Australian outlook and policy toward this neighbour region and the countries within it.

Two separately identifiable forces are at present at work throughout South-East Asia. The first is the rise of nationalism. Stimulated by war-time developments, the movement towards national independence has proceeded more quickly in some countries than in others where its true nature is only half understood. Even when it is further advanced the welding of an organised national state, exercising full sovereignty and resting on the undivided loyalty of all its peoples, is likely to be interrupted and hindered by personal opportunism and by local struggles for control over backward groups and races. Nevertheless, nationalism has now become a widespread and genuine popular movement. The second force is international Communism, whose growth within the region was also stimulated by the war, and which is now seeking to consolidate itself everywhere by absorbing local brands of Communism and by subverting genuine local nationalist movements to its own ends.

Even if it were desirable it would not be possible to halt the progress of nationalism. Our proper and indeed only enlightened course is to understand its nature and meaning and adjust our policies to take account of it.

Even under the best auspices it could not be expected that changes of such fundamental importance would take place without causing some dislocation and local unrest throughout a great part of Asia. We could perhaps afford to adopt a more leisurely approach to the problems of the region, however, were it not for the part that Communism is threatening to play in shaping the future of Asia. The firm establishment of Communism throughout the whole of South-East Asia cannot be regarded with indifference by the people of Australia; anything that can be done to prevent Communist elements from using force and subversion to overthrow new governments that are trying to establish themselves within a framework of national independence must have our active sympathy and support. It is no answer to condemn nationalism and Communism as indistinguishable and therefore equally undesirable. The fact is that in most cases the genuine nationalists are firmly rebuffing all Communist overtures; but they must have encouragement, and help from outside if they are to prevent the Communists from taking advantage of the disruption that habitually accompanies a nationalist movement.

On the logical thesis that the movement towards independence and self-government throughout South-East Asia is inevitable and natural, Australian interests are coupled with the emergence of stable, moderate and friendly governments in all these neighbour States and the defeat of Communism. This requires more than mere acquiescence on our part in the processes of change; it calls for positive thought and action.

Current Trends

It requires no more than a cursory examination of the existing situation to show that the Communist threat to engulf the whole of South-East Asia, perhaps within a few years, is a very real one. It is obvious above all that the Communists and their adherents everywhere throughout the region will have drawn considerable encouragement from the victories of Communism in China, and that some hitherto staunch opponents of Communism will have become disheartened and apprehensive.

Indo-China is the country most immediately threatened by the southward expansion of Communism. The French have divided Indo-China into three States, Vietnam, Laos and Cambodia, and are now in the process of incorporating them as associate states of the French Union. They are finding great difficulty in maintaining a "foothold in Vietnam, of which an estimated 80% is under control of the Viet-Minh movement led by the Communist-trained Ho Chi Minh. By no means all of Ho Chi Minh's followers are Communists, but there seems little doubt that if they succeed in attracting sufficient military and moral support from the Communists in China to be able to convince the French of the futility of further resistance, the present French-sponsored regime in Vietnam, headed by the former Emperor Bao Dai of Annam, will collapse and be replaced by a Communist-dominated Government with effective control throughout the greater part of Indo-China.

Even if the Viet-Minh should not succeed in bringing the whole of Indo-China under their control, it will be in a position to bring pressure on Thailand, which at the present time is relatively stable but which cannot be relied upon to offer much resistance to an aggressive Communist movement operating within and across its borders. The capitulation of Siam would be likely to tip the balance in favour of Communism in Burma, where the Government is maintaining a precarious existence against various left wing and separatist groups whose aims are not necessarily identical but which between them control a large part of the country. It would also threaten Malaya, where the United Kingdom Government is still making very slow progress in eradicating the Communist guerillas who for the past 18 months have been carrying out acts of sabotage throughout the Federation. Indonesia is less directly threatened, but here again the Government of the new Federation will have to deal with an armed Communist minority which will be looking for encouragement from abroad. It should not be forgotten that in all countries of South-East Asia there are substantial numbers of resident Chinese who play an important part in the economic life of the community and who, while hitherto for the most part conservative in outlook, are still closely bound to China by racial and family ties and who can be expected to adjust themselves without much difficulty to the Communist regimen.

Nature of Problem

It is not claimed that the situation that threatens to develop in South-East Asia represents an immediate military problem for Australia. On present appearances there is little likelihood of any rapid development of a large scale military threat calling for active intervention by Australia. It is doubtful whether the Chinese Communists will be able for at least three or four years to pursue an aggressive military policy outside China itself. Chinese military intervention in South-East Asia is likely to be restricted for the time being to the infiltration of guerillas and other subversive elements. The countries of South- East Asia are themselves incapable individually or collectively of offering any external threat. Thus the situation does not necessarily call for immediate military planning by the Australian defence authorities, or for the assumption of firm military commitments in South-East Asia�though this opinion might well have to be altered if events were to move rapidly. For Australia the problem is at present political and economic; it calls for sustained and co-ordinated action to encourage and strengthen established governments throughout the area, to cultivate and maintain the goodwill of the peoples, and to help them to raise their standards of living and thereby increase their resistance to Communism.

Australia's Capacity to Assist

So far as Australia is concerned, the two elements of the problem are linked together in the sense that the amount of political influence we can exert within South-East Asia is likely to be determined largely, even though not entirely, by the extent to which we can help to foster the economic development of the region. There are a number of ways in which we can help the South-East Asian countries in the purely political and diplomatic field. Their governments and peoples are likely more and more to resent any attempts to patronise them, and will be correspondingly grateful to any country which gives proper deference to their international status. It will cost us nothing to treat them with courtesy when problems arise between us, and to give them a measure of support in the United Nations and other international agencies whenever the facts warrant it.

But it is in the field of economic and social advancement that the most effective help could be given. Apart from what can be done in the way of supporting the requests of South-East Asian countries for assistance from international agencies, there is the question of extending direct economic aid to them. This serves as a reminder that the resources in goods, money and services that we can spare for the pursuit of political and economic objectives outside Australia are limited.

There are two principal ways in which we can play a part in the economic life of South- East Asia�by fostering trade and by making available gifts, loans or other forms of economic assistance, either direct or through the United Nations. Of these trade provides obvious opportunities for the promotion of closer contact and co-operation with all South- East Asian countries, to the material as well as the political benefit of Australia. Trade with South-East Asia has increased generally beyond pre-war levels, and there is undoubtedly room for considerable further expansion. At present the main limiting factors are, firstly, the disposition of Australian exporters and manufacturers to think solely in terms of Australia's traditional markets and sources of raw materials; secondly, Australia's contractual commitments to the United Kingdom and other countries; and thirdly the scarcity in Australia of many of the commodities that are in greatest demand in South-East Asian countries.

While our first objective should be a substantial increase of trade with the whole of South- East Asia, there is still room for a planned programme of economic and technical assistance for special purposes. Here again we must bear in mind our limited resources. It is in fact doubtful whether we would be making the most effective use of such economic aid as we can offer by trying to distribute it among all countries of the region. The best course would seem to be to concentrate on the country where it is likely to have the most useful effect. There appears to be little that we can do by way of direct economic aid for Indo-China or Thailand. Malaya is essentially a United Kingdom responsibility. The usefulness of Australian participation in financial aid to the present government of Burma is debatable. In Indonesia, on the other hand, Australia has already earned much goodwill by the part we have played in bringing the Netherlands - Indonesian dispute before the United Nations and by the constructive work of Australian representatives on the United Nations Commission for Indonesia. When the new sovereign Federation of Indonesia comes into existence early next year it will undoubtedly need all the assistance it can acquire if it is to establish itself as a stable political unit. There are already indications that assistance in various forms will be sought from Australia as well as from the United States and other countries. It is clearly important that we should do everything we can to help to stabilise this nearest of all neighbour countries, arid this in itself is a strong argument in favour of our concentrating on helping Indonesia rather than dissipating our resources.

B. POLITICAL ACTION

While Australia's part in the task of combatting Communism in South-East Asia is likely to be determined in the last analysis by the material resources we can devote to it, there are nevertheless certain political activities which could be undertaken at negligible cost and which could at the same time strengthen the hand of the moderates and earn credit and goodwill for Australia. These cover the general field of diplomacy already mentioned, and amount in substance to the espousal of good causes that are being wrongly resisted by other nations, and to the avoidance of offhand treatment of sensitive governments and peoples.

Australian Representation

Our capacity to make our influence felt in these ways will be increased if Australia is adequately represented within the region itself by a Commissioner in Singapore, by Consuls-General in Batavia, Bangkok and Manila, and by a Consul in Portuguese Timor. Now that Indonesia is about to become sovereign it is certain that a number of countries will be entering into diplomatic relations with it; the Governments of the United Kingdom and India have in fact already appointed Ministers to Indonesia. It is important that Australia should not delay in doing likewise. The establishment of a legation at Batavia early in 1950 will be the most effective goodwill gesture that we can make towards Indonesia, and will entail little additional expense over and above the cost of our present consular establishment.

If we are to raise the status of our representation in Indonesia we can scarcely avoid doing the same in the Philippines and Thailand. The Thai Government has already approached us formally with a proposal for an exchange of diplomatic missions; we have replied that we do not consider that this would be appropriate until all outstanding Australian claims against Thailand arising out of the war have been settled. The Philippine Government is almost certain to make a similar approach in the near future. There are also good reasons in favour of our going ahead with an exchange of diplomatic representatives with Burma. Approval of the Government has already been given for such an exchange, and the Burmese Government has agreed to it; but we have not so far carried it into effect because of the confusion prevailing in Burma and consequent uncertainty whether the Burmese Government would survive. However, the Government has managed to remain in power, and since no satisfactory alternative to it can be seen it is desirable that we should do what we can to help keep it there. Although Burma's decision to leave the British Commonwealth must be regarded as irrevocable, there is evidence that the Burmese Government continues to draw comfort from the sympathetic attitude of British Commonwealth countries, and there is little doubt that an Australian diplomatic representative at Rangoon would have a valuable effect in reinforcing the influence that the United Kingdom, Indian, Pakistan and Ceylon representatives already exercise there. The cost of establishing a small mission in Rangoon and of raising the status of the consular posts in Batavia, Bangkok and Manila would be outweighed by the political value that would accrue. Not only would relations with the respective countries be strengthened�it is well known that they attach a great deal of importance to the status of representation�but official dealings with them would be placed on a more convenient basis. At the present time formal inter-Govemmental exchanges with these countries cannot take place direct but have to be conducted through London or Washington. It might be mentioned also that, with the possible exception of Indonesia, it would not be necessary for the Australian Government to appoint Ministers to each of the posts concerned. For the time being at least they could be left in the care of Charg�s d'Affaires.

One of the strongest arguments in support of the appointment of competent Australian representatives at key point[s] throughout South-East Asia is that it is the best way of increasing our knowledge of political, economic and social conditions in these neighbouring countries. A constant supply of political and economic intelligence, gathered on the spot with an eye to specific Australian requirements, is necessary to provide a background of knowledge for all Commonwealth Government departments handling matters affecting South-East Asia. This would include the Defence Department and the three Service Departments, which even though they may not be immediately concerned with detailed military planning for South-East Asia itself are nevertheless dependent on accurate and up-to-date intelligence reports from all quarters to provide a basis for their appreciations and overall plans. In this connection there would be advantages to the Defence and Service Departments if selected officers from those departments or from the armed forces could be posted for limited periods to Australian missions in South-East Asia. There they could assist in the collection of intelligence (including military intelligence, if so desired by the Service Departments), and would at the same time have an opportunity of learning local languages, customs and conditions. This suggestion is still under discussion with the Defence Department.

In the general context of political action to help maintain stability in South-East Asia, Indo-China presents an immediate problem that requires individual consideration. If arrangements for the establishment of Vietnam as an associate state of the French Union are completed it is the intention of the French Government to support the application of Vietnam for membership of the United Nations. In the meantime the French Government hopes that other countries will accord full recognition to Vietnam as a sovereign State. There is a possibility that the United Kingdom Government will decide to recognise the Bao Dai Government de jure early in 1950.1 It will be a matter for consideration by the Commonwealth Government whether our doubts about the reality of the independent status granted to Vietnam by the French Government are overborne by the argument for according full recognition to Bao Dai as a means of strengthening his position within Vietnam. Irrespective of the question of recognition, there is a strong case for establishing an Australian consular post in Vietnam, where we have virtually no sources of information at the present time.

C. ECONOMIC AID

A diplomatic approach to South-East Asia along the foregoing lines is a necessary part of any serious attempt we might make to exercise a healthy and stabilising influence there. But it is in the economic field that we could do most to achieve political ends. In this field the effectiveness of what Australia may be able to do will be determined rather more by the extent to which we are prepared to divert resources from other uses. The fact that our capacity to do this is limited is, as was stated earlier, the principal argument in favour of concentrating on the territory where economic assistance promises to be most effective � at the present time Indonesia. The United States Government is already considering how it can help the Indonesians, and has asked us what we are going to be able to do. If we are to do anything useful there is a need for prompt and wise action, based strictly on the limit of our capacity and unaccompanied by any lavish promises that we may find ourselves unable to fulfil.

The matter of Australian representation in Indonesia has been mentioned earlier. It is particularly important that the Australian mission should have attached to it at least one senior official with all-round experience in economic matters, who can ascertain Indonesian needs at first hand and form judgements on which of them can be met from Australia. The function would be separate from that of trade promotion and such an official might be called on for advice on the establishment of the internal economic organisation of Indonesia. He should be selected and posted to the Australian Consulate- General in Indonesia as soon as possible, without waiting for the establishment of a diplomatic mission there.

The function of providing up-to-date information about Australia will also become an important question. The United Kingdom and United States Governments have already established quite elaborate information centres in Indonesia, and it is desirable that the Australian mission at Batavia should have attached to it an Information Officer and a well- equipped library.

Consideration will also have to be given in due course to the establishment of consular posts at important outlying centres in Indonesia, e.g., Macassar.

Relief Supplies

One direct means of providing economic aid for Indonesia, and one that we have employed already on a limited scale, is through donations of goods urgently needed for the relief of the population. It can be expected that the Indonesian Government will be asking for further relief supplies to help overcome shortages that have arisen and persisted throughout the dispute with the Netherlands. We have already sent them a consignment of medical supplies, and a second consignment is awaiting shipment to Indonesia. It is likely that still more will be needed. The full extent of Indonesian requests for medical and other relief supplies will not become apparent until the new Indonesian Government regains control, but meanwhile an indication to the Indonesians that the Australian Government is prepared to consider their needs sympathetically would be helpful to them and would strengthen Australian influence among them.

Technical Assistance

Here again the extent of Indonesia's needs are not yet known; but it is certain that they will be considerable and will cover a broad field. It is desirable that Australia should consider ways and means of extending technical assistance to Indonesia over and above whatever general contributions we may make to the United Nations technical assistance programme recently approved by the General Assembly. It is clear that when they come to establish their own administrative machinery and run their economy the Indonesians will find themselves severely handicapped by lack of trained officials and technicians. They realise that for some time to come they will have to rely to an extent on Netherlands assistance and advice. But they have made it clear that they would like the assistance of officials and technical experts from other countries in addition to the Netherlands, and especially from Australia. Our own manpower limitations make it unlikely that we shall be able to let them have all the assistance they will ask for; but we should be prepared to go to some length in helping them, both by encouraging trained men from Australian universities and private business institutions to accept short-term engagements in Indonesia, and by seconding officers of the Public Service and public authorities to the Indonesian administration for limited periods.

We can also expect to be asked by the Indonesians to provide facilities for the training in Australia of their own official and technical personnel. Some requests of this nature will probably come within the ambit of whatever overall arrangements can be made for the reception and placing of all overseas students; others might perhaps be met by enabling Indonesian trainees to obtain first-hand experience in Public Service methods and procedures. In this connection it is highly probable that the Indonesian Government will be seeking training facilities for the officers of its armed forces, particularly its army. Consideration is being given by the Defence Department to the proposal that Indonesia be given the same concession as has been given to Pakistan, i.e., that a limited number of officers and specialists of the Indonesian armed forces be admitted to the Royal Military College and other officer training establishments in Australia. It is considered that such a concession, if accompanied by a readiness on the part of the Commonwealth Government to make available the services of specialist officers for the training of the armed forces in Indonesia itself, and by an indication that Indonesia could look towards Australia for certain types of military equipment and munitions, would do much to increase the efficiency and discipline among Indonesia's fighting forces and so help towards making the new State self-reliant and resistant to threats from within and outside. Insofar as this would lessen potential military commitments in South-East Asia it would represent a sound investment for Australia.

Australia will undoubtedly be expected to make a substantial contribution to this United Nations technical assistance programme. Any contribution that we make will of course pass out of our direct control and be administered by the United Nations and the various specialised agencies; in other words, it will not be for Australia itself to determine which countries are to benefit from it. Nevertheless Australian representatives at meetings of the United Nations and the specialised agencies can and should insist whenever opportunity occurs that a fair proportion of the total United Nations technical assistance pool be allocated to South-East Asia, whose needs and economic potentialities can be shown to be great in relation to other regions.

Educational Assistance

One medium through which Australia has in recent years made an impression on the peoples of South-East Asia is that of education. This offers a broad field in which by careful planning, and at comparatively little cost, Australia can earn valuable goodwill and at the same time foster a better understanding of Australian conditions and ways of life, not only in Indonesia but throughout the region.

All countries of the region are taking full advantage of the present limited programme of Commonwealth Government scholarships and fellowships tenable in Australian training institutions. It is considered that this programme could usefully be extended and greater numbers of trainees accepted, particularly from those countries that are most eager to benefit from them.

There is a demand for Australian lecturers and teachers in certain countries of the region. It is recommended that as part of Australia's general educational programme discretion be given for the use of funds to send selected Australian university lecturers to deliver short courses of lecturers at Asian universities, possibly during the long university vacation in Australia.

The best advertisers of Australia at the present time are the numerous Asian students who come here at their own expense to be educated at Australian universities, schools and technical training institutions. Even in Thailand, whose Government is at present somewhat unfavourably disposed towards Australia, there is considerable goodwill among private citizens whose children have been studying at institutions of learning throughout the Commonwealth and have reported favourably on their treatment here. It is considered that more might be done to encourage the entry of students from South-East Asian countries who are prepared to meet all their expenses. Those who are now in Australia are under the disadvantage that whereas Government fellows and scholars are looked after from the date of their arrival in Australia, no responsibility whatever is accepted for private students, who are left to fend entirely for themselves. It is understandable that some of them should have found difficulty in adjusting themselves to unfamiliar Australian conditions of living, and should tend to paint a distorted picture to their relatives at home. It is suggested that Commonwealth departments concerned might jointly establish machinery for looking after the welfare of private as well as Government students, including for example the appointment in some of the capital cities of a Welfare Officer who could act as an adviser to all Asian students in his city.

A further useful measure in the educational field would be an extension of the existing scheme for providing supplies of educational materials, including text books and films, to South-East Asian countries.

Trade

It was stated earlier that an increase in trade with the whole of South-East Asia should be one of the first objectives of Australian policy. This calls for Government action to stimulate the interest of the Australian commercial community in the needs and resources of the area, and to encourage and facilitate visits to Australia by officials and businessmen.

This applies with special force to Indonesia. A resumption of trade with that country is likely to provide Australia with the best and most natural means of helping to strengthen the Indonesian economy and at the same time establishing lasting contacts with that country. Evidence suggests that as soon as regular shipping services are restored trade on a substantial scale will begin to flow naturally in both directions. A number of Australian exporters and agents are known to be anxious to return to pre-war markets and sources of raw materials in Indonesia, and commercial interests in Indonesia can be expected to seek from Australia commodities that have been non-existent or in short supply in Indonesia since before the war. The future pattern of Australian-Indonesian trade is at present hard to predict, but there would seem to be scope for a considerable increase beyond the pre-war level provided Australian commercial interests are early in the field and continue to be active in it. This could also lead to opportunities for investment by Australian business houses in Indonesia itself.

On the assumption that Australian-Indonesian trade is likely to remain for the most part in private hands, the Government's chief function will be to act as a stimulant and to remove obstacles and restrictions wherever possible. An additional consideration is that during 1950 the new Indonesian administration will no doubt make many decisions which will affect the long-term basis of its commercial policy and local administration. It will be clearly in our interests to have discussions on commercial relations as soon as possible in order to protect Australian interests in trade and investment. This is all the more desirable in the light of the provisions of the Netherlands-Indonesian economic agreement. This leaves the way open for an exchange of trade preferences between the two governments which could be inimical to long-term Australian interests.

For the promotion of commercial trade the appointment of an Australian Trade Commissioner in Indonesia would be useful.

Particularly in the early stages, there is likely to be a heavy demand from Indonesia for materials and equipment required for reconstruction and rehabilitation�for just those items, in fact, which in many cases are in short supply in Australia. It is recommended that government departments concerned should be instructed to give special consideration to requests of this nature from Indonesia whenever the granting of export licenses is involved.

Another aspect of trade with Indonesia where the Commonwealth Government may be able to intervene usefully relates to foodstuffs. Before the war there was a limited but steady Indonesian demand for Australian dairy products and meat. This was essentially a European demand, and whether it will be maintained in the future cannot yet be predicted with certainty; but there is no particular reason to assume that it will end. So long as rice continues to be scarce the Indonesian population is likely to be heavily dependent upon imports of flour, and here again Australia is the natural source of supply. It will be for the Commonwealth Government to consider whether these demands can be met in whole or in part without undue interference with Australian commitments to the United Kingdom and other countries.

Financial Assistance

One serious initial obstacle to internal rehabilitation and the expansion of trade with Australia is likely to be Indonesia's shortage of foreign exchange. Their balance of payment difficulties will be affected by United States decisions which are impossible to foresee. It appears likely that the country will be short of sterling, particularly if there are heavy imports for the rehabilitation programme. An early approach to the Commonwealth Government for some form of credit to cover urgent purchases in Australia and perhaps elsewhere in the sterling area can be expected. It will be recalled that as long ago as July 1947 the Commonwealth Treasury was considering the possibility of an extension of credit to the interim government of Indonesia as and when it was established. It is recommended that this possibility be now re-examined in the light of whatever knowledge can be obtained of the present and prospective balance of payments position of the country.

Civil Aviation

The subject of civil aviation comes within the general scope of possible assistance to Indonesia. The prevailing uncertainty surrounding the future management and operation of civil air services in Indonesia is in itself sufficient reason for the Commonwealth Government to be giving thought to ways in which it might help to provide Indonesia with an efficient air transport system, possibly with advantage to Australian civil aviation. At the present time K.L.M. operates an efficient and comprehensive network of air services throughout the Archipelago, but it is not yet certain that K.L.M. intends to continue in operation after the transfer of sovereignty to Indonesia. The Indonesian Government has indicated that it intends eventually to establish its own civil aviation, but that for some time it will have to rely on outside assistance. The Indonesians will almost certainly be seeking facilities for the training of Indonesian pilots, maintenance staffs, etc., and it is recommended that the Commonwealth Civil Aviation Department be prepared to assist in this regard. In addition, whether or not K.L.M. decide to remain in operation (as they would presumably be entitled to do under the terms of the Netherlands - Indonesian agreement reached at The Hague), there may be opportunities for Australian air carriers, under agreement with the Indonesian Government, to operate not only a trunk service through Indonesia but also certain internal services. It is suggested that these matters be discussed with the Government of Indonesia as soon as may be convenient after its establishment in power.

Position of Japan

Although the question of Australia's future political and economic relations with Japan fall outside the present context, the undoubted importance of Japan in relation to the economic development of the South-East Asian region is such that it cannot be ignored in any examination of Australia's capacity to assist South-East Asia. It is only realistic to assume that Japan, with its industrial system now reviving rapidly, will become the natural supplier of many of the commodities, such as steel and textiles, which will be in greatest demand in Indonesia and other South-East Asian countries, and which Australia is a present unable to supply. Japanese manufactured goods are already entering the region on a substantial scale. In taking this fact into account, we must also ensure that our attitude towards Japan does not have the effect of nullifying what we may be trying to do in South- East Asia. It is conceivable, for example, that continued Australian insistence on the maintenance of close restrictions, on Japanese industry and trade would bring us into disfavour in South-East Asian countries which are anxious to share in Japanese production.

Attitude of the Australian Public

It is self-evident that the pursuit of a calculated and consistent policy of closer political and economic contact with South-East Asia will be made easier if it is understood and supported by the Australian people as a whole. Up [to] the present there has been a natural tendency in Australia to emphasise traditional political and economic links with the United Kingdom and Europe and to overlook South-East Asia as a potential bulwark of Australian security and as a natural outlet for Australian trade. Events during and since the last war have shown that South-East Asia can no longer be ignored.

It is likely that consciousness of the importance of these neighbour countries will grow in the public mind as commercial and other contacts increase. But this can at best have only a limited effect unless the Commonwealth Government follows a conscious policy of educating the public to a greater awareness of the growing inter-dependence of Australia and South-East Asia.

D. SUMMARY OF RECOMMENDATIONS

The foregoing represents a broad outline of a comprehensive policy by which the Commonwealth Government and all Government Departments might be guided in relation to South-East Asia. Individual aspects of this policy would take the form of separate submissions to Cabinet in due course. In the meantime the following recommendations are submitted to Cabinet for its approval in principle:

(a) The establishment of—

(i) Australian diplomatic missions at Batavia, Manila and Bangkok, to replace the existing Consulates-General;

(ii) An Australian diplomatic mission at Rangoon;

(iii) An Australian consulate in Vietnam;

(iv) An Australian vice-consulate at Macassar.

*(b) Attachment to the principal Australian posts in South-East Asia of officers drawn from the Australian Defence Department and/or Service establishments.

(c) The formation of a comprehensive programme of technical and educational assistance to South-East Asian countries through—

(i) The provision of technical advice and assistance, particularly to the Government of Indonesia, to the extent permitted by Australia's obligations to the United Nations technical assistance programme and by Australia's limited capacity to release skilled manpower;

(ii) An increase in the number of Government fellowships and scholarships;

(iii) Measures to encourage the entry of private students, including the provision of welfare facilities for all Asian students;

(iv) The engagement of Australian lecturers to deliver courses at Asian universities;

(v) The provision of educational materials for countries of the region.

(d) The promotion of increased trade with South-East Asia, and particularly with Indonesia, through—

(i) Encouragement of reciprocal visits by Australian and South-East Asian officials and private commercial interests;

(ii) The relaxation of trade restrictions wherever possible, and discussions with the Government of Indonesia, if appropriate, on future policy in the field of commercial relations, and measures for the protection of any Australian investments;

(iii) Restraint in the use of export controls on goods in current short supply in Australia;

(iv) Encouragement of Australian industry manufacture with an eye to the South-East Asian market.

(e) The setting aside of an additional sum for the provision of relief goods for Indonesia, particularly urgently needed medical supplies

(f) Examination of the possibility of granting a credit to the Government of Indonesia for trading purposes.

*(g) The provision of facilities for the training and equipment of the Indonesian armed forces, through—

(i) The admission of Indonesian officers to Australian officer training establishments;

(ii) The release of specialists to conduct training in Indonesia;

(iii) Encouraging the Indonesian authorities to look towards Australia for military equipment and supplies.

(h) The provision of training facilities in Australia for Indonesian civil air crews and ground staff.

(i) The institution of a campaign to educate the Australian public in the importance of South-East Asia to the future security and well-being of Australia.

* Subject to further discussion with the Defence Department.

[NAA: A1838, 532/7 part 1]

1 The United Kingdom recognised Bao Dai in these terms on 7 February 1950. Australia followed suit on the following day.

Last Updated: 10 January 2017

Category: International relations

Topic: History