Jakarta, 23 October 1954

CONFIDENTIAL

Thank you for your letter of 27th September¹ about the Colombo Plan.

As at the moment, we have supplied roughly �200,000 worth of capital aid to Indonesia, but the following projects amounting to �4,939,359 have been placed before the Department:

(a) Items amounting to �853,000 which have been approved by the Minister.

(b) A project amounting to �200,000 which is still under examination, but which it seems may be approved.

(c) Projects amounting to �2,000,000 and �400,000 which are not yet settled.

(d) A project (diesel locomotives) involving �1,000,000, against which we have recommended.

(e) The items mentioned in the Department's telegram 217²

This, I suggest, is a fairly substantial bill, especially when, as your letter says, the Department might be able to make available in its budgeting for this year up to �500,000 for the Indonesian programme.

In regard to technical assistance, we have so far sent 124 Indonesians to Australia, 62 of them during the past ten months, and there are others in prospect. On the obverse side, we have 4 experts already here and others are in prospect. The number of Indonesians going to Australia far exceeds that going to any other Colombo Plan country, and greatly exceeds the United Nations figure although not that of F.O.A.

I should not like you to think that we are deterred by obstacles; indeed I should like to go further and suggest that in the circumstances prevailing, the achievement is not inconsiderable taking into account the following factors:

(i) We are attempting to handle, with one officer, a volume of aid which is greater than that of F.O.A. and that of the United Nations, both of which agencies have very large staffs here.

(ii) There is no proper definition by the Indonesian Government of their real needs; despite the Planning Bureau, Ministries are not basing their requests on any scientific appraisal of the country's problems, and there is no co-ordination of programmes.

(iii) The administrative machine is untrained, sublimely inept, disconnected, badly paid and corrupt.

(iv) Having tested any given need, in the case of a proposal brought forward by ourselves, the approach requires handling of a most delicate order. There is still a basic resistance to intrusion in any form, intra mural jealousies have to be surmounted and the shadow of corruption and misuse hangs over everything.

There are related factors which deserve mention or repetition:

(i) The after-care of equipment cannot be taken for granted. The Dutch did nothing about training technicians, and under their own dispensation the Indonesians are only now embarking on training programmes. This is tantamount to suggesting that the technical assistance aspects of any aid programme should move ahead of its supply aspects.

(ii) Nor can we move too far ahead of what the Indonesian economy allows. The country is faced with heavy deficits and what Bavansky (the Financial and Economic Adviser in the Planning Bureau) describes to us as the worst inflationary situation in Asia. Asked what this meant in terms of foreign aid[,]³ Bavansky said that no new commitments of Indonesian funds should be undertaken and that the emphasis should rest on programmes to which the Indonesians are already committed. In explanation of Bavansky's statement it should perhaps be added that there is always a local cost element in every injection of foreign aid, particularly heavy equipment.

(iii) In an area like Java where there are heavy manpower resources, the injection of heavy equipment does not always produce the economics which might be achieved elsewhere. You have mentioned three subjects in particular, all of which have been described elsewhere:

You have mentioned three subjects in particular, all of which have been described elsewhere:

(i) Diesel locomotives: We made the best possible enquiries; T.G. White & Co., the engineering consultants to the Indonesian Government, who are very much aware of the railway position, recommend against the offer. The Minister for Communications (Rooseno)⁴ contradicted his own Ministry in defining the need. Indonesian engineers from the Ministry of Public Works have said that it would be folly to import diesels when the tracks are not in sufficiently good condition to permit them to operate at economic speeds. (We understand that steel rails designed for modernising the main lines on which diesels are used, have been rusting for years in the railway yards Djakarta). Furthermore, neither of the Clyde Engineering Co. executives who spoke to the Railways Department were able to inform us either in regard to need or intended use, nor satisfy us on the point of maintenance.

(ii) Mr. Rank⁵: Here again we sought the best available advice. Dr. Jungalwalla, the senior W.H.O. representative recommended' against the visit and Lemeina, the Senior Adviser in the Ministry of Health, could develop no interest. The need here is for basic medicine, hospital facilities are badly overstrained; there could have been no facilities for after-care and, unlike Malaya, no public interest would have been aroused.

(iii) Diesel buses: We first raised this subject with the Department in November 1953, but got no reply. The official request from the Indonesian Foreign Ministry came to us in May last and at the end of June the Department told us that the supply of 100 vehicles had been approved. There was very little delay in obtaining specifications, and the Department's revision of the specifications reached us last weekend.

(iv) Other projects: The only other instances of delay at this end which I can recall, concern one or two projects which came to us from particular Ministers but which the Indonesian Government refused to sanction pending further investigation of the funds position by the Planning Board. This was something about which little could be done. In one or two technical assistance proposals, (e.g. vocational training equipment, mobile cinema vans and perhaps to a lesser extent book binding equipment), the delays have not always been at this end.

I should like you to feel that we are energetically carrying out the Department's policies and that any instructions which we receive will be complied with to the best of our ability. If, moreover, we can discover any new avenues of useful help, we shall always submit them for your consideration. At the same time, I am sure that the Department for its part will take account of the atmosphere in which we are working and not be displeased if, against the background of our experience here we sometimes feel obliged to bring forward comments which aim to ensure that in its examination of any given project the Department has all factors before it.

Thank you again for your letter.

[NAA: A11604, 704/1]

1 Not published.

2 Not published.

3 Editorial insert.

4 Professor Rooseno.

5 Presumably a reference to the plastic surgeon, Benjamin Rank, who later travelled to India and Ceylon under the Technical Assistance Program. See Document 289.