Kuala Lumpur, 24 November 1965

2506. Secret Immediate

Barter Trade

Following is text of letter addressed to me¹ from the Tunku and handed to us by Ministry official this afternoon. Comments in our immediately following cable.²

I wish to invite your attention to the question of the proposed resumption of barter trade between Singapore and Indonesia with Pulau Senang as its centre, and to convey through you the Malaysian Government stand for the consideration of your Government.

2. To us two important matters are involved in any resumption of trade between Singapore and Indonesia whatever the form and guise it may assume, and therefore I would much prefer Singapore to defer decision for some time until every aspect of these matters has been carefully considered:–³

(i) Question of principle
Regardless of the security assessment, the question of barter trade is so wound up with the overall question of Indonesian confrontation that it would be totally against our principle to agree to any resumption of barter trade so long as Indonesian confrontation continues. We are strongly of the view that there should be no pact between Indonesia and Singapore who like us is subject to Indonesian confrontation. Any agreement that is likely to benefit the enemy must be regarded as harmful to Malaysia. There is no doubt that barter trading will benefit Indonesia a great deal and the money derived there from would be used not in the interest of the Indonesian people alone but more likely to help that Government to carry out their acts of aggression against Malaysia.

(ii) Security
Whatever the security reason may be as viewed by the military experts on the effectiveness or otherwise of measures to prevent Indonesian barter traders from getting no further than Pulau Senang, consideration must be given to the inherent dangers arising from any contact with the enemy. For this reason when the separation of Singapore from Malaysia was concluded both parties agreed, under Article V(4) of the Agreement, not to enter into any treaty or agreement with a foreign country which may be detrimental to the independence and defence of the territory of the other party. I hold that contact with Indonesia through barter trade constitutes a breach of this agreement. There are large numbers of Indonesian and communist agents both in Malaysia and Singapore who could easily use the barter trade for clandestine exchange of information and for the supply of arms to further their nefarious design detrimental to our independence. There is no guarantee that smuggled weapons will not pass hands and there is no possibility of an effective checking on them. Malaysia's experience has proved in respect of the Tawau barter trade that despite elaborate and sophisticated precautionary measures and despite the small volume of the trade involved,⁴ it has not been possible to completely prevent the smuggling of arms. The opportunity for doing so in the event of resumption of Singapore's trading with Indonesia is even greater.

3. In view of these considerations, and of the fact that Singapore is likely to take unilateral action to resume barter trading in December, the Malaysian Government must condemn such a move as a serious breach of Article V of the Agreement and must take counter measures as are open to us to prevent it. These are:–

(i) Apply economic sanction.

(ii) Impose a blockade against vessels calling at Singapore anywhere within Singapore territorial waters from Indonesia for barter trading.⁵

4. It is therefore important for Malaysia to be informed clearly of the Australian attitude in such an eventuality in particular with regard to the duties of seconded officers of Australian nationality now serving in the Malaysian Armed Forces.

5. The matter is, however, of considerable importance and urgency to us and I would appreciate hearing from you as soon as possible.'

[NAA: A6364, KL1965/10]

1 That is, Parkinson, who was Acting High Commissioner until the arrival of Eastman from London. Eastman was to arrive on 12 December and present his credentials as High Commissioner to Malaysia on 16 December.

2 In addition to comments on paragraphs 2 and 3 of the letter, Parkinson advised that the UK and New Zealand had received identical letters, that it appeared the letter had not been 'drafted by or even in consultation with' Ministry officials, and that he believed it was 'a definite statement of policy'.

3 In handing over the letter, the Ministry official had drawn attention to the deferment objective in this paragraph and stressed that while the Tunku remained committed to not entering into an agreement with the enemy, he was taking into account that 'confrontation may ease off in six or seven months'.

4 See editorial note, Barter Trade.

5 Parkinson failed to gain clarification as to whether Malaysia intended to use both economic sanctions and force together or to apply sanctions first and then force. Before he left Kuala Lumpur, Critchley had advised that he believed 'the most likely pressure [would] be economic' if Singapore went ahead with barter trade, with the Malaysians asking Singapore to choose between trade with Indonesia and trade with Malaysia. Parkinson too felt that it had to be assumed that the Tunku meant to use the first option set out in this letter.