656.56D31/3–1247: Airgram
The Acting Secretary of State to the Embassy in the Netherlands
A–55. For your information: Professors Weyer and de Kat Angelino, Dutch representatives,33 have informed Department that Neth Govt proposes to supplement Linggadjati Agreement by economic agreement with each of three states of projected United States of Indonesia. Even if Republic refuses, Dutch hope to negotiate such agreement with East Indonesia and Borneo. Purpose of proposed agreement is to attract foreign capital as essential to rehabilitation of N.E.I. Main points proposed agreement are:
- 1.
- Sound currency system under control autonomous central bank of issue similar Java Bank to be chartered first by states and then by U.S.I. for specified period of time.
- 2.
- Sound control of foreign exchange by autonomous body with right of foreign investors to remit at least income and amortization.
- 3.
- Sound governmental financial policies.
- 4.
- Agreed rates of duty on exports produced by foreign capital and imports essential to foreign capital enterprise, to remain in force, say, twenty-five years but subject to change by agreement between Neth and Indonesian Govts.
- 5.
- A guarantee of all prewar rights and obligations of foreign capital for a specified period, say twenty-five years, which would inter alia prevent nationalization of foreign holdings.
Dutch representatives stated that they were not here to request U.S. Govt loan but, believing rehabilitation of N.E.I. would require private capital, Dutch Govt hoped their proposals could have moral support this Govt; that they might so inform Indonesians; and that, if necessary, U.S. would so inform Indonesians.
Dept has informed Dutch representatives that it is unwilling to give any assurance that this Govt would urge on, or suggest to, Indonesians acceptance of the proposed economic agreement; that it cannot subscribe [Page 905] to proposal which would involve presentation to Indonesians by Neth Govt of proposed economic agreement as embodying views U.S. Govt. Dept stated this Govt is deeply interested in prompt economic rehabilitation N.E.I. and recognizes that foreign capital must play important part in such reconstruction and that stable government and currency and reasonable foreign exchange controls will facilitate such reconstruction; that it considers that immediate free and unhampered trade and commerce between N.E.I. and rest of world is one of most essential steps to world rehabilitation as well as to economic rehabilitation of the N.E.I.; that it believes that “open door” policy is an essential predicate of such free and unhampered commerce.
Dept expressed hope that whatever plans may be proposed will complement and not restrict economic development of Indies by Indonesians, and that care will be taken not to give foreign capital position of special privilege, which might result in developing antagonism to capitalism and ideologies of Western democracy and which might, if such antagonism became strong enough, result in liquidation of such foreign capital and undoing of economic rehabilitation of area.
Informal conversations on technical level continuing.
Sent to The Hague. Repeated to London and Batavia.
- On the Far Eastern Commission, Washington.↩