856D.13/4–2751: Telegram
The Ambassador in Indonesia (Cochran) to the Secretary of State
1497. Embtels 1454 and 1456.1 Called on FonMin Roem 5:30 p. m. 26th. Referred to our previous conversation on reported plan of Java Bank to sell gold coin and bullion. I told Roem I had formulated some questions as to wisdom proposed action and presented them to him in form secret and unofficial unsigned memo. These covered points included in Embtels above mentioned and Deptel 1149.
Roem said he had inquired of Finance Min Sjafruddin and learned plans were made to begin gold sales May 1. He thought main purpose was to provide gold for govt stocking as rice harvested and also to place gold in rubber producing areas which are accumulating cash but whose needs for textiles and other consumer goods cannot be met from existing stocks.
Roem was particularly unhappy over thought that proposed action might not be in accordance with precepts of International Monetary Fund whose rules Repub had undertaken to abide by, RTC agreement, although not yet member. Roem asked I speak with Djuanda since he would be the one carry-over member of Natsir govt interested in economic and financial matters. Roem let me know composition new govt was to be announced few hours after our meeting. Roem also suggested I talk with Oudt,2 advisor to Minister Finance, or to Kuypers, head Foreign Exchange Institute.
I visited Djuanda after leaving Roem and gave former copy my memo, explaining Roem had recommended this. Djuanda gave practically same info as Roem re contemplated gold project and reasons therefor. He said govt wld need approximately 200 million rupiahs to meet situation and favored utilizing gold to take care of rice and rubber areas. I argued against this, pointing out that increased note circulation occurs in most countries at harvest time. I thought Indo Govt shld not now deviate from econ and fin policies which have heretofore proved sound. I reminded him that gold which Indo had acquired from US had been sold for building up central bank reserves and not for profit-making distribution at premium prices.
Djuanda advised against my speaking with Kuypers or Neth advisors but promised take matter up with incoming Min Fin.3
This issue has arisen at bad time since it is manifestly impossible for me immed approach members new govt who are expected to be sworn in today and since Java Bank may consider that firm decision to [Page 642] institute plan has already been approved by expiring govt for commencement May 1. I am sure however, Djuanda can be counted upon to do anything that may be feasible in premises.