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December 16, 2016
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April 19, 2005
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July 1, 1954
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2005/05/16 M : CIA-RDP80RO1731 R003000160006-0 DATE Ju4 it 195. COPY N OPERATIONS, COORDINATING BOARD TES ST, .T19 0BJ CT1VF AND COURSES OF ACTION Wr* RZSPE`,CT ?TO INDONESIA REFERENCE: Nsc Action No. 962 'OCB FILE NO. NSC review(s) completed. 2005/031 ; c.rM- t P80R01731 R00300Q16000,6t Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 WARN ING This document contain:, information affecting the national defense of the United States, within the meaning of the eShionage laws, Title i8, Sec- tions 79:? and 794, L.S.C., the transmission or revelations of which in any manner to an unauthorized Person is Prohibited by law. Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET OPERATIONS COORDINATING BOARD Washington 25, D. 0, September 28, 1954 MEMORANDL FOR THE OPERATIONS COORDINATING BOARD SUBJECT: Progress Report on NSC 171/3. (Indonesia) The attached Operations Coordinating Board Progress Report on NSC 171/1,, "United States Objectives and Courses of Action With Respect to Indonesia", dated July 1, 1954, was used by the National Security Council as a basis for discussion in connection with Counc:f_ consideration of the "Review of U.S. Policy in the Far East" (now NSC 542.9/2) on August 12 and August 18,, 1954, Action Nos. 120+ and 1206 respectively, The National Security Council at the August 12 meeting (NSC Action No, 1204,) reaffirmed the policy on Indonesia contained in NSC 171/1, subject to the changes made in paragraphs 19 and 21 (as set forth in paragraph 12 of NSC 5429/2). The previous drafts of this report dated July 1, June 18, and June 9, 1954, and the memorandum dated June 22, 1954 transmitting corrected pages are obsolete and may be destroyed in accordance with the security regulations of ;your agency. ,21 & E lmer B. Staats Executive Officer Attachments: 1. Memo to the Executive Secretary, NSC, from the Executive Officer, OCB, dated July 12, 1954. Progress Report on NSC 171/1 (Indonesia) dated July 1, 1954, 0CB File No. 30 Approved For Release 2005/051: 9 P80R01731 R00300o01 4 rage, Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET OPERATIONS COORDINATING BOARD Washington 25, D. C. July 12, 1954 MEMORANDUM FOR: Mr. James S. Lay, Jr. Executive Secretary National Security Council SUBJECT: Transmittal of Progress Report on NSC 171/1 (Indonesia). REFlRENCESz C1) NSC Action No. 962. (2) Memorandum from the Executive Secretary, NSC, dated November 20, 1953. On November 20, 1953 the President approved NSC 171/1, 'United States Objectives and Courses of Action with Respect to Indonesia" and designated the Operations Coordinating Board as the coordinating agency. Attached hereto is the progress report on implementation of NBC 171/1. covering the period through May 31, 1954. The report was approved by the Operations Coordinating Board on July 7, 19514. With reference to Para. C. 2 of NSC 171/1, viz., increasing the training of Indonesian military officers in U. S. military sQhools, the OCB agreed that the Defense Department will endeavor to finance the trainees and that other agencies, directly or indirectly interested is this problem, will see if they can assist. On July 7, 1954, subsequent to the date of the progress report, he Operations Coordinating Board also noted and discussed recent intelligence, that the Polish Ship PULASKI has loaded in Djakarta 200 tons of an esti- mated 6000 ton rubber punch ase with the apparent intention of proceeding to Communist China in violation of the UN embargo., The ;lepartment of State called in the Indonesian Ambassador on July'3 and our Ambassador in Djakarta is making representations with the Prime Minister and possibly the Vice-President in an attempt to persuade the Indonesian Government, to prevent or divert the shipment. The Operations Coordinating Board noted that this matter is presently being handled through diplomatic channels. ,/I 'el'~ Elmer B. Staats Executive Officer Attachment: Progress Report on NBC 171/1 (Indonesia) dated July 1, 19514 Approved For Release 2005/05/16: CIA-RDP80R01731 R000 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET July 1, 195/ LAM Q .JECTIY AIW C01 j (Policy approved by the President November 20,1953) A. SUZY OF MAJOR C. A? TI, NS Limited progress has been made in implementing the courses os action set forth in NBC 171/1, as follow (paragraph references are'tc Annex A): (a) Agreement to purchase tin under the third year of the RFC- Indonesian contract and announcement of U.S. policy withholding from -world markets tin in excess of stockpile objectives (para. 20. ja). (b) Agreement on an FOA project for training and-equipping'the Indonesian Police (para. 26). (c) At the Indonesian Government+s're" quest, supplying ample anti- Communist legislation (para. 15). (d) Opening negotiations on an Information Media Guerant.""Yro wr l (para. 27). (e) Opening negotiations on a ?.'reaty of Commerce and Navigation (para. 23). (f) Preliminary discussions on, and study of the'feasibility of furnishing-U.S, officers under individual contract as instructors in the Indonesian Army (para. 26). (g) Preliminary discussion of a state visit for President Sukarnc in 1955 (paras. 12 and 18). (h) Improved conditions with respect,to the U.S. technical assistance program.(Indonesian financial deterioration impedes progress of the program).. (para. 22). (i) Increased training for Indonesian-Army officers-in U.S. military service schools (para. 26). (j) Carrying out and strengthening informational activities (para. 27). Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SEAT 25X1 Only limited action has been possible with respect to rubber (para. 20 A.) No solution favorable to the U.S; of the Dutch-Indonesian dispute over New Guinea has been found.. An attempt has been made to discourage Indonesian action which would bring the Nett Guinea issue into the UN (para. 25). B. POLICY CONSIDERATIONS Despite limited progress In implementing U.S. courses of action, the general situation in Indonesia has continued to deteriorate and U.S.. capacity to influence Indonesian leaders in the attainment of its objectives has continued to be limited during the period covered. by this report. Apart from apparently unavoidable political difficul- ties,. U.S. failure thus far to find a workable formula and sound basil to-help increase Indonesia's earnings from rubber'in implementation of paragraph 20(a) NSC 171/1 has been a prominent factor limiting progress. In the light of the Special Estimate, "The Si nificance of the New Indonesian Government".(SE-51, September 15, 1953 which characterised the present Indonesian Government as "more leftist than any preceding Government," the U.S. has perhaps had more success in carrying out, the courses of action than might. have been expected. This is the first Government which.has issued an official. statement on foreign invest- ment, though the statement was phrased in generalities which have yet to be'implemented. The American oil companies have been able to work out satisfactory Ad arrangements on taxes and the remittance of' profits. Labor strife, the Communists' most potent weapon in Indo- nesia, has been less widespread under this Government than under the previous Government though the Communists have continued and may have increased their hold on organized labor. The American Ambassador llu Djakarta has been able to establish rapport with key people in this Government. The most alarming aspect.of the deterioration is Indonesia's internal and external financial position. At the end of May, Embassy Djakarta reported that Indonesia's available international reserves were already below the critical level and that the Government was making frantic efforts to avoid further losses. If this deteriora- tion continues unchecked, non-Communist Indonesian leadership will be further weakened and perhaps unable to remain dominant in Indonesia-L. Government.* * The slight difference between this analysis and that of the current Intelligence Estimate results from the developing situation since the NIE was written. Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET The policies and courses of action contained in NSC 171/l.are in general considered to be adequate, timaly and appropriate to the current situation with the exception of paragraphs 19 and 21. Because of the deteriorating financial position and fog' purposes of clarity, it is recommended that the NSC reconsider par.agra hs 19 siid 21 for the reasons given in td=x,1 attached. C. E=ING PRO BIEr4S AM z A CTIONS 1. Indonesia is faced with either enforcing a further and drastic reduction in imports or permitting its foreign exchange balance to reach a dangerously adverse level. To take the first course invites further inflation and labor unrest; to accept the second courts financial disaster. As the financial situation deteriorates, pressure to ship rubber to Communist China mounts. Shipments of Indonesian rubber in violation of the UN Embargo would call for consideration of invoking the Battle Act, threatening the termination of the U.S. technical as- sistance programs, the cancellation of further disbursements under the Export-Import Bank line of credit and the granting of export licenses to Indonesia. Such a development would seriously threaten U.S.-Indo- nesian relations and benefit the Communists. Study is being made of whether the U.S. should attempt to give Indonesia a financial "shot-in-the-arm", while seeking closer U.S.-Indonesian cooperation in the long-range improvement of the latter's economy and of whether (a) economic aid will have a favorable effect on U.S.-Indonesian relations, and (b) failure to supply effect- ._iveeoanomic aid would result in a situation. imperiling the U.S. position in Indonesia. iRecomsndations based on this study will be made to the NSC at an early date. 2. Pending a more effective arrangement, the training of Indonesia- military officers in U.S. military schools appears to be the beat available means of favorably influencing and strengthening the Indo- nesian armed forces. Unless Indonesiats foreign exchange position improves, the sending of these officers to the U.S. after this year may be precluded. This problem is understudy with a view to finding a way to maintain and, if possible, increase the training of Indonesiac1 military officers in U.S. military schools (para. 26, Annex j). 3. Continued failure to agree on reparations inhibits the increasa of Japanese-Indonesian trade and hinders economic improvement in both countries. If requested by Indonesia, the U.S. is prepared to exert its good offices in this regard. 4. An additional problem :In U.S. relations with Indonesia has been created by the Indochina crisis and by the necessity-for political -3- TOP SECRET Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 . TOP SECRET and-military-consultations with the Southeast Asian and European powers most concerned. its in Indochina and U,S. action with respect thereto will profoundly affect the U.S. position in Indo- nesia, Effective U.S. action in opposing the surrender of any part of Indochina to Communism will strengthen and favorably influence anti-Communist and non-Communist elements. Converse action will weaken these elements, fill them with uncertainty-and perhaps lead .many of them to try to accommodate Communism. In contrast to Inds- china, action countering CommarAsm in Indonesia can be taken in_ non-military fields, most feasibly in the economic field. 4 - TOP SECRET Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 ANNEX "All TOP SSM& DETAILED DEVEWPMENTS OF MAJOI; A IONS Para* lQp. "In carrying out the following courses of action, avoid the pearance of interfering in Indonesian internal of "rs,"- Para. 11. "Seek the elimination of Communist influence frolt the Indonesian Government." Para U. "Constantly distinguish between the Conununists, anti- Communists and the non-Communists in order to isolate, discredit and weaken the Communists, strengthen the anti-Communists, favorably influence and avoid alienating the non-?Communi.sts,0 Para, . "Develcc friendly relations with all anti-Communist and non-Communist groups and leaders in order to preserve U.S. abilit; to work with whatever elements, other than the Communists, may come into power:," These principles have continued to guide the activities of all the departments and agencies of the U.S. Government in the day-to- day conduct of relations with Indonesia and in actions taken pursuant to NSC 171/x.. Para 12.. "Use U.S. influence to encourage the holding of gen- eral elect one in Indonesia at the earliest possible date." In authorizing the American Ambassador in Djakarta to discuss with President Sukarno the latter's interest in a visit to the U.S. (see Para, 18 below) and the latter's views on the relationship such a visit would have to Indonesian elections, the Department of State hopes to influence President Sukarno to expedite the implementation o elections and favorably affect their outcome. Information on election procedures is being included in USIA pamphlets produced and distributed in Indonesia. The recipient of an I3 leader grant who studied election procedures in the U.S. has been made the chairman of an important election committee, Registration for elections is being carried out. Para. 15. "Exert influence wherever possible to bring about a common recognition by key individuals of the gravity of the Communist menace," The American Ambassador in Djakarta has provided the Indonesian Foreign Minister, at the latter's request, with examples of anti- Communist legislation in the U.S,. and other countries, and the Embassy staff are exerting their influence with key members of the Indonesian Government to induce in them a realization of the danger of Communism1 - $ .. TOP SECRET Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET Annex A The visit of Vice President Nixon to Indonesia was effective, particularly with President Sukarno, The visit to Indonesia by a Special Study Mission. of the.House Committee on Foreign Affairs and a discussion between Congressman Judd of that group and President Sukarno was also'effective with respect to increasing the latterts knowledge of Communism. Pag, ,.,16, "Utilize the forces of ?.nationalism and of Islam in opposing Communism, and avoid antagonising the force of anti-colonialism.11 In discussing during April. and May 1954 the "united. action" con- cept with the Southeast Asian Ambassadors, including. the Indonesian, the Department of State avoided simultaneous consultation with the Netherlands and did not invite Netherlands participation in a1w pro- posed Southeast Asian Pact, As a result, the Indonesian Government informed the U.S. officially that while unable to participate in "united action" before elections, it would view U.S. efforts in this field with "benevolent neutrality". Representatives of the Indonesian Government have assured the U.S. informally that they understand the necessity of action to stop Communism in Indochina but feel Indonesia cannot join any grouping now. Publicly, the Indonesian Government has followed the line, adopted at the Colombo Conference of Asian Prime Ministers,. namely, favoring-a, negotiated peace in Indochina, supervision of-the,cease fire by the Asian powers which met at Colombo and non-intervention by European, especially "colonial", powers in the area. 25X1 Para. l . "Place special emphasis on the use of the personal influence of American officials and private citizens on Indonesian leaders, especially President Sukarno." The Department of State has authorized the American Ambassador in Djakarta to discuss with President Sukarno on a personal, confiden- tial and no-commitment basis, the latter's interest in a visit to the U.S. and to elicit his views on Indonesiats position in the present international situation. (See also Para, 15 above). Par&. "Show the Ali Cabinet no special favors which would tend to strengthen its tenure of office; but, on the other hand, attempt to avoid those actions which might alienate not only the Au Cabinet but Indonesia as a whole." ., 6 - MP SECRET Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET Annex A Reconsideration of this paragraph is recommended under "C. Policy Considerations" above and discussed in Annex Para. 20-?.L, inclusive. At the request of the OCB, the Department of State, in cooperation with the Foreign Operations. Administration, prepared a paper recommending ti s of implementing action in four area of economic activity, nm~ly, ( rubber- (b)'U.S. technical and economy.- assistance; (c) foreign investment; and (d) trade with Japan, which serves as a useful guide for action and .for further study of the i.-nple. mentation of these paragraphs. Para 20 a. "Explore urgently the practicable means of assisting Indonesia in regard to its important economic problems, with particuiai attention to the net advantage of helping Indonesia find markets for rubber and tin, and explore the possibility of assisting the Indonesian Government in improving the quality of the rubber produced by small holders." On April 12, the Department of State recommended for NSC Planning Board consideration that the U.S. raise the price of U.S. Government produced synthetic rubber by two cents per pound and offer assistance in long-range programs to improve natural rubber production and dis- tribution. The Department of State withdrew its recommendation in the face of what seemed valid objections by other departments and agencies of the. Government. On April 3C), the NSC directed that the U.S. should "indicate its willingness sympathetically to consider, in cooperation with other countries, the possibility of assisting natural rubber producing countries to improve the efficiency of the natural rubber industry ..." and directed that other possible courses of action should be further explored within this Government (see NSC 5417/1). An Inter- departmental Committee is studying alternative..suggestions on possible U.S. action to reduce distress in rubber in Southeast Asia. Announcement by the U.S. representatives in Ceylon in May 1954 that the U.S. would not raise the price of synthetic and that the-U'S. would not support a Rubber Buffer Stock Agreement elicited an unfavor- able reaction from the Indonesian representatives. Pressures within Indonesia for the shipment of rubber to Com- munist China have increased. On the other hand, Indonesia joined in the Rubber Study Group's estimate of a smaller (approximately 26,000 ton) surplus of natural rubber in the coming year and the Indonesian press did not attack U.S. rubber policy following the May meeting of the Rubber Study Group with anything like the vehemence which followed the meeting in October 1953. FOA has requested its mission in Djakarta for additional informa- tion on the small holder rubber problem in Indonesia with .e. view to .. I - TOP SECRET Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000 60006-0 TOP SE+'ET Annex A exploring the possibilities of developing projects to assist the small holders. Para. 20b. "Recognize the. obligation-. of the U.S. Government, under existing contracts for the purchase of tin, by. making a reasonabl> offer to Indonesia with the intent of reaching agreement on a mutually satisfactory price for deliveries. in the third year of these contracts.' On March 8, 1954, the U.S. announced it would not sign the inter- national Tin Agreement but would isolate U.S. Government tin in excess of stockpile requirements so as not to adversely affect the world tin market, and on March 12, the U.S, signed an agreement to purchase 18- 20,000 tons of tin and tin concentrates under the third year of the RFC-Indonesian Tin Contracto (ithplementation of NSC Action No. 1020).' 21.. "In the event that. CozwMiniet influence is eliminated from the government of Indonesia be prepared to t eke rapid appropriate action that would tend to strenaghen the position of such an Indonesian government, particularly with reap dt to hbiping Indonesia find markets for tin and rubber." Consideration of.the amendment of this paragraph is recommended under "C. Policy Considerations" above and discussed in Annex P.. Pos- sible future action under this paragraph, as amended, is under study by the Department of State and YOA. Para. 22, "In cooperation with the Indonesian Government, con- tinue U.S.-economic and technical assistance, both loan and grant, as appropriate, with special emphasis on the diversification of production to decrease excessive dependence on rubber." There has been better understanding of U.S. objectives in its technical.cooperation program in Indonesia and a greater degree of acceptability of aid, particularly of assistance in training Indo- nesians in technical fields. An Indonesian Planning Board set up under the present government has improved the coordination of foreign economic and technical assistance with Indonesian plans for economic development. The following favtors have impeded the progress of the FOA program in Indonesia both prior to and during the period covered by this report: (a) suspension of program discussions from February 23, 1952 to January 12, 1953; (b) fall of the Wilopo Cabinet during June 1953 and the sub- sequent reorganization of the Indonesian Governmentts foreign aid coordination mechanism by the Government taking office in August 1953; (c) FDA recruitment difficulties and resultant staff shortages; (d) in- ternal administrative difficulties in Indonesia; (e) Indonesian budgeter,- - 5- Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET difficulties and resulting Indonesian inability to render local currency su)ort to the aid projects and failure to implement a counterpart' gripe Because of the slow program progress during FY 1954 the 19 ,program was not submitted until May and June 1954 and is' only now being processed-by JOA. Firm requests now received or anticipated will exceed, available funds by $1 million or more, permitting a deferment of less promising items until FT 1955. Preliminary discussions have been held with the Indonesians, both in Djakarta' and`Weahington, on the necessity of early planning of the FY 195 program. It is anticipated that a complete review of the FOA program with Indonesian officials would be desirable as soon as the newly designated. Mission. Director arrives in Djakarta, and it is believed that the-Indonesiane concur in this desire.. Negotiations for contracts with the University of California (medical affiliation with the University of Indoileaia) and Tuskegee Institute (technical vocational education) have been carried to satisfactory completion,. Preliminary negotiations with J. G. White (advisory engineering) will start early in June, The Indonesian Planning Board has requested extension of the J. G. White contract until December 31, 1955. The extensive program of training in the United States has been effective,. Fuller discussion of this segment of the program appears below under Para, 27, Para, 230 "In cooperation with the Indonesian Government, assist in erea ng an adequate climate for foreign investment in Indonesia," The Indonesian Foreign Minister on April 8 expressed a desire to proceed with preliminary negotiations on a Treaty of Commerce and Navigation, The Secretary of State has approved entering into preliminary negotiations and the Department of State is in communi- cation with the Embassy concerning the preparation of a draft agree- ment Para. 24. "Encourage, to the extent feasible, increased trade between In onesia and Japan." Specific action under this paragraph has not been feasible thus far because of failure to solve the Japanese reparations problem and the question of Indonesia's debts to Japan. Para.. 2 *While for the present maintaining neutrality in the New Guinea dispute in our relations with other governments, explore within the U,S. Government solutions to this problem com- patible with over-all U.S. objectives for possible discussion with other interested governments," Approved For Release 2005/Qi5/06 CIA-RDP80R01731ROn3 6-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET Annex A The Department of State has responded to an informal Indonesian request for U.S. support or abstention in the UN on an Indonesian complaint to the General Assembly about Dutch refusal to discuss the political status of western New Guinea by authorising the American Ambassador in Djakarta to attempt to discourage such action and to suggest instead that the Indonesians find an "area of agreement" for continued bilateral discussions with the Netherlands. There is evi- dence that the U.S. has convinced both the Netherlands and Indonesia of U.S. neutrality on the issue. Para "As requested by the Indonesian Government, and as appropriate, make available U.S. military training, military equipment and supplies for the maintenance of internal security. The United States should respond as sympathetically as possible, subject to con- ditions then prevailing, to any Indonesian request for a U.S. Militar-r Mission," The Department of Defense has continued to study the problem of military training assistance to Indonesia. Pursuant to Indonesian overtures, the Department of Defense is currently considering the possibility of providing U.S. officers to instruct the Indonesian arm1, forces on an individual contract basis. In view of Indonesian dollar shortages, the Department of Defense has considered the idea of pro- viding free transportation to Indonesian officer-trainees to and from the United States via MATS but has determined that it cannot legally expend NIDAP funds for this purpose in the absence of an MAP agreemen between the U.S. and Indonesia, The Department of Defense is wholly in favor of facilitating the training of Indonesian officers in U.S. military service schools. The OCB Working Group is continuing to study this problem in an effort to find funds for the transportation of Indonesian officers to U.S. military service schools.. The U.S. Army allocated 1.15 spaces at U.S. service schools for training Indonesian officers during FY 19511 of which 38 have been filled. Indonesia has requested 137 spaces for FY 1955. The U.S. Navy is training two Indonesian Naval Officers and three more are scheduled for training, Approval has been given to an FOA project for training in polio's administration and the chief technician departed for Indonesia on May 30. FOA has reserved $1 million (beyond the regular program) for necessary supplies and materials to implement the first stages of this project. Approved For Release 2005/0540: elA-RDP80R01731 R0039@F1 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET Annex A Para,2 .. !!Stpengthen the U.S. information program, and the ex. change of persons, including potential leaders in labor, industry and other fields." , USIA objectives in Indonesia have been revised in accordance wi NSC directives. These objectives are: (a) to explain U.S. foreign policy and (b) to expose aggressive Communism as the new imperialis Development of new programs will concentrate on these themes. All USIA services in Indonesia are provided on a request basis or on a basis which will not be regarded as interference in Indonesia internal affairs. USIA attempts to stimulate requests but does not supply books, pamphlets, film programs or other services to those who do not request them. An increase of $234,72O in the requested budget for FY 1955 over that in FY 1954 has been scheduled. The plans call for strengthening press and other services and for increased support for book trans- lations. Two new American positions are being provided for this purpose. The build-up will proceed slowly, however, to avoid arousing antagonism in Indonesia. USIA is conducting a survey of target groups in an effort to focus more effectively on the most important targets, which are: labor, youth, school teachers and students, government leaders, women's organizations, Islamic organizations and the Chinese coismuni,_1r. The daily press bulletin as a source of material for the local press has been discontinued and USIA has had more success in placing feature articles on an exclusive and sometimes unattributed basis in local newspapers and magazines through personal contact. The American Miscellany a bi-monthly magazine produced in Djakarta in English and Indonesian and attributed to USIA continues to be the largest circulating magazine in Indonesia with 0,000 copis per issue, and is one of USLA's strongest and most effective activi- ties. Continuous review of the mailing list is made in order to get the available copies to the most useful recipients. Small, tactical pamphlets are produced locally and mailed to the approximately 50,000 persons who write to USIA each month for infor- mation. Pamphlets on subjects of particular importance are mailed to selected clients. Circulation of books at the three USIA libraries (Djakarta, Medan and Surabaya) dropped in 1953, probably because the supply of new books was greatly reduced. The supply is now being restored. The libraries have steadily increased the number of new members, particularly among student groups. The opening of branch reading w n- TOP SECRET Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET Annex A rooms in several other Indonesian cities is delayed pending approval from provincial and local Indonesian government offices. A total of 143 grants to teachers, students, leaders and special- ists was made in FY 1953, 38 grants were made in FY 1951 and 34 grants are proposed for FY 19.55. The reduction in numbers bas been caused by budget cute. A supplemental budget request for the Far East has been presented to Congress which would allow for much-needed expansion of the Indonesian educational exchange program. The out- standing accomplishment of the educational exchange program in Indonesia was the "Home Ministry Project," under which 21; officials from the Ministry of Internal Affairs were brought to the U.S. to study public administration under the 1953 program. The Ministry desires to continue and expand this program. At the Indonesian Government' s request, an Information Media Guarantee Agreement is under negotiation. If concluded, it would stimulate the import of American books through Indonesian commercial channels. FOA training grants are made primarily to increase technical knowledge but each grant also serves the purpose of the educational exchange program. The FY 1951 program calls for 275 trainees to come to the U.S.for study in the fields of agriculture, fisheries, health, education, industry, transportation, communications, housing, labor and public administration (including police training). There is some doubt that all these trainees can be processed before the June 30 deadline, however, The FY 1955 program tentatively provides for 216 trainees. Para. 28. "Expand intelligence collection capabilities in order to provide adequate coverage of significant developments in Indonesia." Action has been taken to the extent practicable. The U.S. Air Force has increased its effort in this regard. U.S. Army G-,2 has increased its staff and emphasis. The U.S. Embassy in Djakarta has centralized its intelligence gathering and reporting staff in one building for better supervision and coordination, correlated the reporting from all U.S. Consular offices in Indonesia and increased its political reporting staff to the extent permitted by budget limitations. The Department of State has not been able to increase the number of consular offices in Indonesia and the large areas of Indonesian Borneo and eastern Indonesia are not adequately covered from the standpoint of political intelligence. Additignal activities will be reported directly to the NSC. TOP S W Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET Annex A Par 249. "In the event of a seizure, or attempted seizure., of power internal Communist action in Indonesia: a. Seek maximum international response to a request by the legal government for friendly nations to come to its assistance against the insurgents, b. Consistent with world-wide U.S. commitments, take appropriate action, in collaboration with other friendly nations, to prevent per- manent communist control of the area." The contingency calling for action under this paragraph has not developed. Para. 30. "In the event of Chinese Communist aggression again+, Indones a, in addition to appropriate military action against Commu- nist China, as contemplated in our over-all Southeast Asia policy, take appropriate military action to assist in the defense of Tndones--a as part of a UN collective action or in conjunction with other fries:.f- ly governments." In compnae with a Joint Chiefs of Staff directive, CINCPAC is preparing current operational plans including plans for the defense of Indonesia. Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 A f ved For Release 2005/05/16: CIA-RDP80R01731 R0030QP Q Q , l. Paragraph 19# NStf 1?l/i states +~Sl,v-- the Ali Cabinet no special favors which would tend to strezgthh:i its tenure of office; but, on the other hand, attei t to avoid those actions irhich might alienate not only the Ali Cabinet but Indonesia as a wholeift Paragraph 19 does not include consideration of the fact that one of the most effective ways of driving a wedge between the nationalists in and but of the Ali Cabinet and the Indonesian Comn- munist Party is. to involve the nationalists in cooperative ventures with the U S. Nor does paragraph 19 reflect the fact that Presi- dent Sukarno, the single and-st influential non-Communist leader in Indonesia, supports the present Government and has indicated that he would dissolve Parliament if necessary to prevent its fall. Thotgh himself a devout Moslem who, commands the respect of the Moslem co ?. ty, he opposes'the theocratic state sought by the Moslem parties. It appears, therefore, that to attempt to strengthen Indonesia throug any Government (at least prior to elections which are by no means certain to occur in 1955) the U. S. must work with this Government.. There are other reasons for doing so. One accepting aid from the V. So in. Indonesia is widely regarded ab one who is committed to the side of the U. S. To ignore or rebuff the nationalists drives then further towat d the Commmuniets: The Ali Government is weak and lack- ing in effectiveness. The Prime Minister, at least in public utter- ances, gives evidence of overly trusting the Communists. The Minis- ters of Defense, Labor and perhaps others in the Cabinet, invite suspicion by some of their actions favoring the Communists. There is no assurance, however, that if this Government fell prior to ger-::a- oral elections, it would be succeeded by a more effective and. more pro T.Ss Government nor that the deterioration which has been accel- erated by previous Cabinet crises would not be again accelerated by another Cabinet crisis, perhaps to an extent dangerous to the con- tinued dominance of non-Conmsunist elements in government in Indo- nesia** The U. S. has achieved limited progress by working with this Government and, by so doing, has'to some extent favorably in- fluenced at least some of its members. The elimination of paragrapi- 19 would facilitate action implementing other action under IBC I7Z and should, therefore, be considered by the NSC. 2. Paragraph 21, NSC 171/1 reads as followst "In the .event ,that Gist influence is eliminated from the Government of Indo- nesia, be prepared to take rapid appropriate action that would tend * The slight difference between this analysis and that of the cur- rent Intelligence Estimate may be attributed to the developing situation--since the ISLE was written* TOP SECRET Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 Approved For Release 2005/05/16 : CIA-RDP80R01731 R003000160006-0 TOP SECRET Annex.B to strengthen the position of such an Indonesian Government, parttcu- larly with respect to helping Indonesia find marketa,#ee