Indonesia

INDONESIA today is mainly being spoken of in negative terms. It is economically broke. It is internationally aggressive and adventurist. It is politically enfeebled at home. It is ideologically far too flirtatious with Communism, for it not only hosts the largest Communist Party outside the bloc, but it has managed to obligate itself to the Soviet Union for some $1 billion worth of military assistance. These opinions are held not only outside Indonesia but also at home.

Although not all of the charges are entirely true, there is considerable justification for them. And Indonesia did not help itself when in midSeptember, to the dismay of its apologetic friends, it openly defied both the new Federation of Malaysia and the United Nations report on Malaysia, which Indonesia had promised to abide by. Indonesia vented its spleen on Britain, which it considers to be the éminence grise behind Malaysia, by allowing Djakarta mobs to put the new British Embassy to flames.

What has gone wrong in the eighteen years since Indonesia’s revolution? Why should Indonesia, richly endowed with natural resources and population, be foundering so badly?

The answer always seems to be Sukarno, the sixty-two-year-old revolutionary leader and President of the republic. But Sukarno is so representative of his 100 million people that it could well be said that he sums up their virtues as well as their shortcomings. The Indonesians, in Sukarno’s words, are still in a stage of “revolution.” And with the power centers polarized in the Partai Kommunis Indonesia (P.K.I.) and the army, it is Sukarno’s embrace which has had to hold his country together.

And he has held it together. The sprawling archipelago in the South China Sea is still under one flag despite two insurrections which were going on simultaneously and despite the fact that its Dutch colonial masters launched Indonesia into the world without educated leaders, without trained civil servants, without its own economists and technicians to shepherd its vast resources in oil, rubber, tea, rice, timber, and untold and untapped mineral deposits.

Sukarno’s unfinished revolution

Most public attention has centered on Sukarno’s recent foreign excursions in Irian Barat and Malaysia. Irian Barat is West New Guinea, the western half of a very large island to the east of Indonesia which the Dutch used to share with Australia, lying just south of New Guinea. Irian Barat has bountiful supplies of high mountains, impenetrable jungles, and birds of paradise, but very few people. And the bulk of these, the Papuans, are no kin to the Malay stock from which the Indonesians come. But since Irian Barat was a part of the Dutch East Indies empire to which the Republic of Indonesia succeeded, the Indonesians wanted it too.

For Sukarno, West Irian became the unfinished part of the revolution. He tried peaceful negotiation with the Dutch, and that didn’t work. He seized all Dutch properties, and that didn’t work. Finally, he made his contract with the Soviets and acquired more modern military equipment than any other country in Asia, except perhaps Communist China. The jet fighters the Soviets furnished Indonesia with included some of the supersonic MIG-21s they never had let China have.

Thus equipped, Sukarno fueled up his new navy, started a few paratroop drops, and announced that Indonesia was now prepared to reclaim Irian Barat by force. The United States foresaw that the Soviets might jump in to help Indonesia in its war against the Dutch and that the United States would be asked to assist its NATO ally, the Netherlands. The United Nations was brought in, and Ellsworth Bunker, formerly the United States’s troubleshooting ambassador in Italy, the Argentine, and India, was made a special representative by U Thant.

The matter was settled peacefully last fall, and a phase-out scheme devised for the Dutch to relinquish their authority in Irian Barat to the UN and the UN, in turn, to the Indonesians. Under the terms, Indonesia is obliged to hold a plebiscite by 1969 and to abide by the wishes of the Papuans.

Flurry in Brunei

With Irian Barat settled in Indonesia’s favor, Sukarno presumably was left free to concentrate on his country’s internal problems. And he might have, had there not been the flurry of an attempted coup in the tiny, oil-rich sultanate of Brunei last December.

Indonesia owns the southern two thirds of the island of Borneo, because that area was the territorial limit of the old Dutch East Indies. The rest was divided among British North Borneo (Sabah), British Sarawak, and British-protected Brunei. Indonesia was not pleased at all when it was first announced that these territories were to be incorporated in a Federation of Malaysia, along with Malaya and Singapore, for it would have meant pre-empting for all time any territorial ambitions Indonesia might have had toward the northern third of Borneo. But since these territories were moving from colonial status to independence as they federated, Indonesia, a world leader in the fight against the remnants of colonialism, was constrained to keep quiet.

Its opportunity came in Brunei’s attempted coup, when a political leader named Sheikh A. M. Azahari tried to take power away from the sultan and to prevent Brunei from entering a Federation of Malaysia. Azahari had been educated in Indonesia and at the time of the coup was in refuge in the Philippines. When the coup was attempted, and the British troops summoned by the sultan to suppress it, Philippine President Diosdado Macapagal suddenly resurrected an old territorial claim to British North Borneo. And Macapagal put the Philippines on record as opposed to Malaysia because it might pre-empt this claim.

Then, when Malaya, with its long antipathy to Sukarno’s Indonesia, started blaming the Indonesians for the Brunei coup attempt, Sukarno took advantage of both this accusation and the Philippine opposition and put Indonesia on record as opposed to Malaysia. He called it a device by the British to maintain their colonial hold on Southeast Asia, an accusation not without some substance.

The British, although anxious to unload their remaining Borneo colonies in some graceful way, were just as anxious to retain their last main naval base in Singapore. The opposition to Malaysia then shifted from Brunei to Sarawak, which actually borders Indonesian Borneo (Kalimantan). Border incidents began last spring.

The United States, foreseeing another unnecessary war in Southeast Asia, started offering its good offices. And the Philippines’ Macapagal decided to switch his emphasis from claimant to peacemaker and postpone his country’s territorial claim to North Borneo until the Federation of Malaysia had been established.

Economic headaches

The Indonesians cannot ignore the fact that the foreign excursions are indeed distractions from their essential problem — economic reform. For more years than the Western classicists like to admit, Indonesia has been defying economic law and getting away with it. Again and again come the dire predictions that this country, with its fantastic wealth in natural resources, is going broke through needless spending, irresponsible disregard of the production capacity bequeathed it by the Dutch, and graft and corruption. Again and again the seven out of ten Indonesians who live in the countryside ignore a cash economy merely by reaching into a tree for a banana or into a stream for a fish, and smile their way through. But now even Indonesians think their luck may be running out.

Indonesia negotiated with the Soviet Union for some $1 billion worth of military equipment in order to prepare for the battle for Irian Barat, which never had to be fought; it has other obligations to both East and West for economic aid. This year alone, Indonesia, whose foreign exchange earnings now are down to $600 to $700 million a year, should be paying back some $200 million just to satisfy the interest and principal due on its foreign debts. Government employees have found the inflated rupiah worth so little they are obliged to leave the office immediately after signing the attendance roll and seek odd jobs elsewhere during the rest of the day.

Rice, which used to be a surplus crop, now has to be imported; and the government has fallen way behind in its promised price-guaranteed rations of basic commodities. Production is at a trickle; exports have decreased seriously; and the government is trying to crack down on the smuggling of existing exports to Singapore, which until now has deprived Indonesia of its proper for1 eign-exchange return.

Last March, the United States, in order to encourage Indonesia’s economically responsible officials, made a special $17 million grant to purchase vitally needed raw materials and spare parts to help some of Indonesia’s factories start working again. Almost simultaneously, President Sukarno signed a contract to pay $19 million in cash to buy three luxury jet airliners and obviate the need for chartering Pan-American clippers for his worldwide jaunts.

In March, also, Sukarno dedicated the site in Djakarta of a fourteen-story department store which is to have air conditioning, escalators, elevators, counters for purchasing automobiles, and links to branch stores around Djakarta and throughout Indonesia. The Japanese, who are to foot the bill through war reparation credits, were notified only alter the dedication. It was Japanese reparation credit which also helped build Djakarta’s fifteen-story, air-conditioned Motel Indonesia, as luxurious as any hotel in Asia. Now four more hotels are being planned for other parts of Indonesia.

Last year, Indonesia dedicated a $17 million complex of stadiums and sports arenas, a gift of the Soviet Union. This year, Sukarno is having a city recreation park built outside Djakarta which will require some $3 million in foreign exchange.

But while Sukarno permitted these showpiece projects and the expenditure of scarce foreign-exchange reserves, he also decided to delegate responsibility for an economic stabilization program to his trusted First Minister, Djuanda Kartawidjaja, a personally unambitious, dedicated, but ailing former civil engineer. Djuanda saw to it that an economic stabilization plan was introduced in line with some previously ignored recommendations by the International Monetary Fund. The plan included a virtually balanced budget, tight monetary control, new and more realistic rates of exchange, increases of from 300 to 500 percent in utility and transportation rates to make them more reflective of their true costs, and a sharp curtailment of price controls and government subsidies.

Aid from the United States

The I.M.F. was sufficiently impressed to approve a $50 million emergency loan. The United States then began talks with its colleagues on the Development Assistance Committee to try to raise the additional $250 million it is estimated Indonesia will need by next summer just to stabilize its economy.

Why was the Kennedy Administration so determined to bail out Indonesia? Because Administration officials were convinced that Sukarno, despite his periodic and infuriating aggressive gambits, had made a basic policy change to link his country more with the West. They also were convinced that unless Sukarno got some friendly nod from the West he would not be able to make his change in policy stick against the opposition of the Communist Party.

The Western oil companies

The Kennedy Administration has had another reason for rationalizing future help to Sukarno. Last June some Washington troubleshooters visited Sukarno while he was vacationing in Tokyo and came away with a tidy solution to the future operations of the Western oil companies in Indonesia. Until that moment, it looked as if Indonesia might nationalize the vast holdings on Sumatra of America’s Caltex Pacific, jointly owned by Standard Oil of California and the Texaco Company; of Standard Vacuum Petroleum, jointly owned by Standard Oil of New Jersey and Socony Mobil; as well as those of Shell Indonesia, a unit of the Royal Dutch Shell group registered under a Canadian company.

Under the Dutch, the three Western oil companies had enjoyed a fifty-fifty split of their profits with the government, and, according to Sukarno’s powerful Minister of Basic Industries and Mining, Chairul Saleh, they had resisted all pleas to modify this formula as impossible. Along came an “independent,” Standard Oil of Indiana’s Pan-American Indonesia Oil Company, which in June of 1962 had signed a thirtyyear contract with the Indonesian government promising to split profits sixty-forty in Indonesia’s favor, to invest $28 million in exploration, and to pay another $10 million in bonuses. The three majors suddenly found they could agree to Indonesia’s sixty-forty demand. But PanAmerican was looked upon as such a saboteur that the general manager of at least one of the majors threatened to fire any employee seen talking to a Pan-American associate.

And once the three majors did agree to a sixty-forty split, Minister Saleh raised the ante and asked the companies to advance dollars to Indonesia to help it operate, maintain, and expand the company refineries and distribution facilities it gradually will be taking over in the years to come. The companies and the government immediately deadlocked, with each side convinced it had gone as far as it could.

The deadlock lasted for many months; and as long as it continued, the companies kept production to a minimum, the government held off on granting new exploration rights, and economically depressed Indonesia, whose main source of foreign exchange comes from these oil revenues, found itself losing money at the rate of $50 million a year. Luckily, the Kennedy Administration found a team of troubleshooters who knew both how to gain Sukarno’s confidence and how to confront the oil companies with the hidden profits they had not wanted to mention. The matter was settled last summer with both sides apparently satisfied.