203. Despatch From the Embassy in Indonesia to the Department of State 0

No. 905

REF

• Embassy Despatch No. 904 of May 26, 1959

SUBJECT

• A Proposal for Settlement of the West New Guinea Dispute

[Page 384]

In Despatch No. 904 the Embassy submitted a recommendation that the United States abandon its present policy toward the dispute between Indonesia and the Netherlands over West New Guinea in favor of a policy of actively seeking a solution to the dispute.

In this despatch the Embassy submits a specific proposal for settlement of the West New Guinea dispute, including both a formula for settlement and a suggested method to be followed in obtaining approval of the formula by the two disputants. In summary, the two-part formula envisages (1) a special United Nations trusteeship over the territory for a limited number of years, at the end of which time sovereignty would be turned over to Indonesia, and (2) a bilateral agreement between Indonesia and the Netherlands providing for the payment by Indonesia of adequate compensation for seized Dutch assets and the removal of discriminatory restrictions against Dutch nationals. Steps to effect the settlement would be inaugurated by a General Assembly resolution calling on the two sides to negotiate the dispute, thereby giving the United States an opening to convince both sides to accept the proposed formula.

Part I—The Formula for Settlement

A satisfactory settlement of the West New Guinea dispute is possible only if each disputant receives what it considers to be substantial compensation from the other in return for concessions offered. The elements for mutual compensation can be found in (1) the Indonesian demand for sovereignty over West New Guinea, and (2) the Dutch demands for adequate compensation for Dutch assets seized by Indonesia and for the elimination of Indonesian discrimination against Dutch business, cultural entities, language, etc. A two-part settlement, accordingly, is required, one part covering sovereignty over West New Guinea and the other compensation for Dutch assets. The mutual lack of trust felt by both participants to the dispute makes it necessary that both parts of the settlement come into effect simultaneously, that each part be brought to completion at about the same time, and that execution of the two parts be linked. This can be accomplished through (1) a special United Nations trusteeship which would assume sovereignty over West New Guinea for five years, at the end of which period sovereignty would be transferred to Indonesia if certain conditions were met, and (2) a bilateral agreement between Indonesia and the Netherlands, by which the former agrees to the payment in installments of adequate compensation for seized Dutch assets, and further agrees to the progressive removal of discriminatory restrictions on Dutch enterprises in Indonesia.

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A. The United Nations Trusteeship

A three-nation trusteeship, to include the Netherlands, Indonesia and a third power, would be established by the General Assembly and given the following terms of reference: To administer the trust territory of West New Guinea for a period of five years and to take measures during this period to effect the orderly transfer of sovereignty over the territory to Indonesia, the Dutch administering power to utilize this period to effect the withdrawal of its prior administrative apparatus, and the Indonesian administering power to utilize this period in making necessary preparations for the assumption of sovereignty. Transfer of sovereignty would be postponed if, at the end of five years, (a) the trustees were unanimously agreed that preparations were not complete, or (b) the United Nations made a finding that such transfer would, under then existing conditions, be a threat to world peace.

The trusteeship would operate under the following general and specific conditions:

1.

The administering powers will take over the administration of West New Guinea from the Netherlands government one year after passage of the resolution establishing the trusteeship. (Comment: The one-year interval is necessary to allow the Netherlands time to amend its constitution to permit a transfer of sovereignty and to give both countries an opportunity to conclude a bilateral compensation agreement.)

2.

Administration of the territory will be placed in the hands of a commission consisting of two members appointed by each of the three administering powers plus one ethnic Papuan member representing the West New Guinea populace, the latter selected by majority vote of the other members of the commission. Decisions of the commission will be by majority vote.

3.

The commission will appoint subordinate civil officials to operate the various administrative, security and welfare bureaus of the territorial government. At the outset these subordinate officials will be the Dutch incumbents. In making subsequent appointments the commission will draw up and will follow a schedule by which Dutch officials are progressively replaced by Indonesian nationals and ethnic Papuans over a period of four years. At the end of a four-year period, subordinate administrative personnel will be entirely Indonesian/Papuan. All subordinate officials appointed by the commission must have the approval of at least one of the two Indonesian members.

4.

The commission will establish training schools, provide for on-the-job training, and make available other necessary facilities for training Indonesian nationals and ethnic Papuans in the various branches of civil administration, security, welfare and health services, etc.

5.

At the end of five years the Dutch and Indonesian members of the commission will report to the commission the satisfactory conclusion of measures undertaken by prior agreement of the two powers to adjust the status of Dutch nationals and of Dutch business and cultural enterprises in West New Guinea and in Indonesia. Upon the receipt of such a report, the commission will surrender its responsibility for administration of the territory to the Indonesian government except in case of postponement as noted above.

6.

If such a report by the Indonesian and Dutch members is not forthcoming at the end of five years, the commission will continue to administer the territory until such time as the Indonesian and Dutch members report agreement over the future status of the territory.

7.

All expenses incurred by the commission will be borne by the Dutch and Indonesian governments, each paying an equal portion thereof.

The identity of the third nation of the trusteeship would be subject to certain limiting criteria: It should not be one of the former colonies or strong anti-colonialists among the Afro-Asian states, any of whom would be considered by the Dutch as unduly favorable to Indonesian interests; to meet similar Indonesian sensitivities, it should not be either a Western European nation or Australia; it should not be Japan because of its wartime association with West New Guinea; and, in our interests, it obviously must not be a Soviet bloc country.

The United States itself is an obvious candidate for the third trust power. This may, however, be inadvisable. The third trust power will, in effect, be the actual governing power in West New Guinea during the trust period, and will be in the position—particularly during the earlier years—of deciding between opposing Dutch and Indonesian views. Its decisions may at times create strong reactions in the Netherlands and, especially Indonesia. As the United States is already labeled as the chief external enemy by Indonesian leftists, it appears unwise to place us in a position whereby we will provide a standing target for communist propaganda and agitation for five years, particularly as the PKI would use our inevitable “adverse” decisions on the commission to drum up support among other nationalist groups for its anti-American campaign. A further consideration is that United States participation in the trusteeship would bring forth the most strenuous efforts by the Soviet bloc to frustrate its establishment and defeat its objectives. Soviet opposition to the trusteeship can be expected in any event, but its intensity would be increased by direct American participation therein.

The most suitable third power in the trusteeship, accordingly, is one relatively remote from the dispute and one belonging neither to Afro-Asia, Western Europe or the Soviet bloc. Among countries meeting [Page 387]these specifications, the most appropriate may be: Turkey, Mexico, Canada.

B. The Compensation Agreement

At the time the General Assembly passes a resolution establishing the trusteeship, Indonesia and the Netherlands would initiate bilateral negotiations leading to treaty or other form of agreement covering (1) the payment of compensation for Dutch enterprises seized by Indonesia, (2) the elimination of discriminatory restrictions on Dutch commercial and cultural activities in Indonesia, (3) the status of Dutch interests in West New Guinea at the conclusion of the trusteeship period, and (4) the re-establishment of normal trade and consular relations between the two countries.

Points two, three and four could be handled in a relatively simple manner by clauses extending to Dutch enterprises and Dutch nationals in all fields the same rights now enjoyed by the enterprises and nationals of other countries in Indonesia, and by an Indonesian commitment to revoke progressively all conflicting laws and regulations over a stated period of time.

The major point, that of compensation payments, presents more of a problem. The key to an ultimate solution would be mutual agreement on arbitration in all cases resulting in a deadlock. The exact formula by which a figure for compensation is reached in the case of individual enterprises might best be left up to the negotiators. Agreement on certain guide-lines, however, would be obtained from both sides as a part of the over-all West New Guinea settlement. They would include the following:

1.

Acceptance of present market value as the criterion in fixing compensation.

2.

Delegation of the task of setting actual compensation figures for individual enterprises to a binational commission of financial and economic experts, whose decisions would be final.

3.

Establishment of a simple and specific procedure for submission to arbitration of those individual cases in which the binational commission is unable to reach agreement, the arbitrator or arbitrators to be designated in advance. (Comment: A special arbitration board with, perhaps, a Malayan as the chief figure might be the best arbitration procedure, but this would be decided by the principals.)

4.

Once a specific compensation figure is set for each individual enterprise, a schedule of installment payments would be drawn up in such a manner that the final payment coincides with the termination of the trusteeship over West New Guinea.

Part II—The Method for Obtaining Settlement

In attempting to bring about a settlement of the West New Guinea dispute, the United States faces a particular problem in that the current intransigence of both participants all but precludes a direct approach to [Page 388]either. Should the United States approach either side directly with the foregoing proposal, we lay ourselves open to the charge that we are promoting the surrender of what that side considers its just and inalienable right. To avoid this danger the Embassy suggests the following course, admittedly tortuous but with greater prospects of success:

1.

A resolution would be submitted to the General Assembly calling upon both the Netherlands and Indonesia to undertake further negotiations toward settlement of the West New Guinea dispute and related issues, its text carefully drafted to show complete impartiality toward both sides. It would not be introduced or sponsored by the United States but by a group of non-European states. Among likely candidates are the Philippines, Malaya, Japan, Mexico, Argentina, and Brazil—the last particularly useful because its sponsorship would indicate wider support for the resolution than was received by the 1957 resolution.

2.

While the resolution is pending in the General Assembly, the United States would approach the Dutch government. Pointing out that the resolution appears to have a good chance of passage and that we will find it difficult to recommend that friendly non-European members abstain, we would take the opportunity to suggest that the time had come for a re-examination of the entire West New Guinea issue as it affects our mutual interests in Indonesia and NATO. We would then put forth the most persuasive arguments for a final settlement of the dispute in accordance with the formula described in Part I, ultimately presenting the Dutch with the formula itself for study. We would assure the Dutch that, should the formula be acceptable to them, we would make a major effort to induce the Indonesians to accept it, to the extent of applying quiet pressure if necessary.

3.

Should the Dutch reply that their internal political balance or the temper of their populace precludes the voluntary surrender of sovereignty over West New Guinea, we would then propose the following: that the Dutch vote against the pending General Assembly resolution and attempt through other public means to defeat it; if the resolution passes despite their efforts, that they then announce their reluctant decision, as loyal members of the United Nations, to accede to the demand for negotiations notwithstanding their opposition to it. The formula could then be represented as the best obtainable under the circumstances.

4.

While the formula is being discussed with the Dutch, the United States would also approach the Indonesian government. Pointing out that passage of the pending General Assembly resolution would be assured by our open or tacit support, we would affirm our interest in finding a solution to the West New Guinea dispute and our conviction that both sides must accept a compromise. We would then put forth a suggestion [Page 389]for settlement in accordance with the formula, making the point that any other course on which they may embark to obtain West New Guinea would in all likelihood take them at least the five years envisaged in the formula. We would assure the Indonesians that, should the formula be acceptable to them, we would make a major effort to induce the Dutch to accept it, to the extent of applying quiet pressure if necessary.

5.

(a) Should both the Dutch and the Indonesians signify general agreement with the terms of the proposed formula, the West New Guinea resolution would come before the General Assembly and be passed with United States support.

(b) Should the formula be definitely rejected by either side or by both, the United States would abstain on the resolution, making no effort either to aid or to block passage. This eventuality would mark the defeat, for the time being, of our attempt to achieve settlement of the dispute, but the proposal would be in the hands of both governments for later second thoughts.

6.

Should the settlement pass the stage described in 5 (a), we would suggest a conference of Dutch and Indonesian officials at the Prime Minister or Foreign Minister level at a neutral site—preferably Washington—where they would agree formally to the proposal, petition the General Assembly to undertake action on the trusteeship agreement, and set the time and place for the beginning of negotiations toward drawing up the compensation agreement. The United States would assist informally at this conference but would have no official role.

Conclusion

As stated in Despatch No. 904, the Embassy believes the foregoing proposal for settlement of the West New Guinea dispute to be feasible and to avoid certain of the pitfalls which otherwise will threaten United States efforts to solve the issue. Should this particular proposal be found impractical by the Department, however, the Embassy strongly recommends that steps be taken as soon as possible to draft an alternative proposal.