INDONESIA NEW GUINEA DISPUTE ENDANGERS RELATIONS

Press, Volume LXXXVII, Issue 26395, 13 April 1951, Page 6

INDONESIA NEW GUINEA DISPUTE ENDANGERS RELATIONS

(By

A T. STEELE

in the “New York Herald Tribune”)

(Reprinted by Arrangement.)

Djakarta. Indonesia. —The Netherlands Indonesia Union —a special political relationship between Holland and its former ward—is in jeopardy as a result of the dispute over Western New Guinea. No firm decision has been reached here on the steps to be taken. But Indonesian officials predict privately that some of the major provisions of the Union Statute will be cancelled unless Holland agrees to full-fledged Indonesian sovereignty over Western New Guinea, which Indonesians call Irian. The Union Statute was an offshoot of the Round Table Conference of 1949 at which Indonesia won its independence. "It provided among other things that the two independent countries would be loosely linked in a voluntary union, with Queen Juliana at the head. Ministerial conferences were to be held twice yearly and each country was to be represented in the other by a high commissioner. Annulment of these arrangements would reduce the diplomatic relations between Holland and Indonesia to about the same basis as those with other foreign states. Though the Indonesian Government has appointed a committee to consider revision of the Statute, it is moving slowly in the hope that the Dutch will still come around. At the moment there is not much prospect of the Dutch giving in to Indonesian terms. Some Dutchmer feel that in any case the special political arrangements between Holland and Indonesia are not taken seriously by the Indonesians. It would probably cause a bigger stir if the Indonesians were to threaten revision of their financial agreements. So far the Government here has stood by its economic commitments despite noisv criticism from extremist elements which would like to junk the Round Table agreement. Indonesia’s Economic Life Though Indonesia is politically free, its economic life is still subject to a considerable measure of foreign influence. Tn be sure, the Dutch have handed over such State holdings a: railways, communications, utilities and the Government interest in the bit tin mines on Bangka and Billiton islands. But private foreign investments—mostly Dutch—remain just about what they were before the war. Foreigners control plantations pro ducing about one-fourth of the country’s rubber output and substantial Quantities of tea. coffe. cinchona and copra. Dutch. American and British interests dominate the petroleum industry. Shipping is Dutch controlled: civil air lines are jointly operated. A highly placed Indonesian economist estimated that 85 per cent.

of Indonesia’s foreign trade is still handled through Dutch import and export houses. Retail trade is mainly - in Chinese hands.

But in contrast to the old days, a substantial part of the profits of these foreign enterprises is now turned back into the country. “The Dutch may control production,” said an official, “but we control the taxes.” For instance, there is a 40 per cent tax on profits, not to mention a multiplicity of other levies. There is also a curious system of exchange control that enables the Government to collect a fat return on every foreign exchange transaction. Oil well royalties make a tidy contribution to the Governments exchequer. “Between the devil and the sea" Economically, the Indonesian Government is between the devil and the sea. On the one hand it is under constant attack from extreme NatioWalists for tolerating what the Communists like to call "economic imperialism." On the other, it knows very well that Indonesia has neither the financial means nor the technical personnel to take over and run u>e big foreign-owned enterprises established in colonial days. Moreover, to take them over without compensation. as some extremists suggest would destroy faith abroad in the young republic's integrity, beside* creating economic chaos at home. The same goes for the debt to Holland which Indonesia assumed under the Round Table agreement. Though the servicing of this debt eats up •/ relatively small fraction of the country’s budget, it is nevertheless a nagging source of ill-feeling. The Indonesian Government hopes in time to nationalise some of the vital foreign enterprises. First, W faces the long and arduous task « training up cadres of Indonesians m the know-how of industry, cn S' , j£Jfj inc. finance and big business. Thgt will bo the work of years. Meanwhile, Indonesian capital is being • cruited for n->w ;, n r| much-ncefllP light indo-trio-. A !'-■()> mil) J under construction <and paper aW cement plants are planned). The GflFornment is even trying to encoufl® the investment of more for*W® capital on a5l per cent.-49 per cambasis. There is little foreign interim because of the current