BRIEFING BY MR. JACK LYDMAN ON INDONESIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00268R000700150019-1
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 3
• Document Creation Date: December 27, 2016
• Document Release Date: August 22, 2013
• Sequence Number: 19
• Publication Date: May 29, 1961
• Content Type: MEMO

Declassified in Part - Sanitized Copy Approved for Release 2013/08/22 : CIA-RDP86T00268R000700150019-1
MEMORANDUM FOR TRE RECORD
ONFWEN11M
29 May 1961
SUBJECT: Briefing by Mr. Jack Lydman on Indonesia
1. Mr. Lydman gave the briefing this morning to the
Board of National Estimates. Mr. Lydman is a former State
Intelligence Officer who several years ago entered the
Foreign Service. For the last five (?) years he has been
in Indonesia and is particularly knowledgeable on ,East
Java.
2. According to Mx. Lydman, Indonesia economically is
better off than at any time in the past three years.
Indonesia is a resilient country. The reason is that Indonesia
is a rich country, which is basica31y self-sufficient. It has
enough food to feed itself and will have for the foreseeable
future. In addition the urban economy has improved considerebly
in the last year, for several reasons:
a. The revision of the tex structure, including
import duties in early 1960, produced unexpectedly
high tax revenues with the result that the budget
deficit in 1960 was the lowest in years.
b. Production went up over 1959. Because of
poor statistics, the exact rise is not known, but
it was probably 10 to 15%. This resulted from a
better supply situation, including greater availability
of imported parts and equipment and a spurt in textile
production.
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c. The balance of paymentssituatignAs good
in 1960. Indeed the Indonesian ba1ance7Payments
situation is basically good.
d. Inflation in 1960 was checked although not
stopped.
3. The new Eight Year Plan is a hodge-podge and there
has been considerable argument about who would run it. This
argument has quieted down and it appears that Djuanda is back
Declassified in Part - Sanitized Copy Approved for Release 2013/08/22 : CIA-RDP86T00268R000700150019-1
Declassified in Part - Sanitized Copy Approved for Release 2013/08/22 : CIA-RDP86T00268R000700150019-1
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in the saddle. This is good because, for all of his weaknesses,
he is the best man that we could have. Mr. Lydman believes
that the Indonesians are able to fund the Plan and do it
rather easily if just a little common sense is used. (He seemed
to be referring here to the Foreign EXchange aspects of the Plan.)
Some bankers in Washington believe that Indonesia is in too
deep, but Mr. Lydman does not think so. Things will not get
too sticky until about 1964. The big joker with respect to
the Plan concerns what will happen to military expenditures.
Large sums may be required internally support the use of
Soviet military equipment.
4. The US has been encouraging Djuanda to take on an
economic consultant (Bernard Bell) who would be backed up
by a Board of Consultants consisting of economists and engineers.
Lydman assumes that these would all be Americans but he does
not know.
5. Relatively speaking, by Far Eastern standArds, Indonesia
is a sound country lou* its potential is enormous.
6. There is little correlation between economic ups and
downs and the political dynamtas. Indonesia has never really
been in an economic bind and per economic problem is not of the
kind which would impel people to change governments. The PKI
does not get its support as a result of economic factors. An
indirect exception is the presence of half-baked intellectuals
who, for economic reasons, have nothing to do. The economic
situation will not be an important factor in the future of
Sukarno or the PKI. It is true and significant that Sukarno
is committed to the Eight Year Plan but he has been adept at
jumping off such bandwagons before.
7. The PKI derives much of its strength from identifi-
cation with nationalism. The real key to their success, however,
is their organization which goes down to the village level
where they have people who are concerned about people, e.g.
about new roads, repairing roofs, recreation areas, etc. The
number of dedicated Communists is quite small, but people go
along with the PKI because it helps them. The other Parties
revolved around themselves and were concerned with looking
out after themselves, including the Masjumi, the PNI, and the
PSI. There are villagers in East Java who think Sukarno is
head of the PKI--example of the successful identification with
nationalism.
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Declassified in Part - Sanitized Copy Approved for Release 2013/08/22 : CIA-RDP86T00268R000700150019-1
Declassified in Part - Sanitized Copy Approved for Release 2013/08/22 : CIA-RDP86T00268R000700150019-1
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8. Sukarno is quite aware of his weaknesses in not having
his own mass organization and in depending on the PKI. His
answer is the rational front--he wants to envelope the PKI
in the national front.
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9. Mr. Lydman believes that the drawdown on the4military
credit will be slow. The key to the rate of drawdown is how
Sukarno views Indonesia's progress on West Irian. Mr. Lydman
believes that we should give West Irian to the Indonesians
"of course", for overriding political reasons and not because
they deserve it.
10. In the short run, Indonesia would certainly respect
the line between West New Guinea and East New Guinea. He also
thinks they will do so in the long run. This will depend on
many factors.
11. MxLs-40Jnefrol-belle uinea-ls-an
ecdzIncomic?s,ituati-en: ?:Although the Indonesians might like to have
Timor and North Borneo, they would not exert the kind of pressure
for these places that they have for West New Guinea.
CARLIFKIIAL
STAT
Declassified in Part - Sanitized Copy Approved for Release 2013/08/22 : CIA-RDP86T00268R000700150019-1