STAFF NOTES: EAST ASIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000300110002-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 19, 2016
• Document Release Date: July 23, 2004
• Sequence Number: 2
• Publication Date: January 27, 1975
• Content Type: REPORT

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 East Asia
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SOUTHEAST ASIA
January 27, 1975
The Arabs in Southeast Asia . . . . . . .
Thailand: In Search of a Foreign Policy . . 10
Indonesia: Things That Go Bump
in the Night . . . . . . . . . . . . . . . 13
Burma: The Insurgency Problem . . . . . . . 16
Malaysia--Singapore: Friends at Last . . . . 18
NORTH ASIA
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Japan and CIPEC . . . . . . . . . . . . . . 23
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SOUTHEAST ASIA
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The Arabs in Southeast a
Travel posters most often depict Southeast
Asia as a land of Buddhist temples and exotic
Hindu dancers, but it is equally the land of
Muhammad and the mosque. More than 123 million
Muslims live in the region, and 114.5 million of:
these are in Indonesia, the most populous Muslin
nation in the world. Malaysia, with 4.7 million,
counts itself a Muslim state. Thailand, Singapore,
and the Philippines have significant Muslim minor-
itiss, -while Burma has a small .but vocal Musl:j, Ti
community.
Despite historic religious ties with the Arabs,
Southeast Asian states have until recently had
few diplomatic contacts with them, most of which
have occurred in the context of 'international eco-
nomic and political issues affecting former colonies.
The new prestige and aggressive diplomacy of the
Arab world since the Middle East war of October
1973 and the oil embargo, however, are making waves
in Southeast Asia.
Southeast Asian governments have ambi Yv ';lent
feelings about Arab interest in their area, On the
one hand, they get a vicarious pleasure from watching
the Arabs humble the former colonial powers, and they
see a chance for new sources of easy credit and eco-
nomic assistance. On the other, they worry about
the political and religious repercussions among
their own Muslim populations of increasing Arab
activities.
The Philippines was the first Southeast Asian
state to experience directly the political and
diplomatic effects of resurgent Arab Islam. In
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1972, Libya's Qadhafi publicly took up the cause
of Muslim insurgents in the southern Philippines.
Interest in the rebels' cause subsequently spread
to other Arab states as it became an important
topic of discussion at the periodic international
Islamic Conferences--a gathering of representatives
of world Muslim states. Saudi Arabian officials
have recently had bilateral talks with Manila about
its treatment of the Muslim minority in the Phil-
ippines.
Arab interest in the Muslims has economic as
well as political implications for Manila, which
relies on the Middle East for 90 percent of its
petroleum. Through some fancy diplomatic footwork,
President Marcos managed to get an exemption from
the oil embargo of 1973, but the experience brought
home to him the consequences of antagonizing the
Arabs. The nagging concern that Arab Muslim leaders
are watching him closely has been an important
factor in keeping Marcos on the path of moderation
in his dealings with Muslim insurgents.
All things being equal, Marcos would probably
prefer to let his armed forces try to settle the
rebellion, but he has been under public pressure
from the Arabs since last year's conference of
Islamic foreign ministers called for negotiations.
The secretary general of the Islamic Conference has
visited Manila several times to promote discussions,
and Marcos is now taking steps on several fronts.
One series of talks is under way in Saudi Arabia,
a country which did not have a Philippine ambas-
sador until the fall of 1973.
Hoping to turn Arab interest in the southern
Philippines to his own economic advantage, Marcos
is seeking Arab participation in various develop-
ment schemes planned for the Philippine Muslim
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area. Despite polio noisen from variou:i Arab
leaders, however, Marces is finding it very
difficult to separate the Arabu from their money.
Indonesia, self-appointed leader in regional
affairs, views the Arab "invasion" of Southeast
Asia with a jaundiced eye. President Suharto
regards Philippine Muslim affairs as a local
problem and resents outside interference. IIe is
unhappy with the Arab's Johnny-come-lately diplo-
macy, which threatens to undercut hi,:: Awn efforts
at mediation. Moreover, Indonesia's military leader-
ship is uneasy with the precedent of Arab support
for a Muslim minority in revolt against an established
central government.
The army has bitter memories of the Muslim
revolt in Indonesia in the 1950s. Since acceding to
power in 1967, the generals have kept Indonesian
Muslims on a short political leash. None of the top
Indonesian leaders is a devout Muslim and, at the
last Islamic Conference, Jakarta took care to draw
a line between itself and the other participants
on the grounds that Indonesia does not consider it-
self an "Islamic state."
Various Arab leaders have criticized the
Suharto regime for its lukewarm support of worldwide
Muslim causes, and there has been veiled criticism
of its suppression of Indonesian Muslim political
aspirations. Increasing contacts between Arabs
and Indonesian Muslim leaders worry Suharto. He
is aware that his own poor Islamic image could
become a serious political handicap both at home
and abroad. Suharto is trying to remedy this by
scheduling a state visit to the Middle East for
this summer and by finally making the pilgrimage
to Mecca. He has also enlisted the aid of at least
one Indonesian Muslim leader who has close ties
with the Arabs to advise the government on how to
improve relations with the local Muslim community
and with the Arabs.
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While Suharto hopes to prevent Arab meddling
in Indonesian Muslim politico, he--like Marcos--
is interested in opening up now sources of credit
and economic assistance from the wealthy Arab
states. Again like Marcos, Suharto has received
more promises than capital. Some of his advisers
attribute this to Arab uncertainity about his
Muslim credentials.
Of all the Southeast Asian states, Malaysia
probably has had the most contact with the Arabs.
Malaysia has been an active participant in the
Islamic Conference, and former Malaysian prime
minister Tunku Abdul Rahman served as its secre-
tary general until last year. Malaysian Islam,
moreover, is more conservative and less eclectic
than the Indonesian variety, and Malay Muslims
have kept in closer touch with developments in
Middle Eastern Islam, largely through students
studying in Cairo and Mecca.
Malaysia has welcomed Arab interest in
Southeast Asian Mu.zlim affairs--particularly in
the problem of Philippine Muslims, whose cause
it has championed for many years.
Malaysian leaders show less concern than
their Indonesian counterparts about the potential
domestic political consequences of increased
Arab activity; yet their government is probably
the most vulnerable in Southeast Asia to political
disruption from local Muslims. Although Malaysia
calls itself an Islamic state, government leaders
in Kuala Lumpur have little in common with the
experiences and aspirations of the rural Malays,
who form the majority of their Muslim constituency.
Prime Minister Razak has already had problems with
so-called Malay chauvinist politicians whose power
is based in these rural areas.
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The increased prosencc of Arab Muslims in
Southeast Asia could easily strike a resonant
chord among conservative Malays and strengthen
their hand against Razak. Unlike Indonesia,
Malaysia does not have a large population of
nominal Muslims to dissipate the effects of
activist Muslim political ambitions. Moreover,
the delicate communal balance between Malays and
Chinese means that Razak must avoid anything
that would politically divide the Malays.
Thailand has only a small Muslim minority,
but it is concentrated in the southern provinces
that border on Malaysia. Thai Muslims have ..ong
felt neglected by the central government, and
Bangkok is suspicious of their close ethnic and
cultural ties to Malay Muslims. The Arabs have
already "discovered" the Thai Muslims, and the
secretary general of the Islamic Conference
recently toured the area. As with other South-
east Asian states, the Thai have begun paying
more diplomatic attention to the Arabs, the
major source of their oil.
With the exception of the Philippines, the
new international prominence of the Arab states
has had pore impact on the leaders of Southeast
Asian states than on their indigenous Muslim
populations. This could quickly change, however,
increasing problems for many governments in the
area. Many local Muslim communities are dis-
satisfied with their present economic and polit-
ical situation and increasing Arab interest
in them could spawn antigovernment activities.
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 Thailand's foreign policy, like i to poli t:ical
system, is in a state of transition. Although the
outlook for parliamentary government taking perma-
nent root in Thailand remains questionable, it is
clear that Thai foreign policy in becoming more
nationalistic and independent of the US than at any
time since the end of World War II.
The metamorphosis in Thai foreign policy,
which began during the latter years of the Thanom
military regime, results largely from a conviction
among senior Thai officials that the US is no
longer prepared to play a major role in Southeast
Asia. Many of these officials believe that their
country's close support of US policy in Indochina
has gained little more over the years than the en-
mity of Hanoi and Peking. Judging the US now to
be a doubtful guarantor of Thailand's security,
Bangkok has begun to mend its fences with neigh-
bors long deemed hostile to its interests, notably
China and North Vietnam. It has also taken steps
ang o has made some progress in Bal-
ing with the new coalition government in Vientiane
and with Ne Win's regime in Rangoon, but it has dis-
covered that zapp rochoment with Peking and Hanoi is
more easily said than done.
Thai officials generally agree that Peking is
amenable to improving relations, but they are not
of one mind on how best to proceed. Conservative
government, military, and business circles remain
wary of moving too fast to repair relations with
Peking, out of concern partly over Chinese support
to Communist insurgents in north Thailand and partly
over a possible resurgence of pro-Peking sentiment
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Thailand--in Search of a I'oreic n PoLicy
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within Thailand's largo Chinese population. The
Foreign Ministry, on the other hand, believes
that the sooner formal diplomatic relations are
established with China, the better it will be for
Thailand. Ministry officials seem to believe that
moving closer to China will help to balance Thai-
land's long-standing clone relationship with the
US--a relationship that many Thai believe to be
out of balance and in need of adjustment. Such
thinking has also prompted the ministry to ac-
colurato the establishment of formal diplomatic
relations with Last European countries.
The Thai have been less successful in trying
to establish a dialogue with the North Vietnamese
than with the Chinese. In an exchange if Foreign
Ministry notes lath month, Hanoi made clear that
it was not prepared to improve relations until all
US military forces were withdrawn from Thailand.
While most members of Bangkok's conservative elite
regard such a quid pro quo as out of the question,
there does exist considerable sentiment among in-
tellectuals, in the press, and in the Foreign Min-
istry for total US withdrawal at an early date.
These elements argue that the continued presence
of US forces unnecessarily limits Thailand's foreign
policy options and actually nullifies any chance
to improve relations with North Vietnam--a country
that the Thai see as actively aiding Thai insur-
gents and as a more immediate threat to Thailand's
security than China.
Although Thailand's new parliamentary govern-
ment is likely to be conservative, it will probably
also be responsive to the pressures for developing
closer ties with Peking and Hanoi. A high-level
official in the Foreign Ministry recently said that,
even though little careful thought had been given
to what form better relations with Hanoi or Peking
should take, the newly elected government could well
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move to establish formal diplomatic Lieu with China
before the year is out. Mutual suspicions and the
US base issue would seem, however, to rule out any
oar.ly progress in relations with North Vietnam.
The now Thai govor. mont will want to retain
e close association with the US. But it will prob-
ably seek to avoid becoming identified with US
policies that it believes would impair its efforts
to improve relations with its neighbors.
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Indonesia: Things That Go Bump in the Night
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Reports of political jostling among President
Suharto's inner circle have increased in recent
months, causing speculation about disunity among
the military elite that governs Indonesia and tho
effect this could have on overall political sta-
bility. The latent reports of factionalism in
the army occur only a year after the anti-Japanese--
and by implication anti-government--riots of
January 1974 in Jakarta,which stunned the Suharto
regime and caused the army- quickly to cloac ranks
and publicly to patch up its differences.
Nn important element in the army factionalism
of a year ago was the long-standing antagonism
between General Sumitro, until last March deputy
commander in chief of the armed forces, and General
Ali Murtopo, close confidant of Suharto and loader
of a clique u palace advisers. As a result of
the January disturbances, General Sumitro, con-
sidered at that time the second most powerful man
in the country, was forced to retire. The current
backroom political activity reflects in part the
fact that, since Sumitro's departure, there is no
clear number two man in the regime. President Su-
harto's own coyness about whether he will stand for
re-election in 1977 or retire as he has sometimes sug-
gested only encourages maneuvering for position
behind him--even though few believe Suharto will
really leave.
In the wake of Sumitro's departure, General
Murtop' began an aggressive campaign for greater
power and influence and showed signs of entertain-
ing political ambitions far beyond those of a loyal
presidential aide-de-camp. He and his coterie in-
timated widely that Murtopo alone had Suharto's
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confidence as a formulator of government policies
in every field from foreign affairs to the economy.
Members of Mur.topo's well-publicized research in-
ntitute became increasingly prominent, organizing
seminars on national issues and policies and fos-
tering a plethora of now mass organizations under
the ostensible sponsorship of the quasi-governmental
political party Golkar--itself controlled by the
Murtopo apparatus. Word also spread that Murtopo
would be appointed minister of the interior co give
him an official position commensurate with his
reputed influence.
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strust Murtopo, but they are reluctant to con-
front him because of his close personal relation-
ship with Suharto. There have boon recent signs,
however, that Murtopo may be more vulnerable than
previously supposed, and these have triggered a
spate of rumors that his star is fading. His ene-
mies, scenting blood, are becoming more bold in
their criticism of Murtopo's activities.
Jakarta's tea-leaf readers believe the water-
shed in Murtopo's fortunes was the "Pop" magazine
affair of last October. "Pop," a Murtopo-controlled
pulp magazine, printed a story alleging that
President Suharto was not the son of a peasant,
as he claims, but in fact the illegitimate descen-
dant of a Javanese prince. Suharto, outraged,
held an emotion-charged press conference during
which he criticized Murtopo's special operations
group, which runs the magazine, as irresponsible
and said there was no place for this kind of thing
in his government.
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Adding spice to rumors that Murtopo's tide is
ebbing are indications that Sumitro has been re-
stored to Suharto'u good graces.
res ent gave Sum ro s daughter away at
her recant wadding, to the accompaniment of much
publicity.
m ro s return to political center
wou not be an unusual development in Indonesia
whore major figures often repent in the political
wilderness and then are summoned again to glory.
Sumitro kept this option open by not contesting
Suharto's original demand for his retirement and
by living quietly afterward.
Murtopo's enemies would do well to avoid cele-
brating his political demise prematurely, however.
Murtopo is a past master at political intrigue,
and he evidently realizes he has been pushing a
little too hard. Suharto has given no sign that
he plans to dump his long-time aide and trusted
adviserl
ur opo may nave to scale own his political am i-
tions, at least for the present, handing a victory
of sorts to his rivals.
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Burma: The Insur, enc, Problem
The Burmese government is still holding its
own against its numerous insurgent foes, but there
are signs that it will soon face a stronger chal-
lenge from its main antagonist--the Burmese Com-
munist Party. Fighting in northeast Burma has been
unusually light since the current dry season began
last fall, but thy, Communists are building up their
troop strength in eastern Shan State and may be
preparing for heavier action. Communist forces made
a major effort toward the administrative canter at
Kengtung last year, but the government was able to
stop the advance and push the insurgents back toward
the China border.
The Communist units apparently have been ex-
periencing morale and organizational problems, how-
ever, and they may not be capable of a campaign as
large as the one last year before the rains begin
again in June. The Burmese Communists have had
to adjust to reduced personnel support from the
Chinese during the past year, although they are still
receiving logistic support from Peking. There were
indications that the Communists had hoped to mount
strong attacks last fall, but that some ethnic tribes-
men who had been recruited forcibly refused to fight.
The Burmese army, which continues to use a
major part of its manpower and resources to contain
the Communists, is certain to react strongly to
new attacks in the northeast. Last November,
the army completed a massive six-month operation
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in the Pegu Yomas area of central Burma, reportedly
wiping out most- of the remnants of a Communist
force that had operated there. The region, once
a Communist stronghold, has soon little insurgent
activity in recent years.
The vari.ouu narcotics-smuggling and ethnic
groups in narthoast Burma remain a secondary con-
cern for Rangoon. There were indications last
fall that the Burmese hoped to make deals with some
of those non-Communist groups for military cooper-
ation against the Communists. Local army command-
ers may have held discussions with a few rebel
leaders, but mutual suspicions remain high, and
there is no hard evidence that any deals have gone
into effect as yet. The army is still trying to
disrupt the fighting units and drug caravans of
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Malays ia-Sine a pore: Fr cridn at Last
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Singapore Prime Minister. Lao Kuan Yew's
throe-day visit to Kuala Lumpur this month appears
to liavo largely removed the vestiges of the bitter
relations that followed Singapore's expulsion from
the Malaysian Federation almost a decade ago.
Both countries have since become reconciled
to a separate existence, but their relations took
a downturn two years ago after Malaysia unilaterally
took steps to sever remaining economic links. Al-
though Lee and Razak smoothed over their personal
differences during Razal:'s visit to Singapore in
November 1973, this; did not eliminate petty bicker-
ing at the civil servant level.
Lee's visit, at his initiative, took place
amidst a cordiality that clearly pleased both Ma-
laysian and Singaporean officials. Considering
the predominance of each leader in his country,
their obviously close rapport should have a bene-
ficial effect in removing the rough spots that
remain in the working level relationship.
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The improvement in Malaysian-Singaporean re-
lations is partly the consequence of a broadening
regional outlook in both countries. Their increased
contacts through the Association of Southeast Asian
Nations (ASEAN) have brought a greater awareness of
shared aspirations with their neighbors. Malaysia's
expanding internatiur;al role has spawned greater
self-confidence in its dealings with the aggressive
Singaporean Chinese, and Razak seems less constrained
by Malay chauvinism than was his predecessor. For
his part, Lee--although he does not brook question-
ing of his leadership at home--shows a greater dis-
position to try to understand his Malay neighbors.
Ingrained racial suspicions will continue to
limit relations between Singapore and Malaysia.
Nevertheless, the current lack of rancor is in
sharp contrast to the feuding of the past, sug-
gesting a greater maturity in both states and a
growing determination not to let differing points
of view obscure their common interests.
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Japan and CIPEC
Japan is moving cautiously in its
dealings on the copper market, trying
to avoid action that might strengthen
the Intergovernmental Council of Copper
Exporting Countries (CIPEC). The CIPEC
countries, which supply 30 percent of
Japan's copper imports, have succeeded
at least temporarily in getting the
Japanese to atop exporting refined
copper, but the Japanese probably will
resume exports, even at a Zoos, if ore
shipments cannot be reduced from both
CIPEC and non-CIPEC countries. To
avoid giving any incentive for other
nations to join CIPEC, Japan is asking
for equal percentage cutbacks from all
its major ore suppliers.
Normally a large net importer of refined copper,
Japan upset the world market last year by becoming
a large net exporter. In fact, Japan accounted for
more than 100 percent of the increase in Free World
exports during January-September 1974 as sales of
many traditional large exporters declined. Despite
a sharp falloff in domestic demand, Japanese smelters
maintained metal production until late 1974 because
they were tied to long-term import contracts for
ores and concentrates. As inventories climbed and
interest rates rose, the industry sought relief
through exports. Refined copper exports totaled
203,000 metric tons during the first three quarters
of 1974 compared with only 21,000 tons during the
comparable 1973 period. Japan's exports jumped to
11 percent of the Free World total last year from
only 1 percent in 1972 and 1973.
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Japanese exports undoubtedly were a key factor
in the nearly 65-percent drop in the London Metal
Exchange price of copper between April and the end
of the year. In an effort to halt the decline,
the CIPEC countries (Chile, Peru, Zambia, and Zaire)
began probing Japanese intentions last summer and
in September requested that Tokyo suspend exports.
Japanese producers were reluctant to renegotiate
their ore-import contracts, and Tokyo neither wanted
to reduce export earnings nor help finance the
producers' inventories. CIPEC pressure mounted,
however, and Tokyo responded with a partial export
ban on October :. and a total ban on November 6. By
this time, the Japanese had delivered their mes-
sage: suspension of exports would require a cutback
in production and a corresponding cut in imports of
ores and concentrates.
The CIPEC members reportedly agreed to cut
exports of unrefined copper to Japan by 10 percent
during December 1974 and January 1975, and Japan
agreed to approach other shippers for similar
reductions. Within a month, however, the situation
in Japan deteriorated; domestic demand fell further
and inventories mounted. The government and com-
mercial banks arranged $43 million in loans to help
finance stocks, but the smelters claimed they needed
at least $300 million to survive. Producers had no
choice but to reduce output, in most cases by 15-25
percent. To prevent ore stocks from mounting, the
Japanese went back to CIPEC and requested a 30 per-
cent reduction in ore shipments through June 1975.
The two sides reportedly compromised on a, 15-percent
cut for December and January deliveries, and agreed
to negotiate the level of subsequent deliveries.
The Japanese have approached copper companies
in non-CIPEC countries for similar percentage cut-
backs in ore shipments. The response from Papua-
New Guinea, Australia, Canada, and the Philippines,
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which together provide abaut 60 percent of Japan's
copper imports, has not been altogether favorable.
Bougainville Copper, Ltd., in Papua-Now Guinea,
has agreed to rt'duce ore shipments by 15 percent
for two months an have several companies in Canada.
The Australians apparently are stalling, and
Philippine companies reportedly are refusing to
go along in the belief that the Japanese will
reduce imports from other suppliers in favor of
honoring contracts for lower price Philippine
concentrates. If the Japanese persist, however,
Philippine producers probably will have to accede
because they have no alternative markets.
Tokyo responded positively to CIPEC pressure
principally because it does not want to antagonize
important raw material suppliers. For the same
reason, the Japanese are trying to be impartial,
reducing ore shipments from all suppliers by an
equal percentage. By treating all suppliers
equally, Japan also hopes to avoid encouraging
other countries to join CIPEC. The Japanese pre-
fer to deal bilaterally with raw-material suppliers,
relying on the continued success of their network
of trading companies to get what they need. Inter-
national commodity agreements are viewed as a last
resort. Should CIPEC emerge from the current dis-
array with any real clout in the market:, it will
be because the sharp falloff in world demand and
in prices for copper induced members to work more
closely together than at any time in the past.
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