THE POLITICAL OUTLOOK FOR INDONESIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP98-00979R000400280001-7
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 15
• Document Creation Date: December 23, 2016
• Document Release Date: May 29, 2013
• Sequence Number: 1
• Publication Date: August 27, 1957
• Content Type: NIE

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NIE 6 5 ? 6 7
27 August 1957
N9 309
NATIONAL INTELLIGENCE ESTIMATE
NUMBER 65-57
(Supersedes NIE 65-56)
THE POLITICAL OUTLOOK FOR INDONESIA
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of
State, the Army, the Navy, the Air Force, and The Joint Staff.
Concurred in by the
INTELLIGENCE ADVISORY COMMITTEE
on 27 August 1957. Concurring were the Special Assistant, In-
telligence, Department of State; the Assistant Chief of Staff,
Intelligence, Department of the Army; the Director of Naval
Intelligence; the Assistant Chief of Staff, Intelligence, USAF;
and the Deputy Director for Intelligence, The Joint Staff.
The Atomic Energy Commission Representative to the IAC
and the Assistant Director, Federal Bureau of Investigation,
abstained, the subject being outside of their jurisdiction.
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TABLE OF CONTENTS
Page
THE PROBLEM
1
CONCLUSIONS
1
DISCUSSION
2
Present Political Situation
2
Major Factors in the Political Situation
4
Sukarno
4
Regionalism
4
Military and Security Forces
5
The Non-Communist Political Parties
5
The Communist Party
6
Economic Deterioration
6
The Political Outlook During the Next Year
7
The Economic Outlook During the Next Year
8
Longer Run Prospects
8
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THE POLITICAL OUTLOOK FOR INDONESIA
THE PROBLEM
To estimate Indonesia's political situation and prospects over the next year or so.
CONCLUSIONS
1. Indonesia continues to suffer from
lethargic administration, corruption,
and economic stagnation, and to blame
its woes on the Dutch and on the capi-
talist world.
2. President Sukarno has stated his de-
termination to rekindle the spirit of the
1945 revolution and to supplant political
division with unity and discipline. He
proposes to replace the Western parlia-
mentary system by what he calls "guided
democracy," a fuzzy concept which, how-
ever, clearly involves less democracy and
more guidance. The immediate and
pressing danger in the situation lies in
Sukarno's increasing reliance on Com-
munist support and the growing Com-
munist influence on Sukarno.
3. The Communist Party (PKI) is the
only political group which proposes a
clear cut solution to Indonesia's prob-
lems and possesses an industrious and
effective political organization. In the
central and most populous island of Java
it polled 20.8 percent of the vote in the
1955 parliamentary elections. It has
showed large gains in local elections since
that time. Though the PKI has as yet
had no official representation in any In-
donesian government, there are 4 Com-
munist sympathizers in the present cab-
inet, as well as 18 extreme leftists in the
45-man National Council, a key element
in Sukarno's "guided democracy" con-
cept.
4. These developments have encouraged
increasing regionalism in the outer
islands. Provinces in Sumatra, Celebes,
and elsewhere have defied the central
government and demanded a greater
voice in administering their own affairs
and a greater share of governmental rev-
enues. Though the army has in the past
been regarded as a potential force for
national unity, it is now seriously divided,
and the provincial movements have been
led by local area commanders.
5. Over the next 12 months, the prospect
is for a continued increase in Communist
influence over the central government.
Although we doubt that the PKI will
achieve effective control of the govern-
ment during the next year, this possi-
bility cannot be excluded. The provin-
cial regimes on the outer islands are not
likely to revert to central control during
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THE POLITICAL OUTLOOK FOR INDONESIA
THE PROBLEM
To estimate Indonesia's political situation and prospects over the next year or so.
CONCLUSIONS
1. Indonesia continues to suffer from
lethargic administration, corruption,
and economic stagnation, and to blame
its woes on the Dutch and on the capi-
talist world.
2. President Sukarno has stated his de-
termination to rekindle the spirit of the
1945 revolution and to supplant political
division with unity and discipline. He
proposes to replace the Western parlia-
mentary system by what he calls "guided
democracy," a fuzzy concept which, how-
ever, clearly involves less democracy and
more guidance. The immediate and
pressing danger in the situation lies in
Sukarno's increasing reliance on Com-
munist support and the growing Com-
munist influence on Sukarno.
3. The Communist Party (PKI) is the
only political group which proposes a
clear cut solution to Indonesia's prob-
lems and possesses an industrious and
effective political organization. In the
central and most populous island of Java
it polled 20.8 percent of the vote in the
1955 parliamentary elections. It has
showed large gains in local elections since
that time. Though the PKI has as yet
had no official representation in any In-
donesian government, there are 4 Com-
munist sympathizers in the present cab-
inet, as well as 18 extreme leftists in the
45-man National Council, a key element
in Sukarno's "guided democracy" con-
cept.
4. These developments have encouraged
increasing regionalism in the outer
islands. Provinces in Sumatra, Celebes,
and elsewhere have defied the central
government and demanded a greater
voice in administering their own affairs
and a greater share of governmental rev-
enues. Though the army has in the past
been regarded as a potential force for
national unity, it is now seriously divided,
and the provincial movements have been
led by local area commanders.
5. Over the next 12 months, the prospect
is for a continued increase in Communist
influence over the central government.
Although we doubt that the PKI will
achieve effective control of the govern-
ment during the next year, this possi-
bility cannot be excluded. The provin-
cial regimes on the outer islands are not
likely to revert to central control during
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the period, and, though they are un-
likely to declare their independence,
their autonomy will probably become
more firmly established.
6. Paralleling these developments in the
political field, the central government's
economic position is expected to deteri-
orate during the next year. As the prov-
inces continue to withhold foreign ex-
change earnings from exports, the cen-
tral government's ability to import will
be seriously curtailed. Government rev-
enues, which are based primarily on im-
ports, will decline still further. However,
the political consequences of the deteri-
orating economic situation will probably
not reach a critical stage during the next
year. The worsening economic situa-
tion, however, will limit the ability of the
central government to provide more gen-
erous subsidies to the provincial govern-
ments ? one of the primary objectives of
the regionalist regimes.
7. Indonesia has nearly exhausted its
period of grace. Over the next two or
three years the political situation may,
at best, stabilize temporarily on the basis
of a group of autonomous but inherently
weak provinces and a central govern-
ment in which the effectiveness of the
parliament and cabinet is reduced still
further. At the worst, relations between
the provinces and the central govern-
ment and the general economic situation
may deteriorate to a point where sudden
political collapse would occur, possibly
accompanied by outbreaks of violence.
In this situation, the Communists as the
best organized group would have a good
opportunity to seize control of Java.
DISCUSSION
PRESENT POLITICAL SITUATION
8. During the past year, Indonesia has fallen
into an advanced state of political confusion
and economic deterioration. There has been
a weakening of many of the elements which
have provided Indonesia a tenuous unity
since it acquired independence in 1949. The
nationalist and patriotic impulses generated
by the struggle for independence have waned,
while regional interests and loyalties have
gained momentum and found effective politi-
cal expression. Although Sukarno's wide
personal popularity among the Indonesian
people remains a unifying force, his stature
as a national leader apparently has declined
outside Java and among many of the educated
group. The army, which in the past has
tended to be a force for national stability, is
now seriously divided in its loyalty to the
central government. The Communists, who
have achieved a close rapport with Sukarno
and have become his most effective supporters,
have increased their strength and influence.
These circumstances have created a situation
which puts in jeopardy the continued exist-
ence of Indonesia as a coherent political
entity.
9. The most serious manifestation of national
disintegration occurred during late 1956 and
early 1957, when the provincial military com-
manders, allied with local civic leaders, as-
sumed control of most of the outlying is-
lands in a series of bloodless rebellions. The
Djakarta government retains control only in
Java and in areas surrounding the provincial
capitals of Medan in North Sumatra and
Makassar in South Celebes. Elsewhere in In-
donesia, the extent of local autonomy and
resistance to the central government varies in
intensity and degree. In most of Sumatra
and in North Celebes, resistance and autono-
my appear strong and well organized under
local army commanders. In Borneo and Bali,
although the demand for local autonomy is
strong, central government directives are
given superficial respect. In the islands of
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East Indonesia other than Celebes (i.e., the
Moluccas and Lesser Sundas) the government
has achieved a compromise on matters of mili-
tary command but otherwise apparently has
preferred not to challenge the considerable
local autonomy which now exists there. -
10. Efforts to reach an understanding with
the rebellious provincial regimes have failed,
largely because of President Sukarno's unwill-
ingness to compromise and his increasingly
close association with the Communists. On
the other hand, the central government has
been unwilling and probably unable to re-
store its authority by military means. 1
11. The provincial revolts were largely re-
sponsible for a serious cabinet crisis early in
1957. The Masjumi, Indonesia's second larg-
est political party, which favored greater re-
gional autonomy and a negotiated settlement
with the rebellious commanders, withdrew
from the Ali government in January in an
unsuccessful attempt to cause its downfall.
Although the Ali cabinet had lost most of its
prestige and authority, it managed to con-
tinue in office for another three months with
the support of the Communist Party (PKI)
and the two remaining major government
parties, the Nationalist Party (PNI) and the
NU (Moslem Scholars). By the time it re-
signed in March, the political atmosphere had
become so tense that it was impossible to form
a new cabinet through the usual processes.
Accordingly, Sukarno proclaimed a state of
emergency and appointed an "extra-parlia-
mentary" cabinet with Djuanda, a nonparty
moderate, as prime minister.
12. During this period, President Sukarno
announced that a Western parliamentary sys-
tem would not work in Indonesia and that
the time had come to introduce a system of
government attuned to Indonesia's peculiar-
Although the total forces on Java are greater
than on any other island, the central govern-
ment's ability to concentrate a superior force at
any one place is restricted by the threat of out-
breaks of civil war on Java itself and by the
shortage of sea and air lift.
Disposition of major army units:
Sumatra 35,000 (including 6,000 active
reserves)
Java 96,000
Borneo 10,000
East Indonesia 30,000
ities and needs. Accordingly, he proposed a
system of "guided democracy," involving the
formation of a cabinet representing all poli-
tical parties in parliament and the establish-
ment of a National Council representing
"functional" groups, as distinguished from
political parties. Among the major parties,
only the PKI has given full support to Su-
karno's plan. The PNI and NU have tended
to be ambivalent. Their leaders fear that Su-
karno may use the National Council to weaken
the position of the cabinet and the parliament
and thus to destroy the political parties. On
the other hand, they are unwilling to forego
the prestige and economic benefits of public
office. Sukarno's proposals have been vig-
orously opposed by the Masjumi, by the rebel-
lious provincial regimes, and by a number of
influential national figures, including ex-vice
president Hatta, who feel that these proposals
endanger democratic government or tend to
increase Communist influence.
13. The Djuanda cabinet, which took office
9 April, is under the direct influence of Su-
karno and has in general been responsive to
his manipulation. Although the PKI is not
represented directly, four of the 23 ministers
are almost certainly sympathetic to Commu-
nism and may be under Communist guidance.
Five of the ministers have no known political
affiliation; four are members of the PNI;
four are members of the NU; two are from
the Indonesian Christian Party (Parkindo) ;
and three others are members of minor par-
ties. The Masjumi refused to participate on
grounds that the cabinet was unconstitutional
and expelled a member of the party for accept-
ing a portfolio. Another cabinet member was
formerly affiliated with the Masjumi, but re-
signed from the party immediately before ac-
cepting a post in the Djuanda cabinet. The
cabinet, having been appointed under emer-
gency procedures, holds office at the pleasure
of President Sukarno.
14. Soon after taking office the Djuanda cab-
inet approved an emergency law for the estab-
lishment of a 45-member National Council.
The council was activated in July after much
debate within the parties, a series of meetings
between Sukarno and political leaders, and
considerable pressure on those opposed to it.
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The emergency law did not define the func-
tions of the council; so far it has acted solely
in an advisory capacity. Its members, ap-
pointed by Sukarno who serves as chairman,
represent a wide variety of nonparty func-
tional groups, such as trade unions, veterans,
and teachers. Of the 44 members thus far
named to the council 18 are Communists,
Communist oriented, or extreme leftists.
MAJOR FACTORS IN THE POLITICAL
SITUATION
15. Sukarno. President Sukarno is still the
central figure in Indonesia. He has long been
dissatisfied with the country's lack of eco-
nomic and political progress and has blamed
Indonesia's problems on the inefficient man-
ner in which the parliamentary system has
performed in Indonesia. Sukarno has sought
to maintain his position as nationalist leader
and revolutionary symbol, while at the same
time avoiding personal responsibility for the
government. While he was a vigorous and
effective leader during the revolutionary peri-
od, in the following years he has appeared to
be unwilling or unable to provide similar lead-
ership in coping with the problems of polit-
ical administration and economic develop-
ment. Sukarno is an exceedingly vain and
emotional man, highly impatient with criti-
cism or opposition. He is convinced that he
represents the conscience and the aspirations
of the Indonesian people.
16. Sukarno, like most educated Indonesians,
has long been influenced by Marxism. He
was greatly impressed during his recent tour
of the Bloc, especially in Communist China,
by the lack of party rivalry, the effectiveness
of centralized control, the zeal of highly moti-
vated cadres, and the extent of economic
accomplishments. These elements, together
with ideas which he probably received from
conversations with PKI leaders, may account
in large measure for his "guided democracy"
concept.
17. Sukarno is convinced that a highly cen-
tralized government, based on Java, is es-
sential for Indonesia. He does not appear to
believe that the strength of regionalism is
very great or to take the provincial rebel-
lions seriously, largely because of the public
enthusiasm with which he is greeted in the
provinces. Although Sukarno claims affilia-
tion with no political party, he has been gen-
erally identified with the PNI, which he helped
to found in 1927. However, the events of late
1956 and early 1957 have brought Sukarno
closer to the PKI which, during recent months,
has been his strongest supporter. Although
Sukarno has expressed awareness that the
PKI constitutes a potential danger to his posi-
tion, he apparently believes he has sufficient
control of the situation to cope with the Com-
munists if they get out of line. ?
18. Regionalism. The authority of the central
government has never been fully established
throughout the archipelago. Regionalism,
due to geographic, ethnic, and linguistic di-
versity, and to the outer islanders' fear of po-
litical and economic domination by the more
numerous Javanese, has always been a strong
centrifugal force in the Republic of Indonesia.
The people of the outlying islands have also
felt that they are being exploited for the eco-
nomic benefit of Java. Provincialism within
the army has been preserved and fostered by
the stationing of troops in their areas of ori-
gin, principally for reasons of economy and
language. Over the past year the urge for re-
gional autonomy has found political expres-
sion in the regimes established by the pro-
vincial military commanders. Although these
revolts have followed a similar pattern, they
appear to be spontaneous reactions to similar
grievances against the central government
rather than coordinated uprisings. Their ob-
jectives appear to be more autonomy, a greater
voice in formulating central government pol-
icy, and a greater share of the economic re-
turns from exports originating in the prov-
inces.
19. Although the central government has
made some overtures to the provincial leaders,
President Sukarno, thus far, has been unwill-
ing to admit the strength of regional feeling.
On their side, the local leaders have not only
maintained their position but in addition
some of them are demanding that Sukarno
take action to reduce the Communist threat
on Java. There is evidence that efforts are
being made to coordinate the activities of the
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various provincial regimes and that the idea
of independence, not mentioned in the early
stages of the provincial rebellions, may grad-
ually develop. Both sides have avoided the
use of force probably because they fear it
would impair the possibility of political settle-
ment and might lead to widespread violence
or civil war.
20. Military and Security Forces. The In-
donesian army (about 171,000 men) has never
been a cohesive military organization fully re-
sponsive to the authority of the central gov-
ernment and its commanders have always ex-
ercised considerable local autonomy. Most
of the officer corps, which is a large part of
Indonesia's small educated elite, favors mod-
ernization and reorganization of the army
but differ widely on how it is to be done. The
army is now split between those who have
identified themselves with regional demands
for local autonomy and those who continue
to be responsive to orders from the Djakarta
government. Army units responsive to Dja-
karta are chiefly Javanese.
21. The army has been and still is a basically
anti-Communist force. However, in the
areas where Djakarta retains control, this as-
pect of the army's effectiveness has dimin-
ished in the past 18 months, largely as the
result of an extensive program of transfers.
Many of the well-trained, anti-Communist
officers, some of whom have been schooled
in the US, have been transferred out of the
country, posted to army schools or staff posi-
tions, and in some instances placed under
prolonged house arrest.
22. Aside from Communist infiltration ?
which is probably increasing ? the neutrali-
zation of strong anti-Communist personali-
ties has left the army in Java a more disci-
plined instrument and one more amenable to
carrying out the directives of President Su-
karno. These directives of Sukarno appear
increasingly to work to the advantage of the
Communist party. Since Sukarno declared
martial law in early 1957, the army has
wielded broad powers for civil administration.
The army chief of staff, General Nasution,
has so far loyally carried out the orders of
the central government. However, if the ma-
jority of the army leaders, in a showdown,
decided to oppose the government, he might
join them.
23. The Indonesian air force, which is infil-
trated with Communists and leftists at the
top command level, is serving Sukarno loy-
ally; the navy is attempting to remain unin-
volved in politics. Neither the air force nor
the navy are of great political importance
because of their small size. However, since
Indonesia is spread out over an archipelago,
the allegiance of both the air force and the
navy would be important in the event of civil
disruption.
24. The Indonesian police includes a mobile
brigade, numbering approximately 18,000,
which has limited military capabilities. This
organization has been strongly influenced by
the American training given many of its offi-
cers and is strongly anti-Communist. In the
outer islands, the police have generally co-
ordinated their activities with the local anti-
Djakarta army commanders.
25. The Non-Communist Political Parties.
Indonesia's non-Communist political parties
have not served the nation well because of
their factionalism, concentration on the eco-
nomic spoils of office, and lack of effective
leadership. With their loose organization and
weak party discipline they offer poor compe-
tition to the Communists. The Nationalist
Party (PNI) which had the largest popular
vote in the 1955 elections, draws most of its
strength from Java.2 It is highly national-
istic and has been closely associated in the
public mind with Sukarno. Its leaders are
greatly concerned with Sukarno's increased
rapport with the PKI, but they are reluctant
to force a showdown with him.
2
PARLIAMENTARY REPRESENTATION OF MAJOR
POLITICAL PARTIES BY GEOGRAPHIC AREAS
JAVA
OUTER
ISLANDS
TOTAL
PNI
43
14
57
Masi umi
31
26
57
NU
37
8
45
PKI
35
4
39
Others
59
Total
257 -
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26. The Moslem Masjumi has shown greater
unity of purpose than any other major non-
Communist party during recent months and
is now leading the opposition. It favors
greater provincial autonomy, and it has de-
nounced Sukarno's "guided democracy" con-
cept as undemocratic and the Djuanda cab-
inet as unconstitutional. The Masjumi is
especially strong in the outlying islands. The
other major Moslem party, the Nahdatul
Ulama (NU), draws most of its strength from
Java. Although the NU is basically anti-
Communist and would prefer to maintain
Moslem solidarity, its leaders have been un-
willing to go into the opposition. They are
reluctant to give up the economic benefits of
continued participation in the government
and they wish to avoid a straight lineup of
religious against secular parties. Such a
lineup, in the view of NU leaders, might drive
the PNI farther to the left and into a close
alliance with the PKI.
27. The Communist Party of Indonesia (PKI)
emerged from the first national elections, held
in 1955, as the fourth largest of the Indo-
nesian political parties. Its greatest popular
following is in Java, which provides 35 of its
39 representatives in parliament. Major
sources of strength are SOBSI, Indonesia's
largest labor organization, and other mass
organizations including veterans, youth,
women, and peasant groups. The PKI has
been lavish in its expenditures for election
and mass rally purposes. It appears to have
considerable financial resources, which are
probably derived not only from front groups
but also from the Communist embassies in
Djakarta, particularly the Chinese Commu-
nist.
28. The Communists apparently are pursu-
ing the "united front" tactic to achieve politi-
cal domination of Indonesia. While they
have not participated in any cabinet thus far,
they have recently made substantial strides
toward gaining a strong position in the high-
lest levels of government. In the Djuanda
cabinet, four portfolios, including agriculture,
education, and veteran affairs, are held by
persons who are known to have far leftist
connections. A number of Sukarno's close
personal advisors are also known or believed
to be Communists. These include the PKI's
secretary-general and its parliamentary
leader. In addition, there is evidence of Com-
munist penetration of the government minis-
tries and the armed forces.
29. The organizational effectiveness of the
PKI in Java has substantially increased dur-
ing the past two years, as was demonstrated
in the municipal and provincial council elec-
tions held in the summer of 1957. In
Djakarta the PKI improved its position in
the municipal council, gaining 21.1 percent of
the vote, compared to 13.2 percent in the con-
stituent assembly election in 1955. In Cen-
tral Java the PKI will have 27 out of 75 seats
in the provincial council (36 percent of the
total), and has supplanted the PNI as the
strongest party. In 1955 the PKI elected 15
out of 62 members of parliament for Central
Java (24 percent of the total). In East Java
the PKI gained control of the municipal coun-
cils in the major cities, though it will appar-
ently not control the provincial council. In
West Java the PKI may gain control of the
municipal council of Bandung, but elsewhere
in the province the Masjumi maintained its
position as the strongest party.
30. The increased association of the PKI with
Sukarno has been a major factor in the
growth of the party's strength. Its political
position in the government and its increased
popularity with the Javanese voters are, to a
large extent, directly attributable to the fact
that he has permitted them to capitalize on
their association with him and his program.
31. Economic Deterioration. Underlying its
other difficulties, the Indonesian economy is
deteriorating as a result of neglect, the pur-
suit of nationalistic and Marxist-influenced
policies, internal insecurity, and the current
rebellions in the outer islands. Per capita in-
come is probably below prewar levels, despite
the apparent richness of Indonesia's re-
sources. The curtailment of revenues from
the provinces is largely responsible for the
current crises in governmental financing and
in the balance of payments. About 80 percent
of Indonesia's foreign exchange earnings is
derived from exports of oil, rubber, tin, and
copra which originate in the outer islands.
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The provincial regimes have greatly reduced
the amount of taxes and revenues remitted
to the central government. Although rev-
enues derived from exports of oil and estate
rubber still go to Djakarta, copra and small-
holder rubber are being used in extensive and
increasing barter trade with Singapore,
Penang, British Borneo, and the Philippines.
The provincial regimes appear to be making
out reasonably well, but heavily populated
Java is experiencing increasing inflation,
shortages of consumer goods, and a heavy
drain on its foreign exchange reserves.
THE POLITICAL OUTLOOK DURING
THE NEXT YEAR
32. Unless there is a marked change in pres-
ent trends, the Communists will continue to
increase their strength and influence on Java
during the next year. We believe they will
make haste slowly in seeking to gain overt
control of the central government apparatus.
However, they will be pressing their subver-
sive activities, particularly with respect to
their efforts to neutralize or to gain control
of the armed forces. They will continue to
work through Sukarno, posing as his servants
and as sincere nationalists. Sukarno will
probably continue to welcome Communist
support and utilize Communist advice. We
believe that the chances are less than even
that the PKI will gain effective political con-
trol of the central government during the
next year, and that there is little likelihood
that the Communists will attempt to seize
control by force. The Communists will con-
tinue efforts to develop their relatively meager
assets in non-Javanese areas, but we do not
believe they will become a threat to the pro-
vincial regimes on the outer islands.
33. During the next year the provincial re-
gimes will probably continue to strengthen
their positions as autonomous political
entities, but will probably not completely
sever relations with the central government.
Sukarno has given no indication of a willing-
ness to give in to provincial demands, but
thus far it does not appear that the provinces
are seriously considering the alternative of
declaring their independence, nor are they
likely to do so unless the Communists come
to power in Djakarta. However, the longer
the provincial regimes continue to enjoy a
degree of autonomy from the central govern-
ment, the greater will be their reluctance to
submit once again to administrators from
Djakarta. In any event, the state of uncer-
tainty and tension will probably continue to
be such that an outbreak of violence or a
political upheaval leading to fragmentation of
the Republic will remain possible at any time.
34. We believe the above to be the most likely
developments in Indonesia during the next
year. However, due to the limited length of
Indonesia's experience as an independent na-
tion and the relatively weak, undeveloped
state of its major political institutions, unex-
pected developments are always possible and
might be sparked by relatively minor inci-
dents. Moreover, in the past Sukarno has not
proven himself to be a dependable ally to any
political group and he is subject to sudden
and unpredictable changes of direction ap-
parently based on emotion and instinct. De-
velopments might involve overt participation
in the cabinet by the PKI, a central govern-
ment effort to regain control of the outer
islands by force, or the attempted secession
of one or more of the provincial regimes.
a. The Communists might gain effective
control of the government by political means.
If Sukarno broke with the Djuanda cabinet
(as he might in exasperation at its inability
to cope with political and economic problems),
he might insist that the PKI be given critical
ministries in the successor government. This
could split the PNI and would probably cause
the NU and some of the smaller parties to
join the Masjumi in political opposition.
Whether they would take forcible action
would largely depend on the attitude of army
elements in Java at this point, and it is un-
certain what that attitude would be. The
bulk of the Javanese forces might remain
loyal to Sukarno and accept the new govern-
ment. On the other hand, the army on Java
might split, and major elements of it join
with opposition groups, in which case civil
war would probably result.
b. If the Communists should come to power
in Java, some of the provincial regimes out-
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side Java would probably repudiate the cen-
tral government. In these circumstances,
these provinces might unite and proclaim that
they were the legitimate government of Indo-
nesia, but it is more likely that, they would
fragment into separate political units. Army
commanders in the provinces would probably
take action to eliminate active Communist
supporters and central government control
over any troops in their areas. They would
appeal to the West and particularly to the
US for support.
c. The provincial regimes, especially on
Sumatra and Celebes, might also declare their
independence of Djakarta if the central gov-
ernment launched a military attack against
them or if they came to believe that Djakarta
would not ultimately concede them the de-
gree of automony which they desire. Su-
matran leaders in particular probably believe
that the wealth of natural resources would
make a Sumatran state economically viable.
However, both Sumatra and Celebes lack
skilled labor, administrators, and capital, and
would need considerable outside assistance.
Moreover, neither area appears to have ade-
quate political leadership. An even more
important problem would be the ethnic
diversity and lack of political cohesion of both
Sumatra and Celebes. Their present unity is
largely due 'to common opposition to Djakarta,
and if they were to achieve independence, the
many divisive factors would tend to lead to
further political fragmentation.
35. Sukarno's Disappearance from the Scene.
If Sukarno should disappear from the scene,
it would remove a major obstacle to a settle-
ment of the provincial rebellions and deprive
the Communists of their main entree to gov-
ernment. On the other hand, the Indonesian
nation would lose a dynamic leader who is the
symbol of Indonesian independence and a
major force for holding the country together.
His death might lead to mob violence and a
general breakdown of law and order, from
which civil war for control of the country
could develop. This would be particularly
likely if the circumstances of his death were
such that it could be attributed to political
motives.
8
THE ECONOMIC OUTLOOK DURING
THE NEXT YEAR
36. The central government's economic situ-
ation will deteriorate. As the provinces con-
tinue to withhold foreign exchange earnings
from exports, Djakarta's ability to import will
be seriously curtailed and government rev-
enues, which are based primarily on imports,
will decline still further. The balance of pay-
ments position will probably continue to be
critical, and the government may be forced to
seek a moratorium on its foreign debt repay-
ment. If the latter is not forthcoming, de-
fault or repudiation of some of Indonesia's
foreign debts will become increasingly likely.
Djuanda's efforts at economic retrenchment
will probably be limited by political resist-
ance, by the necessity for greater expendi-
tures to appease the rebellious provinces, and
by increasing inflation as deficits are financed
by new issues of paper currency. However,
since the bulk of the peasants, who make up
about 85 percent of the total population, live
outside the money economy in communities
which are largely self-sufficient, the political
consequences of the economic situation will
probably not reach a critical stage, at least
during the next year. The worst effects of a
mounting inflation and a shortage of foreign
exchange will be to reduce sharply the city
dweller's purchasing power and the availa-
bility of imported manufactured goods. Seri-
ous unrest could develop on Java which could
be exploited by the Communist-dominated
labor unions and mass organizations.
37. In this situation, the Indonesian govern-
ment will probably seek additional foreign
assistance and, in keeping with its neutralist
foreign policy, will be receptive to offers from
both the East and the West. The Indonesian
government will almost certainly begin to
draw on the $100 million Soviet line of credit,
the approval of which is currently being con-
sidered by the Indonesian parliament, and will
seek to conclude a reparations agreement with
the Japanese.
LONGER RUN PROSPECTS
38. We can foresee little to be optimistic about
in Indonesia. It is possible that Sukarno may
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seek to reach some compromise with the re-
gimes in the outer islands or to bring the
Communists under control. We consider such
actions unlikely except under heavy pressure
by the non-Communist parties or by the army.
We believe that the non-Communist political
parties are unlikely to cooperate effectively,
except perhaps for brief periods in efforts to
counter immediate Communist threats. The
army, despite its factionalism and internal
conflicts, will probably continue to be a better
potential force for providing national unifica-
tion and a stable non-Communist government.
However, we know of no leader, political or
military, who is willing to challenge Sukarno's
leadership or who has the necessary combina-
9
tion of army support, popular appeal, and
political acumen.
39. Over the next two or three years the polit-
ical situation may, at best, stabilize tempo-
rarily on the basis of a group of autonomous
but inherently weak provinces and a central
government in which the effectiveness of the
parliament and cabinet is reduced still fur-
ther. At the worst, relations between the
provinces and the central government and the
general economic situation may deteriorate to
a point where sudden political collapse would
occur, possibly accompanied by outbreaks of
violence. In this situation, the Communists
as the best organized group would have a good
opportunity to seize control of Java.
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ADMINISTRATIVE DIVISIONS AND EXTENT OF DISAFFECTION 15 Au ust 1957
100 105
bKutaradja 6
115 120 125 130 135 140
ATJEH
BRUNEI
Treaty Limits of The Philippines
P. MIANGAS
? (Indonesia)
Bindjai.0
Medan
elawan
MALAYA
(U.K.)
PULAU
M EU LU E
Sibolga
ULI?
OAST
2
PULAU
NIAS
E (U.K.)
Manado
HALMAH ER
Gorontalo
4
UMATRA
WAIGEO
?0 ;IOUTEN-
El LAN DEN
PULAU
SI BERUT
,,PULAU. PULAU
OBI
INDEX TO PROVINCES
1. ATJEH
2. NORTH SUMATRA
3. WEST.SUMATRA*
4. R1OUW*
5. DJAMB1
6. SOUTH SUMATRA
7. WEST JAVA
8. CENTRAL JAVA
9. EAST JAVA
10. BORNEO
II. CELEBES
12. LESSER SUNDAS
13. MOLUCCAS
*Presumed boundaries approved
by the central government
Bengkulu
?Palembang
SOUTH
11 6
SUM ATR
elukbetung
BILLITON
Makasar
DJAKARTA
Bogor?
?Bandung ,
CENTRAL
8
rebon JAV
THE REPUBLIC OF INDONESIA
PULAU
BUTU NG
A
AMBOI NAmboina
NETHERLANDS NEW GUINEA
(Status in dispute)
MOLUCAS
13
BANDA SEA
PU LAU.
PULAU
ARU
A
Pekalongan Semarang
A
Surakarta. v
MADURA
c::=7WETAR
PULAU? PU LAU
TANIM BAR
???? International Boundary
Provincial Boundary (approx.)
Military-district Boundary
National Capital
0 Provincial Capital
? Major City or Municipality
Status
to a p
SU M SAWA LESSER SUNDAS
Waingapu 12
OCUSSI
(Pan.)
A R AFUR A S E A
Disaffected
Loyal to government
Mixed loyalty
100 200 300 400
Miles
100 200 300 400
Kilometers
115 120 125 130 135 140
26184 8.57
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