The Indonesian Injection

Contribution to the reconstruction of the Netherlands

On December 27, 1949 from one day to the other the Netherlands changed from being a colonial power into a minor European state. Unknown is that Indonesia made a crucial contribution to the post-war reconstruction of the Netherlands.

By Lambert Giebels – January 5, 2000, De Groene Amsterdammer

On 27 December 1949 Queen Juliana signed the transfer of Indonesia’s sovereignty in the palace on Dam-square in Amsterdam. The Netherlands as a colonial power ceased to exist. From now on the Netherlands was comparable to a nation such as Denmark. In the months prior to the Round Table Conference (RTC) in The Hague they had been negotiating about the terms and conditions. There were four parties sitting around the table: a Dutch delegation led by Van Maarseveen, the then Minister of Overseas Territories; a delegation of the Republic which was proclaimed by Sukarno on August 17, 1945, led by Prime Minister Hatta; a delegation of federalists from the Indonesian federal states, led by Anak Agung who was Prime Minister of the largest state of the ‘Grote Oost.’ The fourth party was the United Nations Committee for Indonesia (Unci), which was created by the United Nations to bring the Netherlands and the Republic together. This delegation was led by Merle Cochran, the US chairman of the Unci.

Prior to the RTC the Republic and the federalists made an agreement. They prepared a constitution for a sovereign Indonesia: the United States of Indonesia, Republik Indonesia Serikat (RIS), The deployment of two Indonesian delegations at the RTC was to safeguard the sovereignty of the Federal Republic. They were prepared to make concessions. They accepted that Indonesia and the Netherlands remained associated in one Union under the Dutch Crown. It remained unclear where this Union was based on, but at least the Indonesians were able to prevent that this would undermine the sovereignty of their new state.

During the Round Table Conference the delegations negotiated long about the issue of debts. The Netherlands forced Indonesia to pay a high price for the sovereignty. In contrast to Surinam that received a dowry of two billion guilders thirty years later, Indonesia took over the total debt of the former Dutch East Indies colony. This debt was calculated by the Netherlands about 6.5 billion guilders. It meant that Indonesia even had to bear the cost of the ‘police actions’. This was too much for Cochran. To the fury of the Dutch Minister-President Drees the American managed to persuade the Dutch financial negotiators to drop two billion guilders – being the approximate cost of the police actions. A debt of about 4.5 billion guilders – in the money value of that time – remained.

The business instinct of the Dutch delegation lead to a significant advantage. During the negotiations on the RTC the Netherlands managed to get the status of the most privileged trading partner of Indonesia. This meant that the earnings from the approximately three billion guilders of Dutch private investments remained and that they could be transferred back to the Netherlands with an attractive rate. These arrangements were written in a financial and economic regulation: the Finec.

If the Netherlands would have stopped here, it could have benefit from its former colony until the end of time. However, the Netherlands overplayed its hand. It did not waive West New Guinea. They used a variety of arguments: New Guinea should become a colony for [colonial] Dutch Indies citizens and Dutch farmers; the missionary interests were at stake; behind closed doors there were speculations about the rich mineral resources of New Guinea, bauxite, copper, gold and especially oil; and then there were some people that saw New Guinea as a permanent point for our navy in the Pacific.

The main argument at the RTC was that without preserving New Guinea there would be no parliamentary majority that would ratify the RTC agreements. The Indonesian delegation was between two fires: on one hand the Dutch negotiators did not waive New Guinea, on the other hand, President Sukarno had proclaimed the freedom of Indonesia from Sabang to Merauke. The chairman of the Unci managed to break the deadlock with the proposal to remove New Guinea from the RTC. Under pressure due to short timeline, on the last day of the RTC they decided that the Netherlands and the RIS would commit to further consultations on the status of New Guinea within one year after the transfer of sovereignty. This became a ticking time bomb threatening the RTC agreements; it would trigger a chain reaction of explosions.

Soon after the transfer of sovereignty the distrust between the two Union partners was growing. On the Dutch side the most suspicious politician was Prime Minister Drees. The distrust already begun in Jakarta where the Van Heutsz Boulevard was renamed and changed into jalan Teuku Umar, after the Aceh guerrilla leader. The Oranje Boulevard changed into jalan Diponegoro. Neither did Drees like the decision of the Indonesian government to appoint August 17 – and not December 27 – as the national Independence Day. For Drees the ultimate proof of the unreliability of the Indonesian Union partner was that within eight months Sukarno shut down the federal government and proclaimed a Unity state on August 17, 1950.

The Netherlands did not realize that the federal states were seen by the Indonesians as an attempt to rule from beyond the grave by a divide and rule policy. But the RIS did not collapse because Sukarno destroyed it but because there were almost no supporters among Indonesians. Indonesia had good reasons to distrust the Netherlands when Captain Westerling in January 1950, with the agreement of the KNIL seemed to want to restore the Dutch rule on West Java. Later that year the RMS was proclaimed with the support of the KNIL in Ambon.

But what caused the real break between Indonesia and the Netherlands was the question of New Guinea. After Sukarno ‘torpedoed’ the RIS, Dutch politicians were convinced that New Guinea should not be handed over to Sukarno’s Indonesia. The talks, which were held in the course of 1950, about the status of the area, led to nothing. A completely new argument was introduced to prove that New Guinea had to stay under Dutch rule: the Netherlands had the obligation to lift the Papuans from the Stone Age. For this ethical viewpoint socialist Drees found in 1952 a powerful ally in the Catholic leader Luns. Drees nor Luns entrusted the noble mission to Indonesia, which had their hands full with their own development. Both saw the insistence of Indonesia to the transfer of New Guinea merely as a hobby of Sukarno. They saw him as the evil genius behind the increasingly discerning attitude of Indonesia against the Netherlands.

Indeed was “Irian Barat (West New Guinea) the main theme of the speeches that were held by the president at every conceivable opportunity. Indeed this contributed to a growing anti-Dutch sentiment. The Dutch government, however, did not understand that the Indonesian president in the parliamentary democracy that Indonesia still was, had no more political power than for example, the President of the German Federal Republic. Therefore they overlooked that all Indonesian political leaders shared the view that New Guinea belonged to Indonesia and that every Indonesian government saw the issue of transfer of Irian Barat to Indonesia as their first priority.

Indonesia was trying to persuade the Netherlands to fulfil the RTC agreements on New Guinea. But after 1950 the Dutch government put the issue of New Guinea ‘on hold’, and New Guinea was declared Dutch territory in the constitutional reform of 1956. At the end of 1955, in early 1956 there was one last meeting in Genève between the Netherlands and Indonesia to discuss the problems that blurred the relationship: the Union that had not worked out, the Finec that according to Indonesia only worked one way in favour of the Netherlands, and the increasingly hopeless matter of New-Guinea.

The initiative for this meeting, which would end so dramatically, came from cabinet Harahap that showed its good will to the Dutch country. Foreign Minister Anak Agung was the leader of the Indonesian negotiating team. The Dutch delegation was led by Luns, who stayed in touch with Prime-minister Drees in The Hague. The delegation-Luns was willing to let the Union dissolve and adjust the Finec. Under condition that Indonesia, in the event of economic conflicts between the two countries, agreed upon international arbitration. The Indonesians, who regarded international arbitration as an infringement of the sovereignty of their country, were not willing to accept these conditions and the Dutch delegation was not willing to accept theirs. Luns did not want to talk about New Guinea. When Anak Agung nonetheless submitted a discussion paper on the issue, Luns took the paper and deposited it into the wastebasket. After which the Balinese rajah was deeply aggrieved. The Geneva conference ended in a complete failure.

Frustrated, the Indonesian delegation returned home. After their recommendation, the cabinet Harahap unilaterally ended the Indonesian-Dutch Union on February 13, 1956. This was the beginning of a chain reaction. The termination of the Union was immediately followed by termination of the Finec and on August 4 the Indonesian government quitted the payment of debts to the Netherlands. One year later also the Dutch companies were succumbed to the question of New Guinea. Moreover they had messed up the relation themselves. The Indonesian government wanted to ‘Indonesianize’ foreign companies and transform the old colonial economy into a national one. This policy was thwarted by the Dutch managers; senior and executive positions remained inaccessible for Indonesians and there was no question of ‘Indonesianization’ of the capital. The small Dutch upper class in Indonesia maintained its old colonial lifestyle and kept its strongholds, such as the Harmony Society and marina in Priok, closed for Indonesians.

Since the bilateral talks on New Guinea had become hopeless, the government-Ali Sastroamidjojo already sought after international intervention in 1953. In the United Nations General Assembly, for three years Indonesia had submitted resolutions to ask the UN agency for intervention in the New Guinea question. Not once the resolutions received the required two-thirds majority. The reason for that was that the Eisenhower-Dulles administration did not want to support the Indonesian resolutions because of their NATO ally: the Netherlands. Therefore all the countries that were depending on ‘Uncle Sam’ did not dare to vote in favour of the Indonesians. On November 27, 1957 it was the fourth time that the Indonesian resolution did not get a two-third majority. In Indonesia they responded furiously. A few days after the rejection of the resolution, Indonesian workers occupied Dutch companies throughout Indonesia. This action was encouraged by the communist trade union. The companies were first brought under control of the Cabinet-Djuanda, then transferred to the army and finally, without compensation, nationalized.

What remained in our Dutch collective memory is the image of President Sukarno refusing to pay his debts. In this memory something has been erased. When Indonesia in 1956 quitted the payments of its debt to the Netherlands, only 650 million guilders remained. This means that between 1950 and 1956 Indonesia has paid almost four billion guilders. The importance of this amount of money can be compared with the American Marshall Aid. Over the period 1948-1953 the Netherlands received 1127 billion dollar by the Marshall Plan – which was a loan. With the dollar exchange rate of 3.80 guilders in that time, this aid has not been much more than what Indonesia paid between 1950 and 1956. Many Dutch people believe that only Marshall Aid financed the post-war reconstruction of the Netherlands, but we tend to overlook the Indonesian contribution.

Another aspect of our national collective memory is the impression that Sukarno’s Indonesia robbed Dutch shareholders of companies from their lawful possession. It is not known that the capital gains, pensions and savings that were transferred from Indonesia to the Netherlands, plus all the income that Dutch businesses generated in Indonesia, have made a significant contribution to our national income during the ‘poor’ fifties. In the early fifties this annual contribution was about eight per cent. In the last year before the New Guinea question ended everything, the capitalized value of the Dutch income was nearly one billion guilders. It seems that the Indonesian injection between 1950 and 1957 in our economy did have impact on the rapid post-war industrialization of our country, which was called ‘le miracle hollandaise’ [the Dutch miracle.]

In short, the Dutch standing phrase ‘Indië verloren, rampspoed geboren’ [Indië lost, catastrophe born] did not become reality because the Netherlands – in this crucial post-war period – benefitted from its former colonial possession, which laid the foundation of our current prosperity.

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