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rent dollar payments deficits. Although the
about 70 percent was Dutch before World War
Netherlands has retained its international
II. This need for foreign capital will cer-
creditor position in the postwar period, total
tainly continue for many years because of
current revenues accruing to the Netherlands
the low level of Indonesian private saving.
from interest, dividends, and profits from
It is probable, therefore, that a large sector of
abroad are lower than in prewar years, and
the economy will be permitted to remain in
probably will be reduced further as additional
foreign hands for a considerable period.
foreign loans are obtained.
Netherlands trading and financial interests
Under the provisions of The Hague Agree-
constitute an integral part of the Indonesian
ments, Netherlands investors retained their
economy, and although there has been some
holdings in Indonesia after independence was
effort on the part of the Indonesian Govern-
granted, and the change in juridical status
ment to promote the interests of Indonesian
had, of itself, little immediate effect on the
traders, it probably would take years for these
value or earnings of Netherlands investments.
newcomers to compete effectively. The politi-
Discrimination against Dutch investments is
cal and economic uncertainties which Indo-
forbidden by treaty. There has been no na-
nesian independence has brought will tend,
tionalization of basic industries, although the
at least for the present, to discourage Dutch
inter-island airlines have been brought under
investors from initiating new enterprises, even
Government control, and similar controls are
if capital is available. Investments probably
anticipated with regard to inter-island ship-
will be confined to existing enterprises to re-
ping. Present conditions in Indonesia are not
store normal production.
such as to encourage new Dutch investments.
Political uncertainty and continuation of
Dutch Budgetary Expenditures.
sporadic lawlessness have had an adverse ef-
Because of expenses assumed as a result of
fect on the development of Dutch investment
Indonesian independence, the Netherlands
and profits. Moreover, the Indonesian Gov-
1950 budget deficit, originally 410 million
ernment in March 1950: (1) reduced liquid
guilders, has been increased by about 160 mil-
assets by 50 percent through a currency con-
lion guilders. After 1950 there will be re-
version; and (2) introduced foreign exchange
duced expenditures, however, particularly on
measures which resulted in tripling the cost
the training, supplying, and transport of
of imports for rehabilitation and expansion
troops to Indonesia, items which entailed large
purposes and in increasing the cost of remit-
expenses in previous years. (Expenditures
ting dividends abroad. At the same time,
for Dutch troops actually in Indonesia were
however, these new regulations stimulated the
in the past borne largely by the Dutch-con-
export of Indonesian raw materials, a large
trolled Indonesian Government.) If the
proportion of which are derived from Dutch-
Netherlands retains control of New Guinea,
owned properties and therefore served to main-
future capital expenditures for the economic
tain the level of Dutch earnings. No serious
development of the area and the expansion of
reduction in profits is expected to result in
military installations probably will be in-
the near future from the wage rises granted
creased, offsetting to a certain extent the re-
since independence, because export prices on
duction in expenses for Indonesia. By its can-
such essential items as rubber and tin have
cellation of 2 billion guilders of the Indonesian
increased considerably owing to the rearm-
debt, the Netherlands will sustain an annual
ament needs of the West. The Indonesian
loss of roughly 110 to 125 million guilders in
Government aims eventually to institute state
interest and amortization, assuming the debt
control of the privately-owned public utilities
would have been retired over a 25-year period
and transportation systems, and possibly of
as the Netherlands Government had proposed
other vital branches of production and natural
before this cancellation.
resources. These developments will cause
future difficulties for Dutch investments.
Invisible Payments and the Indonesian Debt.
The Indonesians, however, depend to a great
Postwar earnings from Dutch loans to In-
extent upon foreign investment, of which
donesia and from investments in the Archipel-
SECRET
ARCHIVES
NATIONAL
AND
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"ocrText": "6\nSECRET\nrent dollar payments deficits. Although the\nabout 70 percent was Dutch before World War\nNetherlands has retained its international\nII. This need for foreign capital will cer-\ncreditor position in the postwar period, total\ntainly continue for many years because of\ncurrent revenues accruing to the Netherlands\nthe low level of Indonesian private saving.\nfrom interest, dividends, and profits from\nIt is probable, therefore, that a large sector of\nabroad are lower than in prewar years, and\nthe economy will be permitted to remain in\nprobably will be reduced further as additional\nforeign hands for a considerable period.\nforeign loans are obtained.\nNetherlands trading and financial interests\nUnder the provisions of The Hague Agree-\nconstitute an integral part of the Indonesian\nments, Netherlands investors retained their\neconomy, and although there has been some\nholdings in Indonesia after independence was\neffort on the part of the Indonesian Govern-\ngranted, and the change in juridical status\nment to promote the interests of Indonesian\nhad, of itself, little immediate effect on the\ntraders, it probably would take years for these\nvalue or earnings of Netherlands investments.\nnewcomers to compete effectively. The politi-\nDiscrimination against Dutch investments is\ncal and economic uncertainties which Indo-\nforbidden by treaty. There has been no na-\nnesian independence has brought will tend,\ntionalization of basic industries, although the\nat least for the present, to discourage Dutch\ninter-island airlines have been brought under\ninvestors from initiating new enterprises, even\nGovernment control, and similar controls are\nif capital is available. Investments probably\nanticipated with regard to inter-island ship-\nwill be confined to existing enterprises to re-\nping. Present conditions in Indonesia are not\nstore normal production.\nsuch as to encourage new Dutch investments.\nPolitical uncertainty and continuation of\nDutch Budgetary Expenditures.\nsporadic lawlessness have had an adverse ef-\nBecause of expenses assumed as a result of\nfect on the development of Dutch investment\nIndonesian independence, the Netherlands\nand profits. Moreover, the Indonesian Gov-\n1950 budget deficit, originally 410 million\nernment in March 1950: (1) reduced liquid\nguilders, has been increased by about 160 mil-\nassets by 50 percent through a currency con-\nlion guilders. After 1950 there will be re-\nversion; and (2) introduced foreign exchange\nduced expenditures, however, particularly on\nmeasures which resulted in tripling the cost\nthe training, supplying, and transport of\nof imports for rehabilitation and expansion\ntroops to Indonesia, items which entailed large\npurposes and in increasing the cost of remit-\nexpenses in previous years. (Expenditures\nting dividends abroad. At the same time,\nfor Dutch troops actually in Indonesia were\nhowever, these new regulations stimulated the\nin the past borne largely by the Dutch-con-\nexport of Indonesian raw materials, a large\ntrolled Indonesian Government.) If the\nproportion of which are derived from Dutch-\nNetherlands retains control of New Guinea,\nowned properties and therefore served to main-\nfuture capital expenditures for the economic\ntain the level of Dutch earnings. No serious\ndevelopment of the area and the expansion of\nreduction in profits is expected to result in\nmilitary installations probably will be in-\nthe near future from the wage rises granted\ncreased, offsetting to a certain extent the re-\nsince independence, because export prices on\nduction in expenses for Indonesia. By its can-\nsuch essential items as rubber and tin have\ncellation of 2 billion guilders of the Indonesian\nincreased considerably owing to the rearm-\ndebt, the Netherlands will sustain an annual\nament needs of the West. The Indonesian\nloss of roughly 110 to 125 million guilders in\nGovernment aims eventually to institute state\ninterest and amortization, assuming the debt\ncontrol of the privately-owned public utilities\nwould have been retired over a 25-year period\nand transportation systems, and possibly of\nas the Netherlands Government had proposed\nother vital branches of production and natural\nbefore this cancellation.\nresources. These developments will cause\nfuture difficulties for Dutch investments.\nInvisible Payments and the Indonesian Debt.\nThe Indonesians, however, depend to a great\nPostwar earnings from Dutch loans to In-\nextent upon foreign investment, of which\ndonesia and from investments in the Archipel-\nSECRET\nARCHIVES\nNATIONAL\nAND"
}