WITHDRAWAL NOTICE RG 84 Records of the Foreign Service Posts of the Department of State Box 00121 Withhold Box 0 Withhold Folder 0 Document 3 HMS REID Entry Series State Department Post Files Total Pages 17 ACCESS RESTRICTED The item identified below has been withdrawn from this file Document Date 06-22-1966 Airgram Special Media File Number in the review of this le this item was removed because access to it is restricted This document is being withheld under Section 3 3b of E0 13526 and or NARA's discretionary withholdings outlined in 36 CFR 1256 NND 37770 Withdrawn 02-03-2005 by RETRIEVAL 37770 00121 0 0 3 System Doch 24103277 NC STATE OBJECTION TO DE BY 3 DATE 7 I PM 0 DEPARTMENT OF STATE ABE-ashram FOR RM USE ONLY ARA EUR FE CU Pro Secret HANDLING INDICATOR 0 TO DEPARTMENT OF STATE FL F80 no FROM AMEMBASSY DJAKARTA DATE A 3 SUBJECT PUBLIC FINANCE Foreign Exchange Fragmentation TR XMB AIR REF A CERP Section D CIA NAVY b l The Embassy has recently gathered from GOI officials cements as well as several bits of circumstantial evidence which indicate that foreign exchange frag mentation continues to be a problem While it is clear that the Sultan the Finance Minister and t0p officials of the Bank Indonesia have made efforts to acquire uni tary control over funds the problem is proving intractable for political and organizational reasons There follows a summary of recent remarks on this subject by R A 3 Deputy Governor of the Bank and Head of E the Foreign Exchange Fund and Selo SUMARDJAN the 2 9'8 9 Sultan's personal assistant together with two reports a of deals made to use forex available from estate ex- a B ports under Agriculture Minister Frans SEDA i g gh 2 Kartadjoemena was hesitant to talk about fragmenta- 335% tion some time ago but he recently volunteered confir- i'F 53- mation that it remains a considerable problem and that 53- g the causes are twofold the continuing power and inde- pendence of certain Ministers and chaos at the Bank 5 5 82 Indonesia Kartadjoemena confirmed what we have often UK heard that Oil Minister IBNU is a major offender Ibnu is taking an increasing amount of the GOI's profit Secret FOR DEPT USE ONLY 2 failed by' we 05 323 DOM elandactb 6 22 66 by i Jun-cu DECL Authority lms 1 Djakarta A-797 2 share from oil in the form of crude and is selling it on his own as he is indeed legally entitled to do under the oil company work contracts The problem said Kartadjoemena is that Ibnu cannot be made to report to the Central Bank how he is using these funds Sedao he added was just as bad in his own way Others like the state trading companies were not so much a problem Independent projects like Kopelapip aircraft industry and the Carya Putra shipyard which previously siphoned off foreign exchange by earmarking certain export pro- ceeds are now being postponed Kartadjoemena's conclu- sion the situation is not getting any worse at the moment nor is it necessarily getting any better 3 Selo Sumardian in a conversation on June 13 1966 was equally reserved about progress in this area According to Sumardjan when the Sultan took his present jOb the first thing he dedided on doing was to regain the central economic authority's foreign exchange control by placing it firmly in the hands of the Central Bank Since then the Sultan has worked closely with the new Bank Indonesia Governor whom he himself appointed RADIUS PRAWIRO to sort out the chaos at the Bank establish conventional foreign exchange controls and on the basis of information picked up at the Bank to go after individuals and Ministries which have se- questered foreign exchange Because of the demorali- zation and heritage of intrigue from the days of Jusuf Muda Dalam sorting out matters at the Bank was proving difficult As for going after the Ministries there were many political risks and so far the Sultan had only been able to nibble away at the small fish Big time operators like Seda and Ibnu as well as some Army commanders all agreed in principle to the need i for central control but the had not wholeheartedly followed through in practice Some regional Army commanders especially in the outer islands simply claimed they needed 50 percent of the exPort earnings from their areas for their Revolutionary Funds 1mm Djakarta A-797 3 Sumardjan further confirmed that the independent authorities KOpelapip Carya Putra and the Trans- Sumatran Highway were now under control He also noted that while SUKARNO still had private sources for funds the President was at least officially cut off from going directly to his Ministers for money With some pride Sumardjan claimed that the Sultan had bluntly told Sukarno to come to him in the future when the Palace needed foreign exchange Sumardjan chortled as he acknowledged that the Presi- dent had not yet come 4 Two reports of deals arranged by Agriculture Minister Seda were described to the reporting officer in conversations with Mr OHTAKA of the Japanese Embassy and Robert Keatley Wall Street JOurnal re- porter recently in Djakarta a Ohtaka told an interesting story of how the Japanese auto manufac- turer Toyota not long ago arranged to export 1 000 cars to Seda's Plantations Ministry through the Dutch firm Carven Continental Carven in exchange for a high commission from Toyota is including Toyota cars in a million sh0pping list of goods ordered by the Plantations Ministry Seda is apparently paying for the list with estate products From all indications he has not obtained approval of the central financial authorities for these transactions b Keatley reports Land Communications Miniter Brig General Utomo UTOJO as saying that $21 million was needed for refurbishing the state railroads When Keatley asked where the money was coming from Utojo who has a record of frankness said I've been made a member of Frans Seda's club Seda is going to give me $7 million of his foreign exchange if I use it on the railroads serving plantations in Sumatra which come under Seda's control 5 DEC IF tummy E Authorilyb - 1 mm - Djakarta A-797 4 5 COMMENT While there appear to be strong indi cations that such pe0ple as Seda Ibnu and certain Army officers continue to operate sectors of the economy under their purview as personal fiefdoms it is difficult without access to Central Bank records to establish the extent of their personal authority The Embassy believes that one of the key tasks that the forthcoming IMF mission could perform would be a thorough examination of the extent of foreign ex change fragmentation An objective analysis of this question by the IMF would not only help clarify the situation for the creditor nations but could also be useful to the Sultan in formulating a strategy designed to harness the independent economic forces under the unitary control of the central economic authorities GREEN IFIED wl u vg-gw gmq-ryf-yg IFIED Authority CONFIDENTIAL MEMORANDUM OF CONVERSATION PARTICIPANTS Tadashi Ohtaka First Secretary Japanese Embassy Paul M Cleveland Economic Officer DATE June 10 1966 SUBJECT Foreign Exchange Fragmentation The reporting officer described the questions regarding foreign exchange fragmentation to Ohtaka several weeks ago Ohtaka had been unaware of the problem but immediately comprehended its significance and said he would check among his contacts for evidences of it On June 10 he came back with the following tale The Japanese auto manufacturer Toyota was holding five thousand cars in its godowns for Indonesia ever since Japanese exports to Indonesia were stOpped last December When Toyota recently learned that it could not hope to obtain a part of the Sultan-negotiated $30 million credit to cover shipment of the cars it began looking for other ways to unload the cars It sold 1 000 to Australia Toyota then managed to make a deal with Carven Continental a large Dutch firm with banking connections and connections with the Indonesian Plantations Ministry to sell 1 000 more cars 4 million worth through Carven to the Plantations Ministry When the deal finally goes through Carven will receive a large commission from Toyota Through Toyota's man in Djakarta who is exceedingly nervous about this deal and through other contacts Ohtaka has learned that Carven Continental has in fact got a list of $30 million worth of goods it is trading with the Plantations Ministry in exchange for Ministry products Most of the goods listed are for agricultural uses Ohtaka believes but is checking further that the proceeds from the Plantation Ministry's exports are deposited directly into Carven's banks in Holland and are then used to pay Carven for the goods ordered by the Plantations Ministry CONFIDENTIAL 1 1-uQ-p awn-- pa-mum- nEcL Authority Elm 4 I CONFIDENTIAL 2 Ohtaka acknowledged that there was nothing in his story to establish beyond all doubt that Seda and his Ministry are acting without central bank authority However he believes circumstances point in this direction 1 the deal has been very con dential Ohtaka said he pointedly made no mention of it in a conversation he_had with 2 central bank official about foreign exchange fragmentation see 2 Toyota only turned to making a deal with and paying a high commis- sion to Carven after it failed to get coverage of the export under the $30 million credit negotiated by the central economic authorities 3 Toyota is nervous about the whole deal All these things says Ohtaka point to the conclusion that the deal has so far been undertaken without the knowledge of central authorities and in the belief that the central authorities might not approve it if they had a chance to block it What need for all the mystery said Ohtaka had the central authorities already given their approval To obtain additional confirmation of these suspicions Ohtaka said he talked in a general way about fragmentation with Sonneville a high level official at the Bank Negara Sonneville said it was indeed very hard to control the Plantations Ministry He said that the Ministry did Open the letters of credit for many of its purchases through the Bank He went on to say however that this approval came after the deals were made and was not proving an effective way to control the Plantations Ministry use of foreign exchange diving-i- ugww Owl-u n - CONFIDENTIAL MEMORANDUM OF CONVERSATION PARTICIPANTS Mr Rdbert Keatley Wall Street Journal Paul M Cleveland Economic Officer SUBJECT Foreign Exchange Fragmentation DATE June 3 1966 A mw CONFIDENTIAL Mr Keatley reported on a late May conversation he had had with Brigadier General Utojo Utomo Deputy Minister for Land Communi- cation Utojo said that he needed $21 million for refurbishing the railroads in Indonesia When Keatley asked where the money was coming from the General replied I've been made a member of Franz Seda s Agriculture Minister Club Seda is going to give me $7 million of his foreign exchange if I use it on the railroads serving the plantations in Sumatra which came under Seda's control COMMENT This would appear to be another bit of evidence that Mr Seda is running his own private economy 6 15 66 I mqunum yr - Kw-Jr CONFIDENTIAL ium - UNITED STATES GOVERNMENT #cCuskeq a i I develand DATE May 30 1966 LFragmentation i irector of the Central Foreign Exchange hesitant to talk about fragmentation Eoreign exchange two months ago but 5e volunteered several remarks to indi- hntation is still a considerable problem Lagmentation are twofold he said the ndence of certain ministers and chaos rsters major Confirming Howard CRAWFORD's susPicions raised in a conversation May 24 with the Ambassador Kartadjoemena said that Ibnu is taking a large amount of the 601's profit share from oil in the form of crude which he then sells mostly in Japan This is perfectly legal in keeping with the Work Contracts and the companies don't mind However Ibnu does not Obtain central bank or higher approval for spending the foreign exchange proceeds from these sales and does not even report to the bank what he Spends these earnings on Kartadjoemena allowed as how the Oil Ministry has always been independent in this regard but he felt Ibnu had usurped power he should not have I asked about others was SEDA doing this kind of thing Who else According to Kartadjoemena Seda is just as bad as Ibnu Also the independent projects like Kepel- apiplthe aircraft industry project and the Carya Putra shipyard siphon off foreign exchange Teams have now been organized to clean up these organizations Karno Barks head of the Indonesian equivalent of our FAA told me a week ago he had just been appointed to the Kopelapip Team AuthO ty mum i CONFIDENTIAL 166 Memorandum UNITED STATES GOVERNMENT TO DCM- quiLydman 30 1966 HROUGH ECON - Paul D McCuskeq a q FROM ECON - Paul MN t ieveland summcn Foreign Exchange-Fragmentation KARTADJOEMENA Director of the Central Foreign Exchange Fund BLED was hesitant to talk about fragmentation of Indonesia 3 foreign exchange two months ago but two nights ago he volunteered several remarks to indi- cate that fragmentation is still a considerable The causes of fragmentation are twofold he said the power and independence of certain ministers and chaos at the bank Independent Ministers General IBNU is a major Confirming Howard suspicions raised in a conversation May 24 with the Ambassador Kartadjoemena said that Ibnu is taking a large amount of the GOI's profit share from oil in the form of crude which he then sells mostly in Japan This is perfectly legal in keeping with the WOrk Contracts and the companies don't mind However Ibnu does not obtain central bank or higher approval for spending the foreign exchange proceeds from these sales and does not even report to the bank what he spends these earnings on Kartadjoemena allowed as how the Oil Ministry has always been independent in this regard but he felt Ibnu had usurped power he should not have 1 I asked about others was SEDA doing this kind of thing Who else According to Kartadjoemena Seda is just as bad as Ibnu Also the independent projects like Kopel- apiplthe aircraft industry project and the Carya Putra shipyard siphon off foreign exchange Teams have now been organized to clean up these organizations Karno Barka head of the Indonesian equivalent of our FAA told me a week ago he had just been appointed to the Kopelapip TEam m1 11111111111 SONFIDEN In DECL when I mac len bur-9' Authority i3 2 0n the other hand the Niagas according to Kartadjoemena are not so bad when it comes to squirreling away foreign exchange earnings Nor could he blame the outer island governments for wanting more control over their foreign exchange earnings Giving the outer islands more control over earnings as has been done recently will give them more incentive to export When I asked if fragmentation were getting worse Karta- djoemena replied no He added that it wasn't getting any better either The Bank Kartadjoemena confirmed what we have heard elsewhere that the bank is thoroughly disorganized and demoralized This was a major factor in the central authorities' in- ability to deal with foreign exchange fragmentation Kartadjoemena seemed doubtful about the possibility of the IMF assisting the Bank We are not members of the IMF and I don't think we can afford the hard currency portion of the subscription fee he said 5 30 66 0 CONFEENTIAJ CONFIDENTIAL MEMORANDUM OF CONVERSATION PARTICIPANTS Selo Sumardjan Office of Sultan Hamengkobuwono Paul Gardner Political Section Paul Cleveland Economic Section SUBJECT Foreign Exchange Fragmentation DATE June 13 1966 In a good discussion with Selo Semardjan the Sultan's personal assistant the reporting officer used the opportunity to raise the subject of foreign exchange fragmentation This is what Sumardjam had to say 1 When the Sultan took his present jdb he asked himself What should I do The very first thing to get started on he concluded was the regaining of control over foreign exchange so that the government could control exPenditures for recovery and develoPment His plan was and is to start working with the help of Radius Prawiro at the Bank Negara to centralize control in the Bank 2 The Sultan and Radius have begun by trying to re-establish conventional controls within the Bank itself While this work is well underway it is by no means finished and has proved difficult because of the heritage of chaos and intrigue left by Jusuf Muda Dalam and his friends First conventional con- trols have to be established then even more difficult they have to be implemented said Sumardjan 3 The Sultan has also now begun by using information gained at the Bank to regain control over independent foreign exchange funds held by some of the lesser offenders in the government This has proved difficult for the somewhat different reason that the Sultan cannot afford politically to move against too many people at once He is nibbling away at them one by one As for the bigtime Operators SEDA IBNU and a variety of folks in the Army the Sultan was having to proceed even more cau- tiously Sumardjan handled this subject carefully but none- theless made it clear that while absolutely everyone recognizes the need for central control in principle the big foreign CONF ENTIAL Mam-vi m - - CONFIDENTIAL 2 exchange earners are not yet following through wholeheartedly When we asked if the Sultan could afford to move against the major holdouts following the MPRS when his political base might be stronger Sumardjan said that the Sultan could then move faster but that he still would not be able to do all he Wished in one fell swoop 4 Sumardjan was obviously reluctant to go into specifics such as who is involved in squirreling away funds and how they squirrel them away and how much He did however in a general way clearly implicate the Army along with Seda and Ibnu He said that much of the foreign exchange gathering was done quite openly by Army officers who claim they need 50 percent of all earnings for their Revolutionary Funds Some foreign exchange was accumu- lated and spent independently by Ministers simply because the Bank did not yet have an adequate control system Some of it was ferreted into foreign accounts through such practices as false documentation In the case of oil he said that the Oil Ministry funds had always been handled separately and that the Oil Ministry was in a strong position to dictate their use He admitted he did not know why this was In- answer to a question he said it might just be historical procedent from the time when Chaerul SALEH was oil czar But there he re-emphasized that the Ministry still retained strong control over how oil earnings were used 5 Sumardjan did not make much of a distinction between foreign exchange sequestered legally amounts above the check price and that obtained illegally The main point he thought was to establish clear and conventional controls so that all funds could be allocated in accordance with the central authorities' list of import priorities not in accordance with some minister's list of personal needs We did not get into the subject of Whether direct or indirect controls should be established 6 Addenda a The Sultan has cancelled the rights of the independent agencies Carya Putra K0pelapip and the Trans- Sumatran Highway Authority to certain foreign exchange earnings which formerly could be Spent as these agencies wished Sumardjan also gave confirmation to the susPicion that at least some of Kopelapip's foreign exchange earnings were to be used for political purposes rather than purchase of Fokker friendship aircraft as the 601 claimed An investigation of their PKI-infiltrated nu - DEC 1mm CONFIDENTIAL - - DECL Amhmg CONFIDENTIAL 3 organization was now underway he said b The Sultan went to Sukarno and told him that he knew the President had projects requiring foreign exchange that he the Sultan didn't care what they were but that the President should henceforth come to the Sultan When he needed money not to other ministers The President said Sumardjan had not yet come but might have to come soon Sukarno had just sold two cars apparently to get some cash This checks as we know that the President drove unescorted to his birthday party at Madam Dewi's the other evening in a Jeep ' EC 6 14 66 CONFIDENTIAL u In-u-m- - 5 IFIED - AuthorityiI FN OF CONVERSATION PARTICIPANTS Tadashl Chtaka First Secretary Japanese Embassy Paul M Cleveland Economic Officer DATE June 10 1968 SUBJECT Foreign Exchange Fragmentation The reporting office described the questions regarding foreign exchange fragmentation to Ohtaka several weeks ago Ohtaka had been unaware of the problem but immediately comprehended its significance and said he would check among his contacts for evidences of it On June 10 he came back with the following tale The Japanese auto manufacturer Toyota was holding five thousand cars in its godowns for Indonesia ever since Japanese exports to Indonesia were stepped last December When Toyota recently learned that it could not hope to obtain a part of the Sultan-negotiated $30 million credit to cover shipment of the cars it began looking for other ways to unload the cars It sold 1 000 to Australia Toyota then managed to mue a deal with Carven Continental a large Dutch firm with banking connections and connections with the Indonesian Plantations Ministry to sell 1 000 more cars 4 million worth through Carven to the Plantations Ministry When the aal finally goes through Carven will receive a large commission from Toyota Through Toyota s man in Djakarta who is exceedingly nervous about this deal and tlucugh other contacts Ohtaka has learned that Carven Continental has in tact got a list of $30 million worth of goods it is trading with the Plantations Ministry in exchange for Ministry products Most of the goods listed are for agricultural uses Chtaka believes but is checking further that the proceeds from the Plantation Ministry's exports are deposited directly into Carven's banks in Holland and are then used to pay Carven for the goods ordered by the Plantations Ministry CONFIDENTIAL CONFIDENTLAL I CONFIDENTIAL Ohma beyond was nothing in his story to establish hank authority Hawaii and his are acting without central direction- 1 the Silver he believes circumstances point in this intedl 0 has been very confidential Ohtaka said he P0 37 made no mention of it in a conversation he__had with a_ central bans about foreign exchange fragmentation see 3 Toyota only turned to making a deal with and paying a high commis- sion to Carven after it failed to get coverage of the export under the $30 million credit negotiated by the central economic authorities 3 Toyota is nervous about the whole deal All these things says Ohtaka point to the conclusion that the deal has so far been undertaken without the knowledge of central authorities and in the belief that the central authorities might not approve it if they had a chance to block it What need for all the mystery 'said Ohtaka had the central authorities already given their approval To obtain additional confirmation of these suspicions Ohtaha said he talked in a general way about fragmentation with Bonneville a high level of cial at the Bank Negara Sonneville said it was indeed very hard to control the Plantations Ministry He said that the Ministry did open the letters of credit for many of its purchases through the Bank He went on to say however that this approval came after the deals were made and was not proving an effective way to control the Plantations Ministry use of foreign exchange bii if jiain w i Authority 0 commamam WI - 0P Mr Robert mu 32223 gourge 2 Paul M Cleveland Economic Officer r q SUBJECT Ioreign Exchange Fragmentation t j DATE June 3 1966 Hr Rentley reported on a late may conversation he had had with Irigadier General Utojo Utomo Deputy Rinister for Land Communi- cation Utojo said that he needed $21 million for refurbishing the railroads in Indonesia When Keatley asked where the money was coming from the General replied I've been made a member of Franz Sean's Agriculture Minister Club Soda is going to give me $7 million of his foreign exchange if I use it on the railroads serving the plantation in Sumatra which came under Sean's control Wu this would appear to be another hit of evidence that ur Sade is running his own private economy COR-FIDENTIAL 6 15 66 i warm Authority 0 1 FM 0 3A v0 an IMBM - Hr Lydman econ Paul D McCusker BOON - Paul H Cleveland my 30 1966 toreign Exchange fragmentation Director of the Central Foreign Exchange Fund BLED was hesitant to talk about fragmentation Of Indonesia's foreign exchange two months ago but two nights ago he volunteered several remarks to indi- cate that fragmentation is still a considerable problem The causes of fragmentation are twofold he said the power and independence of certain ministers and chaos at the bank Re enden '1 ate 3 General IBRU is a major problem Confirming Howard CRAWFORD's suspicions raised in a conversation May 24 with the Ambassador Kartadjoemens said that Ibnu is taking a large amount of the 601's profit share from oil in the form of crude which he then sells mostly in Japan This is perfectly legal in keeping with the werk Contracts and the companies don't mind However Ibnu does not obtain central bank or higher approval for spending the foreign exchange proceeds from these sales and does not even report to the bank what he spends these earnings on Kartadjoemena allowed as how the Oil Ministry has always been independent in this regard but he felt Ibnu had usurped power he should not have I asked about others was SEDA doing this kind of thing Who else According to Kartadjoemena Seda is just as bad as Ibnu Also the independent projects like Repel- apipithe aircraft industry project and the Carya Putra shipyard siphon of foreign exchange reams have now been organised to clean up these organizations Karno Barks head of the Indonesian equivalent of our BAA told no a'week ago he had just been appointed to the Kopelapip than #335 0 co f 2 i It - Authority CONFEQEQIIAL 2 in the other hand the Niagas according to Kartadjoemena re not so bad when it comes to squirreling away foreign exchange earnings Nor could he blame the outer island governments for wanting more control over their foreign exchange earnings Giving the outer islands more control over earnings as has been done recently will give them more incentive to export When I asked if fragmentation were getting worse Karta- djoemene replied no He added that it wasn't getting any better either some xnrtadjoemena confirmed what we have heard elsewhere that the bank is thoroughly disorganized and demoralized rhis was a major factor in the central authorities' in- dbility to deal with foreign exchange fragmentation Ksrtadjoemena seemed doubtful about the possibility of the In assisting the Bank we are not members of the and I eon't think we can afford the hard currency portion of the subscription fee he said - scorpmian imuctb 5 30 66 o1- IFIEDW S gln gg g FNJO Ck sorrow-rm or PARTICIPARTS Solo Stmardjen Office of Sultan Izmnonngbuwono I Poul Gercmor Political Section Paul Cleveland Econanic Section SUBJECT Foreign Exchange Fragmentation In good discussion with Selo Senor-63am the Sultan's personal assistant the reporting officer used the opportunity to raise the subject of foreign exchange framontation This is that Smardjaocmd to any 1 When the Sultan took his present ob he asked himself that should I do The very first thing to get started on he concluded was the regaining of control over foreign exchange so that tho government could control Witues for recovery and Bis plan was and is to start working with the help of Radio Prawiro at the Bank negate to centralize control in tho Bank 3- 2' 2 the Sultan and Radio have begun by trying to res-establish conventional control within the Bank itself While this work in well underway it is by no means finished and has proved difficult because of the heritage of chaos and intrigue left by anon on Dela and his friends first conventional con-f trolc have to be established than even more difficult they have to he said Sumerdjan 3 The Sultan has also now begun by using information gained at tho Bank to regain control our independent foreign exchange fund- hold by none of the lesser offenders in the government This has proved difficult for the 3th different reason that the Sultan cannot afford move against too many it at once an is nibbling away at them one by'ono no for tho bigtimo Operators arm IBM and a variety of fol ks in tho Army the sultan was having to proceed even more can- tiously handled this subject carefully 'but none- theless Iedo it clear that while eboolutely everyone recognizes the need for antral control in principle the big foreign - CONFIDENTIAL DECL Authority a n wr-- 2 gxxge are not yet following through wholeheartedly major hol the Sultan could afford to move against the night coats following the MPRS when his political hare 1 0 stronger Sumardjan said that the Sultan could then move faster but that he still would not be able to do all he wished in one tell swoop 4- Smnardjan was obviously reluctant to go into specifics such I Who is involved in squirreling away funds and how they squirrel than away and how much He did however in a general way Clearly implicate the Army albng with Soda and 1131111 He said that much of the foreign exchange gathering was done quite Openly by Army officers who claim they need 50 percent of all earnings for their Revolutionary Funds Some foreign exchange was accumu- lated and spent independently by Ministers simply because the Bank did not yet have an adequate control system Some of it was ferreted into foreign accounts through such practices as false documentation In the case of oil he said that the Oil ministry funds had always been handled separately and that the Oil ministry was in a strong position to dictate their use He admitted he did not know why this was In answer to a question he said it might just be historical precedent from the time when Chaerul was oil czar But there he rte-emphasized that the Ministry still retained strong control over how all earnings were used 5 Stmardjan did not make much of a distinction between foreign sequestered legally amounts above the check price and that obtained illegally The main point he thought was to establish clear and conventional cmtrols so that all funds could be allocated in accordance with the central authorities' list of import priorities not in awn-dance with some minister's list of personal needs We did not got into the subject or whether direct or indirect controls should be established 6 Addenda a Sultan has cancelled the rights of the indepc mt agencies earya Petra melapip and the Trans- mtran Highway Authoritydzo certain foreign exchange earnings vhich formerly could he spent as these agencies wished Sumardjan also gave con rmation to the suspicion that at least some of Napolepip's torsign exchange earnings were to be used for political so rather than purchase of owner Friendship aircraft as the cor claimed An investigation of their Pm-infiltrated 'nt-w-o p- Authority organization was now underway he said The Sultan went to and told him that he knew the President had projects requiring foreign excuange that he the Sultan didn't care they were but that the President should henceforth come to the mltan when he needed money not to other ministera The President said Sumardjan had not yet come but might have to come soon Sukarno had just sold two cars apparently to get some cash This checks as we know that the President drove unescorted to his birthday party at Madam Dewi's the other evening in a Jeep 6 14 66 51 - - LIFIEDH A Authority                     National Security Archive    Suite 701  Gelman Library  The George Washington University    2130 H Street  NW  Washington  D C  20037    Phone  202 994‐7000  Fax  202 994‐7005  nsarchiv@gwu edu