1950–1957: Pragmatic pluralism and grass-roots economic nationalism

British business interests had tended to support The Netherlands, and feared the consequences of full independence for Indonesia, during the ‘revolution’ of 1945–1949. In the course of guerrilla warfare with the Dutch, Republican insurgents caused considerable disruption to foreign-owned plantations, killing crops and burning down factories.Footnote ¹⁰ Sir John Hobhouse, an Ocean Steam Ship Company senior executive and chairman of the British Chamber of Commerce for The Netherlands East Indies in London, supported the Dutch police actions to restore ‘order’ in 1947, regretted UN interference to halt this, and regarded the federal state being established by the Dutch ‘pacifiers’ as a ‘genuine partnership of Dutch and Indonesians’.Footnote ¹¹ The alternative scenario of Republican victory was difficult to digest. During February and March 1947, George Palmer Holt, a visiting Ocean Steam Ship Company manager, was able to tour Republican areas of Java, and attended a political congress in Malang, concluding that the delegates were ‘certainly not a body of fanatics and revolutionaries’. However, the view that The Netherlands East Indies was exploited by European capitalists had ‘become orthodox opinion in the Republic’. It was recognized that an independent Indonesia could not immediately ditch European investment, merchants and technicians, but Holt predicted that economic tendencies would increasingly be towards public ownership, co-operatives, joint management, and trade union participation.Footnote ¹²

Holt would not be proved far wrong and, most disturbing for expatriate enterprise, was the thinking of Sukarno, first president of Indonesia: ‘On questions of economic development he made no secret of his suspicion of foreign capital and his desire to the see the Indonesianization [Indonesianisasi] of the economy’.Footnote ¹³ Amongst Indonesia's political parties, Sukarno's principal supporters were to be found in the Indonesian Nationalist Party (hereafter, PNI) which was generally unsympathetic towards both indigenous and exogenous business. This radicalism was countered, however, by the small (yet influential) Indonesian Socialist Party, which espoused gradualist, evolutionary socialization.Footnote ¹⁴ Even more accommodating towards foreign capital was Masjumi, the Consultative Council of Indonesian Muslims. Masjumi's leadership tended to be hostile towards nationalization, and its economic expert, Minister of Finance, 1950–1951, and first governor of the nationalized Bank Indonesia, Sjafruddin Prawiranegara, laid more stress on the importance of output increases than indigenization.Footnote ¹⁵ Moreover, influential administrator-politicians, notably Mohammad Hatta, vice-president and first prime minister of independent Indonesia, despite championing indigenous cooperatives, recognized that western capital and expertise were vital for the reconstruction of the new republic's economy. Hatta played the dominant role in the Indonesian side of negotiations during the Round Table Conference with The Netherlands in 1949, and inter alia agreed to provide guarantees for Dutch investments in post-colonial Indonesia.Footnote ¹⁶ A. L. Mathewson, convenor of the Rubber Growers’ Association's Indonesia Committee, discovered in early 1950 that the non-party and moderate Minister of Prosperity, Dr Djuanda Kartawidjaja, ‘seemed to have clearly in his mind that in general, Government must create conditions which will encourage and enable producers to restore and further increase production’.Footnote ¹⁷

Both President Sukarno's and the PNI's authority was also constrained by the 1950 constitution, and the general instability of parliamentary government in the era of political pluralism between 1950 and 1957. Numerous coalition cabinets did not afford the radicals sufficient space to engineer a total indigenization of the economy. Only under Minister of Economic Affairs Iskaq Tjokrohadisurjo, and Minister of Finance Ong Eng Die, in the first PNI-led cabinet which excluded Masjumi (from July 1953 to July 1955), were dramatic attempts made to unravel the colonial economy.Footnote ¹⁸ Nationalizations were kept within bounds—for example, the transmogrification of the Javasche Bank, The Netherlands East Indies’ bank of circulation, into Bank Indonesia between 1951 and 1953 was understandable since ‘control of money and credit is generally recognized as an essential ingredient of sovereignty’.Footnote ¹⁹ A department of the Ministry of Agriculture, the Government Estates Central, Pusat Perkebunan Negara, took over estates previously owned by Axis subjects in the wake of the Pacific War or voluntarily purchased small plantations from departing Dutch owner-occupiers. But by 1952 the vast majority of plantations were back in the hands of their pre-World War Two overseas owners. A government corporation operated Shell's former facilities in North Sumatra from the end of the Pacific War. But, this was ‘small beer’ when compared with the other Indonesian fields in South Sumatra and East Kalimantan where Shell and the American oil companies, Stanvac and Caltex, extracted and refined under the so-called ‘Let Alone’ agreements dating from 1948. The oil producers were exempted from Indonesian foreign exchange controls and restrictions on profit transfers. There was some state involvement in manufacturing industry, but the ‘alien’ sector was left largely to its own devices.Footnote ²⁰

Where indigenization did tend to hit British enterprises before 1957 was in the field of human resources rather than in capital. At the Round Table Conference in 1949, the Republic had been able to extract a commitment that foreign employers should include ‘as soon as possible capable Indonesians in the management (including boards of directors) and staff positions of companies’. The Anglo-Dutch Batavian Petroleum Company responded to this latter demand particularly effectively as foreign staff in managerial and supervisory posts fell from 60 to 39 per cent between 1949 and 1956. One quarter of Unilever's managerial staff were Indonesian nationals by 1956. The ethnic profile of management at Anglo-Indonesian Plantations changed dramatically in the 20 years after 1940: from 55 Indonesians and 268 foreigners to 225 Indonesians and 16 foreigners.Footnote ²¹ But, no British firm was required to install an Indonesian as chief manager or local director.

Economic nationalism was restrained, in the benteng or fortress programme for the creation of an ‘indigenous’ (pribumi) merchant class. From April 1950, this scheme attempted to reserve increasing proportions of Indonesia's imports to indigenous traders through the rationing of foreign exchange in their favour.Footnote ²² Under the radical PNI cabinet of 1953–1955, British rubber companies were required to channel their imports through Indonesian hands. Already in September 1954 permits to import basic supplies were ‘showing a tendency to dry up’, and the outlook was far from encouraging if Iskaq's plan to allocate 70 per cent of imports to ‘National Importers’ eventuated.Footnote ²³ However, in practice, most benteng entrepreneurs lacked the finance or commercial ‘know-how’ to compete effectively with foreign and Chinese enterprises, and, through so-called ‘briefcase’ or ‘Ali Baba’ arrangements, they frequently became mere fronts for such institutions.

Moreover, from the summer of 1955 Indonesian Socialist Party Finance Minister Sumitro Djojohadikusumo introduced sweeping reforms of import and export regulations, appalled as he was by rampant ‘cronyism’ in the award of licences and disturbed by a loss of business confidence.Footnote ²⁴ This was welcomed by British interests. Plantation companies were entitled to increased foreign exchange allowances, and export duty cuts suggested a desire to ‘improve conditions for producers’.Footnote ²⁵ At the end of 1955, a Blue Funnel executive was pleased to discover that an effective Bureau for Foreign Exchange in Trading had replaced the previous ‘corrupt system’ of granting licences as favours or in return for bribes. The head of the bureau was entirely opposed to any form of rationing, and intended to allow imports to come in as freely as the market required and would issue licences to any importer regardless of ethnic origin or nationality who could place a sufficient down payment in Bank Indonesia.Footnote ²⁶ Moreover, in December 1955, the non-PNI Harahap government issued a policy statement on foreign investment, which ruled out nationalization without prior agreement and ‘reasonable and adequate compensation’, as well as promising profit remittances after the deduction of taxes.Footnote ²⁷

Admittedly, there were constant complaints by British firms about increases in corporation tax and export duties, as well as exchange certificates in which the rupiah rate of exchange for foreign transactions was pushed well above the official rate. It was claimed in February 1952, for example, that the Indonesian state was already retaining one half of the proceeds of all estate crops.Footnote ²⁸ There were also ongoing restrictions on the remittance of profits, even under the most cautious Masjumi-led administrations. A 66.6 per cent levy on foreign remittances was ‘deplored’ by the Rubber Growers’ Association in 1954. The entire profit for the financial year of 1953 could be remitted after payment of tax, and, in 1955, overseas transfers were permitted for 1954's profits as well. However, estate companies discovered that 40 per cent of net profits would now have to be deposited with Bank Indonesia, only the remaining 60 per cent being remittable and subject to payment of the levy. Moreover, in practice, remittances for 1953 were ‘never in full nor were any reasons vouchsafed for the deductions made’.Footnote ²⁹ The result was also to make Indonesia's system of multiple exchange rates even more complex and even more skewed against foreign enterprises.Footnote ³⁰

Yet, such measures and practices were not necessarily expressions of a rabid anti-western economic nationalism but were more reflective of the financial problems Indonesia faced in the wake of declining commodity prices at the end of the Korean War boom, leading to shortages of foreign exchange and reduced government revenues from export duties. Budget deficits subsequently re-emerged with a vengeance after 1952 as the government in Jakarta continued to be lumbered with the inherited debts of The Netherlands East Indies regime as part of the Round Table Conference settlement, piled on top of the vast costs of reconstruction in lieu of both the Japanese Occupation and the war of independence. The resultant escalating inflation was further fuelled by restrictions on imports, designed to curb foreign exchange leakages.Footnote ³¹ In addition, governments of all political persuasions found it impossible to shackle military and civil service profligacy: ‘Government squandermania accompanied by falling production were the root causes of the deteriorating position’ reported Rubber Growers’ Association chairman Keith Anderson in May 1954.Footnote ³²

However, declining levels of output did reflect the existence of an alternative, grassroots-level economic nationalism sparked by frustrations with the inequitable legacies of colonial rule. The trade union movement was generally opposed to the decolonization settlement and wished to see the nationalization of industries and plantations. As such, employers frequently suspected that wage demands and strikes were directed not at increasing workers’ living conditions but towards grinding expatriate enterprise out of the islands.Footnote ³³ As early as January 1950, Unilever conceded joint consultation on labour problems and a wage increase following a strike in Jakarta.Footnote ³⁴ Through threats of a general strike at the end of 1953, SARBUPRI, the Union of Indonesian Estate Workers, persuaded the government mediation board, to compel employers in Java to issue rice to estate workers at a price of 30 cents per kilo, instead of the 70 cents previously agreed.Footnote ³⁵ Other concessions extracted from the employers by SARBUPRI with official support in the 1950s included the extension from Sumatra to the entire archipelago of a fortnight's wages bonus for 1953; a wage hike of 50 cents a day for estate workers in North Sumatra from June 1955; and, a new pension scheme for labourers on the east coast of Sumatra in 1957.Footnote ³⁶

The flexing of organized labour's muscle emanated from the increasing influence of the PKI, which, after 1951, began to rehabilitate itself under the leadership of the charismatic D. N. Aidit in the wake of the disastrous Madiun uprising of 1948. The Stalinist revival involved a rapprochement with the radical wing of the PNI, an end to criticism of Sukarno, and backing for the anti-Dutch campaign in West New Guinea (Irian Jaya). The PKI was reconciled to ‘national’ capital, but remained fully hostile towards western capital. The growing influence of the Indonesian communists was confirmed in the 1955 elections, when they won 23 and 25 per cent of votes in east and central Java respectively. For Sukarno, a PNI-PKI alliance was a means of bypassing Masjumi, and with declining living conditions, the radical nationalists, the communists, and the President, increasingly attempted to whip up the masses by blaming Indonesia's economic woes on the foreign stranglehold.Footnote ³⁷

SARBUPRI had affiliated with SOBSI, the All-Indonesian Federation of Labour Organizations, in 1952, and SOBSI was PKI-dominated from 1948. With the goal of forcing foreign-owned enterprise out of the country, SARBUPRI also tended to support illegal occupation of estate lands; opposition to the return of plantations to their legal owners; large-scale thieving of crops; attacks on factories, buildings and trees; as well as ambushes, shootings, and killings of European managers.Footnote ³⁸ In the decolonization period, P and T Lands had experienced higher casualties amongst its expatriate planters than any comparative concern in Malaya under communist insurgency, and continued to face security conditions ‘worse’ than those on the peninsula as late as 1952.Footnote ³⁹ Meanwhile, the ‘extent to which Dutch and English companies have suffered. . .[from squatting]. . .has to be seen to be believed!’ reported a Bank of England official in 1954. Anglo-Indonesian's rubber replanting programme had been ‘seriously menaced’ as a consequence. The company had started to plant saplings at double the normal distance and entered into prior arrangement with local peasants to cultivate rice in between the rows until the trees reached maturity. But local communists were encouraging the agriculturalists not to co-operate. Another problem at P and T Lands was the wholesale theft of estate crops: Anglo-Indonesian had been forced to give up growing tapioca altogether. The roots were pilfered by well-organized gangs, ‘who must obviously have had exceptional transport facilities at their disposal’.Footnote ⁴⁰

In a tour of Java in early 1951, R. F. Burt, the City-based rubber grandee, reported that the Indonesian authorities ‘quite definitely realized the danger to the economy of the country and to the standard of living of the people where such conditions continued’. But the very weakness of the coalition cabinets made it unlikely that those authorities ‘would undertake the risks of trying to ensure the maintenance of law and order’ where lawlessness had the support of locally powerful left-wing groups and ex-army malcontents.Footnote ⁴¹ Ocean stockholders were told in 1951 that the ‘main difficulties in Indonesia are due to the complete lack of disciplined control over the men loading and discharging the cargo. This leads to much stealing. . .and considerable risk of injury to the crew’. After remonstrations to the UK Foreign Office, the problems of lawlessness in most Indonesian ports had subsided by 1953. Nevertheless, Belawan—Medan's ocean harbour——remained plagued by violent ‘expert gangs of thieves’ whose intimidation extended to the police and employees of shipping agents and stevedores.Footnote ⁴²

The proclivity and ability on the part of the union movement and left-wing groups to cause considerable inconvenience for British economic interests in Indonesia was revealed during the Suez crisis of 1956. Indonesian outrage at the Anglo-French invasion of Egypt in October and November expressed itself in a move to boycott British undertakings. Local staff went on strike at the HSBC in Jakarta, apparently encouraged by a ‘few professional agitators’. Inspired by SBPI, the communist-dominated port workers’ union, it was shipping which was the principal target. There were particular stoppages of wharf work at Tanjong Priok (Jakarta's port), and a refusal to handle some British ships. It was not official strategy to interfere with British shipping.Footnote ⁴³ But, in early 1957, the Rubber Growers’ Association was informed that the boycott had not yet ended and ports were still not loading for British destinations, leading to an accumulation of rubber stocks.Footnote ⁴⁴

1957–1963: Dutch nationalization, ‘guided economy’ and regional rebellion

It was the leftist unions which would bring about a more long-term decline in operating conditions for British enterprises in Indonesia less than a year later, again in the context of external events. In protest at the failure of Indonesia's attempts in the UN to force The Netherlands to hand over Irian Jaya, PNI- and PKI-affiliated unions seized Dutch businesses in December 1957. The army brought an end to ‘syndicalism’ by taking control of the sequestered firms. But, at the end of 1958, when it became clear that The Hague was not prepared to surrender Irian Jaya in return for its Indonesian investments, emergency legislation permitted the nationalization of all Dutch assets throughout the archipelago.Footnote ⁴⁵ In this, British firms were potentially in a strong position. For fear of offending Dutch interests, the Ocean Steam Ship Company declined an offer from the Ministry of Shipping to take over the inter-island shipping business.Footnote ⁴⁶ However, the Singapore-based Straits Steamship Company, in which Ocean held a controlling interest, was able to expand its Indonesian services from the east coast of Sumatra to Kalimantan, Belitung, Bangka and Tanjong Priok—by 1961, the archipelago accounted for over one-quarter of the Straits Steamship Company's total earnings.Footnote ⁴⁷ Meanwhile, there were opportunities for Blue Funnel in the expansion of international cargoes. Pusat Perkebunan Negara-Baru (New Government Estates Central) had been formed in December 1957 to administer the 500 or so Dutch plantations; it would merge with the original Pusat Perkebunan Negara in 1960. In October 1958, Pusat Perkebunan Negara-Baru approached the Ocean Steam Ship Company to increase Europe-bound capacity for export crops.Footnote ⁴⁸ Indeed, the Bank of England appreciated that there was likely to be a considerable diversion of trade from The Netherlands to Britain, not only with regard to the marketing of Indonesia's raw materials, but, even more so, in respect of the supply of essential capital goods. British financial institutions were also likely to benefit here, since increased levels of trade would eventuate with other European countries, notably France and West Germany. This would be financed in sterling rather than in Dutch guilders as Indonesia departed from The Netherlands Monetary Area.Footnote ⁴⁹

On the other hand, the speed and breadth of the Dutch takeovers heightened anxieties that British enterprises and personnel were in line for similar treatment. As Mike Turner, chief executive of HSBC in Hong Kong, appreciated in December 1957: ‘It only requires some agitation in connection with Dutch warships using Singapore to start a campaign against all British interests in the Islands’. The sense of foreboding made Turner ‘more reluctant than ever’ for HSBC in Indonesia to get ‘involved in any way with long term or complicated finance’, thus allowing for a swift and painless departure.Footnote ⁵⁰ Such angst was related to the disturbing growth in PKI influence, especially on Java, which was confirmed by the Dutch sequestrations. Unilever executives were reassured in March 1958 by the British Ambassador to Indonesia, Sir Leslie Fry, that Sukarno could ‘drop’ the communists when it suited him but there was ‘nevertheless a strong communist element among the cabinet ministers’.Footnote ⁵¹ A month earlier, British plantation interests had been informed by W. H. Meijer, the expelled chairman of the Dutch plantation employers’ organization, Algemeen Landbouw Syndicaat (General Agricultural Syndicate), about the ‘extent of the Communist's party strength’ as a result of the 1957 regional elections on Java. The PKI had captured over 27 per cent of the popular vote in Java, and had demonstrated ‘self discipline and superior organization’ with the ultimate aim of securing control of Java by ‘legal means’ as soon as possible. Most of the other major parties were either ‘grossly inefficient’ or ‘incurably corrupt’. Only Sukarno was apparently in a position to impede PKI plans, but it was ‘impossible to foretell on which side the President would throw his weight’.Footnote ⁵²

Indeed, a resurrection of Sukarno's authority accompanied the confrontation with the Dutch. In July 1959, the ‘revolutionary’ constitution of 1945 was re-adopted, and the President headed extra-parliamentary cabinets as chief executive.Footnote ⁵³ The Dutch takeovers and nationalizations were largely related to the Irian Jaya situation. But Sukarno's speeches in 1958–1959 returned to old economic themes—notably that the Indonesian economy remained disabled by a vampiric colonial capitalism, draining the country's wealth.Footnote ⁵⁴ Consequently, there was a growing penchant for state encroachment on the economy, and departures from western economic conventions in Sukarno's Socialisme à la Indonesia. As the President explained in August 1959, the Indonesian ‘revolution’ had not been designed for the archipelago ‘to become a place for grabbing riches for whomsoever’. Indonesia ‘must completely leave all the constructions of the liberal world, and. . .must replace them with the foundations of guided democracy and guided economy’.Footnote ⁵⁵ There was increasing preference for loans over Foreign Direct Investment, and new direct investment was expected to take the form of joint Indonesian-foreign ventures. The Eight-Year Overall Development Plan of 1960 declared that ‘the right of private entrepreneurs to operate is not derived from natural law but is given by the government’.Footnote ⁵⁶

Indonesian parastatals were certainly given a major boost after December 1957. Pusat Perkebunan Negara, for example, became the lead player in the Sumatra Planters’ Association, and Harrisons & Crosfield Ltd noted increasing interference from the left-wing Minister of Agriculture, S. H. Sadjarwo, in the association's affairs, notably in the setting of wages.Footnote ⁵⁷ Moreover, the new Basic Agrarian Law impinged upon British-owned estates. One-third of each foreign-owned plantation was now to be surrendered to the Ministry of Agriculture. Harrisons & Crosfield proposed a consolidation scheme under which the surrender of one-third of the total area would not have seriously affected production on its Sumatran estates. The Minister accepted this offer, but promptly demanded a further one-third of the productive area be given up. Such tactics appeared to a Bank of England official to illustrate a tendency in Indonesian economic policy to acquire ‘eventual control of foreign productive enterprises without cost to themselves’.Footnote ⁵⁸

By the end of 1962, the foreign-owned exchange banks—HSBC, Chartered, the Oversea-Chinese Banking Corporation and the Bank of Tokyo—were responsible for a trifling 4 per cent of total credit granted in Indonesia by commercial banks; just seven years earlier, national banks had disbursed 39 per cent of all credits granted by foreigners. Much the greater part of banking business was, therefore, undertaken by the five state commercial banks.Footnote ⁵⁹ The ideal of replacing the ‘colonial economy’ by ‘a national economy’ affected international shipping too where it was seen as increasingly desirable that imports and exports should ‘be carried out as far as possible by Indonesian national shipping companies’. Consequently, the parastatal Indonesian Freight Organization, was established in 1960 to book and channel the carriage of overseas trade.Footnote ⁶⁰ Indeed, Ocean Steam Ship Company directors were concerned at a more aggressive phase of ‘unwise’ economic nationalism. The state-owned Indonesian national line, Djakarta Lloyd, entered the liner trade in 1960 and was admitted to the Europe-Indonesia Conference. By 1962, Djakarta Lloyd had also started a service to Japan. In 1960, George Holt cautioned against hasty measures to establish Indonesian shipping companies, as well as manufacturing concerns (given much higher priority in the eight-year plan than the five-year plan of 1956 that it superseded).Footnote ⁶¹

Moreover, Dutch businesses were part of an integrated network of backwards and forwards linkages from production to shipping and insurance, so that their expropriation after 1957 had wider implications.Footnote ⁶² For British firms, this often meant the loss of significant Dutch partners and personnel. Blue Funnel had run a joint service with the Dutch Mails from continental northern European ports to Java from 1920 and did not ‘look forward with any great pleasure’ to working with ‘entirely new partners’.Footnote ⁶³ In addition to the British shipping agents, Maclaine Watson at Jakarta and Harrisons & Crosfield at Medan, the Ocean Steam Ship Company relied on Dutch merchant houses, for example, the Borneo-Sumatra Maatschappij (hereafter Borsumij) in Palembang. The famed efficiency of the Borsumij organization was threatened, however, by the imminent departure of Dutch staff in the autumn of 1958.Footnote ⁶⁴ Although Unilever did increasingly distribute its products (Sunlight soap especially) through benteng ‘national traders’, it refused to completely abandon the ‘Big Five’ Dutch agencies. The multinational had been dismayed, therefore, by Government plans—even before the nationalization—to take distribution out of the hands of the Dutch merchants, since Unilever would be forced to link up with a large number of local firms ‘who had little experience and no facilities in this field’. Should the government insist on cutting out the Dutch distributors, the Special Committee in London viewed the only solution as lying in the creation of its own distribution network ‘although this would involve us in finance of about Rupiahs 150 million and a great deal of extra clerical work’. Hence, the takeover of the ‘Big Five’, and the evacuation of the European management, was hardly greeted enthusiastically by Unilever, and culminated in direct selling in Java after 1962. At the end of 1956, due to the ‘enormous expansion of our interests in Indonesia’, Unilever's overdraft facility with the ‘Factorij’ (Nederlandsche Handel-Maatschappij, Netherlands Trading Association, one of the four Dutch banks in the islands) had been increased to Rupiahs 40 million. In February 1960, subsequently, visiting Unilever chairman, George Cole, fretted that the Factorij was ‘becoming less efficient’ in its rapid turnover from Dutch to Indonesian management.Footnote ⁶⁵

The Rubber Growers’ Association in London, meanwhile, was principally concerned about the future of Dutch employees on the estates. By mid 1959 only 6,000 of the 50,000–60,000 Dutch population at the time of the takeovers remained.Footnote ⁶⁶ In Harrisons & Crosfield's Jakarta office, the limited promotion of Indonesians to management positions now told: the local assistants capable of replacing the departing Dutch staff were ‘all promoted clerks, several of them getting on in years, and, with one exception, all of Chinese origin’.Footnote ⁶⁷ Out on the estates, meanwhile, the Dutch withdrawal, and the refusal of the Indonesian authorities to grant work permits for replacement non-Dutch foreigners, left 13 expatriate managers overseeing 100,000-plus cultivated acres and 11,000 labourers in the Harrisons & Crosfield group on Sumatra by 1962. In 1958 there had been 41 European staff.Footnote ⁶⁸

Further inconveniences and insecurities for British firms derived from the counter economic nationalism of the regional rebellions in the Outer Islands, which formally began in February 1958. The dissidents were alienated by both the drain of export revenues from Sumatra, Sulawesi and Kalimantan to Jakarta and the restriction and high prices of imports arising from multiple exchange rates and import licences. They were further dismayed by Sukarno's authoritarian tendencies and rapprochement with the PKI.Footnote ⁶⁹ There was clandestine Anglo-American official support for the anti-Sukarno and anti-communist movement. But, despite the alternative republic in Bukittingi being headed by the financially conservative Masjumi leader, Sjafruddin, there is no evidence that British business interests backed the rebellions. On the contrary: Shell, as well as Caltex and Stanvac, continued to pay revenues to Jakarta.Footnote ⁷⁰ There were violent rebel reprisals on Harrisons & Crosfield's Sungei Rumbija plantation in North Sumatra, following the manager's involvement in government military operations to suppress illicit tapping.Footnote ⁷¹ The Rubber Growers’ Association ‘sincerely’ hoped that Sjafruddin's threat of ‘a long economic war of attrition’ against Jakarta did not materialize, ‘otherwise all foreign interests would become involved with unpredictable consequences’. In the meantime, the whole economy was ‘going from bad to worse’. Barter trade and smuggling was on the rise, and, with Sumatra's exports—bar mineral oil—coming to a standstill, the foreign exchange position ‘was worsening so rapidly that there could be little hope of any profit or other transfers being granted in the immediate future’. Many rubber companies were facing bankruptcy, and indeed were so short of sterling that they found it impossible to pay their Rubber Growers’ Association subscriptions.Footnote ⁷² As the locus of government military suppression shifted from Sumatra to Sulawesi, by May 1958, perilous shipping conditions eventuated in the Makassar straits, and, on the east coast of Kalimantan, Shell was forced into closing the ports of Balikpapan and Tarakan following damage to installations and the sinking of a tanker.Footnote ⁷³ On Java, meanwhile, Unilever was working at just 30 per cent of normal output in April 1958; this was partly due to the scarcity of foreign exchange to purchase imports but also reflected extreme difficulties in obtaining supplies of copra and palm oil from the Outer Islands.Footnote ⁷⁴

1963–1966: Konfrontasi

Even so, with the petering out of regional secessionism and end of the Irian Jaya agitation in the course of 1962, the outlook for certain British businesses looked relatively bright again. The ongoing dearth of foreign exchange had made the repatriation of profits for British manufacturers, banks and rubber companies impossible since 1955. For Harrisons & Crosfield, however, uncertainty over the future of the group's land rights had been relieved. Sixteen of the plantation companies it managed were merged during 1960 and 1961 to become wholly-owned subsidiaries of London Sumatra Plantations Ltd. While one-third of the new group's planted area in Sumatra was surrendered in 1962 in accordance with Sadjarwo's diktat, a compromise was reached on the renewal of titles whereby expiry dates could be averaged to maintain larger units. For the key portion of Harrisons & Crosfield's acreage an extension of titles for a further 15 years had been secured, offering, in Chairman Sir Leonard Paton's view, ‘no greater encouragement for facing the future’. The London board was also looking forward to a £12 million engineering deal in Jakarta.Footnote ⁷⁵

At the beginning of 1963, Unilever found more Sumatra palm oil available; the multinational was able to purchase foreign exchange requirements on the open market from government-approved exporters; and, notwithstanding spiralling hyper-inflation, half the products manufactured at Unilever's Java factories were not subject to price control.Footnote ⁷⁶ Plans for an evacuation from Indonesia on the part of HSBC had been put off earlier in 1961, once the Jakarta office was discovered to be again operating at a profit.Footnote ⁷⁷ Shell's future seemed relatively secure too, after the signing of an agreement in June 1963 between the Indonesian government and the oil companies allowed the latter to continue in the absence of suitably experienced and financed indigenes and as subcontractors of indigenous enterprise. Shell, Caltex and Stanvac were given full control over management while the government of the Republic won formal agreement for a 60–40 split of profits.Footnote ⁷⁸

Dreams of a rosier future were shattered, however, by Confrontation with British-backed Malaysia from September 1963. In the short term, Anglo-Indonesian trade was allowed to continue as undisturbed as possible. Outright nationalization of British firms was resisted by Jakarta, opting instead for the severance of commercial and financial links with Malaysia. But there were extreme inconveniences and uncertainties for British enterprises in the archipelago. Because the fusing of Malaya with Singapore, Sarawak and North Borneo (Sabah) was assumed to be a manifestation of British neo-colonialism, houses belonging to British companies in Jakarta, as well as the British embassy, were attacked and ransacked on the inauguration of the new federation. In West Java, following the unofficial seizure of British plantations by the trade unions, these firms were taken into ‘protective custody’ by the Indonesian government. The pattern reproduced the lead-up to the expropriation of Dutch interests with Indonesian supervisors and ‘control teams’ installed by the communist-led unions and regional government.Footnote ⁷⁹ In Jakarta, meanwhile, the staff and labour force at Harrisons & Crosfield's branch went on strike and, subsequently, representatives of the KBKI clerical union announced to the British management that they had taken over. The company was placed under the supervision of the Governor of Jakarta, and then, in accordance with a presidential directive, under a central government department. In this particular case, a Team Pengawas Pemerintah (supervisory team) was appointed by the Ministry of Agriculture, and this also assumed complete managerial control of the estate companies for whom the company acted as agents. The expatriate managers of Harrisons & Crosfield Jakarta were not allowed into the office or onto the estates under their agency, nor were they permitted any contact with office or plantation staff.Footnote ⁸⁰ Meanwhile, an Indonesian ban on through bills of lading involving shipment via Malaysian ports, the customs authorities in Medan preventing ships from clearing for Malaysian ports, and the seizure of vessels in Palembang, led to the Straits Steamship Company suspending Malaysia-Indonesia sailings in September 1963.Footnote ⁸¹

In January 1964, a second wave of takeovers commenced with an attempt by the SOBSI-affiliated Unilever union, SERBUNI, and some sympathetic Indonesian managers, to oust the British management at Unilever's head office in Jakarta. In response, the authorities formed a supervisory team, comprising a senior police officer as chairman and two representatives each of the Governor of Jakarta, the Board of Unilever Indonesia, the trade unions, and the indigenous management. Subsequently, Unilever (and other British industrial concerns such as British American Tobacco) were placed under the supervision of a team appointed by the Minister of Peoples Industries.Footnote ⁸² The takeover movement now spread to Sumatra. Staff unions took control at Harrisons & Crosfield, followed by the Governor appointing a Team Pengawas. The unions also moved against the plantations where the company's Medan branch manager, John McLeod, discovered that ‘None of the European staff is permitted to exercise any authority, nor are they allowed to enter their offices’. In February, Minister of Agriculture Sadjarwo announced that estate companies in North Sumatra would be placed under the control of a single supervisory team appointed by the Governor on the Minister's behalf, and the role of expatriates would be that of ‘advisers’.Footnote ⁸³

At the same time, those British firms taken under the government's wing in September 1963 were subject to new inconveniences—for example, most of Harrisons & Crosfield's accommodation in Jakarta was occupied by members of the union and the supervisory team, the latter now being in complete control of the business.Footnote ⁸⁴ There was still no boycott of British shipping, but there was increasing diversion from British vessels of export cargoes. On a visit to Medan at the end of February 1964 George Holt was ‘not optimistic’ about the future, especially as a new shipping decree seemed to make it impossible for Harrisons & Crosfield to continue as Blue Funnel's agents.Footnote ⁸⁵ In March 1964, Imperial Chemical Industries (ICI) (which merely operated a representative office in Jakarta) was left as the lone British firm without any form of supervision. In May, the closure of the Chartered Bank's branches in Medan and Surabaya was demanded.Footnote ⁸⁶

Indeed, from the spring of 1964, Indonesian state direction of British enterprises was also stepped up: expatriate staff were increasingly deprived of authority but also dispossessed of housing and transport. Sumatran plantations were set monthly production targets for exports to meet government-to-government contracts. Supervisory teams enforced the switch of company banking accounts from the Chartered to Bank Indonesia (HSBC having fortuitously taken the decision to close its Indonesian business in July 1963). By the end of May 1964, most of the expatriate staff at P and T Lands had evacuated, and, generally, British nationals employed by Anglo-Indonesian were refused extensions to their work permits and visas. S. H. Pull, chairman of the British Chamber of Commerce in Jakarta and head of the managing plantation agents, Wattie & Co., reported to the Rubber Growers’ Association in August 1964 that ‘matters in the estate sector had almost passed the point of no return’.Footnote ⁸⁷

A month earlier, Harrisons & Crosfield had taken the decision to withdraw expatriate estates staff and their remaining dependents from Indonesia.Footnote ⁸⁸ Concurrently, Unilever House in London was informed that the influence of the PKI on government affairs was growing, and the regime—and, notably, Sukarno himself—was moving towards an economic nationalism which regarded all property ‘in the widest sense’ as belonging to the indigenes. It was appreciated that ‘help’ in the form of capital and know-how would still have to be sourced from overseas, but in future in a system of ‘production sharing’ in which factories and plantations would be Indonesian-owned with foreign participation taking the form of machinery and technical expertise. Overseas profit transfers and capital repatriations would be repaid in the form of goods produced by the resultant industry. Concurrently, there was on-going pressure from the unions to oust all the expatriates at Unilever Indonesia, and to confiscate the British and American sections of the group and to nationalize the Dutch share.Footnote ⁸⁹ In November 1964, a presidential decree appeared to suggest the de facto seizure and control of all British enterprises by the Indonesian government. This also included Unilever factories, despite their supposed trans-national ownership, and reassurances from Sukarno—as well as Subandrio, the leading cabinet minister—that it was not the intention to interfere with the independent conduct of Unilever's business.Footnote ⁹⁰ At the end of the month, the manager of the Chartered Bank was summoned to Bank Indonesia, informed that his Jakarta branch was to be fully controlled, and that a new Indonesian management would be installed.Footnote ⁹¹

The increasingly radical tone of Indonesian economic nationalism was epitomized by the Minister of Sea Communications, Major General Ali Sadikin, in singling out the Europe-Indonesia Conference—now led by Blue Funnel—as ‘the tool of imperialist domination in the field of international shipping’. Indonesia was to remain part of the conference system, but through developing a ‘strong fleet’ of its own would subsequently ‘have the power. . .to transform the. . .imperialist “tool” into a tool for our nationalist stride’.Footnote ⁹² Ocean Steam Ship Company executives were informed that the British flag would be withdrawn from the islands from January 1965. George Holt pointed out that this would leave a serious gap in westbound trade, especially in the shipping of bulk liquids from Belawan. But the president's policy was now to establish ‘real political independence without worrying about the economic consequences’, and Indonesian officials saw the withdrawal of the British flag as an opportunity to further expand Djakarta Lloyd through links with the communist bloc.Footnote ⁹³ Indeed, as the tempo of Confrontation was stepped up in 1965, and Indonesia edged closer and closer to Beijing, ‘the more radical anticapitalist groups within Indonesia's political spectrum’ were bolstered, further accelerating ‘the internal drift to the left’.Footnote ⁹⁴ The protests of Unilever executives that its plant in Indonesia was Dutch-owned had led to a temporary postponement of a complete takeover. But, in April 1965, all foreign companies were put under full government control, including Shell which had also tried to claim immunity from Konfrontasi given its supposed Dutch status.Footnote ⁹⁵

Two retrospective observations should be made about this saga of supervision, takeover and control between 1963 and 1966. Firstly, the Confrontation experience varied considerably from British company to company, and from region to region, mirroring the pluralism of Indonesian society and politics. Hence, in West Java, where communist influence was relatively strong, the British plantations suffered the deepest degree of local control from September 1963. In Sumatra, however, and particularly in Medan, the military presence was much more effective in the context of the suppression of the regional revolts in the outer provinces. As such, damage to and attacks on British properties in Medan were relatively limited, and attempts by the SOBSI unions at the end of September 1963 to raise ‘total strikes’ on the plantations were suppressed by the police. It was not until January and February of 1964 that Harrisons & Crosfield in Medan was officially taken-over, and, even then, the chief expatriate manager, John McLeod, was able to spend three hours per day at the office.Footnote ⁹⁶ Even within Java, there was great variation in the practice of control. For example, amongst the head offices of the plantation groups in Jakarta, Pull of Wattie continued to run his business ‘in more or less the usual way’ (albeit from his home), ‘being provided with two cars, money, cigarettes etc. by his “Team”’. He met with two Indonesian members of his staff every evening and discussed the day's business, and also made decisions with Dr Danardojo Hadisano, the Deputy-Minister of Agriculture. Wattie's exports of estate produce and general imports were still continuing as usual, and the firm was ‘not much worse off than before’. But Harrisons & Crosfield's management was ‘virtually without contact’ with its Team Pengawas. The chief manager, Leonard Paris, was simply sent cheques to sign and was denied transport or payment of his salary.Footnote ⁹⁷

The second wave of takeovers in Jakarta during January and February 1964 ‘meant something different in almost every case’ reported Paris: Shell ‘had the situation more or less under control’; Chartered had convinced Bank Indonesia officials that even the slightest measure of interference would have repercussions detrimental to Indonesia; Maclaine Watson, meanwhile, was operating under ‘normal supervision’.Footnote ⁹⁸ Unilever, on the other hand, had avoided a union takeover, but the officially appointed supervisor was in sympathy with PKI demands to nationalize all foreign capital, and had ‘no real power or backing’ to resist labour demands. Even so, and notwithstanding massive labour and managerial indiscipline, Unilever managers were able to maintain lines of communication with the Jakarta factory. But, to re-emphasize the diversity of experiences, at the Surabaya plant, Indonesian control was ‘virtually nil, not even by a Supervisor’.Footnote ⁹⁹

This all suggests that the anti-British campaign was incoherent, chaotically managed and lacked central direction. There seems to have been a similar absence of official planning during the occupation of Dutch businesses and properties in December 1957, and senior cabinet ministers were caught off-guard.Footnote ¹⁰⁰ The Suez crisis boycotts, and the widespread lawlessness of the 1950s, had already shown the tendency of the unions to operate their own system of economic justice, frustrated as they were by the compromises towards foreign capital taken by the coalition governments in Jakarta. That the anti-British economic nationalism of the Konfrontasi period was largely spearheaded by left-wing groups, and reflected the inability of the central government to control this grass-roots feeling, is confirmed by earlier demands, dating from the aftermath of the abortive Indonesian-supported anti-Malaysia rebellion of December 1962 in the British-protected sultanate of Brunei. The Indonesian Ship Workers’ Union issued a warning that ‘unless the British Colonialists cease oppressing and suppressing the people of North Kalimantan [that is, Brunei, North Borneo and Sarawak], all vessels flying the Union Jack as well as British vessels calling at Indonesian ports will be boycotted’. Further union demands followed in January 1963, and it was shortly after these remonstrations that Subandrio, as Foreign Minister, announced the policy of Confrontation against Kuala Lumpur on the grounds that the Malayan government, in advocating the creation of ‘Mighty Malaysia’, were ‘representing themselves as accomplices of the neo-colonialists and neo-imperialists pursuing a policy hostile to Indonesia’. But, at this stage, as a Maclaine Watson manager in Jakarta appreciated, ‘The Government is. . . quite happy to let the present verbal barrage continue in an effort to distract the peoples’ minds from economic problems. . . [T]here is absolutely no intention on the part of the Government to go any further’.Footnote ¹⁰¹ Once the Malaysian federation became a reality, however, the more moderate elements within the Indonesian government and military were temporarily unable to contain the PKI and the labour movement.

This leads to the second point worth underlining at this juncture: again, as in the Dutch expropriations, there was a concern by the central government authorities and the military to limit the influence of the PKI unions and ensure that management remained in non-communist, and sometimes—to 1965 at least—in expatriate hands. In October 1963, Deputy-Premier Subandrio assured the British Ambassador, Sir Andrew Gilchrist, that the Jakarta government intended to hand back the British companies once the Malaysia dispute was settled.Footnote ¹⁰² The desire to contain PKI-labour influence was evident in the specific experience of Harrisons & Crosfield in Jakarta. KBKI clerical union section leaders were immediately informed in September 1963 that occupied firms would be placed under the Ministry of Labour, the political head of which was also national chairman of the clerical union. But, this aspiration was subsequently overruled by a decision at the end of the month to install a Team Pengawas responsible to the Governor of Jakarta, and subsequently, to the Minister of Agriculture.Footnote ¹⁰³ As late as January 1964, Sukarno instructed due observance of his decree of September 1963 which expressly forbade takeovers of British concerns unless instructions came from the President, and this was supported by the implacably anti-PKI army chief of staff, Lieutenant-General Achmad Yani. Significantly, 65 trade union activists were arrested in Jakarta after the unauthorized takeover attempts of January and February 1964.Footnote ¹⁰⁴ In Medan, when the Chartered Bank was placed under supervision in January 1964, a ‘security team’ of five officials arrived at the bank, explaining that ‘they did not intend to interfere in any way with the running of the office and that their function was to ensure that there was no “unofficial” takeover’. The team consisted of representatives of the Governor's office, the police, the military, the judiciary, and the National Front (Sukarno's mass organization) but at this stage not the unions.Footnote ¹⁰⁵

The President's diktat of September 1963 was revoked by the ‘Committee of Thirteen’, established by the cabinet to settle economic and financial difficulties. PKI boss Aidit declared that the position of the workers in taken-over concerns would be ‘defended to the death’. However, the presidential and military position had not been completely reversed since the new supervisory team imposed in February 1964 at Harrisons & Crosfield in Medan, for example, consisted not only labour representatives but also military and National Front elements, and the team would operate ‘outside the office’ and play no direct part in the running of day-to-day business. Moreover, Chaerul Saleh—the cabinet minister closest to Sukarno and associated with the communist (but anti-PKI) Murba party—reiterated to Gilchrist that there remained ‘no intention of taking over or nationalising British capital, all firms will be returned to full British control’. The present actions were of a temporary nature, and were necessitated by the militant attitude of labour, in order to secure continual production.Footnote ¹⁰⁶

Top policymakers in Jakarta were still not willing to jettison foreign investment. As indeed Sukarno acknowledged as late as 1965, the Eight-Year Plan continued to rely ‘heavily’ on overseas inputs; new ways were merely being devised to make the relationship more favourable for the Indonesian host through, for example, production-sharing agreements epitomized by the Anglo-American oil company settlement which preceded the Confrontation with Malaysia.Footnote ¹⁰⁷ Theo Gleichman, the Dutch chairman of Nederlandsche Stoomvart Maatschappij ‘Oceaan’, was informed by The Netherlands ambassador to Indonesia in the autumn of 1964 that ‘by no means all the Military, advocate strong anti-British measures’. Meanwhile, the technocrats in the shipping ministry accepted that Gleichman should take on the position of acting chairman in the Indonesia-Europe conference, partly because a full chairmanship for Nederlandsche Stoomvart Maatschappij ‘Oceaan’—as an entirely British-owned company—would raise criticism from anti-British political groups inside Indonesia. But it was also the ultimate desire of the Indonesian authorities to re-instate George Holt as chairman as soon as Konfrontasi was terminated.Footnote ¹⁰⁸

The balance of advantage: the post-colonial state versus expatriate enterprise

In their tussles with Indonesia's various economic nationalisms, British businesses were not completely powerless, or without ‘agency’ and pursued a variety of strategies to try and protect their investments. For the multinationals there was the option to change the nationality of ownership of Indonesian subsidiaries during the confrontations with The Netherlands and Malaysia, as well as replacing Dutch and British personnel. Hence, after December 1957, Unilever shares in the archipelago were transferred from ‘NV’ in Rotterdam to ‘Ltd’ in London, and the transnational's executives went to considerable lengths to convince Indonesian officials of British ownership and control of the Jakarta and Surabaya factories. Concurrently, two Indonesian managers benefited from accelerated promotion to directorial positions, and urgent steps were additionally taken to replace Dutch managers with Britons and Germans. To confirm its new-found British identity in the islands, Unilever joined the Indonesian Association in London, and also sought to strengthen its links to government departments in Whitehall and to the British Chamber of Commerce in Jakarta.Footnote ¹⁰⁹ Shell followed similar tactics to save its business in the short-term. In 1960, the oil transnational planned to transfer its Indonesian business to a separate company, which would be owned partly by the British side of the group and partly by Shell's Canadian subsidiary. At the same time, Shell withdrew its Dutch personnel from the islands.Footnote ¹¹⁰ Meanwhile, Maclaine Watson advised that Blue Funnel ‘refrain from sending Dutch flag ships to Indonesian waters’. Moreover, wharf properties in Java and Sulawesi were transferred from the ownership of Nederlandsche Stoomvart Maatschappij ‘Oceaan’ to the Ocean Steam Ship Company during 1958.Footnote ¹¹¹

Subsequently, it was deemed prudent to re-introduce Nederlandsche Stoomvart Maatschappij ‘Oceaan’ Dutch-flag ships to Indonesian waters from the autumn of 1963. In November 1964, Blue Funnel executives were able to persuade the Indonesian authorities to allow the company to continue to call at Indonesian ports as a Dutch concern, in spite of the Ocean Steam Ship Company having gone to great lengths back in 1958 to stress to the Jakarta bureaucrats that the Amsterdam-listed company was overwhelmingly British-owned. At the same time, the Ocean Steam Ship Company's property in Indonesia was sold back to Nederlandsche Stoomvart Maatschappij ‘Oceaan’.Footnote ¹¹² The products of the Shell refineries in Indonesia were distributed by tankers flying the red ensign. Shell had replaced its British crews on these vessels with Dutch ones, but it was thought inadvisable to switch from the British to the Dutch flag because The Netherlands’ burgeoning aid to Indonesia was likely to antagonize Malaysia. Shell Indonesia chose a Norwegian flag of convenience instead.Footnote ¹¹³ Shell was also able to secure the return of its refinery at Balikpapan to its control from the military, following the replacement of 51 British personnel, involving the promotion of 21 Indonesians to managerial positions.Footnote ¹¹⁴ On the advice of Subandrio and Indonesian directors in the autumn of 1963, Unilever began to replace its British expatriate management with Dutch individuals who were once again in favour with the Jakarta regime. This action, followed by a return of shares in the Indonesian business from Ltd to NV, seems to have won Unilever a reprieve from full government takeover during 1964. Indeed Subandrio confirmed that the restructured Unilever would serve as an ‘example of good co-operation between Holland [sic.] and Indonesia’.Footnote ¹¹⁵

As a wholly owned British company, Harrisons & Crosfield had far less room for manoeuvre. However, in reorganizing its plantation interests between 1960 and 1962, efforts were made to give the impression of increased Indonesian participation to try and improve relations with the Sukarno regime. An Indonesian subsidiary of London Sumatra was registered in Jakarta and three Indonesian directors were appointed to the board, including Tandiono Manu, ex-Minister of Agriculture, who was believed to be a friend of Sadjarwo.Footnote ¹¹⁶ Indeed, developing cordial relations with key powerbrokers in the post-colonial state was a second strategy for protecting trade and investments, a process of ‘building up goodwill’ as the tendency has been described for West Africa.Footnote ¹¹⁷ In this, Unilever and Ocean especially, attempted to present their business activities as integral to Indonesia's economic development and decolonization.

The British stake in Unilever Indonesia was certainly much helped by the progressive attitudes of its Europe-based directors. During the struggle for independence, Paul Rijkens, chairman of Unilever NV, had been very critical of The Netherlands for not adhering to the Linggajati agreement of November 1946, which, in turn, had ‘given the Indonesians an excuse to deviate from what has been agreed’.Footnote ¹¹⁸ In similar vein, from 1950, Unilever executives—notably Rijkens—regarded The Hague's stubborn refusal to surrender Irian Jaya as liable to harm Dutch relations with the other and more important islands of the former Netherlands East Indies. The best solution was Dutch acceptance of West New Guinea's transfer to the Indonesian Republic but with The Netherlands continuing to administer the Papuan territory for a further 25 years. This possible solution to the crisis was accepted by Sukarno.Footnote ¹¹⁹ In February 1960, Unilever's chairman, George Cole, visited Jakarta where he parleyed with senior cabinet ministers who ‘went out of [their] way to be friendly and showed a genuine interest in Unilever’. Representatives of the British banks described the treatment Unilever was receiving in respect of import licences as ‘remarkably favourable’—applications for these certificates were on average granted up to only ten per cent, whereas the Anglo-Dutch conglomerate was having about 90 per cent of its requests approved. Cole was additionally advised by the American ambassador, Howard P. Jones, that established European interests should be prepared to assist Indonesia and ‘recognize what is going on there’ to ‘forestall’ ‘the Russians’.Footnote ¹²⁰ Hence, in November 1961, to help Indonesia dispose of its copra, Unilever breached its established buying policy of purchasing raw materials through commodity brokers by accepting a government offer of a contract for a continuous supply at a fixed price. Following the beginnings of Malaysian confrontation, Unilever director, F. J. Tempel, offered Sukarno technical assistance in the fields of oils and fats, plantations and transport. This followed the Bung's confirmation that Unilever Indonesia would be able to continue running its own business ‘provided [it] did not attempt to introduce any element of colonialism’.Footnote ¹²¹

During the Suez crisis, Sir John Nicholson, chief executive of the Ocean Steam Ship Company, was delighted that George Holt was visiting Southeast Asia since ‘your presence will help to remind your circle of genuine friends in Indonesia that Great Britain is not exclusively populated by old-fashioned imperialists’. Indeed, Holt developed close relationships with Indonesian policymakers on his many trips to the archipelago: in August 1958, even if Indonesia became a ‘one party socialistic state rather on the lines of modern Jugoslavia [sic.]’, Holt was anxious to maintain good relations with the new leadership ‘not with the intention of entering into any sort of debate but to let them know that the way will be open to them for friendly co-operation with us’.Footnote ¹²² One practical manifestation of this was the re-organization of Blue Funnel's pilgrim service from Java to Jeddah from the end of 1958. This involved close consultation with the Indonesian authorities on the suitable re-fitting of a ship, including an onboard mosque.Footnote ¹²³ The Blue Funnel director also courted Indonesian ambassadors in Britain. Hence, Dr Sunario attended the launch of a new Blue Funnel vessel on Tyneside in February 1960, and the shipping line gave practical expression to its sympathies with Indonesian economic nationalism by providing training on Ocean Steam Ship Company vessels for young Indonesian officers ultimately destined for Djakarta Lloyd.Footnote ¹²⁴ During Konfrontasi, Holt maintained communication with the Indonesian embassy in London, and the latter ‘showed appreciation’ of ‘our policy. . .to carry on to the best of our ability and to serve the Indonesian economy’.Footnote ¹²⁵ This ‘very good record of assisting the Indonesian national aspirations’ clearly went some way in persuading the archipelago's authorities to recognize Nederlandsche Stoomvart Maatschappij ‘Oceaan’ as a Dutch concern in 1964.Footnote ¹²⁶

A further option open to British firms in Indonesia was to lobby British government agencies to put pressure on the Jakarta government. But, as the Rubber Growers’ Association discovered in 1957, the British government was reluctant to forcefully support the interests of British investors in the archipelago given the diplomatic desire ‘to avoid offending Indonesian susceptibilities and encouraging a pro-Communist reaction’.Footnote ¹²⁷ Her Majesty's Government had limited leverage anyway. As the Bank of England appreciated in 1962, the prospect of compensation for sequestrated assets was poor ‘even assuming the will to pay’. Indonesia's overall gold and foreign exchange position was a net ‘minus’, and the Jakarta regime was hard pressed even to pay for current imports, let alone long-term compensation payments. The only funds which could be frozen in London in the event of an expropriation dispute were on Bank Indonesia's ordinary account, which amounted to a mere £2.7 million in early 1962.Footnote ¹²⁸ As we have seen, during the Malaysia-Indonesia dispute Ambassador Gilchrist was frequently in contact with British business leaders in Jakarta, and did try and intervene with Indonesian cabinet ministers on their behalf. But Gilchrist and his embassy staff had lost credibility with the boxwallahs back in September 1963, when the military attaché defiantly played the bagpipes whilst the British Embassy was stoned, and Gilchrist obstinately re-raised the Union Jack. Such behaviour, according to Harrisons & Crosfield's manager in Jakarta was no ‘substitute for diplomacy’, was regarded as insulting by Indonesians, and placed in jeopardy ‘the whole British community, including a great many women and children’.Footnote ¹²⁹

British companies were by and large left to themselves to deal with the Indonesian authorities. Yet, even the best connected and most flexible of British interests in Indonesia remained beholden to the twists, turns and intricacies of Indonesian domestic politics and foreign policy. As Unilever Indonesia's new Dutch chairman, I. E. B. Quarles van Ufford, reported in February 1964: ‘The biggest problem is one over which we have no influence, i.e. the personal relationship between President Soekarno [sic.] and the Tunku [Malaysia's prime minister]’. Concurrently, it became increasingly difficult to cope with domestic political scenarios because the Indonesian nationalist assault upon British firms did not emanate from a central, easily identifiable source. British companies became enmeshed in the President's ‘brilliant series of balancing acts between the national, religious and communist groups, which again are all balanced out against the armed forces’. In this, ‘[no] one has full responsibility for anything, but a lot of people have power’.Footnote ¹³⁰ As Harrisons & Crosfield's manager in Jakarta confirmed ‘the lack of unanimity between Ministers and top Government bodies has frequently been demonstrated’.Footnote ¹³¹ The Company's chief executive in Medan, John McLeod, enjoyed congenial relations with the senior military officer in North Sumatra, Major-General R. A. Kosasih, playing golf and tennis with him, and being reassured in October 1963 (and again in January 1964) that under his watch there would be no takeover of British firms or property by the unions à la Jakarta. But McLeod's assertion that Kosasih was ‘the man of North Sumatra’ (emphasis in original) proved misjudged. As we have seen, the unions did move against the east coast plantations and the offices of British firms in Medan in January 1964, and Kosasih was powerless to prevent these subsequently being placed under government-appointed supervision teams. On a visit to Jakarta in February, McLeod discovered that the military had for the moment lost influence at the centre of power. In discussions with Ambassador Gilchrist, it appeared that ‘left wing elements’ had ‘at least temporarily, taken over control in Indonesia’.Footnote ¹³² In April 1964 came an order that McLeod and other foreign staff could no longer attend the Harrisons & Crosfield office in Medan, a decision in McLeod's view emanating from ‘the Communist Unions’.Footnote ¹³³ In October, McLeod was the last of the company's staff to leave Indonesia, having been harassed and even beaten up.Footnote ¹³⁴

Back in Jakarta, even if Subandrio and Sukarno were sympathetic towards Unilever's continued operations in the islands, the unions and pro-communist supervisors stifled attempts by the expatriates to retain control of day-to-day management. Quarles van Ufford did have a secret understanding with the supervisor giving the senior expatriate authority over most payments. Nevertheless, the Indonesian supervisors were dictating Unilever's pricing strategies, and in the interests of their ‘social and political impact’ rather than their ‘commercial meaning’. In consequence, during 1964, the total rupiah loss was 3.5 millions or about £900,000. Political considerations overrode commercial logic elsewhere at Unilever Indonesia. Marketing was a ‘shambles’ because the state-owned trading companies—the Indonesian successors to the Dutch ‘Big Five’ through which Unilever Indonesia was now required to distribute its products—had been reorganized three times in 18 months to allow ‘various political parties’ to get ‘their turn’. Meanwhile, the area manager in Surabaya had defrauded the company of Rupiah 28 millions but could not be ‘dismissed because of his political connections’.Footnote ¹³⁵

This lack of control on the part of expatriate businesses over Indonesian events was re-emphasized during the dismantling of the Sukarno regime between 1965 and 1967. This might seem like a bizarre assertion. After 1967, Unilever, for example, negotiated a favourable deal for the return of its businesses. Both existing and new capital in the toiletries and edible oils factories would qualify as coming under the new Foreign Investment Law and would therefore be available both for repatriation as capital and as a basis for dividend payments. Moreover, the group received import duty remission on all capital imports and a tax holiday for three years. Consequently, it was decided to place an order for capital equipment to the value of half a million US dollars, and a new influx of expatriates was to strengthen the management. Unilever and other British multinationals were represented at a conference in Geneva in November 1967 at which ‘[e]xcellent speeches had been contributed by the Indonesian Foreign Affairs and Economic Ministers, both of whom had indicated that private investment would be welcome’.Footnote ¹³⁶ Labour relations at Unilever's factories were greatly improved, meanwhile, by the ‘loss’ of ‘200 hard core Communists’ from the pay-roll. Indeed, the three remaining non-communist unions petitioned the new military-dominated regime to return the company to the multinational's control as soon as possible.Footnote ¹³⁷ In March 1968, Harrisons & Crosfield signed an agreement in Jakarta with the Indonesian government for the repossession of its properties. The official handing-over ceremony in Medan on 1 April took place ‘in an atmosphere of goodwill and high hopes for the happy future relationship’.Footnote ¹³⁸ During 1968, the British exchange banks both re-opened offices in Jakarta, and, in 1970, the HSBC management there reported on a welcome restoration of confidence in the rupiah, combined with a relaxation of import controls and reductions in taxation.Footnote ¹³⁹

But, the Suharto regime was not anticipated by expatriate enterprises, nor indeed was the favourable treatment which certain British firms would receive under the new administration. Even after the brutal military suppression of the Indonesian communists, and the curtailment of Sukarno's authority, following the abortive coup of 30 September 1965, there were no certainties. In November 1965, Unilever's boss in Indonesia found ‘the political situation still very confused’.Footnote ¹⁴⁰ As the Malaysian Commercial Association of Great Britain learned from a ‘most reliable source’ it was ‘not yet clear how permanent and far-reaching the reversal of. . . [the PKI's] fortunes will prove to be. . .[E]ven if the military. . .should find itself firmly in the saddle it would not be able to afford—anyway for some time to come—to give up “Confrontation”’.Footnote ¹⁴¹ As British plantation owners found, this still meant that the ‘principal obstacle’ in Indonesia was the ambiguous legal status of their properties, which had not been officially nationalized but merely placed under the ‘control and management’ of the government. Consequently, the estate companies were not entitled to compensation under international law but, concurrently, British managers were not able to run the plantations either.Footnote ¹⁴² Even after Suharto had forced Sukarno to transfer executive power to him in March 1966, the General still declared that his regime was compelled to continue Konfrontasi.Footnote ¹⁴³ Because the Nederlandsche Stoomvart Maatschappij ‘Oceaan’ commanded only five of Ocean's 60 vessels engaged in Europe-Indonesia trade, in the financial year of 1966 the group continued to be ‘quite hard hit by the commercial effects of the disastrous policies’ pursued by the Sukarno regime.Footnote ¹⁴⁴

Moreover, the unsatisfactory takeover deal of Shell—as far as the oil transnational was concerned—went ahead in 1965 with the oil company continuing to pay for ‘what used to be their own oil before they have been paid for it themselves’. In February 1966, Quarles van Ufford predicted that even if full military control eventuated in Indonesia, it would be ‘unlikely’ that there would be any opening up of Indonesia ‘willingly’ to foreign capital.Footnote ¹⁴⁵ In August, the Bangkok ceasefire agreement presaged the end of the Malaysia-Indonesia dispute, but in the autumn of that year Unilever Indonesia's chief executive still expected to negotiate some form of partnership or management contract. It was a great surprise, therefore, when Sultan Hamengku Buwono IX of Yogyakarta, vice-premier responsible for economic affairs, decreed in December 1966 that Unilever would be returned in toto, and that it would not be necessary to form a joint venture.Footnote ¹⁴⁶ As late as March 1966, the Rubber Growers’ Association was still anticipating the eventual expropriation of the British estates. Instead, quite out of the blue, a cabinet presidium instruction of April 1967 permitted the return of plantations to their former foreign owners (bar Dutch firms and individuals) on 30-year or 15-year leases (depending upon the level of rehabilitation and replanting carried out since independence).Footnote ¹⁴⁷ In 1961, it will be recalled, Harrisons & Crosfield had only been able to secure a 15-year extension for the key portion of its concessions, and, when negotiations began with the Suharto regime in 1967, the company (like Unilever) expected to be allowed to return on an unappealing joint-venture basis.Footnote ¹⁴⁸

At the same time, the New Order was not that new: many of Suharto's officials had cut their teeth under the ‘guided economy’, and statism and a suspicion of foreign capital persisted ‘well into the New Order period’.Footnote ¹⁴⁹ In international shipping, Ocean Steam Ship Company directors remained concerned in 1973 with corruption and excessive red-tape in the islands. Moreover, the reservation of government project cargo to the Indonesian flag, dating from 1964, would not be repealed until 1985.Footnote ¹⁵⁰ Moreover, British investment did not return in oil, and the military-dominated Pertamina would expand ‘rapidly to the point where it was considered to operate as a “state within a state”’.Footnote ¹⁵¹ At the same time, a resumption of anti-Indonesian Chinese measures—because of Beijing's alleged involvement in the abortive coup of 1965—was not welcomed by British firms since these strictures would lead to further dislocation of the economy, given the significance of Chinese merchants at a local level.Footnote ¹⁵²

Post-Sukarno Indonesia, then, was not necessarily the foreign investors’ paradise that journalist John Pilger has suggested.Footnote ¹⁵³ That British business interests in Indonesia ultimately survived Sukarno was more by luck than judgement. In this wider study of British businesses, it is difficult to demur from Fieldhouse's assertion for Unilever that the multinational's ‘well-being depended entirely on the benevolence of [the Indonesian] host government and that this could be solicited but not extorted by threat or force’.Footnote ¹⁵⁴ Moreover, the uncertain and imponderable nature of Indonesian politics and economic nationalism intensified risk, made long-term planning virtually impossible, and gave the decolonized Indonesian state the upper-hand in its dealings with British private enterprise. Lindblad points out that nationalization of Dutch enterprises could be justified in international law in the context of decolonization, but this was obviously trickier for British companies seized temporarily in a war (albeit low intensity and undeclared).Footnote ¹⁵⁵ But, in the thick of the Malaysia-Indonesia Confrontation, few in the British business world in Indonesia had much confidence that this international legal decorum would be observed by a government which appeared to have been hijacked by the Beijing-inspired far left. As Ambassador Gilchrist reported on a meeting with the British business community in Jakarta in February 1964: ‘no-one. . . had any illusions about the ministerial assurances regarding the temporariness of the measure. The parallel with [the] anti-Dutch action six years ago was too vivid’.Footnote ¹⁵⁶ It was precisely the unpredictable and disjointed nature of Indonesia's body politic which made British business operations in the archipelago so difficult to manage. As Mike Turner, HSBC's chief executive, wrote to his Jakarta manager back in May 1958: ‘what one considers to be the future of Indonesia—whether it will go communist or re-organize itself, possibly with aid from outside, on a sound basis’[—]was ‘largely a matter of guesswork’.Footnote ¹⁵⁷