CONFIDENTIAL
4. Further, we would expect Hong Kong influence in Indonesia to develop in the
future. In comparative terms Indonesia is likely to remain low on the technology curve. Apart from the heavy capital-intensive investment in petro- chemicals, fertilisers, steel etc, most of its industry is still largely traditional unsophisticated process ing. This is likely to change over the next fifteen years, as the next two five year plans push the country into the local production of machine tools, and components for domestic goods, including cars. No doubt Japan will remain the major suppliers of capital equipment and technology to Indonesia, but Hong Kong has an equal chance in the market, when its experience of light and capital intensive small industry becomes more relevant. Hong Kong has already established a tradition in
investing in Indonesia (which oddly Singapore has not). So we would expect the Hong Kong Indonesia connection to grow.
5. At some stage the Indonesians must consider more seriously than they have what effect a change in the status of Hong Kong would have for their interests. Given their traditional phobia about the CPR, it is difficult to believe, certainly at this stage, that they would be happy to see the control of sub- stantial investment in Indonesia moving into Communist hands. A flight of services and banking out of Hong Kong presumably to spread around the rest of the region would give them some comfort. But even so, in terms of power politics and given their anti-Chinese sentiments, it is hard to believe that they will take kindly, however quiet they may be overtly, to an expansion of the CPR's role. They might perhaps calculate that if Peking made a hash over Hong Kong, the CPR chance of rega in ing Taiwan would be that much more remote. They might equally calculate that some modus vivendi between Feking and Hong Kong which allowed for the satisfactory continuation of Hong Kong's services and industry might pave the way for some kind of modus vivendi with Ta iwan. In all this they would feel inhibited from taking up any position which could be construed as supporting any regime with a colonial label. The ir NAM tradition is too powerful for that. They might look more favourably on some entity which did not have such a label.
6. This is all very speculative, and based on very limited knowledge of the bilateral talks on the problem. But it provides, perhaps, sufficient background for the suggestion in my telegram that it may be useful to mull over South East Asian responses and whether they might not be influenced in some way suited to our purposes. There may indeed be practical possibilities of promoting a specifically Hong Kong interest providing we know where we ultimately are going. If the Indonesians could see at the end of the tunnel the possible emergency of a non-colonial Hong Kong, not wholly subservient to Peking, they might not be unwilling to work along with us.
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Bangkok, Kuala Lumpur,
Manila, Singapore
Personal for
Mr Robin McLaren
Political Adviser Hong Kong
CONFIDENTIAL
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R Brash