Singapore, 18 November 1965
1115. Secret
Barter Trade
CINC(FE) this afternoon showed me Head’s cable reporting his talk with the Tungku referred to in Kuala Lumpur’s 2436.1 I note that Head opened the conversation by referring to reports that Singapore Ministers were intending to start barter trade on December 1 whatever the position in the C.O.C. or C.D.C. One can understand that in the face of this the Tungku might be encouraged in his determination to resist the Singaporeans, even though one cannot accept his apparent readiness to ‘crush Singapore’. However, talking to the British yesterday Bogaars2 said the Pulau Senang installations were not yet complete and he did not believe Goh and Lim Kim San had yet decided on timing. If there has [been a decision], I believe the Singaporeans could be persuaded to postpone it for a while if this was shown to be necessary to bringing the Tungku round.
2. I find disturbing a tendency among the British (not Grandy) to say we must avert the crisis by strong messages to both parties, asking Kuala Lumpur to take no aggressive action and Singapore to cancel plans for barter trade. I agree that there could not be representations to one party and not the other. But to ask Singapore not to trade because Kuala Lumpur might attack it if it does would appear to put us in the position of supporting rather the sort of conduct we have been concerned to combat in this region for the last two years. Moreover, it would bring on a major crisis of confidence in our relations with the Singapore Government and people, who would thus see themselves as completely exposed, and exposed by us, to arbitrary pressure from Kuala Lumpur.
4. 3Of course it would be preferable that there were no barter trade. But Singapore having decided that for over-riding economic and political reasons trade should shortly resume, subject to the increased security risk being acceptable and continuing so, how can Kuala Lumpur or anyone else sustain an objection? Unless points of substance are advanced, such as evidence that the resumption of barter trade would encourage the Indonesians to continue confrontation or in some such way jeopardise regional interests greater than the interests pleaded by Singapore, then it is difficult to conclude otherwise than that the Tungku is moved simply by ‘political venom’, as Goh puts it.
5. In this respect, any representations to the Singaporeans might emphasise an Australian view that there can be no substitute for close co-operation with Malaysia, that this is basic to the Australian involvement in the region we understand the Singaporeans to seek, that we believe such co-operation cannot be expected to go forward in the face of political attacks and that the crisis over barter trade is a clear example of how political conflict damages tangible interests in trade, inter-governmental consultation, etc. I do not see how we can go much further with Singapore (except in points of detailed arrangement of the trade). The situation this time requires the major pressur in Kuala Lumpur.
6. I think it would in any case be useful to express a view to Singapore along the lines suggested above. It would be timely now to damp down their expectations of economic assistance and any notion that we and others can be expected to subside4 the economic loss resulting from a complete political breach from Kuala Lumpur.
7. If we ask Singapore to cancel the trade they will ask for a quid quo pro. Would it be possible to use the barter trade crisis to get economic talks going again between Kuala Lumpur and Singapore, possibly under some international auspices (the World Bank has been suggested)?
8. I am not going to Kuala Lumpur to-morrow as the question now seems to be one for capitals.5
[NAA: A1945, 248/10/22]
1 See footnote 1, Document 344.
2 George Bogaars, Permanent Secretary to the Ministry of Interior and Defence. Former Director, Special Branch, Singapore Police.
3 Paragraph numbering as in original document.
4 Presumably, ‘subsidise’.
5 That is, to the COC meeting on 19 November (see footnote 1, Document 344).