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Modern Indonesia is an amalgam of more than 13,000 islands incorporating a wide variety of cultural and religious traditions. For almost 1000 years, Indonesia has been involved in maritime trade resulting in a wide range of religious, cultural and ethnic influences. The Chinese were among the first to trade with the islands, followed in the eighth century AD by Hindu and Buddhist merchants from India who built up two empires, known as Srivijaya and Majapahit. These were supplanted in the 13th century by Islamic influences brought by Arab and Malay seafarers. The English and Portuguese were the first Europeans to arrive in the area in the 16th century but in 1595 the Dutch East India Company took control of trade in the area. From 1814 until the Japanese invasion during World War II, Indonesia’s people and resources were subjected to the autocratic Dutch rule.

The main independence movement, the Indonesian Nationalist Party (PNI), emerged in the 1920s under the leadership of Ahmed Sukarno. It was thoroughly suppressed by the Dutch and remained largely underground until the Dutch East Indies were overrun by the Japanese during World War II. The Japanese installed a puppet PNI government for the duration of their occupation. Following the Japanese defeat in 1945, the PNI declared independence. This was quickly challenged by the Dutch who dispatched a military expeditionary force to Indonesia and arrested Sukarno. However by 1949, under international pressure, they were forced to concede the country’s sovereignty.

The colonial powers had depleted much of Indonesia’s wealth while contributing little to its development. The Sukarno government had a massive development task ahead of it. It also had to forge a national consciousness among dozens of mutually suspicious tribes and ethnic groups. The leaders chose as their national motto the phrase Bhineka Tunggalika, meaning ‘unity in diversity’.

The new Government planned a federal structure for the country, but in 1950 reverted to a unitary state. This concentrated political and economic power in Java, and produced resentment elsewhere. Sukarno’s growing authoritarianism at home was accompanied by an activist foreign policy which attracted, in particular, the enmity of the USA and its allies, who were suspicious of Sukarno’s Cold-War neutrality.

Economic difficulties further fuelled the growth of the opposition, in particular the powerful Indonesian Communist Party (PKI). In September 1965, a coup was launched by sections of the army with full PKI support. The immediate political struggle, which the Government eventually won, was one of the closest in recent history. With discreet support from the Western powers, the army Chief of Staff, General Suharto, backed Sukarno, and saved the regime. Between 400,000 and one million were massacred by the army in the aftermath of the coup. Sukarno was now politically crippled and, in March 1967, was replaced by Suharto.

Suharto remained as President until his (forced) resignation in May 1998. Under the Suharto government, the army always held ultimate political power while a technocrat class was left to run the country day-to-day. The Golkar (Partai Golongan Karya) party was established as the regime’s official political vehicle. Until the fall of Suharto in 1998, Golkar and its candidates won every election with comfortable majorities.

The regime brought Indonesia relative peace and stability and steady economic growth. Manifestations of Muslim fundamentalism – Indonesia is the world’s largest Muslim country – were rigorously controlled by the Government: both Sukarno and Suharto adhered to a policy of allowing religious diversity as a guarantor of social stability, although attempts to enshrine this formally in an official doctrine of Pancasila were dropped and the Government introduced various stop-gap pro-Islamic policies.

Sukarno’s foreign policy was determinedly neutralist: Indonesia was a founding and active member of the Non-Aligned Movement. His successor, Suharto, steadily tilted his country towards the West and joined the pro-Western ASEAN bloc (Association of South East Asian Nations). From the mid 1980s onwards, he also made some efforts to improve relations with the Soviet Union and China.

The trigger for the fall of Suharto was the Asian financial crisis of 1997. Indonesia suffered particularly badly, as the structural flaws in the economy were laid bare (see Economy section). As thousands were thrown out of work, months of rioting and protest followed. The army, which was already struggling with several insurgencies on Indonesia’s outlying territories (see below), began to show signs of dissent. In May 1998, once the influential Muslim leader Amien Rais and various senior military figures had lent their voices to the clamour already demanding Suharto’s departure, the President was left with little choice but to resign (years of bottled-up resentment at the extended Suharto clan’s general freeloading and wholesale corruption also played its part in this scenario).

Suharto’s deputy, Jusuf Habibie, took over until presidential elections were held under new rules in November 1999; national assembly elections were held five months earlier, in June. These saw Golkar pushed into second place by the principal opposition party, the Partai Demokrasi Indonesia Perjuangan (PDIP, the Indonesian Democratic Party of Struggle) headed by the daughter of former President Sukarno, Megawati Sukarnoputri.


Sukarnoputri was expected to win the November presidential poll. However, she suffered from a lack of support in crucial parts of the new electoral college which now selects the president. Her opponents settled on the veteran cleric Abdurrahman Wahid, leader of the third-largest party in the assembly, the Partai Kebangkitan Bangsa (PKB, National Awakening Party). He garnered sufficient support to defeat Sukarnoputri in the electoral college. Sukarnoputri secured the vice-presidency.

It was not a good choice. In his first 12 months in office, apparently stricken by inertia and indecisiveness, Wahid proved incapable of tackling the mess left behind by Suharto. In April 2001, Wahid himself was impeached for alleged corruption – a matter of a few million dollars – and by July had been forced out of office. As Vice President, Sukarnoputri took over.

Sukarnoputri faced a huge task. Indonesia’s economic recovery has been stalled by an increasingly acrimonious confrontation with parliament which has stalled the implementation of key policies, as well as disagreements over the IMF rescue package (see Economy section) and international concern about the Wahid government’s policies (or lack of them). The corruption that typified the Suharto regime continues much as before, despite the implication and arraignment of a series of leading political figures.

Sukarnoputri was herself defeated in 2004 and replaced by the new president, Susilo Bambang Yudhoyono. On taking office, the retired general and former security minister vowed to set an ambitious agenda for reform.

One of the biggest challenges for the new government is Indonesia’s economic difficulties that have made it so difficult to hold the fractious nation together. Militant Islam is making its presence felt throughout the archipelago which, in addition to a variety of ethnic and inter-communal conflicts, is threatening to tear it apart. However, the main regional problem, that of East Timor, has been resolved. Formerly a Portuguese colony, East Timor was under Indonesian military occupation between 1974 and 1999. The territory is now the world’s newest independent state (see East Timor section). Elsewhere, however, the picture is bleak. In Aceh, in northern Sumatra, Muslim guerrillas of the Free Aceh Movement have been fighting for independence for over a decade. There are some indications that they may accept limited autonomy, but negotiations with the previous Government broke down on several occasions. There is also an active independence movement in Irina Jaya, the Indonesian province which shares an island with the independent state of Papua New Guinea. The Moluccan Islands (the so-called ‘Spice Islands’) are one of the few parts of Indonesia with a majority Christian population: since the beginning of 1999, they have been engaged in an increasingly violent struggle with Muslim militants which has so far claimed over 5000 lives. Armed confrontations between Muslims and Christians have also taken place in central Sulawesi. An ethnic conflict broke out in late 1999 between the indigenous Dayak people of Kalimantan province (in central Borneo) and migrants from Madura (near Java). The Madurans had been dispatched to Kalimantan to increase the overall population, in part of an occasional Suharto government policy of ‘demographic engineering’ designed to homogenize the disparate Indonesian population).

The cataclysmic tsunami that occurred on December 26 2004 has also hampered Indonesia's economic and tourist progress. The western tip of Sumatra was the closest inhabited area to the epicenter of the earthquake and was consequently devastated. More than 70 per cent of the inhabitants of some coastal villages are reported to have died. There are now at least 100 aid organizations - plus UN agencies - operating in Indonesia. Aid agencies have provided emergency food, water and shelter to about 330,000 people, according to the UN Office for the Coordination of Humanitarian Affairs (OCHA). Temporary settlements for 150,000 families must now be constructed. The reconstruction was not helped by an earthquake on March 28 2005 that registered an estimated 8.7 on the Richter Scale and that took place along a fault line around Sumatra. Although the earthquake was dwarfed by the magnitude of the tsunami in December, which was five to six times stronger, the March earthquake was still, historically, one of the eight strongest to hit Indonesia since 1900. On the island of Nias, 1000 people are feared dead. Electricity was severely damaged and water purification defected. Consequent rises in disease and epidemic are suspected. Nearby Banyak islands so far claim that nobody was killed by the quake but the infrastructure of the islands is mostly in tatters. A lengthy process is ahead but Indonesia, considered one of the world's most corrupt countries, has made the process somewhat more positive by putting controls in place to try to prevent dishonest officials siphoning off donations - something that those who put forward donations and contributions for the victims of the recent tsunami will welcome wholeheartedly.

The 1000-member People’s Consultative Assembly is the country’s highest political institution. It agrees the broad outlines of state policy and selects the President and Vice-President. Its membership comprises all the members of the National Assembly (see below), representatives of the armed forces, the country’s main political organizations, and delegates from the regions.

The President, who serves a five-year term, holds executive power. The Parliament, the Dewan Perwakilan Rakyat (People’s Representative Assembly), has 500 members. Of these, 462 are directly elected by proportional representation, while the other 38 are appointed as representatives of the army and security forces. Members of the Assembly serve a five-year term.

Following the Asian economic crisis in 1997, the economy stabilized again by 1999 and, since 2000, has resumed steady annual growth of around 5%. And in October 2006, Jakarta paid off its outstanding IMF debt, incurred during the crisis, four years ahead of schedule. Unemployment remains relatively high at 11.8% (2005).

Oil and natural gas are the most important raw materials produced by Indonesia. Tourism has become a major industry and vital source of foreign exchange, although it is likely to suffer in the wake of the Bali bomb attacks, as well as the tsunami; the government has estimated that the reconstruction of Aceh and North Sumatra will cost Rp58.3 trillion (£3,410 million). Foreign aid will offset some of this cost, and the economy will also benefit in 2006 from the Paris Club’s debt deferral for tsunami-affected countries, but the state budget will still have to absorb a substantial amount of the cost of reconstruction.

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