A Short History of Southeast Asia: Indonesia


late 1980's: Non-oil exports exceed oil exports and Indonesian economy undergoes steady liberalisation and internationalism

1965: New Order government under President Suharto

1965: Unsuccessful coup attempt by some army officers

1959-65: Period of Guided Democracy

1950: President Sukarno elected leader of independent Indonesia

1946-49: Dutch resume control and guerrilla war starts

1945: Independence unilaterally declared on 17 August

1942: Japanese occupation

1796: VOC bankrupt: Dutch government assumes control

1602: Netherlands United East India Company (VOC) formed and attacks Jayakarta in 1619

16th century: Portuguese first to establish trading posts

13th century: Islam spreads throughout archipelago

6th-8th centuries: Borobudur and Prambanan temples built


Indonesia’s geography is an integral part of its history. A sprawling archipelago straddling the equator, Indonesia has more than 13,500 islands, ranging from tiny areas that not so long ago were merely atolls to the huge island of Sumatra. In the mid 1990s it has over 185 million people, spread very unevenly across these islands. At one extreme, about 100 million live on densely populated Java; at the other the large resource-rich island of Kalimantan is sparsely populated. Indonesia is a tropical country with a volcanic spine running through its islands. Many volcanos are still active, every so often wreaking destruction on surrounding peoples and crops. But the volcanic soil and the tropical climate have made most of Indonesia extremely fertile, nowhere more so than the river valleys of Java where prosperous kingdoms have waxed and waned over more than a thousand years.

The Indonesian coat of arms bears the inscription ‘Unity in Diversity’. The diversity of Indonesia is apparent to even the most casual observer. There are over 300 socio-linguistic groups in Indonesia, each with a distinct culture and heritage. Only about one in six Indonesians speaks the national language at home. Even fewer speak Indonesian as their first language. The mother tongue of the vast majority is a regional language, for example, Javanese, Balinese, Minangkabau or Acehnese. Nursery rhymes, childhood stories, myths, legends and cultural mores are as diverse as the languages. Not surprisingly, most Indonesians first develop a regional identity, only learning the national language, Indonesian, when they begin school and with it an Indonesian identity.

In the major cities of Jakarta, Surabaya, Bandung and Medan there are significant numbers of people who speak Indonesian in the home and identify themselves as Indonesians from childhood. The diversity of Indonesia is an enormous challenge to the modern State. Nation building in Indonesia is no mere slogan, nor is it merely a euphemism for economic development. The Indonesian government is acutely aware that national unity and a national cultural identity have to be created. The regional identity that most Indonesians acquire automatically, together with the country’s cultural and linguistic diversity, makes nation building and the development of social cohesiveness a long–term and difficult task.

Pre-Colonial Indonesia

Southeast Asia lies astride the great trading routes from China to India. For over two thousand years there are records of traders sailing their ships between China and Southeast Asia and between Southeast Asia and India. Southeast Asia, and especially the Indonesian archipelago, was a source of spices, gourmet foods, sandalwood, medicines and other tropical products. Chinese, Arabic and Indian traders were a common sight in the ports which dotted the area.

There were two broad types of states in the Indonesian archipelago in the pre-modern period. First were the coastal states. Located at the mouths of rivers with good secure harbours, they were dependent on regional and international trade. The most prominent of these were on, or close to, the Straits of Malaka through which shipping between China and India (and later Europe and China) had to pass – on the east and south coast of Sumatra and on the north Java coast. Second were the inland states. The wealth of these states was based on rich agricultural production from the volcanic soils of the alluvial plains. The most prominent of these were in Central and East Java and in Bali.

The earliest kingdoms in the Indonesian archipelago were Hindu/Buddhist states. Hinduism and Buddhism came to Southeast Asia from India, spreading along the trade routes and adopted by local rulers attracted by the Court ritual and religious/philosophical ideas. Today visitors to Indonesia flock to the central Javanese city of Yogyakarta. Together with its neighbouring city of Solo, Yogyakarta is the heartland of the Javanese, the centre of their history, culture and philosophy. Within thirty kilometres of Yogyakarta are two great religious monuments, the Buddhist temple of Borobudur and the Hindu temple of Prambanan. Both were built out of local stone between the 6th and the 8th centuries, hundreds of years before the medieval cathedrals of Europe were begun. Restoration projects have revealed the stunning beauty of the temples, their sheer scale of construction and the intricately carved bas reliefs which adorn them from top to bottom. These are religious monuments, dating from a time when Hinduism and Buddhism were the predominant religions in Java. They are evidence of the prosperity of the kingdoms to which they belonged, the engineering knowledge of their people, their craftsmanship and their artistry. Borobudur and Prambanan temples are the finest in Indonesia, but hundreds of other smaller temples can be found throughout Java. The Balinese remain predominantly Hindu and there are many thousands of old and new temples on Bali.

Muslim traders are recorded in the Indonesian archipelago as early as the 6th century, but the Islamisation of Indonesia began in the 13th century with the conversion of the ruler of Aceh, at the northern tip of Sumatra. We know little about this but it is clear that the process of Islamisation of Indonesia was very slow, with people absorbing Islamic beliefs into existing religious and philosophical systems as they adapted Islam to Indonesian soil. When the Dutch arrived in Indonesia at the beginning of the 17th century the kingdoms they engaged with were almost all Islamic, with Hinduism restricted to Bali. But the nature of Indonesian Islam varied greatly, and still does in the 1990s. There is a broad spectrum of practices and intensities of belief, ranging from the Acehnese, who are generally more publicly Islamic and more strict adherents to the principles of the Koran than others in Indonesia, to the people of central and east Java who have a more relaxed Islamic faith sustained alongside pre-Islamic beliefs and practices.

The inland kingdoms were prosperous agrarian states generating considerable agricultural surpluses. They were strongly hierarchical states with taxation systems extracting agricultural products and labour from the peasants. They developed legal systems and bureaucratic structures. The agricultural surpluses supported large courts and the skilled workers needed to build the massive stone temples. The courts promoted high cultures of music, dance and literature. The great Indian epic poems, the Mahabharata and the Ramayana were adapted by court musicians, dancers and master puppeteers as vehicles for the transmission of Javanese or Balinese ethics and cultural values. Writing systems were based on Sanskrit with many Sanskrit words entering local languages.

When the Europeans arrived in Southeast Asia in the middle of the 16th century there were well established States across the whole of Southeast Asia. The early European visitors marvelled at the prosperity of Southeast Asia, the health of its peoples and the sophistication of its high cultures. There were long-standing trading networks linking the Southeast Asian states and a tradition of shipbuilding and maritime skills which saw traders from Southeast Asia ply their wares as far afield as China and India. The major Indonesian states were at Aceh, on the northern tip of Sumatra, in Central Java, in Bali, in the Malukas and Sulawesi and on the north coast of Java. They competed vigorously, sometimes waging war on each other. There was a constant flow of goods and peoples across the archipelago using Malay as the medium of communication.


The Portuguese were the first Europeans to acquire outposts in Asia. In the 16th century they established trading posts and colonial outposts in places as disparate as Goa in India, Malaka in Malaysia, Ambon and Timor in Indonesia and Macau in China. By the beginning of the seventeenth century the power of catholic Portugal and Spain was waning in the face of the emerging protestant nations of England and the Netherlands. The English East India Company and the Netherlands United East India Company (VOC) were established in 1600 and 1602 respectively. For nearly two hundred years they were fierce commercial rivals in Asia. The VOC moved quickly to establish trading posts in India, Ceylon, Taiwan and China seeking the produce of ‘the Orient’. A major target was the spice islands, in what are now Sulawesi and Maluku in eastern Indonesia. The VOC first became involved in the Indonesian archipelago through trading with local kingdoms, but its desire to monopolise the spice trade to Europe quickly caused it to eject the Portuguese from Ambon in Maluku and then to destroy the local kingdoms. In 1619 the VOC launched an attack on Jayakarta, then a major fort and trading town of the West Java kingdom of Banten where the VOC had been peacefully trading for a number of years. The Bantenese were driven out and on the ashes of the razed town the VOC established its headquarters for the archipelago. Jayakarta was re-named Batavia, a name which was retained for the capital of the Netherlands East Indies until the declaration of independence in August 1945 when it was again re-named, this time as Jakarta.

The VOC slowly extended its physical presence in the Indonesian archipelago. Throughout the 17th and 18th centuries it behaved much like a local kingdom, creating and breaking alliances with rival kingdoms to make war on its enemies and trading widely both within the archipelago and with China, India and Europe. But there were crucial differences which eventually enabled the Dutch to conquer the archipelago. First, the VOC had a power base outside the archipelago with gunboats and troops stationed throughout Asia able to be brought into battle against indigenous rulers. Second, the VOC had a broader strategic framework, and against traditional ruling elites with little experience of the world outside the archipelago they were able to take advantage of the rivalry between local kingdoms. Third, by the 18th century they had superior weaponry.

Nevertheless, it was not until 1756 that the VOC controlled the whole of Java, when it divided the Mataram Court of Central Java against itself. The VOC went bankrupt in 1796, wracked by corruption. It then controlled Java, Ambon and small nearby islands and small enclaves in central and southern Sumatra. It was the biggest, most powerful State in the archipelago, but most of what is now Indonesia still lay outside its control. The Netherlands Crown took over the assets of the VOC and, after a brief interlude of British control of Java during the Napoleonic Wars, the East Indies reverted to Dutch rule. Gradually, through the nineteenth century the Netherlands East Indies Government extended its control over Sumatra and eastern Indonesia. With the destruction of the Balinese kingdoms in 1905 and the defeat of the powerful kingdom of Aceh in 1911 the colony was complete. The Dutch often talked of their three hundred years in the Netherlands East Indies, but for most people in the archipelago incorporation into the Netherlands East Indies occurred towards the end of the nineteenth century or in the first decade of the twentieth century. Local pride, regional political, cultural and personal loyalties and a sense of local history remained strong when the Japanese destroyed the Dutch empire in 1941.

By the beginning of the twentieth century the Dutch had created the Netherlands East Indies as a centralised state, with power concentrated in the capital Batavia (now Jakarta), an efficient bureaucracy and a police and military service able to maintain social control. After the bitter experience of fighting the fiercely Islamic kingdom of Aceh for over 40 years the colonial government maintained a careful watch on Islamic religious leaders. Its policy distinguished between Islam as a religion and Islam as a political force. Religious observance was interfered with as little as possible, though mosques, Islamic schools and religious teachers were carefully monitored to ensure that they did nothing to rally people against the colonial state. Islamic leaders’ involvement in political activities was not only carefully monitored but was ruthlessly quashed if they appeared to be gathering local support. The Dutch promoted a western educated secular elite built on the children of the pre-colonial elites and made every effort to prevent the development of a modernised Islamic elite.

The Dutch economic impact on the Indonesian archipelago was enormous. In their successful efforts to control the quantity and prices of the products of the archipelago they gradually destroyed regional trading networks that had existed for hundreds of years, serviced in large part by indigenous traders who plied the area and sailed as far as India to the west and China to the north. Indigenous traders were henceforth restricted to local trade. External trade became the exclusive preserve of European companies and inter-regional trade the preserve of Chinese who were encouraged to immigrate from southern China.

Javanese agriculture in particular was transformed by the Dutch in the 19th century. They created what they called a ‘Cultivation System’, by which Javanese farmers were compelled to produce designated crops for sale to the State at fixed prices. The crops – sugar, indigo, coffee and tea in the main – were then processed and transported for sale to European markets. By the end of the 19th century Java was the world’s largest sugar producer. Sugar mills were built throughout rural Java to process the raw cane and railways and ports constructed to take the export crops to market. Village Java, largely a subsistence economy before 1830, was transformed. The subsistence economy gave way to a much more diversified economy, the population steadily grew until by the end of the 19th century there was little uncultivated land left and towns and cities sprang up to service the burgeoning export trade. By the beginning of the 20th century most Javanese no longer owned land, working as tenant farmers, share croppers or wage labourers in the local area and nearby towns.

The economic transformation of Sumatra in the first thirty years of the 20th century was equally dramatic. Huge areas of virgin forest made way for tobacco and rubber plantations. Sumatra became one of the world’s largest and finest suppliers of tobacco and together with Malaya its largest supplier of rubber. When oil was discovered in the 1920s it became the springboard for what was to become the Royal Dutch Shell Oil Company.

Much of the labour which opened up Sumatra was Chinese. Chinese had long been resident in the Indonesian archipelago, predominantly as traders and merchants, and there had been a steady growth in their numbers in the 17th and 18th centuries. The great expansion, however, was part of the wider process of Chinese migration to Southeast Asia, Australia, the Pacific and the United States after the acquisition of Hong Kong by Britain in 1842 and the forced opening of Treaty ports on the south China coast. In the Netherlands East Indies they became not only traders, shopkeepers and urban workers but labourers on plantations, in tin and coal mines and on wharves and ships. They were never a large proportion of the colony’s population, less than three per cent, but by the 20th century were dominant in local trade and urban commerce.

The economic transformation of Indonesia led to an accelerating process of urbanisation. By the mid 1910s the major cities on Java were already unable to cope with the migration from rural areas. The increasingly densely populated poorer parts of the towns and cities had low quality houses, with no sanitation systems or piped water. They flooded badly during the annual monsoon season and their peoples were wracked by malaria and water borne diseases such as cholera and typhoid. The colonial government lacked the political will to tackle these urban problems. By the 1920s the problems were probably beyond its capacity to solve. Living conditions for most urban Indonesians steadily worsened from the 1920s through to the 1970s.

The Dutch introduced western education in order to provide the skilled labour needed by the expanding colonial economy. The best schools used Dutch as the medium of instruction, graduation from which led to the better paid administrative jobs or the possibility of entering a University in the Netherlands or the medical and law schools in the colony. But entry to these schools for Indonesians was very difficult and, those few on scholarships aside, in practice was restricted to children of the indigenous elites or government officials. It was easier to get a modicum of education in schools where the medium of instruction was the vernacular language. Even so, at the end of the Dutch colonial era the literacy rate in Indonesia was lower than in that of any other European colony in Asia, with the exception of the Portuguese colony of East Timor.


The first people to regard themselves as Indonesian rather than Javanese, Acehnese or a member of one of the other ethnic groups, were young men and women who had received a western education at local high schools and subsequently at universities in the Netherlands. The term ‘Indonesia’ was first used in the early 1920s, but by 1928 the idea of being Indonesian and the determination to create a modern Indonesian nation free from Dutch colonial rule was widely held. In 1928 a national Youth Congress was held in Batavia at which thousands of emotionally aroused youths witnessed the ceremonial raising of the red and white flag, recited a National Pledge and sang a newly composed national song. This was a public expression of their determination to create an independent Indonesia with a common flag, language (Indonesian, which was derived from Malay) and national identity which transcended regional and ethnic loyalties.

The first stirrings of nationalism in the 1910s were seen by the Dutch colonial government as potentially dangerous but not an immediate threat. As political parties enrolled thousands of members and as newspapers and propaganda handbills were widely distributed the colonial laws were made more restrictive and political activists repeatedly jailed or exiled from the colony. The Dutch could never understand the intensity of nationalist feelings and had no plans for the colony’s political development beyond vague references to the possibility of self-government eventually.

The Indonesian Communist Party (PKI) tried a revolutionary path to independence in a badly planned uprising in November 1926 and January 1927. The only result was that thousands of Indonesians, many of whom had only a marginal connection with the PKI, were either jailed or exiled to a political prison on the malaria infested upper reaches of the Digul River in what is now West Irian. There they stayed until brought to Australian jails in 1942 in the wake of the Japanese occupation of Indonesia. Ironically, they did not long remain in jail once Australian trade unionists realised that they were political prisoners. Many of them became leaders of a campaign to support Indonesian Independence in 1945 and 1946. This resulted in Australian trade union black bans on Dutch shipping and the Australian government’s diplomatic support of the Indonesian Republic against the Dutch.

The Japanese Occupation

The Japanese occupied Indonesia in March 1942. There was little resistance from the Dutch. Initially they were welcomed by many Indonesians, glad to be freed from Dutch rule and impressed by Japanese propaganda slogans such as ‘Japan the Light of Asia’ and the ‘East Asian Co-Prosperity Sphere’. However, it did not take very long for the Japanese to alienate themselves from all levels of Indonesian society. The romusha program on Java, whereby all able bodied males were required to provide free labour for the war effort, affected almost every family. Most romusha labour was used within the colony, on projects such as building railway lines and ships and on infrastructure construction. But hundreds of thousands were sent overseas to work on the construction of the Thai–Burma railway and Japanese projects elsewhere in Southeast Asia. Rice production on Java fell, through Japanese mismanagement as much as any other cause, and food and clothing were soon in desperately short supply. Indonesians quickly learnt that despite Japanese propaganda stressing Asian solidarity against Europeans, they were treated as distinctly inferior people by the Japanese.

However, Japanese occupation policies had some long term benefits for Indonesia. First, in removing the Dutch from administrative functions the Japanese elevated Indonesians to positions they would not have been able to obtain under colonial rule. This administrative experience proved useful after 1945. Second, they prohibited the use of the Dutch language and, while promoting Japanese, were pragmatic enough to realise that few Indonesians would be able to master that language quickly. They therefore also encouraged the use of Indonesian, in schools and in government administration. This was to help the infant Republic of Indonesia after 1945. Third, they mobilised young Indonesians to support the Japanese war effort. Various schemes were created to provide military training for young people. This military training proved invaluable when Indonesia had to confront the re-occupying Dutch forces between 1946 and 1949. Fourth, they freed nationalist leaders from jail, including Sukarno, on the condition that they supported the war effort. Sukarno and other nationalists used every opportunity to nurture a sense of being Indonesian, using all the propaganda tools placed at their disposal by the Japanese.

By the end of 1944 it was clear to the Japanese that they were losing the Pacific War. As a consequence, they determined to make it as difficult as possible for the western powers to re-occupy their former colonies. In Indonesia they began to promote moves towards independence, encouraging nationalists to work out a desirable constitutional framework. Some Indonesians were alarmed at the prospect of obtaining independence courtesy of the Japanese, believing that this would cause the Allied powers to view an independent Indonesia as a puppet regime, thereby playing into the hands of the Dutch whose Netherlands Indies Administration had spent the war years in Brisbane planning to re-occupy Indonesia as soon as the war was over. When the atomic bombs brought the Pacific War to an end, these people prevailed on Sukarno and his fellow nationalist leaders to unilaterally declare independence. The Republic of Indonesia was born on 17 August 1945 at a simple flag raising ceremony in Jakarta.

The Revolution

The Netherlands rejected this declaration of independence, asserting that it was the legitimate government of Indonesia. The Netherlands began its reoccupation of Indonesia in the middle of 1946 and quickly gained control of most of the towns and cities. The Republic of Indonesia government retreated to the principality of Yogyakarta in Central Java. Over the next four years the Indonesians fought the Dutch on two fronts. First, a guerrilla war which quickly bogged down thousands of Dutch troops and prevented the Dutch from holding the countryside. Second, a diplomatic offensive focussed on pressuring the United States to withdraw Marshall Plan aid from the Netherlands and on urging the newly created United Nations to support its independence. In December 1949 an agreement was finally reached between the Republic of Indonesia and the Netherlands bringing the war to an end and formally recognising the end of Dutch colonial rule.

Many western observers in 1950 argued that Indonesia would not survive very long, in the face of regionalism and cultural and ethnic diversity. In retrospect they greatly underestimated the enormous sense of being Indonesian which had been created among a broad cross-section of people by what Indonesians called their revolution. Having to fight for their independence gave at least the Indonesian elites a strong sense of nationalism. Above all, the Revolution saw the emergence of a strong Indonesian army, with a firm ideological commitment to maintaining national unity and to taking a leading role in the development of their society.

As a result of three years of Japanese occupation and four years of warfare with the Dutch, the Indonesian economy was devastated. The economic infrastructure was in tatters, most of the little industry that had existed in 1941 was in ruins and productivity in the plantations and on the farms had regressed to well below pre-war levels. Under-employment in the urban areas was a massive problem, essential services simply didn’t work and in the countryside growing population pressure on the land led to lower per capita outputs and a steady stream of migrants to the already overcrowded towns and cities. Added to this was the problem of what to do with the hundreds of thousands of people who had given years of their lives as guerrillas fighting the Dutch. They feared demobilisation when there was little prospect of gainful employment. In 1950 revolutionary elan was high and expectations of the fruits of independence were even higher. The tragedy was that no government in the 1950s could possibly have satisfied these expectations.

Indonesia After Independence

On the eve of independence Indonesian political elites were agreed that Indonesia should be a unitary state and should have Indonesian as its national language. Apart from this they were united on little else. The twenty years between 1945 and 1965 in Indonesia was a period of de-colonisation when four broad groups struggled for control of the state. First, were those who wanted a multi-party parliamentary democracy. Second, those who wanted some kind of consensus parliamentary system, arguing that western liberal democracy was an imported idea not suited to Indonesian cultural and political values. Third, those who wanted some kind of marxist state – the communists were the most visible and strongest but there were other groups who wanted a liberal marxist state or a democratic socialist state. Fourth, those who wanted a state based in some way on Islam, ranging from those who wanted an Islamic state to those who wanted the state merely to reflect Islamic values. These broad divisions can be traced back to debates within nationalist circles since the 1910s. They had not been resolved by 1945, though at that time the marxists and the Muslim groups were in the weakest position.

The Indonesian army has generally supported the second group among the Indonesian elite – those who wanted a consensus political system. The army leadership has consistently seen the army as the major force behind the Indonesian Republic’s defeat of the Dutch and because of this believes it has a special role in post-independence Indonesia. Its leaders have talked since the early 1950s of the army’s ‘dual function’ – to defend the nation from external threats or internal subversion as well as to be the engine of development and the protector of the Revolution. The army has always been suspicious of politicians. Its involvement in politics is very different from that of armies elsewhere in Asia, Africa and Latin America, which on seizing power invariably promise to return to civilian rule as soon as possible. The Indonesian army has made no such commitment. It venerates its origins as a people’s army, is proud of its close ties with rural people during the guerrilla campaign against the Dutch, and believes it is more able than any other group to generate and manage the transformation of Indonesian society.

While the army was an important force in Indonesian politics in the 1950s, it became the dominant force only after the events of 30 September 1965 – the coup attempt. These events were the major turning-point in post-independence Indonesian history. There has been a great deal of debate as to what actually happened. The conflict between competing political groups in Indonesia since 1945 had become more intense by the 1960s. Many observers, both Indonesian and foreign, believed that the Indonesian Communist Party was becoming dangerously strong and might shortly be in a position to take over the state. Others were concerned about the growing strength of the armed forces, much more centralised and united in purpose by the early 1960s.

The political instability in Indonesia heightened further in 1965 with rumours of Sukarno being terminally ill and of both the PKI and the armed forces preparing for a coup. On 30 September 1965 a group of lower level army officers declared the overthrow of the Indonesian government. The next day the PKI’s official newspaper threw its support behind them. Within twenty four hours the strategic army reserve in Jakarta, under the command of General Suharto, had put down the coup and arrested its leaders.

Over the next six months the army vigorously searched out members of the communist party, whom it blamed for the failed coup and for the murder of six generals. At least 400,000 people were killed in that six month period, mostly in rural Java and Bali. In the aftermath of the events of 30 September 1965 one of the principal political forces since 1945, the communist party, was destroyed. Since 1965 the military-dominated government led by General and now President Suharto has restructured Indonesian politics. It calls itself the ‘New Order’ government, as opposed to the ‘Old Order’ of Sukarno’s presidency.

Independent Indonesia began as a liberal democracy – with a multi-party parliamentary system, a free and diverse press and with freedom of organisation for voluntary groups, including labour unions. However, its populist President, Sukarno, had argued against western-style multi-party parliamentary democracy since the 1920s (what he called ‘50 per cent plus one democracy’). He argued that it was not in accordance with Indonesian cultural values which stressed harmony and consensus. Sukarno was a strong advocate of ‘democracy with leadership’: so too was the army. When parliamentary democracy faltered in the mid 1950s – with widespread discontent with the failure of the revolution to produce prosperity for all – Sukarno marshalled like-minded forces. ‘Guided Democracy’ between 1959 and 1965 balanced political party representation in parliament with representatives from ‘functional groups’ – defined as the armed forces, workers, peasants, Muslim scholars and numerous minority groups. The armed forces functional group – called GOLKAR – quickly became the strongest.

Since 1965 the ‘New Order’ government has openly fostered Golkar. Elections have been held every five years since 1971, but they have been carefully managed. Golkar has been provided with government funds and the bureaucratic and military apparatus swung behind it. Candidates put forward by all political parties are vetted by a government committee and tough electoral rules applied. Not surprisingly, Golkar has won two-thirds or more of the votes in each of the elections.

One issue more than any other has dominated Indonesian political life over the past two decades. This is the government’s insistence that pancasila become the sole ideological basis of all political and social organisations. Pancasila is the five principles first enunciated by Sukarno in 1945 as the basis for Indonesian public life: belief in one God; national unity; humanitarianism; democracy based on consensus and representation; and social justice. It is a vague, syncretic philosophy, but its very obscurity allows for many interpretations.

With the Communist Party destroyed, the army, the government and much of the western educated elite have seen a revitalised Islam as the greatest threat to their control of the State. Suharto’s government has been determined to inculcate pancasila philosophy throughout the country. The consensus political system, for example, is called pancasila democracy. All school and university students must pass examinations in pancasila, as must civil servants and members of the armed forces. The intention is to remove from the Indonesian political agenda what the government sees as the evils of liberal democracy, Marxism and militant Islam.

The debate in the last decades is not the first time the issue has been heatedly discussed. In mid 1945 the committee of politicians preparing the way for independence after the defeat of Japan were most strongly divided on the role of Islam in independent Indonesia. Many Muslim politicians demanded that Islam be the official religion while others demanded an Islamic state. However, the majority of western educated Indonesians who dominated the nationalist movement from the 1920s were philosophically committed to a secular state, a commitment strengthened by their understanding of the religious diversity in Indonesia. Not only is there a significant Christian minority and a small number of Buddhists and Hindus, but the majority of Indonesians who regard themselves as Muslims reject Islamic fundamentalism.

Some Muslims have never abandoned their desire for Islam to be the basis of the Indonesian state. Other Muslims, while not wanting an Islamic state, have been increasingly critical of what they see as the moral pollution of westernisation. There was an Islamic revival in the 1970s and 1980s, which, in part, reflected the impact of the Iranian revolution and the general resurgence of revivalist Islam in the Middle East on Muslims throughout the world. Many tens of thousands of Indonesians make the pilgrimage to Mecca each year and while there are influenced by these revivalist ideas. It is important to see the great diversity of thinking amongst those Indonesians who identify themselves as part of an Islamic community. The vast majority accept the pancasila state, or at least accept that because of its religious diversity Indonesia can never be an Islamic state, and within this overall philosophical framework are striving to develop political, social and economic policies which reflect their religious values.

Suharto’s government has steadily de-politicised Indonesian society. The press is subject to formal and informal controls and the state-operated television network is under firm control with bland news and information services reflecting government views. Magazine publishing is also licensed and books cannot be published without a government permit. The result is a system of self-censorship whereby editors and publishers err on the side of caution in order to avoid the risk of being closed down or of having books and magazines seized. On many occasions the government has withdrawn the right to publish for lengthy periods or permanently closed down publications.

Despite this authoritarianism, there is a considerable amount of debate on major social, economic and political issues. Writers and editors have learned the art of subtlety and innuendo and of pushing criticism just so far. The carefully worded editorial or commentary in daily newspapers is a major method of airing sensitive topics. Cartoonists frequently make critical comments in pictures that could not be made in words – indeed Indonesian newspapers and magazines have fostered talented cartoonists able to make subtle but telling social comment. In the world of literature critics of Indonesian society are also by no means silent.

When the New Order government of President Suharto came to power in 1965 the Indonesian economy was in chaos, inflation was rampant and the social and economic infrastructure had just about collapsed. Much has been achieved in the nearly three decades since then. There has been sustained economic growth, averaging around six per cent per annum, inflation has been brought under control, the economic infrastructure had been enormously improved and there have been sustained efforts to tackle some of the long-standing fundamental problems of the economy.

Rice is the staple food in the Indonesian diet, yet Indonesia was a net importer of rice from the late 19th century until the 1980s. Despite the intricate rice terraces, large-scale irrigation and enormous labour inputs, the productivity of Indonesian rice farmers steadily declined in the 1950s and 1960s. With a remorselessly increasing population the result was a reduction in rice consumption per person and the substitution of less nutritious foods such as cassava. All this has changed since 1979, with dramatic improvements in crop yields and per capita output. In 1983 Indonesia produced its first rice surplus for perhaps one hundred years. The dramatic turn-around in rice production is a result of the Indonesian government’s successful agricultural policies. While many developing countries have ignored agriculture in favour of industrial and urban development, the Indonesian government has poured money and expertise into improving agricultural output. The result is considerably increased productivity and the development of agri-businesses for the export of primary products and processed foods.

Successful agricultural policies are the base on which resource development and industrial policies have been constructed. With the gradual opening in the 1990s of huge coal mines in eastern Kalimantan, Indonesia has become a major coal exporter. In the 1970s and early 1980s economic development depended on revenue derived from the export of oil, boosted by the price hikes imposed by OPEC. As the price of oil fell in the 1980s Indonesia was forced to review its economic policies. The result was a steady liberalisation and internationalisation of the economy with stress on securing international investment and developing export oriented manufacturing industries. In the last two decades Indonesia has moved from an import substitution policy in the manufacturing sector to an export oriented policy. It is now a major textile, footwear and clothing exporter and a growing exporter of consumer products. The economic growth of the past thirty years shows every sign of continuing in the decades ahead, promising to move Indonesia into the ranks of the ‘Newly Industrialising Economies’ [NIEs] - sometimes referred to as Newly Industrialised Countries [NICs].

In the mid 1990s Indonesia is again at an important point in its history. Economic development since 1965 has been remarkably strong and has moved Indonesia from being one of the poorest countries in the world to the verge of achieving the status of a Newly Industrialising Economy. There is a growing confidence among the Indonesian ruling elite and the middle class that the fundamental social and economic problems of the past half a century or more are on the way to being overcome. They see Indonesia as becoming a significant industrial nation by the early decades of the 21st century. They see Indonesia becoming the major power in Southeast Asia and one of the major countries in Asia.

There are, of course, many Indonesias. The Indonesia of the middle class living in Jakarta is very different from the Indonesia of a farmer in Sulawesi. The Indonesia of strongly Islamic Aceh is very different from the Indonesia of the central Javanese city of Yogyakarta. There is a growing gap between urban and rural dwellers as well as between those who live on Java and those who live elsewhere. There are also widening gaps in the cities between the urban poor and the urban middle class and between the middle class and the wealthy business and power elite.

The New Order government’s successful economic policies have accelerated social change. This can be seen in rapid urbanisation, the effects of agri businesses and the green revolution on rural labour needs and most of all, perhaps, in the rapid growth of a middle class.

The Indonesian middle class is better educated than ever before, more internationally oriented and more articulate than earlier generations. This has led in the last few years to a growing demand for a democratisation of Indonesian political life.

There has been much discussion of the need for greater participation in decision making processes, of the need to make pancasila democracy more open and inclusively democratic and on the need for political processes to be more transparent in line with the liberalisation of the economy. This burgeoning middle class holds the key to the direction of political change in the decades ahead. Indonesians are still aware that there is as much diversity in Indonesia as there is unity and that the impressive economic and social gains of the New Order since 1965 have been due in part to the imposition of political stability. In the next decade the Indonesian elite will have to reconcile the demand for greater openness and political participation with the need to maintain social cohesion in order to achieve its economic goals.

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About this edition:

This is the complete text of the 2nd edition of the book. Short History of South East AsiaThe first edition of "Focus on Southeast Asia" was published in 1997 and the second edition, which was renamed "A Short History of South East Asia", was published in 1999. With so much change taking place in South East Asia over the last few years we recently decided to update the book and a fifth edition was published by John Wiley and Sons (www.wiley.com) in 2009. The cover set out is of the fifth edition.

The 5th edition of "A Short History of South East Asia" is available to purchase from Amazon, as both an e-book and a paperback, and via its publisher, Wiley.


About our company:

AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.

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