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Indonesia is made up of 17,507 islands, 6,000 of which are inhabited, covering about 730,030 sq. mi. Indonesia, with its capital at Jakarta, has the fourth-largest population in the world, estimated at 223 million people in 2005 (after China, India, and the United States). The political system is based on pancasila, in which deliberations lead to a consensus. The constitution was amended in 2002 to allow for direct elections for both the president and the vice president. Indonesia is a member of the United Nations, World Trade Organization (WTO), Islamic Development Bank, Organization of the Islamic Conference (OIC), Asian Development Bank, Asia-Pacific Economic Cooperation (APEC), Association of Southeast Asian Nations (ASEAN), Mekong Group, Colombo Plan, and Organization of Petroleum Exporting Countries (OPEC).

Indonesia’s 2008 gross domestic product (GDP) can be broken down as follows: agriculture, 13.5 percent; industry, 45.6 percent; services, 40.8 percent. Indonesia was the country worst hit by the Asian financial crisis that commenced in 1997. The banking and foreign exchange crisis caused real GDP to shrink by over 13 percent in 1998. However, in 1999 the economy stabilized, and in 2000 it managed to resume growth at a solid pace. On the other hand, its recent growth performance does not match the high single-digit percentage growth it once experienced.

The currency is the rupiah, and since 1992 foreigners have been permitted to hold 100 percent of the equity of new companies in Indonesia with more than US$50 million capital. Indonesia is the world’s largest Muslim country, with 185.1 million Muslims, but religious freedom is granted to all denominations. Indonesia is also the world’s largest archipelago state. There are seven UNESCO sites in Indonesia, with the first four being inscribed in 1991. Independence from the Dutch is celebrated on August 17 with cultural events, and military parades on Armed Forces day, which is October 5. Women are celebrated on Kartini Day, in memory of Raden Ajeng Kartini, a symbol of female emancipation.

The Dutch began colonizing the islands in the 17th century, but the islands were occupied by Japan from 1942 until 1945; shortly after the Japanese surrendered, Indonesia declared independence. However, it was not until four years later, after negotiations and UN mediation, that the Netherlands gave up its stake in the islands and recognized Indonesia.

The official language is Bahasa Indonesia, a form of Malay, and there are an estimated 583 other languages and dialects spoken in the nation. Pancasila is a five-point state philosophy (belief in a supreme being, humanitarianism, national unity, democracy by consensus, and social justice). Education is under the control of the Ministry of National Education, but the Ministry of Religious Affairs is in charge of Islamic religious schools at the primary level. President Susilo Bombang Yudhoyono took office in 2004, promising an agenda close to his predecessor’s, assuring actions such as curbing corruption, combating terrorism, and promoting economic growth.

Economy

The disparity in income has been widening, regardless of extraordinary world prices for petroleum. In 2005 and 2006, the annual rate of inflation exceeded 10 percent, and the unemployment rate continued to stay high. A Corruption Eradication Commission (Komisi Pemberantasan Korupsi—KPK) was established by the government to promote investment. According to critics, KPK was too apprehensive in its approach to major cases. Indonesia’s stock market has been one of the best three performers in the world in 2006 and 2007. The government recently introduced tax and customs reforms, introduced Treasury bills, and increased capital market supervision in order to reduce risk. Indonesia passed a new investment law in March 2007 that addressed some of the concerns of foreign and domestic investors alike.

Indonesia still has the challenges of poverty and unemployment to overcome. Also, there is inadequate infrastructure, an intricate and complicated regulatory environment, and corruption, and resources are distributed unequally among the 30 regions. Over 100 state-owned enterprises have been slowly privatized, and several of those enterprises have monopolies in key sectors. Pension funds and insurance services remain weak as a result of underdeveloped capital markets. The rising price of oil in 2007 affected Indonesia by driving up the cost of domestic fuel and electricity subsidies. These rising costs are also contributing to concerns about higher food prices, a concern the whole world currently shares.

Foreign Relations

Although avoiding taking positions in quarrels among major powers, Indonesia has wanted to be prominent in Asian affairs. However, due to President Sukarno’s assertion between the “old established forces” and the “new emerging forces” that a basic world conflict existed, he tried to project Indonesia to the forefront. While Indonesia was independent in foreign affairs, President Sukarno’s regime became close with the People’s Republic of China and the Soviet Union. Indonesia had also attained the capitulation of West New Guinea (Irian Jaya/West Papua), and enforced a “confrontation” policy against the new state of Malaysia. Only after diplomatic relations with Malaysia and Singapore were asserted in 1966 did the “confrontation” with Malaysia conclude.

As a tool of regional cooperation, Indonesia took the lead in forming ASEAN. In 1966 Indonesia’s membership in the United Nations, as well as other related agencies, resumed. But, in the commotion leading to the resignation of Suharto, relations with China suffered due to attacks against the Chinese. Later in 1999, President Habibie issued an order outlawing ethnic discrimination. At the same time, he terminated the ban against teaching or using Mandarin Chinese.

A security cooperation agreement was signed by Indonesia and Australia in December 1995. Mutual notification in case of emergency was provided for within this agreement. By 1997, they established a treaty for mutual maritime boundaries. In 2001–02, there was criticism from the government of Prime Minister John Howard about how Jakarta had failed to discourage a stream of boats transporting asylum-seekers to Australia’s outer territories. Jakarta’s actions have caused conflict in relations with Australia. Reluctance to recognize the presence of Jemaah Islamiah (a terrorist organization) until October 2002 led to the bombing of a Bali tourist resort, which took 202 lives; 88 of those lives were Australian.

Australia’s $1 billion pledge of relief for the December 26, 2004, earthquake and tsunami disaster was acknowledged in 2005 by President Yudhoyono. The worst-hit area of the country was Aceh, and more than 220,000 people were killed or are missing in Indonesia. The earthquake originated off the coast of Sumatra. A framework partnership agreement was signed by the two countries, which included stipulation of closer military cooperation. Since Indonesia is located in the Pacific “Ring of Fire,” it continues to remain vulnerable to natural disasters. The rebuilding of Aceh after the December 2004 tsunami has been progressively successful; there is now more economic growth in the region than before the tsunami struck.

Indonesia suffered new disasters in 2006 and early 2007. In 2006 there was a major earthquake near Yogyakarta, and in 2007 there was an industrial accident in Sidoarjo, East Java, that created a “mud volcano,” major flooding in Jakarta, and a tsunami in South Java. These disasters caused additional damages in the billions of dollars to an already hard-hit region. Indonesia is receiving assistance with its disaster mitigation and early warning efforts from the international community. Also, in early 2007, more than one-third of all Avian influenza (bird flu) (H5N1) cases were in Indonesia.

Throughout the 1980s, relations between the United States and Indonesia were strengthened, partly because President Ronald Reagan viewed Indonesia as a powerful counterweight to the spread of communism in the region. However, in 1991, the U.S. Congress cut off direct military funding. Similarly, President George W. Bush has described Indonesia as a key ally in the global war on terror. By 2005 full military links had been restored by Washington. That same year, Indonesia made peace with Muslim separatists in Aceh (partly as a result of the 2004 tsunami) and democratic elections were held in 2006.

Law

The Indonesian press was restricted under the Sukarno regime, and had relative freedom under President Suharto until 1974 when riots in Jakarta prompted a strict government crackdown on freedom of press. As a result, more than 200 newspapers and periodicals were shut down or ordered not to report in accordance with the Ministry of Information. In 1999 President Abdurrahman Wahid abolished the Ministry of Information and replaced it with the State Information Dissemination Bureau. However, in 2002, the Indonesian legislature passed a restrictive media law that established a regulatory body to oversee regulation of media.

The Supreme Court is part of the judiciary of the state and is complemented by the legislative and executive branches, but it is free and independent from government intervention. The justices are appointed by the president from a list of candidates selected by the legislature. In 1989 the Muslim sharia courts were given jurisdiction over civil matters. There are 30 provinces in Indonesia, with two special regions and one special capital city district (Jakarta Raya). Its law is based on Roman-Dutch law, but it has been modified by indigenous concepts and by new criminal procedures and election codes. Indonesia has not accepted compulsory International Court of Justice (ICJ) jurisdiction. Indonesia is a temporary member of the United Nations Security Council.

Bibliography:

Arthur S. Banks, Thomas C. Muller, and William R. Overstreet, eds., Political Handbook of the World 2008 (CQ Press, 2008);
Christian Chua, Chinese Big Business in Indonesia: The State of Capital (Routledge, 2008);
CIA, “Indonesia,” World Factbook, www.cia.gov (cited March 2009);
The Europa World Year Book 2006 (Routledge, 2006); “Indonesia,” The Petroleum Economist (v.74/8, 2007);
The International Year Book and Statesmen’s Who’s Who (Martinus Nijhoff Publishers, 2006);
Barry Turner, ed., The Statesman’s Yearbook 2008 (Palgrave Macmillan, 2008).

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