We’ve stopped what we are doing and creating your personalized BrandZ™ report, which will appear in your inbox soon.

Indonesia 2015 | Overview | History

Strong economy emerges after years of upheaval

The 17,000-plus islands that make up the Indonesian archipelago have been a center of trade in the region since the 7th century, delivering not just immigration from around the region, but also an exchange of culture and ideas. Present-day Indonesia brings together hundreds of distinct ethnic groups, with a range of languages and religious beliefs. Recent years have seen economic volatility, terrorism and political unrest – but the fourth-most populous country in the world is emerging from this period of hardship a vibrant, youthful nation, and is now Southeast Asia’s biggest economy.

Spice trade brings new influences

7th century to 17th century

The islands of what is now called Indonesia have been a centre of commerce for many centuries, thanks to their proximity to India and China. Traders brought new settlers and new ideas to the area, all gradually absorbed by the islands’ residents. Muslim traders’ legacy makes Indonesia home to the world’s largest Muslim population today. Hindu and Buddhist communities from around Asia have also flourished on the islands, and Christianity was brought by European explorers attracted by the islands’ exotic spices, particularly nutmeg, which was once one of the world’s most valuable commodities.

Dutch colonisation

17th century to 1942

While Portuguese traders are thought to have been the first Europeans to have regular contact with the people of Indonesia, it was the Dutch who began to colonise the islands in the early 17th century, gradually consolidating their rule over the next 200 years. The United East India Company amalgamated the many Dutch businesses competing for trade through the islands, and established the city that is now Jakarta as the capital of its Asian trading network. When the company collapsed, the Dutch national government took control, uniting the archipelago as one country, named the Dutch East Indies, in 1900. Many areas of modern Indonesia remained independent of Dutch rule, however, and the colonial era was punctuated by unrest due to areas of strong local resistance to foreign rule.

Road to independence

1942 to 1957

At the height of World War Two in Asia, Japan occupied the islands of Indonesia, bringing Dutch rule to an abrupt end and giving rise to a push for independence that had previously been suppressed. Immediately after the surrender of Japan in 1945, nationalist leader Sukarno declared independence and became president. The Dutch were reluctant to relinquish their hold on the islands, however, and it was only after four years of at-times brutal fighting and international diplomatic pressure that the Netherlands agreed to transfer sovereignty. Indonesia became an independent nation with Sukarno at the helm.

Birth of a nation

1957 to 1966

President Sukarno, who had spent a decade under detention when Indonesia was under colonial rule, was the newly independent Indonesia’s first president. The early years of parliamentary democracy were fraught, as rival parties disagreed over the right direction the country should take. Sukarno declared martial law and implemented “Guided Democracy”, ruling with an authoritarian hand. A failed coup in 1965 by alleged communist sympathisers marked the beginning of the end of his reign; there followed a bloody purge of suspected communists and Sukarno handed over emergency powers to one of his generals, Suharto in 1966. Sukarno was accused by his successors of violating the constitution and neglecting the economy. He remained under house arrest until his death in 1970.

The Suharto years

1967 to 1998

General Suharto became Indonesia’s president in March 1967, with his New Order administration supported by the USA. Years of significant economic growth followed, encouraged by a newly outward approach to foreign relations and efforts to build relationships with other countries in the region. Indonesia is a founding member of the ASEAN economic alliance, and restored links with China in 1990 after a lengthy freeze. New Order was, however, widely accused of corruption and the suppression of political dissent, and when the country was battered by the Asian financial crisis of the late 1990s, popular protest erupted and forced Suharto to resign, in May 1998. Shortly afterwards, East Timor voted to secede from Indonesia, ending 25 years of military occupation there.

A new path

1999 to present day

Legislative elections were held in 1999, and the democratic process has gradually been strengthened in the years since then, with the first direct presidential election held in 2004. Political instability and corruption have waned, and the Indonesian economy has rallied. Freedom of speech and freedom of the media have increased significantly, though the country has had to contend with terrorism – most notably the 2002 Bali bombings, and natural disaster. The Boxing Day tsunami in 2004 is widely thought to have killed more people in Indonesia than any other country – about 170,000 – and to have displaced many more. Separatist movements in the provinces Aceh and Papua have also led to armed conflict. Modern Indonesia is now, however, largely peaceful, prosperous and, thanks to mobile and web technology – informed and connected.