Republic of Indonesia
Area: 2 million sq. km. (736,000 sq. mi.), about three times the size of Texas; maritime area: 7,900,000 sq. km.
Cities: Capital--Jakarta (est. 8.8 million). Other cities--Surabaya 3.0 million, Medan 2.5 million, Bandung 2.5 million plus an additional 3 million in the surrounding area.
Terrain: More than 17,000 islands; 6,000 are inhabited; 1,000 of which are permanently settled. Large islands consist of coastal plains with mountainous interiors.
Climate: Equatorial but cooler in the highlands.
Nationality: Noun and adjective--Indonesian(s).
Population: (1997) 201 million.
Annual growth rate: 1.5%.
Ethnic groups: Javanese 45%, Sundanese 14%, Madurese 7.5%, coastal Malays 7.5%, others 26%.
Religions: Islam 87%, Protestant 6%, Catholic 3%, Hindu 2%, Buddhist and other 1%.
Languages: Indonesian (official), local languages, the most important of which is Javanese.
Education: Years compulsory--9. Enrollment--92% of eligible primary schoolage children. Literacy--85%.Health: Infant mortality rate--63/1,000 live births. Life expectancy at birth--men 60 years, women 64 years.
Work force: 90 million. Agriculture--41.2%, trade and restaurants--19.8%, public services--13.7%, manufacturing--12.9% (1997 data).
Type: Independent republic.
Independence: August 17, 1945 proclaimed.
Constitution: 1945. Embodies five principles of the state philosophy, called Pancasila, namely monotheism, humanitarianism, national unity, representative democracy by consensus, and social justice.
Branches: Executive--president (head of government and chief of state) chosen for a 5-year term by the 700-member People's Consultative Assembly (MPR). Legislative--500-member House of Representatives (DPR) elected for a 5-year term. Judicial--Supreme Court.
Suffrage: 17 years of age universal and married persons regardless of age.
GDP: 1999 $142 billion.
Annual growth rate: 1999 0.2%.
Per capita income: 1999 $684.
Natural resources (8.4% of GDP): Oil and gas, bauxite, silver, tin, copper, gold, coal.
Agriculture (17.2% of GDP): Products--timber, rubber, rice, palm oil, coffee. Land--17% cultivated.
Manufacturing (25.3% of GDP): Garments, footwear, electronic goods, furniture, paper products.
Trade: Exports (1999)--$48.7 billion including oil, natural gas, plywood, manufactured goods. Major markets--Japan, Singapore, Taiwan. Korea, EU, U.S. Imports (1999)--$24 billion including food, chemicals, capital goods, consumer goods. Major suppliers--Japan, U.S., Thailand.
Indonesia's 201 million people make it the world's fourth-most populous nation. The island of Java is one of the most densely populated areas in the world, with more than 107 million people living in an area the size of New York State. Indonesia includes numerous related but distinct cultural and linguistic groups, many of which are ethnically Malay. Since independence, Bahasa Indonesia (the national language, a form of Malay) has spread throughout the archipelago and has become the language of most written communication, education, government, and business. Many local languages are still important in many areas, however. English is the most widely spoken foreign language. Education is free and compulsory for children through grade 9. Although about 92% of eligible children are enrolled in primary school, a much smaller percentage attend full time. About 44% of secondary school-age children attend junior high school, and some others of this age group attend vocational schools.
Constitutional guarantees of religious freedom apply to the five religions recognized by the state, namely Islam (87%), Protestantism (6%), Catholicism (3%), Buddhism (2%), and Hinduism (1%). In some remote areas, animism is still practiced.
By the time of the Renaissance, the islands of Java and Sumatra had already enjoyed a 1,000-year heritage of advanced civilization spanning two major empires. During the 7th-14th centuries, the Buddhist kingdom of Srivijaya flourished on Sumatra. At its peak, the Srivijaya Empire reached as far as West Java and the Malay Peninsula. Also by the 14th century, the Hindu Kingdom of Majapahit had risen in eastern Java. Gadjah Mada, the empire's chief minister from 1331 to 1364, succeeded in gaining allegiance from most of what is now modern Indonesia and much of the Malay archipelago as well. Legacies from Gadjah Mada's time include a codification of law and an epic poem. Islam arrived in Indonesia sometime during the 12th century and, through assimilation, supplanted Hinduism by the end of the 16th century in Java and Sumatra. Bali, however, remains overwhelmingly Hindu. In the eastern archipelago, both Christian and Islamic proselytizing took place in the 16th and 17th centuries, and, currently, there are large communities of both religions on these islands.
Beginning in 1602, the Dutch slowly established themselves as rulers of present-day Indonesia, exploiting the weakness of the small kingdoms that had replaced that of Majapahit. The only exception was East Timor, which remained under Portugal until 1975. During 300 years of Dutch rule, the Dutch developed the Netherlands East Indies into one of the world's richest colonial possessions.
During the first decade of the 20th century, an Indonesian independence movement began and expanded rapidly, particularly between the two World Wars. Its leaders came from a small group of young professionals and students, some of whom had been educated in the Netherlands. Many, including Indonesia's first president, Sukarno (1945-67), were imprisoned for political activities.
The Japanese occupied Indonesia for 3 years during World War II. On August 17, 1945, 3 days after the Japanese surrender to the Allies a small group of Indonesians, led by Sukarno and Mohammad Hatta, proclaimed independence and established the Republic of Indonesia. They set up a provisional government and adopted a constitution to govern the republic until elections could be held and a new constitution written. Dutch efforts to reestablish complete control met strong resistance. After 4 years of warfare and negotiations, the Dutch transferred sovereignty to a federal Indonesian Government. In 1950, Indonesia became the 60th member of the United Nations.
Shortly after hostilities with the Dutch ended in 1949, Indonesia adopted a new constitution providing for a parliamentary system of government in which the executive was chosen by and made responsible to parliament. Parliament was divided among many political parties before and after the country's first nationwide election in 1955, and stable governmental coalitions were difficult to achieve. The role of Islam in Indonesia became a divisive issue. Sukarno defended a secular state based on Pancasila while some Muslim groups preferred either an Islamic state or a constitution which included preambular provision requiring adherents of Islam to be subject to Islamic law. At the time of independence, the Dutch retained control over the western half of New Guinea, and permitted steps toward self-government and independence.
Negotiations with the Dutch on the incorporation of the territory into Indonesia failed, and armed clashes broke out between Indonesian and Dutch troops in 1961. In August 1962, the two sides reached an agreement, and Indonesia assumed administrative responsibility for Irian Jaya on May 1, 1963. The Indonesian Government conducted an "Act of Free Choice" in Irian Jaya under UN supervision in 1969, in which 1,025 Irianese representatives of local councils agreed by consensus to remain a part of Indonesia. A subsequent UN General Assembly resolution confirmed the transfer of sovereignty to Indonesia. Opposition to Indonesian administration of Irian Jaya, also known as Papua or West Papua, gave rise to smallscale guerrilla activity in the years following Jakarta's assumption of control. In the more open atmosphere since 1998, there have been more explicit expressions within Irian Jaya of a desire for independence from Indonesia.
From 1524 to 1975, East Timor was a Portuguese colony on the island of Timor, separated from Australia's north coast by the Timor Sea. As a result of political events in Portugal, Portuguese authorities abruptly withdrew from Timor in 1975, exacerbating power struggles among several Timorese political factions. An avowedly Marxist faction called "Fretilin" achieved military superiority. Fretilin's ascent in an area contiguous to Indonesian territory alarmed the Indonesian Government, which regarded it as a threatening movement. Following appeals from some of Fretilin's Timorese opponents, Indonesian military forces intervened in East Timor and overcame Fretilin's regular forces in 1975-76. Smallscale guerrilla activity persisted after Indonesia declared East Timor its 27th province in 1976, following a petition by a provisional government for incorporation into Indonesia. The UN never recognized Indonesia's incorporation of East Timor and later brokered negotiations between Indonesia and Portugal on the territory's status. In January 1999, the Indonesian Government agreed to a process, with UN involvement, under which the people of East Timor would be allowed to choose between autonomy and independence through a direct ballot.
The direct ballot was held on August 30, 1999. Some 98% of registered voters cast their ballots, and 78.5% of the voters chose independence over continued integration with Indonesia. Many persons were killed in a wave of violence and destruction after the announcement of the pro-independence vote. In October 1999, the People's Consultative Assembly (MPR) revoked the 1978 decree that annexed East Timor, and the United Nations Transitional Authority in East Timor (UNTAET) assumed responsibility for administering East Timor until it becomes independent.
Unsuccessful rebellions on Sumatra, Sulawesi, West Java, and other islands beginning in 1958, plus a failure by the constituent assembly to develop a new constitution, weakened the parliamentary system. Consequently, in 1959, when President Sukarno unilaterally revived the provisional 1945 constitution, which gave broad presidential powers, he met little resistance. From 1959 to 1965, President Sukarno imposed an authoritarian regime under the label of "Guided Democracy." He also moved Indonesia's foreign policy toward nonalignment, a foreign policy stance supported by other prominent leaders of former colonies who rejected formal alliances with either the Western or Soviet blocs. Under Sukarno's auspices, these leaders gathered in Bandung, West Java, 1955, to lay the groundwork for what became known as the Non-Aligned Movement. In the late 1950s and early 1960s, President Sukarno moved closer to Asian communist states and toward the Indonesian Communist Party (PKI) in domestic affairs. Though the PKI represented the largest communist party outside the Soviet Union and China, its mass support base never demonstrated an ideological adherence typical of communist parties in other countries.
By 1965, the PKI controlled many of the mass civic and cultural organizations that Sukarno had established to mobilize support for his regime and, with Sukarno's acquiescence, embarked on a campaign to establish a "Fifth Column" by arming its supporters. Army leaders resisted this campaign. Under circumstances that have never been fully explained, on October 1, 1965, PKI sympathizers within the military, including elements from Sukarno's palace guard, occupied key locations in Jakarta and kidnapped and murdered six senior generals. Major General Soeharto, the commander of the Army Strategic Reserve, rallied army troops opposed to the PKI to reestablish control over the city. Violence swept throughout Indonesia in the aftermath of the October 1 events, and unsettled conditions persisted through 1966. Rightist gangs killed tens of thousands of alleged communists in rural areas. Estimates of the number of deaths range between 160,000 and 500,000. The violence was especially brutal in Java and Bali. During this period, PKI members by the tens of thousands turned in their membership cards. The emotions and fears of instability created by this crisis persisted for many years; the communist party remains banned from Indonesia.
Throughout the 1965-66 period, President Sukarno vainly attempted to restore his political position and shift the country back to its pre-October 1965 position. Although he remained president, in March 1966, Sukarno had to transfer key political and military powers to General Soeharto, who by that time had become head of the armed forces. In March 1967, the Provisional People's Consultative Assembly (MPRS) named General Soeharto acting president. Sukarno ceased to be a political force and lived under virtual house arrest until his death in 1970.
President Soeharto proclaimed a "New Order" in Indonesian politics and dramatically shifted foreign and domestic policies away from the course set in Sukarno's final years. The New Order established economic rehabilitation and development as its primary goals and pursued its policies through an administrative structure dominated by the military but with advice from Western-educated economic experts.
In 1968, the People's Consultative Assembly (MPR) formally selected Soeharto to a full 5-year term as president, and he was re-elected to successive 5-year terms in 1973, 1978, 1983, 1988, 1993, and 1998. In mid-1997, Indonesia was afflicted by the Asian financial and economic crisis, accompanied by the worst drought in 50 years and falling prices for oil, gas, and other commodity exports. The rupiah plummeted, inflation soared, and capital flight accelerated. Demonstrators, initially led by students, called for Soeharto's resignation. Amidst widespread civil unrest, Soeharto resigned on May 21, 1998, 3 months after the MPR had selected him for a seventh term. Soeharto's hand-picked Vice President, B. J. Habibie, became Indonesia's third president.
President Habibie quickly assembled a cabinet. One of its main tasks was to reestablish International Monetary Fund and donor community support for an economic stabilization program. He moved quickly to release political prisoners and lift controls on freedom of speech and association. Elections for the national, provincial, and sub-provincial parliaments were held on June 7, 1999. For the national parliament, Parti Demokrasi Indonesia Perjuangan (PDI-P, Indonesian Democratic Party of Struggle led by Sukarno's daughter Megawati Soekarnoputri) won 34% of the vote; Golkar ("functional groups" party of the government) 22%; Partai Persatuan Pembangunan (PPP, United Development Party led by Hamzah Haz) 12%, and Partai Kebangkitan Bangsa (PKB, National Awakening Party led by Abdurrahman Wahid) 10%. In October 1999, the People's Consultative Assembly, which consists of the 500-member Parliament plus 200 appointed members, elected Abdurrahman Wahid as President, and Megawati Soekarnoputri as Vice President, for 5-year terms. Wahid named his first Cabinet in early November 1999 and a reshuffled, second Cabinet in August 2000.
President Wahid's government has continued to pursue democratization and to encourage renewed economic growth under challenging conditions. In addition to continuing economic malaise, his government has faced regional, interethnic, and interreligious conflict, particularly in Aceh, the Moluccas, and Irian Jaya. In West Timor, the problems of displaced East Timorese and violence by pro-Indonesian East Timorese militias have caused considerable humanitarian and social problems. An increasingly assertive Parliament has frequently challenged President Wahid's policies and prerogatives, contributing to a lively and sometimes rancorous national political debate. During the People's Consultative Assembly's first annual session in August 2000, President Wahid gave an account of his government's performance. Under pressure from the Assembly to improve management and coordination within the government, he issued a presidential decree giving Vice President Megawati control over the day-to-day administration of government.
GOVERNMENT AND POLITICAL CONDITIONS
Indonesia is a republic based on the 1945 constitution providing for a limited separation of executive, legislative, and judicial power. The governmental system has been described as "presidential with parliamentary characteristics." A constitutional reform process has been underway since 1999, and has already produced several important changes. Among these are two 5-year term limits for the President and Vice President and measures to institute checks and balances. The highest state institution is the People's Consultative Assembly (MPR), whose functions include electing the president and vice president, establishing broad guidelines of state policy, and amending the constitution. The 695-member MPR includes all 500 members of the House of Representatives (DPR) plus 130 "regional representatives" elected by the 26 provincial parliaments and 65 appointed members from societal groups. The DPR, which is the premier legislative institution, includes 462 members elected through a mixed proportional/district representational system and 38 appointed members of the armed forces (TNI) and police (POLRI). During the authoritarian Soeharto era, the armed forces played a central political role under a doctrine known as "dual function," with the DPR and MPR comprising a substantially higher proportion of appointed TNI/POLRI and societal group members than at present. Under existing agreements, TNI/POLRI representation in the DPR will end at the time of the next general election in 2004 and will end in the MPR in 2009. Societal group representation in the MPR is expected to be eliminated in 2004 through further constitutional change. Military domination of regional administration is gradually breaking down, with new regulations prohibiting active-duty officers from holding political office.
A general election in June 1999 produced the first freely elected national, provincial, and regional parliaments in over 40 years. In October 1999 the MPR elected a compromise candidate, Abdurrahman Wahid (a.k.a Gus Dur), as the country's fourth president, and Megawati Sukarnoputri, a daughter of the country's first president, as the vice president. Megawati's PDI-P party had won the largest share of the vote (34%) in the general election, while Golkar, the dominant party during the Soeharto era, came in second (22%). Several other, mostly Islamic parties won shares large enough to be seated in the DPR. Having served as rubberstamp bodies in the past, the DPR and MPR have gained considerable power and are increasingly assertive in oversight of the executive branch. In part, this reflects a desire to prevent the presidential excesses of the past and, in part, to restrain Wahid, who is seen as at times dangerously unpredictable. Through his appointed cabinet, the president retains the authority to conduct the administration of the government, but some observers believe the balance of power has shifted too far in the direction of the legislature.
Principal Government Officials
President--Abdurrahman Wahid (a.k.a. Gus Dur)
Vice President--Megawati Sukarnoputri
Foreign Affairs--Alwi Shihab
Ambassador to the United States--Dorodjatun Kuntoro-Jakti
Ambassador to the United Nations--Makarim Wibisono
The embassy of Indonesia is at 2020 Massachusetts Avenue NW., Washington, DC 20036 (tel. 202-775-5200-5207; FAX: 202-775-5365). Consulates General are in New York (5 East 68th Street, New York, NY 10021, tel. 212-879-0600/0615; FAX: 212-570-6206); Los Angeles(3457 Wilshire Blvd., Los Angeles, CA 90010; tel. 213-383-5126; FAX: 213-487-3971); Houston (10900 Richmond Ave., Houston, TX 77042; tel. 713-785-1691; FAX: 713-780-9644). Consulates are in San Francisco (1111 Columbus Avenue, San Francisco, CA 94133; tel. 415-474-9571; FAX: 415-441-4320); and Chicago (2 Illinois Center, Suite 1422233 N. Michigan Avenue, Chicago, IL 60601; tel. 312-938-0101/4; 312-938-0311/0312; FAX: 312-938-3148).
Indonesia has a market-based economy in which the government plays a significant role. It owns more than 164 state-owned enterprises and administers prices on several basic goods, including fuel, rice, and electricity. In the aftermath of the financial and economic crisis that began in mid-1997, the government took custody of a significant portion of private sector assets through acquisition of nonperforming bank loans and corporate assets through the debt restructuring process.
During the 30 years of Soeharto's "New Order" government, Indonesia's economy grew from a per capita GDP of $70 to more than $1,000 by 1996. Through prudent monetary and fiscal policies, inflation was held in the 5%-10% range, the rupiah was stable and predictable, and the government avoided domestic financing of budget deficits. Much of the development budget was financed by concessional foreign aid.
In the mid-1980s, the government began eliminating regulatory obstacles to economic activity. The steps were aimed primarily at the external and financial sectors and were designed to stimulate employment and growth in the non-oil export sector. Annual real GDP growth averaged nearly 7% from 1987-97, and most analysts recognized Indonesia as a newly industrializing economy and emerging major market.
High levels of economic growth from 1987-97 masked a number of structural weaknesses in Indonesia's economy. The legal system was very weak, and there was and is no effective way to enforce contracts, collect debts, or sue for bankruptcy. Banking practices were very unsophisticated, with collateral-based lending the norm and widespread violation of prudential regulations, including limits on connected lending. Non-tariff barriers, rent-seeking by state-owned enterprises, domestic subsidies, barriers to domestic trade, and export restrictions all created economic distortions.
The regional financial problems that swept into Indonesia in late 1997 quickly became an economic and political crisis. Indonesia's initial response was to float the rupiah, raise key domestic interest rates, and tighten fiscal policy. In October 1997, Indonesia and the International Monetary fund (IMF) reached agreement on an economic reform program aimed at macroeconomic stabilization and elimination of some of the country's most damaging economic policies, such as the National Car Program and the clove monopoly, both involving family members of President Soeharto. The rupiah failed to stabilize for any significant period of time, however, and President Soeharto was forced to resign in May 1998. In August 1998, Indonesia and the IMF agreed on an Extended Fund Facility (EFF) under President Habibie that included significant structural reform targets. President Abdurrahman Wahid took office in October 1999, and Indonesia and the IMF signed another EFF in January 2000. The new program also has a range of economic, structural reform, and governance targets.
The effects of the financial and economic crisis were severe. In 1998, real GDP contracted by an estimated 13.7%. The economy bottomed out in mid-1999, and real GDP growth for the year was an anemic 0.3%. Inflation reached 77%in 1998 but slowed to 2%in 1999. The rupiah, which had been in the Rp 2,400/USD1 range in 1997 reached Rp 17,000/USD1 at the height of the 1998 violence, returned to the Rp 6,500-8,000/USD1 range in late 1998. It has traded in the Rp 6,500-9,000/USD1 range since, with significant volatility. Although a severe drought in 1997-98 forced Indonesia to import record amounts of rice, overall imports dropped precipitously in the early stage of the crisis in response to the unfavorable exchange rate, reduced domestic demand, and absence of new investment. Although reliable unemployment data are not available, formal sector employment contracted significantly.
As of September 2000, Indonesia's economic outlook is mixed. Recently released economic data provide evidence that the economic turnaround that began in the second quarter of 1999 has continued and accelerated. According to the Central Bureau of Statistics (BPS), year-on-year real GDP growth reached 4.13% in August 2000. Driving this higher than expected GDP growth are record exports, solid manufacturing growth, and continued strong levels of household consumption. At the same time, high petroleum prices are increasing the value of Indonesia's oil exports. As the economy has picked up, there has been a significant increase in corporate debt restructuring, although questions remain about the viability of some deals.
Less positively, foreign investment still lags far below its pre-crisis levels; the rupiah has lost more than 22% of its value since President Wahid was elected, and the stock market is in record low territory. Indonesia's banking and corporate sectors are still extremely weak. Asset sales by the Indonesian Bank Restructuring Agency have slowed amidst turmoil in the agency's senior leadership. Banking sector reform has stalled. Progress on corruption cases against is excruciatingly slow and capricious. These developments have shaken most analysts' faith in the reform credentials of the Wahid administration.
Indonesia's public sector external debt rose from $54.2 billion in March 1998 to about $80 billion by mid-2000. Private sector external debt stood at approximately $82 billion.
Oil and Minerals Sector
Indonesia, the only Asian member of the Organization of Petroleum Exporting Countries (OPEC), ranks 15th among world oil producers, with about 2.4% of world production. Crude and condensate output averaged 1.5 million barrels per day (b/d) in 1999. In the 1998 calendar year the oil and gas sector, including refining, contributed approximately 9% to GDP and, in FY 1999-00, provided 28% to domestic revenues. The sector's share of export earnings was 20% in 1999, a greater percentage than recent years due to high world oil prices. U.S. companies have invested heavily in the petroleum sector. With domestic demand for petroleum fuels expanding, Indonesia will become a net importer of oil by the next decade unless new reserves are found. In 1999, Indonesian imports of crude oil and petroleum products totaled $3.2 billion while Indonesian exports of crude oil and oil products totaled $10.7 billion.
The state owns all oil and mineral rights. Foreign firms participate through production-sharing and work contracts. Oil and gas contractors are required to finance all exploration, production, and development costs in their contract areas; they are entitled to recover operating, exploration, and development costs out of the oil and gas produced.
Although minerals production traditionally centered on bauxite, silver, and tin production, Indonesia is expanding its copper, nickel, gold, and coal output for export markets. In mid-1993, the Department of Mines and Energy reopened the coal sector to foreign investment, with the result that the leading Indonesian coal producer now is a joint venture between U.K. firms BP and Rio Tinto. Total coal production reached 74 million metric tons in 1999, including exports of 55 million tons. The Indonesian Government hopes to surpass 100 million metric tons of coal production in 2002. Two U.S. firms operate three copper/gold mines in Indonesia, with a Canadian and U.K. firm holding significant other investments in nickel and gold, respectively. In 1998, the value of Indonesian gold production was $1 billion and copper, $843 million. Receipts from gold, copper, and coal comprised 84% of the $3 billion earned in 1998 by the mineral mining sector.
Since the late 1980s, Indonesia has made significant changes to its regulatory framework to encourage economic growth. This growth was financed largely from private investment, both foreign and domestic. U.S. investors dominated the oil and gas sector and undertook some of Indonesia's largest mining projects. In addition, the presence of U.S. banks, manufacturers, and service providers expanded, especially after the industrial and financial sector reforms of the 1980s. Other major foreign investors included Japan, the United Kingdom, Singapore, the Netherlands, Hong Kong, Taiwan, and South Korea.
The economic crisis made continued private financing imperative but problematic. New foreign investment approvals fell by almost two-thirds between 1997 and 1999. The crisis further highlighted areas where additional reform was needed. Frequently cited areas for improving the investment climate were establishment of a well- functioning legal and judicial system, adherence to competitive processes, and adoption of internationally acceptable accounting and disclosure standards. Despite improvements in the laws in recent years, Indonesia's intellectual property rights regime remains weak; lack of effective enforcement is a major concern. Under Soeharto, Indonesia had moved toward private provision of public infrastructure, including electric power, tollroads, and telecommunications. The financial crisis brought to light serious weaknesses in the process of dispute resolution, however, particularly in the area of private infrastructure projects. Although Indonesia continued to have the advantages of a large labor force, abundant natural resources and modern infrastructure, private investment in new projects largely ceased during the crisis.
Since independence, Indonesia has espoused a "free and active" foreign policy, seeking to play a role in regional affairs commensurate with its size and location but avoiding involvement in conflicts among major powers. Indonesian foreign policy under the "New Order" government of President Soeharto moved away from the stridently anti-Western, anti-American posturing that characterized the latter part of the Sukarno era. Following Soeharto's ouster in 1998, Presidents Habibie and Wahid have preserved the broad outlines of Soeharto's independent, moderate foreign policy. Preoccupation with domestic problems has not prevented President Wahid from frequently traveling abroad and continuing to participate vigorously, though peripatetically, in many international fora. The traumatic separation of East Timor from Indonesia after an August 1999 East Timor referendum, and subsequent events in East and West Timor, strained Indonesia's relations with the international community.
A cornerstone of Indonesia's contemporary foreign policy is its participation in the Association of Southeast Asian Nations (ASEAN), of which it was a founding member in 1967 with Thailand, Malaysia, Singapore, and the Philippines. Since then, Brunei, Vietnam, Laos, Burma, and Cambodia also have joined ASEAN. While organized to promote common economic, social, and cultural goals, ASEAN acquired a security dimension after Vietnam's invasion of Cambodia in 1979; this aspect of ASEAN expanded with the establishment of the ASEAN Regional Forum in 1994, which comprises 22 countries, including the U.S. Indonesia's continued domestic troubles have distracted it from ASEAN matters and consequently lessened its influence within the organization.
Indonesia also was one of the founders of the Non-Aligned Movement (NAM) and has taken moderate positions in its councils. As NAM Chairman in 1992-95, it led NAM positions away from the rhetoric of North-South confrontation, advocating instead the broadening of North-South cooperation in the area of development. Indonesia continues to be a prominent, and generally helpful, leader of the Non-Aligned Movement.
Indonesia has the world's largest Muslim population, though it is a secular state, and is a member of the Organization of the Islamic Conference (OIC). It carefully considers the interests of Islamic solidarity in its foreign policy decisions but generally has been an influence for moderation in the OIC. President Wahid has pursued better relations with Israel, and in August 2000 he met with former Israeli Prime Minister Peres.
After 1966, Indonesia welcomed and maintained close relations with the donor community, particularly the United States, western Europe, Australia, and Japan, through the Intergovernmental Group on Indonesia (IGGI) and its successor, the Consultative Group on Indonesia (CGI), which have provided substantial foreign economic assistance. Problems in Timor and Indonesia's reluctance to implement economic reform, have complicated Indonesia's relationship with donors.
Indonesia has been a strong supporter of the Asia-Pacific Economic Cooperation (APEC) forum. Largely through the efforts of President Soeharto at the 1994 meeting in Bogor, Indonesia, APEC members agreed to implement free trade in the region by 2010 for industrialized economies and 2020 for developing economies.
Indonesia's armed forces (Tentara Nasional Indonesia, or TNI, formerly ABRI) total about 250,000 members, including the army, navy, marines, and air force. The army is by far the largest, with about 196,000 active-duty personnel. Defense spending in the national budget is only 1.8% of GDP but is supplemented by revenue from many military businesses and foundations.
The Indonesian National Police were for many years a branch of the armed forces. The police were formally separated from the military in April 1999, a process which was formally completed in July 2000. With 150,000 personnel, the police form a much smaller portion of the population than in most nations.
Indonesia is at a relative peace with its neighbors, although competing South China Sea claims, where Indonesia has large natural gas reserves, concern the Indonesian Government. Without a credible external threat in the region, the military historically viewed its prime mission as assuring internal security. Military leaders now say they wish to transform the military to a professional, external security force but acknowledge that the armed forces will continue to play an internal security role for some time.
Throughout Indonesian history the military maintained a prominent role in the nation's political and social affairs. Traditionally a significant number of cabinet members had military backgrounds, while active duty and retired military personnel occupied a large number of seats in the parliament. Commanders of the various territorial commands played influential roles in the affairs of their respective regions. In the post-Soeharto period, civilian and military leaders have advocated removing the military from politics (for example, the military's representatives in parliament have been much reduced), but the military's political influence remains extensive
The United States has important economic, commercial, and security interests in Indonesia. Indonesia remains a linchpin of regional security due to its strategic location astride a number of key international maritime straits. Relations between Indonesia and the U.S. are good. The U.S. played an important role in Indonesian independence in the late 1940s and appreciated Indonesia's role as a staunch anti-communist bulwark during the Cold War. Cordial and cooperative relations are maintained today, although the two countries are not bound by any formal security treaties. The United States and Indonesia share the common goal of maintaining peace, security, and stability in the region and engaging in a dialogue on threats to regional security. The United States has welcomed Indonesia's contributions to regional security, especially its leading role in helping restore democracy in Cambodia and in mediating among the many territorial claimants in the South China Sea.
The U.S. is committed to assisting Indonesia's democratic transition and supports the territorial integrity of the country. There are, nonetheless, friction points in the bilateral political relationship. These have centered primarily on East Timor and human rights, as well as on differences in our respective foreign policy orientations. The U.S. Congress cut off grant military training assistance (IMET) to Indonesia in 1992 in response to a November 12, 1991, incident in East Timor in which Indonesian security forces shot and killed East Timorese demonstrators. This restriction was partially lifted in 1995. Military assistance programs were again suspended, however, in the aftermath of the violence and destruction in East Timor following the August 30, 1999 referendum favoring separation from Indonesia. Indonesia continues to align itself with Non-Aligned Movement and G-77 foreign policy views, often taking unhelpful positions on issues of international human rights concern.
On worker rights, Indonesia was the target of several petitions filed under the Generalized System of Preferences (GSP) legislation arguing that Indonesia did not meet internationally recognized labor standards. A formal GSP review was suspended in February 1994 without terminating GSP benefits for Indonesia. Since 1998, Indonesia has ratified all eight International Labor Organization core conventions on protecting internationally recognized worker rights and allowed trade unions to organize. However, enforcement of labor laws and protection of workers rights remains inconsistent and weak in some areas. Continuing economic malaise has increased difficulties for workers and caused an increase in child labor (10-14 years old).
Economic Relations with the United States
U.S. exports to Indonesia in 1999 totaled $2.0 billion, down significantly from $4.5 billion in 1997. The main exports were construction equipment, machinery, aviation parts, chemicals, and agricultural products. U.S. imports from Indonesia in 1999 totaled $9.5 billion and consisted primarily of clothing, machinery and transportation equipment, petroleum, natural rubber, and footwear. Economic assistance to Indonesia is coordinated through the Consultative Group on Indonesia (CGI), formed in 1989. It includes 19 donor countries and 13 international organizations that meet annually to coordinate donor assistance. The 2000 CGI meeting is to be held October 17-18 in Tokyo.
The U.S. Agency for International Development (USAID) has provided development assistance to Indonesia since 1950. Initial assistance focused on the most urgent needs of the new republic, including food aid, infrastructure rehabilitation, health care, and training. Through the 1970s, a time of great economic growth in Indonesia, USAID played a major role in helping the country achieve self-sufficiency in rice production and in reducing the birth rate.
USAID's current program aims to support Indonesia as it recovers from the financial crisis by providing food aid, employment generating activities, and maintaining critical public health services. USAID is also providing technical advisers to help the Indonesian Government implement economic reforms and fiscal decentralization and is supporting democratization and civil society development activities through non-governmental organizations.
Principal U.S. Embassy Officials
Ambassador--Robert S. Gelbard
Deputy Chief of Mission--Stephen D. Mull
Political Counselor--Pamela J. Slutz
Economic Counselor--Judith R. Fergin
Administrative Counselor--Robert I. Weisberg
USAID Director--Desaix Myers, III
Defense Attache--Col. Joseph H. Daves
Consul General--Stephen A. Edson
Public Affairs Officer--Greta N. Morris
Agricultural Counselor--Kent D. Sisson
Commercial Counselor--Alice A. Davenport
The U.S. Embassy in Indonesia is located at Jalan Medan Merdeka Selatan 3-5, Jakarta (tel. (62-021) 344-2211). U.S. mail to the embassy may be addressed to FPO AP 96520.
The U.S. Consulate General in Surabaya is located at Jalan Dr. Sutomo 33, Surabaya East Java (tel. (62-31) 568-2287).
Principal Officer--Robert Pollard
The U.S. Consular Agency in Bali is located at Jalan Hayam Wuruk 188, Bali (tel. (62-361) 233-605.
Consular Agent--Andrew Toth
For information on economic trends, commercial development, production, trade regulations, and tariff rates, contact the International Trade Administration, U.S. Department of Commerce, Washington, DC 20230.