Indonesia

In August 1945, two days after the surrender of the Japanese occupiers, Sukarno and Hatta declared Indonesian independence. At this point, Sukarno, the country’s first president, laid down the Pancasila or five principles of the Constitution, namely: nationalism, internationalism, representative democracy, social justice and theism. A four-and-a half year guerrilla war followed as the Dutch tried to re-establish their colony. In December 1949, the Netherlands formally recognized Indonesian sovereignty. A military coup in October 1965 meant the beginning of the end of the Sukarno era. The economic policies of Suharto’s New Order fiercely encouraged foreign direct investment (FDI). Also, the Suharto regime restored and maintained tight political control over the archipelago. Economically there were massive ups and downs. The boom in oil prices and the related increase in Indonesia’s oil exports resulted in strong growth of GDP per capita between 1970 and 1980. However, with oil prices trending downwards, GDP shrank 20 per cent from 1980 to 1990, followed by a 13 per cent decline from 1990 to 2000. FDI aiming at the integration of Indonesia’s cheap labour in global production chains in textile, clothing, sport shoes and electronics could not take over the role of mining as growth motor. Moreover, economic growth was hampered by pervasive corruption, with immense wealth accumulated by the Suharto family and their business cronies.