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Definition: Indonesia from The Macquarie Dictionary

a republic in South-East Asia, consisting of a group of about 13 000 islands lying between the Malay Peninsula and New Guinea, principally Java, Sumatra, Kalimantan (part of Borneo), Sulawesi (Celebes), Irian Jaya (Western New Guinea), the Maluku Islands, Bali, and the western part of Timor; a Netherlands colony before independence in 1945; a republic since 1950; the former Portuguese colony of East Timor was part of Indonesia from 1976 to 2002. 1~919~443 km2 Bahasa Indonesia, also many local languages, mainly Javanese rupiah Jakarta

Formerly Dutch East Indies


Summary Article: Indonesia
from The Hutchinson Unabridged Encyclopedia with Atlas and Weather Guide

Country in southeast Asia, made up of 13,677 islands situated on or near the Equator, between the Indian and Pacific oceans. It is the world's fourth most populous country, surpassed only by China, India, and the USA.

Government The 1945 constitution, as amended in 2002, is based on a state ideology, the Pancacila (Five Principles), of monotheism, humanitarianism, Indonesian unity, representative democracy by consensus, and social justice. The country has a presidential political executive, with the president (and vice-president) directly elected since 2004 for a five-year term, renewable once. In 2008, the constitution was amended, requiring a party or coalition of parties to win a minimum of 20% of seats in parliament or 25% of the popular vote to nominate a presidential candidate. The legislature, known as the People's Consultative Assembly (Majelis Permusyawaratan Rakyat: MPR), is made up of two chambers, the 560-member House of People's Representatives (Dewan Perwakilan Rakyat, DPR), and the 132-member Regional Representative Council (Dewan Perwakilan Daerah: DPD), which has limited powers over regional issues. The DPR's members are elected for five-year terms by proportional representation in multi-member constituencies. The DPR passes legislation and monitors the executive, while the MPR has powers to amend the constitution. The constitution provides protection to the religious belief of non-Muslims in what is a mainly Muslim country. The president works with an appointed cabinet, exercises the right of veto over DPR bills, and appoints governors for each of Indonesia's 27 provinces.

HistoryIndonesia's geographical location has always assured its historical prominence. The archipelago dominates the main lines of communication both west–east (from the Atlantic and Indian Oceans to the Pacific) and north–south (from the great Eurasian landmass to Australasia).

Between 3000 and 500 BC, two waves of immigrants from the north (proto-Malays and deutro-Malays) settled in the region alongside the resident Melanesian population (still found in the eastern islands). A series of Hindu and Buddhist empires rose and fell between the 7th and 14th centuries, after which Islam spread throughout the region. From ancient times Indonesian sailors traded and voyaged as far afield as the west coast of Africa in one direction, and to China and Japan in the other.

The coming of the Europeans The wealth of the islands of Indonesia – the East Indies – was well known to Europeans from Greek and Roman times onwards, both by reputation and by such indirect trade as took place via the Middle East. It was, indeed, the riches of the ‘Spice Islands’ (Maluku, or the Moluccas) that drew the Portuguese and Spanish, sailing in different directions around the world, to the archipelago in the first place. The spices of the region were then, in the 16th and 17th centuries, integral both to European cuisine and to European medicine, and commanded very high prices.

The establishment of Dutch rule From 1511 the Portuguese, followed closely by the English, set up trading posts throughout the archipelago. However, it was the Dutch who eventually won the lion's share of influence in what was to become the Netherlands East Indies. The Dutch East India Company established itself in Java, founding Batavia (now Indonesia's capital city Jakarta) in 1619. In the 17th century the Dutch had still only managed to establish trading centres, while extensive Indonesian kingdoms dominated the region. But during the 18th–19th centuries the Dutch gradually took control of all of present-day Indonesia, including the surviving sultanates.

Although Britain occupied the islands for a brief period during the Napoleonic Wars, in general it suited British purposes to have agreed spheres of influence in Southeast Asia, and the Netherlands posed little threat to British interests. Indonesia became a Dutch colony in 1816, and from 1824 onwards a series of agreements between Britain and the Netherlands gave the latter ‘rights’ to the entire archipelago, while Britain was assured of its ‘rights’ in the area that now constitutes Malaysia and Singapore. In 1828, with the Dutch annexation of Irian Jaya, the boundaries of the modern republic were set.

Dutch exploitation in the 19th century The Dutch viewed Indonesia as a source of enrichment of the home country. When war and the secession of the southern provinces (now Belgium) bankrupted the Dutch exchequer, a system of forced labour, called the Cultuurstelsel (culture system) was imposed on Java in 1830. Under it, commercial crops were grown, under compulsion, by the Javanese peasantry for delivery to the Dutch, who shipped the goods to the Netherlands for sale. The system was highly profitable to the Dutch (who built up their railway network and reduced their national debt from the proceeds), but, by causing neglect of food crops, it impoverished the Javanese and precipitated famine.

Changed international conditions encouraged the Dutch to open their colony to international commerce after 1870. The capital of many countries flowed in, opening up the outer islands to old and new commercial crops and products, of which tin, rubber, and oil became of great strategic and economic importance.

The beginnings of Indonesian nationalism Resistance to Dutch occupation flared up in peasant risings and occasionally in national wars, such as that on Java from 1825 to 1830. Islam was a convenient symbol for resistance and nationalism: its spread through the archipelago had been accelerated by the arrival of the Spaniards and the Portuguese in the 16th century (as a kind of extension of the Mediterranean conflict and partly, too, as a proto-nationalist gesture).

Devoutly Muslim Atjeh (now Aceh), a principality in northern Sumatra, held up against Dutch repression well into the 20th century, the resistance overlapping in time with the formation of Sarekat Islam. The latter was a nationalist movement that had begun as an organization of Muslim traders, but had quickly, after 1912, extended its appeal. It became a genuinely mass movement, with millions of followers.

During World War I, the apprehensive Dutch permitted the formation of a people's assembly (Volksraad) as a safety valve, but they kept it firmly in their control and on a strict leash. More significantly, left-wing ideas began to enjoy currency in nationalist circles, and the Communist Party of Indonesia (PKI) was founded in 1920 (thus predating even the Chinese Communist Party). In 1926 and 1927 the PKI attempted revolution, but the fragmented risings were soon crushed. The Indonesian Nationalist Party (PNI), led by Achmed Sukarno, was founded in 1927, but was brutally suppressed by the Dutch and its leaders exiled.

Regional tensions and World War II The great interwar depression hit the Netherlands East Indies very badly. To protect Dutch exports to the colony, the import of Japanese goods was restricted. To maintain the prices of important Dutch products, such as rubber and tin, production and export were deliberately curtailed. These moves were resented by both Japan and the USA. Japan depended upon economic access to Indonesia, and the USA – a major importer of tin and rubber – resented Dutch ‘commodity control’ schemes. The USA also challenged Japanese claims to regional hegemony, and in this atmosphere there was an ever-growing likelihood of a war in the Pacific in which Indonesia would be embroiled.

The Japanese overwhelmed Dutch resistance in 1942 with humiliating ease, taking the archipelago in a mere few days, and subjecting the former colonial masters to every conceivable indignity. The PNI, with Sukarno at its head, was installed as an anti-Western puppet government.

For the Indonesians the occupation had positive and negative features. On the one hand, they were allowed use of the national anthem, the national language, and the national flag, and given military training by the Japanese. On the other, countless thousands were recruited for slave labour on such infamous projects as the Thai ‘death railway’, from which few returned. For those who remained in Indonesia, Japanese rule quickly revealed itself as even more oppressive than that of the Dutch. However, the Japanese did make efforts to improve rice production and to stimulate a local textile industry, and some of their officers genuinely contributed to the advancement of Indonesian nationalism.

Independence achieved As defeat loomed, the Japanese moved to grant Indonesia independence. They were forestalled when Sukarno declared independence on 17 August 1945. The British were entrusted with restoring Indonesia to Dutch colonial rule, and quickly found themselves engaged in armed confrontation with the nationalists. By the late 1940s the Dutch, who had taken over the task of suppression, were clearly losing, and the USA used the weapon of Marshall Aid (post-war financial assistance to European countries) to force the Netherlands to the conference table. Sovereignty was transferred to the new state of Indonesia in 1949, and in December 1949 Sukarno was elected president.

Indonesia under Sukarno The new republic had been planned as a federation of 16 constituent regions, but was made unitary in 1950. This led to dominance by Java (which has two-thirds of Indonesia's population), provoking revolts in Sumatra and the predominantly Christian South Maluku. Until 1957 Indonesia experimented with a broadly democratic constitution, in the Western sense, but the general elections in 1955 failed to throw up any clear majority party, though the PKI did very well. The years since independence had been marked by conflicts between Communists, Muslims, and regional groups and minorities, accompanied by a series of attempted coups, rebel governments, and violent confrontations.

Sukarno accordingly introduced the policy of ‘Guided Democracy’ in 1957, with political parties being dissolved in 1960 and parliament replaced by a People's Consultative Assembly. A relatively stable period followed due to an alliance between Sukarno, the PKI, and the army. From then until his loss of effective power in 1965 Sukarno pursued an anti-imperialist and nationalist policy, became a prominent member of the non-aligned movement, and nationalized foreign enterprises.

However, by the 1960s, inflation was running at 650% per annum as, under Sukarno's increasingly authoritarian rule, foreign debts accumulated. International relations were strained and Indonesia left the United Nations and moved increasingly into the Soviet sphere. Soviet-supplied arms were used in the confrontation with the Dutch over the recovery of Irian Jaya in 1960–62 and with Malaysia over Borneo in 1963.

The overthrow of Sukarno Sukarno's nationalization programme and close relations with communist states alarmed the USA, especially when he challenged the two giant US oil companies Stanvac and Caltex.

In October 1965 six army generals and their aides were kidnapped and murdered in an attempted coup. An unknown army officer, Gen Suharto, defeated the coup's leaders, undermining both Sukarno and the PKI, who were linked to the plot. There followed several months of mass political murder as up to 700,000 people were killed by the army, and many more imprisoned without trial. Anyone remotely suspected of having communist sympathies was killed, including large numbers of Indonesian Chinese believed to have links with communist China. The PKI was obliterated and then outlawed. It was later revealed that the CIA had supplied the army with lists of communists and their sympathizers.

Suharto's ‘New Order’ In March 1966 Gen Suharto took over executive power from Sukarno and instituted a ‘New Order’ in which political power was concentrated in the hands of a group of army and security-force officers. In February 1967 Suharto formally replaced Sukarno as president. He then set about reversing his predecessor's policies and stabilizing a chaotic economy with the aid of a group of US economists nicknamed ‘The Berkeley Mafia’. Lavish incentives were introduced to encourage new foreign investment, assets nationalized by Sukarno were restored to their former colonial owners, and generous compensation paid for losses suffered by foreign companies as a result of Sukarno's policies. Support for China and the Soviet Union was abandoned and Indonesia turned to the West, while maintaining a non-aligned policy.

During the 1970s Indonesia's oil revenue enabled the government to invest in numerous development programmes. By the 1980s the country was self-sufficient in rice, thousands of new schools and health centres had been opened, and communications with the outer islands had been improved. However, the new oil wealth also gave rise to corruption on an unprecedented scale.

Separatist conflict in East Timor In 1975 Indonesia annexed the former Portuguese colony of East Timor. The area remained isolated (as a result of travel restrictions) until the early 1990s as the army fought to quash the secessionist movement, which was spearheaded by the Front for an Independent East Timor (Fretilin). An estimated 200,000 people out of a population of 700,000 died from war or related famine during this period. The United Nations refused to recognize Indonesia's claim to East Timor.

International outrage followed the massacre in November 1991 of 50 Timorese demonstrators by the Indonesian army. In October 1996, Carlos Belo, the bishop of Dili, East Timor, and José Ramos-Horta, the exiled spokesperson for Fretilin, were jointly awarded the Nobel Peace Prize for their efforts against Indonesian human-rights abuses in East Timor.

Irian Jaya and resettlement programmes Separatists movements opposed to Suharto's authoritarian rule also flared up in Maluku (the Moluccas) and in Irian Jaya, where the Free Papua Movement (OPM) systematically opposed Indonesian rule.

In 1984, in response to an OPM-organized rebellion in Irian Jaya, Suharto announced a stepping-up of his ‘transmigration programme’, aimed at resettling families from overpopulated Java, Madura, and Bali in sparsely populated outer islands, such as Sumatra, Kalimantan, Sulawesi, and Irian Jaya, where interethnic friction was evident. Over 6 million people were relocated in this way, but transmigration was subsequently scaled down because of environmental and economic problems. The programme was strongly opposed by native Melanesians and created more than 10,000 refugees in neighbouring Papua New Guinea.

Reform and repression in the early 1990s Improved living standards and economic reforms led to pressure for greater political reform and openness, and in April 1991 a 45-member Democracy Forum was launched by leading members of the country's religious and cultural intelligentsia. It was seen as an attempt to ventilate ideas about freedom in politics in what remained an authoritarian state. The government imposed strict limitations on the group's operations.

The new political openness appeared threatened in 1992 after two students were arrested for taking part in a satirical review mocking the forthcoming elections, and in early 1993 several student publications were shut down.

The ruling Golkar Party was returned to power in the 1992 assembly elections, but with a 5% drop in support. The legislature, the MPR, re-elected Suharto as president for a sixth consecutive term in 1993. Suharto made information minister Harmoko the first civilian leader of Golkar, which caused deep concern in the military who wanted Suharto's successor to be drawn from their ranks.

Crackdown on opposition activists The election in 1994 of former president Sukarno's daughter, Megawati Sukarnoputri, as head of the Indonesian Democratic Party (PDI) aroused further fears among the ruling Golkar elite. Consequently, in June 1996, Golkar engineered a split in the PDI to oust Megawati as leader. This led to violent street demonstrations by members and supporters of the PDI, many of whom were jailed for several months.

The crackdown on anti-government activists continued in August 1996 when supporters of the PDI and the radical opposition party, the People's Democratic Party (PRD), were arrested on charges of subversive activities during the July riots in Jakarta. In April 1997 the PRD was banned from taking part in the May general election and its leader, Budiman Sudjatmiko, was sentenced to 13 years' imprisonment for ‘subversion’.

Several hundred people were reported killed and more than 1,200 were missing after rioting and violence between indigenous ethnic groups and migrants in the province of West Kalimantan between January and March 1997.

Asian financial crisis Indonesia was badly hit by the financial crisis which swept across Asia in 1997–98. It led to a foreign exchange crisis, with a massive depreciation in the value of the currency, the rupiah, and GDP declined by 13% in 1998 and inflation rose to 60%. The government announced in September 1997 that major construction projects, including roads, power stations, and oil refineries, would be postponed until the economy improved. In the province of Irian Jaya it was reported in October 1997 that more than 460 people had died from famine caused by prolonged drought.

In October 1997, Singapore and Malaysia pledged US$10 billion and US$1 billion respectively in financial assistance to help Indonesia and in November 1997 the International Monetary Fund (IMF) agreed a US$43 billion rescue package. The associated restructuring reforms included closure of 16 banks, including some controlled by relatives of President Suharto, but matters failed to improve, with the country's level of external debt exceeding annual GDP and unemployment climbing to over 10%.

Matters were worsened by a prolonged drought, which led to hundreds dying of famine in Irian Jaya in October 1997 and forest fires on the islands of Borneo and Sumatra, in February 1998, causing US$1 billion of damage. Food prices had trebled by spring 2008, leading to violent food riots which claimed lives as troops fired at demonstrators.

The government's failure to adhere to the IMF's austerity package led to the rupiah falling further – by 80% against the dollar between September 1997 and January 2008 – and to the IMF withholding the release of its credits.

Suharto re-elected but civil unrest mounts In February 1998 Gen Wiranto became the new head of the armed forces and Suharto's 46-year-old son-in-law became commander of the Strategic Reserve Command (Kostrad). Suharto was re-elected president in March 1998 by the MPR, unopposed, and was given emergency powers. But Suharto continued to resist the economic reforms demanded by the IMF and in March 1998 appointed a new cabinet dominated by economic nationalists and cronies, including his daughter as welfare minister, and his golfing partner as trade and industry minister.

From February 1998, demonstrations began on university campuses, protesting against Suharto's re-election and rising food and fuel prices, and calling for democratic reform. This followed the government's implementation of IMF-demanded austerity measures, leading to petrol prices rising 70% and kerosene, used as a cooking fuel by the poor, 25%. The demonstrations were held in defiance of government bans and gathered momentum, with ordinary workers becoming involved. In May 1998, there were demonstrations and riots in Jakarta, Medan (on Sumatra), Yogyakarta, and Bandung, and clashes with the police, who used live bullets. Indonesia's official human-rights body later claimed over 1,000 were killed.

The disturbances depressed the stock exchange and the value of the rupiah further. With the economic crisis having made most Indonesian companies technically bankrupt, many laid off employees. This increased the desperation which fuelled the disturbances.

Suharto steps down On 21 May 1998 President Suharto bowed down to the pressure and resigned from office. His constitutional successor, vice-president Bacharuddin Jusuf Habibie, was sworn in. The commander of the country's armed forces, Gen Wiranto, pledged his support for the new president. Suharto's resignation met with cautious optimism, though certain opposition leaders warned that the nomination of Habibie, a life-long protégé of Suharto, would not hasten any significant democratic changes in the country or improve its human rights record.

In July 1998, the ruling Golkar Party removed seven relatives of Suharto from the MPR, while the government offered partial autonomy to East Timor, but ruled out independence. In the same month, Akbar Tanjung, a close ally of President Habibie, was elected Golkar chair in its first-ever free vote.

In August 1998, the IMF, which was satisfied with continuing economic reforms, released another US$1 billion of its rescue package. Former President Suharto's son-in-law was sacked from the army.

By August 1998 more than 40 new political parties had been formed and registered, while the popular Megawati resumed leadership of the PDI. In December 1998 a new party, the Justice and Unity Party (JUP), was formed by a number of senior former members of the ruling Golkar party, including General Try Sutrisino, the vice-president between 1993–98.

Civil unrest and political reform In September 1998 there were riots and looting of houses and shops owned by the country's ethnic Chinese minority, caused by rising food prices, and student protesters demanded President Habibie's resignation.

In November 1998 at least 16 people, some of them students, were killed after troops opened fire in Jakarta on 20,000 demonstrators calling for an end to the military's representation in the legislature and for the president's resignation in Jakarta. The demonstration coincided with a special session of the MPR, which, ahead of elections, repealed much of the repressive legislation of the Suharto era, including the restriction to three officially sanctioned political parties. New political parties were now legalized and a two five-year term limit was imposed on future presidents. There would also be a reduction of the military's quota of seats in the 500 member lower house from 75 to 38; some devolution of political power; and, it was agreed in January 1999, proportional representation, with seat allocation at the provincial level.

Unrest continued throughout 1998 and into 1999, when religiously-motivated fighting escalated, especially on the eastern Spice Island of Ambon. The violence, carried out by Christian and Muslim gangs, took religious and racial tensions to breaking point, and claimed more than 50 lives.

In October 1998, after the conclusion of a ceasefire agreement with the separatist Free Papua Movement (OPM), the government ended the status of the eastern province of Irian Jaya as a military operation zone.

In November 1998, an independent commission reported on the country's May 1998 riots and blamed the military for provoking unrest, in an effort to create an emergency to enable Suharto to stay in power. It also urged the government to investigate former President Suharto's son-in-law, Lt-Gen Prabowo Subianto, for his activities at the time. Marzuki Darusman, chair of the ruling Golkar faction within parliament, publicly apologized for past mistakes.

The election commission delayed, until August 1999, signing off the results of the country's June 1999 parliamentary elections because of claimed irregularities. But President Habibie accepted that Megawati's PDI had come first with 34% of the vote, followed by his Golkar party with 22% in what was the first free ballot in Indonesia in 44 years.

East Timor's independence referendum In mid-November 1998 44 civilians were reported, by the Catholic Church, to have been killed during a military crackdown against separatist rebels in southern East Timor. In January 1999 the government responded to months of increasing political pressure by agreeing to consider autonomy or independence for East Timor. A peace agreement was signed in April 1999 and talks on autonomy continued, but fighting broke out between opposing factions. Over 25 East Timorese refugees were massacred by the militia without the Indonesian army attempting to intervene.

In May 1999, Indonesia and Portugal signed a UN-brokered deal for an 8 August referendum on autonomy or independence for East Timor to be held on 8 August. The referendum was postponed until September 1999 to allow UN monitors to improve security and resulted in 80% of East Timor's population voting for independence. This sparked three weeks of violence, instigated by pro-Indonesian militias, which claimed over 7,000 lives and made 300,000 refugees.

An Australian-led International Force for East Timor (INTERFET) peacekeeping force was sent to East Timor to try and restore order, despite Indonesian protests. All but 4,500 of the 26,000 Indonesian troops and police in East Timor were withdrawn by the end of the month. By October 1999, the Indonesian parliament had agreed unanimously to accept East Timor's independence, and the UN agreed to send 11,000 peacekeepers to oversee the implementation of independence. On 20 May 2002 East Timor achieved formal independence.

Corruption allegations against Suharto In December 1998 the former president, Suharto, was formally questioned for the first time over allegations that he illegally amassed a fortune, estimated at between US$4–20 billion, during his 32 years in power. In March 2000 he was ordered to appear in front of the attorney-general for questioning, but refused because his lawyers said he was too ill. This provoked violent public demonstrations.

In May 2000 he was placed under house arrest, but in September 2000 a court ruled that, having suffered from three stokes in the past year, Suharto was incapable of standing trial on charges of stealing US$571 million during his presidency. In November 2000 the high court overturned this judgement, but in February 2001 the Supreme Court ruled that he was indeed unfit to stand trial.

In October 2000, his son, Tommy Suharto, was arrested in connection with a bomb that had killed 15 people in Jakarta's financial district. Tommy admitted his part in the US$11 million corruption scandal that surrounded the Suharto presidency and was sentenced to 18 months' imprisonment. He was the first member of the Suharto family to admit any wrongdoing and was arrested in November 2001, a year after he was convicted of corruption.

Wahid's presidency The Indonesian leader, B J Habibie, withdrew from the presidential race in October 1999 after he lost a key vote in the legislature. The presidency went to Abdurrahman Wahid, leader of the National Awakening Party (PKB), and a moderate Muslim in poor health. By a remarkable 373 votes to 313, MPs voted him president of Indonesia. Wahid, a scholar best known by his nickname ‘Gus Dur’, had secured the support of some of those who had earlier backed the outgoing president. The surprise defeat of Megawati provoked violence in Jakarta. She was elected vice-president and, as Wahid called for unity and more equal sharing of wealth, protests and rioting petered out across the country.

Wahid pledged to work for national economic recovery and his cabinet contained a balance of radical reformers with allies of the former dictator, Suharto. In February 2000 President Wahid replaced his powerful military chief, General Wiranto, with a civilian, stating Wiranto's alleged role in atrocities in East Timor as the reason. Wiranto remained in the cabinet as coordinating minister for security.

The new Indonesian government under Abdurrahman Wahid declared in November 1999 that it was willing to allow a referendum, but it was unclear whether it would be about independence or the introduction of Islamic law.

Renewed trouble in the provinces In December 1999, the separatist Free Aceh Movement (GAM), a 5,000-strong guerrilla force gained control of much of Aceh province. President Wahid rejected demands by the army to impose martial law to put down the GAM. In May 2000 he signed a three-month ceasefire with the separatist rebels as a first step towards ending the 24 year conflict. However, the agreement did not tackle the issue of sovereignty and, in November 2000, there were further clashes between pro-independence residents and security forces. In April 2001, after negotiations broke down, Wahid ordered a resumption of the war against the rebels, but sought dialogue again from September 2001.

In mid-December 1999 further sectarian fighting between Muslims and Christians broke out in Maluku (the Moluccas), set off by Laskar Jihad, a group of Muslim outsiders, and resisted by Laskar Kristus (the army of Christ) and the Maluku Sovereignty Front. The fighting continued until a peace accord was signed by the Christian and Muslim leaders in February 2002 and claimed 5,000 lives and made 750,000 refugees.

The Indonesian province of Irian Jaya declared independence on 5 June 2000. President Wahid stated, however, that the declaration was unrepresentative of true feeling in the province. Violence in October 2000 left more that 30 people dead on Irian Jaya in clashes between native Papuans and the police. In November 2001, Theys Eluay, the leader of the main independence movement in Irian Jaya province, was kidnapped and killed. His widow blamed the security forces. Riots erupted as news of his death spread, with independence supporters setting fire to several buildings in Jayapura, the provincial capital.

Indonesia experienced disruption in another form when an earthquake measuring 7.9 on the Richter scale struck the island of Sumatra in June 2000, killing more than 100 people, and causing multiple injuries and widespread homelessness.

In October 2000 the UN refused to send aid workers back to West Timor, where three UN officials had been murdered in September. An official claimed that militia gangs were still holding thousands of refugees hostage. The same month, international aid donors pledged US$5.3 billion to finance the country's large budget deficit. This was in addition to an existing IMF loan of US$5 billion. In return the government pledged to reform the economy and act against the militias in West Timor, promptly arresting the leader of the most powerful militia.

In February 2001, indigenous Dayaks, who are mainly Christian or animist, killed between 500 and 1,000 Muslim Madurese in central Kalimantan, in Borneo. Thousands of people fled gangs armed with machetes and spears. After ten days, security forces took steps to regain control. 15,000 Madurese had been transported to Java, with another 20,000 guarded by the military in refugee camps in Sampit waiting to go.

Impeachment of President Wahid In January 2001, violent conflict erupted in Indonesia between supporters and opponents of President Wahid in response to calls for his resignation over two multi-million dollar corruption scandals. As members of parliament agreed to investigate the allegations of corruption, 10,000 students broke down the gates of the Indonesian parliament and engaged with riot police. In response, thousands of Wahid's supporters stormed the offices of political opposition parties in Surabaya, Indonesia's second-biggest city, and East Java, and called for the death of politicians who wanted him impeached.

When the Indonesian parliament voted overwhelmingly to proceed with Wahid's impeachment in May 2001, around 1,000 of the president's supporters stormed the parliament and police opened fire and killed two demonstrators. On 23 July 2001, the parliament voted to impeach President Wahid, and to install vice-president Megawati Sukarnoputri. Wahid had sought to dissolve parliament and impose a state of emergency the day before, but his ministers resigned and the military refused to enforce the decree.

Economic recovery and terrorist challenges From 2000, Indonesia's economy began to recover from the Asian financial crisis and it grew by nearly 5% a year from 2000 to 2006 as Megawati helped stabilize the political situation. She supported the IMF plans for economic reform, but moved cautiously and did not act decisively to take on corruption or restructure the banking system.

Megawati initially took a hardline approach against separatists in Aceh province and in January 2002 police shot dead Abdullah Syafei, the leader of GAM. But in December 2002 she signed a peace agreement with GAM, which promised autonomy and self-government to Aceh from 2004 if GAM disarmed. However, this peace initiative broke down in May 2003 and fighting resumed, leading to the imposition of martial law.

In October 2002 Indonesia was brought into the international ‘war on terrorism’ when Jemaah Islamiah (JI), as Islamic extremist group linked to the al-Qaeda terrorist network, carried out a car-bomb explosion outside a nightclub in a tourist area of Bali, claiming 202 lives. In response, President Megawati introduced new anti-terrorist measures.

Defeat of PDI and Megawati Despite some improvement in the economy, unemployment remained high and the government's failure to tackle corruption led to voters turning against the PDI in the April 2004 parliamentary elections and against Megawati in the country's first direct presidential elections. Held under the revised 2002 constitution, Megawati was defeated in the run-off in September 2004 by Susilo Bambang Yudhoyono of the Democratic Party (DP), who won 61% of the vote to 39%.

Yudhoyono was a retired general who had been a senior officer in the 1975 invasion of East Timor and had been a security minister under Megawati, until leaving her cabinet to found the DP in March 2004. He won election as president on a platform of vowing to fight corruption and terrorism and to create jobs for the country's 50 million unemployed.

Tsunami and Aceh peace accord Yudhoyono became president in October 2004 and faced an early challenge when northwest Sumatra was devastated, on 26 December 2004, by a tsunami (tidal wave) that claimed 237,000 lives, chiefly in Aceh. He accepted international aid and took the opportunity to restart the peace process in Aceh. This culminated in the signing of a peace agreement with the separatists and the granting of political autonomy to the province, with elections held there, for a governor, in December 2006.

Terrorism and natural disasters In October 2005 the JI Islamic terrorists killed a further 19 people at a tourist resort in Bali. In June 2007 Indonesian anti-terrorist police captured eight senior figures from the JI.

During 2006–07 Indonesia was struck by a series of natural disasters, including an earthquake and tsunami in Java in May and July 2006, claiming 6,500 lives, floods in Jakarta in February 2007, leaving 340,000 people homeless, and earthquakes in Sumatra in March and September 2007, killing nearly 100 people.

Death of Suharto The former president Suharto died in January 2008, aged 86, and the government announced seven days of mourning. Despite this the government continued to press on with a civil case initiated in 2007 to try and recover US$441 million that Suharto had allegedly stolen under the cover of a charitable fund, Supersemar. In March 2008 a civil court cleared Suharto of wrongdoing but ordered Supersemar to pay $110 million.

Re-election of Yudhoyono With the economy growing at an annual rate of 6%, Yudhoyono was re-elected president in July 2009. He won 61% of the vote to finish ahead of Megawati (27%) and Jusuf Kalla (12%) of Golkar, who had been vice-president 2004–09. His success followed parliamentary elections in April 2009 in which the DP finished first, but well short of a majority of seats.

In his second term, Yudhoyono continued his fight against terrorism and in September 2009 police shot dead the country's most-wanted Islamist militant Noordin Mohammad Top.

Despite a wider global financial crisis, Indonesia's economy remained strong, with GDP growing by 6% a year in 2010–14, with unemployment falling to 6%.

The PDI's Widodo is elected president Yudhoyono was barred by the constitution from standing for a third term as president. This left the field clear to the governor of Jakarta since 2012, Joko Widodo of Megawati's PDI, which had won most votes in the April 2014 parliamentary elections. Widodo, a former furniture maker who was popular among the urban poor and the young, won 53% of the vote in July 2014, defeating the ex-army general Prabowo Subianto, who won 47%. Widodo, who was sworn in as president in October 2014, pledged to break with the country's authoritarian past, continue the drive against corruption, improve welfare for the poor, and focus resources on education and new technology.

President Widodo took a hard line on enforcement of Indonesia's tough laws on drug trafficking. He refused to intervene to stop the execution by firing squad of Australian, Brazilian, and Dutch drug convicts in January and April 2015, which led to the countries withdrawing their ambassadors in protest.

On 14 January 2016 Islamic State (IS) terrorists carried out explosions and shootings in a shopping centre in Jakarta, which claimed the lives of four civilians and the four attackers.

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The Republic of Indonesia’s 17,000 islands form a 5,120-kilometer archipelago bordering India’s Nicobar Islands to the west and Papua New Guinea...

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