Islands of diversity: A rich blend of cultures and peoples make up this archipelagic state

The name Indonesia dates back to the 18th century, and it derives from the Latin and Greek Indus, and the Greek nèsos, meaning “island”. Early settlers arrived in the country around 2000 BCE, when the Austronesian peoples started to migrate to this region from Taiwan. They already showed well-honed maritime skills, as the archipelago’s strategic location promoted inter-island trading. A fertile soil, the proliferation of commerce and mastery of rice cultivation allowed for villages, cities and small kingdoms to flourish over the following centuries. The earliest evidence of the local adoption of Islam dates back to the 13th century, in northern Sumatra, where the religion was spread by Muslim emissaries travelling to and from China. By the 16th century, Islam was the region’s predominant religion.

IDENTITY: The philosophical basis of the state is known as Pancasila. Pancasila consists of two Sanskrit words, panca meaning “five” and sila meaning “principle”. It comprises five inseparable and interrelated principles: nationalism, humanitarianism, representative democracy, social welfare and monotheism. These still have a major underlying role in Indonesia’s political culture and identity, even though their interpretation – and relative weight – has varied over the decades.

INDEPENDENCE & DEMOCRACY: The Dutch dominated Java by the mid-18th century and colonial rule lasted for more than two centuries. However, the Second World War brought the Japanese invasion and subsequent occupation, which ended Dutch rule and encouraged the previously suppressed independence movement. In 1943, Sukarno and Mohammad Hatta were decorated with awards by the Japanese emperor. The Japanese occupation only ended when the Japanese forces surrendered in the Pacific. Two days later Sukarno declared Indonesian independence.

The battle for independence between Indonesian forces and the Dutch lasted four years, as the Dutch, initially backed by the British, tried to re-establish their rule. However, on December 27, 1949, after four years of sporadic battles and a fierce criticism of the Dutch by the UN, the Netherlands officially recognised Indonesian sovereignty under the federal structure of the United States of Indonesia. On August 17, 1950, five years after the proclamation of independence, Sukarno declared the Republic of Indonesia independent.

In 1957 Sukarno initiated a system of “guided democracy” proclaiming himself as president for life in 1963. Reciprocal distrust between the pillars of power resulted in an attempted coup on September 30, 1965 carried out by the Indonesian Communist Party.

The army halted the coup under the command of Major General Suharto, and soon power was signed over to Suharto to restore order. Assuming full power in March 1967, Suharto went on to win seven consecutive five-year terms in office. People showed signs of frustration towards the widespread corruption and Suharto’s authoritarianism. The Asian financial crisis of 1997-98 caused the currency to plummet and inflation to soar. Under immense pressure, Suharto resigned on May 21, 1998, leaving the office to Bacharuddin Jusuf Habibie, the vice-president. Habibie restored order by regaining IMF and other donor-community support for a wide-ranging economic stabilisation programme.

POLITICAL SITUATION: The current president of Indonesia is Susilo Bambang Yudhoyono (often referred to as SBY). He assumed office on October 20, 2004, and was re-elected in 2009 for another five-year term, although his strength with the voters did not translate over to the parliament, where his party now holds less than 20% of the seats. In 2014 there will be new presidential elections, this time without SBY (as he will have already completed the two terms allowed by the constitution), which means that the country’s political environment is set for change.

In 2011, Indonesia chaired the 10-nation ASEAN bloc, playing a strong role as an emerging economic power in the region. While chairing the ASEAN, the country continued strengthening its diplomatic relations with neighbouring countries, including Singapore, Malaysia and the Philippines. It also played a key role in resolving territorial disputes between ASEAN countries Thailand and Cambodia.

ECONOMY & VALUE-ADDED INDUSTRIES: With almost 50% of the Indonesian population below 29 years old, the government is encouraging the growth of the creative economy to drive rising income levels and create jobs. The government aims to transform the image of the nation while turning innovation and creativity into new competitive advantages. At present, creative industries such as fashion, handicrafts, advertising and design contribute about 7.5% of the non-oil-and-gas export total and employ nearly 8m people.

The government, through the Indonesia Investment Coordinating Board, has focused in the past few years on increasing the percentage of foreign direct investment targeting more value-added industries, in light of its strategy of shifting Indonesia from a resource-based economy to a value-added one.

NATURAL RESOURCES: Indonesia’s natural resources include petroleum, gas, tin, nickel, timber, copper, coal, gold and silver. In 2011 oil production reached 994,000 barrels per day (bpd), ranking at number 20 in the world. Oil reserves currently stand at 3.89bn barrels and the country imports about 420,000 bpd. Indonesia is also the world’s number-one coal exporter, exporting over 300m tonnes of coal in 2011. The country has more than 61bn tonnes of coal resources, which are mainly located in Kalimantan and Sumatera. Production has increased from 149m tonnes in 2005 to 208m in 2009, and is estimated to reach 332m tonnes for 2012, 45.2% of which had already been reached in the first half of the year. Other minerals produced in Indonesia are tin (46m tonnes), nickel (5.8 m tonnes), gold (127m kg) and silver (326m kg).

Indonesia is the largest producer of crude palm oil in the world, closely followed by Malaysia. As prices for the commodity declined between August and September 2012, the government decreased export taxes in January to 7.5% versus 9% in December 2012. The country was expected to produce 23m-25m tonnes of crude palm oil by the end of 2012, by which time the total area of oil palm cultivation was estimated to reach 8.2m ha. In light of concerns over the illegal logging of tropical rainforest, many Indonesian companies have taken steps to address this problem by, among other thing, joining the Roundtable for Sustainable Palm Oil.

A 10,000-MW acceleration plan was started in 2004 in effort to add more capacity mainly by setting up coal-fired thermal power plants by 2010. However, the completion of the plan was delayed until 2014 due to the numerous projects that are still in development, causing rotating blackouts in many cities. The power transmission and distribution sector is largely dominated by the state-owned energy company, Perusahaan Listrik Negara (PLN). A new law regarding energy enacted in 2009 put an end to PLN’s monopoly, allowing private businesses to provide electricity for public use. This wide gap between supply and demand creates opportunities for foreign investment.

POPULATION: Indonesia is the world’s 16th-largest economy, the third-most-populous democracy, the largest archipelagic state and home to the largest Muslim population. With more than 245m people, Indonesia now has the fourth-largest population on earth, with Jakarta being the country’s most populated city with around 9.1m inhabitants.

The island of Java, roughly the size of New York State, is the most populous island in the world – at 129m – and one of the world’s most densely populated areas. The population in Indonesia has continued to grow steadily, and it is expected to reach 265m by 2020 and 306m by 2050. More than 300 different ethnic groups have been identified in Indonesia.

GEOGRAPHY: The country is spread across an archipelago of 17,508 islands, 6000 of which are inhabited. Its coastline totals 54,716 km, with land boundaries of 1758 km, including 1107 km with Malaysia, 820 km with Papua New Guinea and 288 km with East Timor, making it the 15th-largest country in the world.

The archipelago lies between the Pacific and the Indian oceans, and bridges the Asian and Australian continents. This position has had a strong influence on the cultural, social, political and economic life of the country. Lying near tectonic plates, Indonesia is prone to earthquakes and volcanic eruptions.

LANGUAGE: Indonesia has numerous related but distinct cultural and linguistic groups, many of which are ethnically Malay. Since independence, Bahasa Indonesian has become the language of most written communication, education, government, business and media. However, local languages such as Balinese and Javanese are still important in many areas. In the past few years, English has become more important throughout Indonesia’s emerging upper-middle class.

RELIGION: Constitutional guarantees of religious freedom apply to the six religions recognised by the state; these include Islam (86.1%), Protestantism (5.7%), Catholicism (3%), Hinduism (1.8%), Buddhism (about 1%) and Confucianism (less than 1%). On the island of Bali, more than 90% of the population practises Hinduism. In some remote areas, animism is also still practised.