One of the largest and most vibrant democracies, as well as the biggest majority-Muslim country, Indonesia today is also among the world’s most dynamic economies. Indeed, with GDP growth at over 6% every year since 2009 – and with per capita income levels doubling in the past five years – Indonesia is fast becoming a magnet for international investment. This is having positive effects on the country’s political stability as well as on its international stature and influence, while also posing important challenges for the government – at both the national and regional levels – in terms of ensuring successful and sustainable development across this wide archipelago.

ANCIENT HISTORY: While contemporary Indonesia only came into being after the Second World War, the islands that now constitute the republic have a far longer history. Indeed, they were home to a wide variety of our early ancestors, giving Indonesia a major role in the study of human anthropology. The remains range from evidence of humanoid activity discovered at Sangiran on Java that dates back 1.5m-1.6m years to the 700,000-year-old “Java Man” and, more recently, the 74,000 -year-old “Flores Man”.

WRITTEN RECORD: Yet the first written history does not appear until around 200 BCE, with many scholars maintaining that the ancient Sanskrit references to Dvipantara in the Hindu epic, the Ramayana, refer to a Javanese kingdom. By the 2nd century CE, Hindu and Buddhist sites were established in west Java and beyond, with the 7th century seeing the rise of the Srivijaya Empire on Sumatra. This was a powerful maritime state, which extended its borders to include the Malay Peninsula and much of Java, centring on control of the Straits of Malacca. Srivijaya later came into conflict with Javanese kingdoms, such as the Hindu Majapahit founded in east Java in the 13th century. By then, Islam had also arrived, spread by Arab traders and first taking hold in Aceh. The last Srivijayan ruler, Parameswara, converted to Islam in 1414, founding the sultanate of Malacca and ending the empire.

EUROPEANS: The first Europeans to turn up in numbers were the Portuguese in the 16th century, who arrived to find Java divided between the sultanates of Mataram, Pajang, Banten and Demak Bintoro, while Malacca continued to dominate the straits. The Portuguese conquered Malacca and then, as part of a strategy to control the all-important spice trade to Europe, established trading posts on Ambon, Solor, Ternate, Flores and Timor. Yet by the 17th century, their power had dwindled and the Dutch took over as the colonial rulers. With the exception of a short period of British rule during the Napoleonic Wars, the Dutch controlled Indonesia until the mid-20th century. Beginning on Java, the Dutch established Batavia – today’s Jakarta – as their capital and then spread their control and influence over the archipelago, although Aceh did not come under their rule until the 1930s.

WWII & INDEPENDENCE: The Second World War, however, changed the pattern of European colonialism forever. Indonesia – then known as the Dutch East Indies – was occupied by the Japanese in early 1942. In 1945, with Japan surrendering itself, the Indonesian nationalists, led by Sukarno and Mohammad Hatta, declared independence before the return of the Dutch. This was done in an historic declaration, delivered by Sukarno on August 17, 1945. Independence was not to be achieved without bloodshed, with the British attempting to reoccupy the country to hold it for the Dutch. Conflict resulted and continued after the Dutch returned and the British left. On December 27, 1949, however, the Dutch recognised an independent Indonesia, withdrawing from all the islands except West Papua. This too was handed over to Indonesia in 1963. Since then, the country has enjoyed the territorial scope it has today, covering a total land area of around 1.9m sq km and combining a variety of ethnic groups – from Javanese to Dayaks, Chinese to Eurasian.

REVOLUTION TO REFORMASI: As leader of the revolution, Sukarno rapidly established himself at the head of the new Indonesian state. This was based on a set of five principles, known as Pancasila. These were part of the original 1945 constitution and still form the official political philosophy of the nation. They include belief in: the one and only God, a just and civilised humanity, the unity of Indonesia, democracy, and social justice for all country’s people.

NEW CONSTITUTION: In 1950, a new constitution was drawn up, based on parliamentary democracy, with the first elections held in 1955. Sukarno’s Indonesian National Party (PNI) came first, with the Indonesian Communist Party (PKI) also making a strong showing. A third force, the Islamists, also showed their strength.

The 1950 constitution and the divided nature of many voters’ loyalties gave rise to a series of short-lived coalition governments in the 1950s, with this instability, combined with outbreaks of violence on the ground, leading to Sukarno abrogating the constitution in 1959 and restoring the 1945 model. Sukarno also established presidential oversight of parliament, effectively removing legislative control over laws, in favour of a Supreme Advisory Council. Sukarno’s leadership continued – he described his regime as “guided democracy” – until his overthrow in 1965. This took place amidst a particularly dark period in Indonesian history, when upwards of 500,000 alleged PKI members or sympathisers – mainly ethnic Chinese – were massacred, following an abortive coup attempt. Major General Suharto then took over, continuing authoritarian rule in the guise of the “New Order”.

During this time, Indonesia saw a highly centralised system develop, with transmigration policies seeing many Javanese resettled to less populated parts of the country – a move that later gave rise to ongoing ethnic tensions. Indonesia also annexed West Papua, and East Timor, provoking international condemnation. By the 1990s, the Suharto regime was nearing its end. More open political protests began, with the Asian financial crisis of 1997-98 undermining Suharto’s main achievement – the economic growth of the country. In 1998, Suharto resigned and was replaced by his vice- president, Bacharuddin Jusuf Habibie, who began the period of change known as “Reformasi”.

ELECTIONS: The first, free elections since 1955 were held in 1999, with the largest party, the Indonesian Democratic Party-Struggle (PDI-P), led by Megawati Sukarnoputri, Sukarno’s daughter. The new president, however, was Abdurrahman Wahid, known as Gus Dur, who came from a background in one of the largest Muslim organisations, the Nahdlatul Ulama (NU). Gus Dur led a coalition, with Megawati as vice-president, until 2001, when protests led to his handing over of executive duties to Megawati, who became president. Under Gus Dur, the policy of decentralisation was begun, partly in response to increasingly virulent calls from many regions for more autonomy.

Megawati ruled until 2004, when elections swept the current president, Susilo Bambang Yudhoyono (known as SBY), to power. SBY won re-election in 2009, his last term under the two-term maximum rule of the constitution, which remains a heavily modified version of the 1945 document. Now, with fresh elections for president and parliament due in 2014 – ones in which SBY cannot stand – Indonesia has emerged as a country with a growing tradition of democratic politics, still shaped in many ways by the founding ideas of Pancasila: religion, social justice, nationalism and democracy. The political dynamics of the country are in many ways the result of the interplay of these sometimes overlapping, sometimes competing forces.

EXECUTIVE POWER: The head of state and head of the armed forces, the president of Indonesia also appoints and heads the government. Since a constitutional amendment in 2004, the president has been elected directly for no more than two five-year terms. He or she then forms the cabinet, appointing all its members, which include all the heads of ministries and other high secretaries of state.

The president also runs on a ticket with a vice-president, usually, although not necessarily, from another party. To propose a presidential candidate, a party currently needs 3.5% of the legislative vote, although as OBG was going to press discussion continued on efforts by the larger parties and other constitutional experts to raise the minimum support level to 20% of the parliament or 25% of the popular vote before a candidate can run for president.

The president can propose legislation to the parliament – the People’s Representative Council (DPR) – and negotiate with the DPR on legislative matters. He or she may also issue government regulations (provided they are in accordance with the law), issue pardons (provided the advice of the Supreme Court has been considered), sign international treaties, and appoint ambassadors and members of the Judicial Committee – but only with the DPR’s approval.

The president’s role then, reflects the concerns of the reformasi era; the wide-ranging power exercised by Suharto and Sukarno has been largely removed or tamed. The DPR has gained in consequence, with the need to obtain its approval meaning that presidential initiatives are often the result of coalition and consensus-building in the DPR.

LEGISLATIVE POWERS: The DPR is the most powerful chamber of the bicameral People’s Consultative Assembly (MPR), with the Regional Representatives Council (DPD) the second chamber. As the name suggests, the DPD brings the regions into the centre of power, with the chamber composed of four members from each province, with 132 in all voted in at the 2009 elections. The members are elected on a one-term-only basis for five years, with the initial idea that they be non-partisan, although many now have party ties. The DPD can propose legislation to the DPR and must give its approval to legislation concerning regional issues, but is not able to return, veto or revise bills on other issues, unlike many other upper chambers. The DPR remains the seat of national legislative power for most political purposes. It can propose its own bills, as well as debate and vote on those proposed by the government. It must also work with the government and presidency on the budget, while it also enjoys oversight powers over government officials, including the president.

At the last, 2009 elections, the DPR had 560 members, who are all elected for single, five-year terms. The largest party after the 2009 results was the Democratic Party (DP), which won 26.4% of the vote and 148 seats. Second was the Party of Functional Groups (Golkar), the ruling party during Suharto’s presidency. This won 18.9% and 106 seats. Third was the PDIP, with 16.8% and 94 seats, while the Prosperous Justice Party (PKS) was fourth, with 10.2% and 57 seats. Five other parties also won representation: the National Mandate Party (PAN), the United Development Party (PPP), the National Awakening Party (PKB), the Great Indonesia Movement Party (Gerindra), and the People’s Conscience Party (Hanura).

In terms of alignments, PKS, PAN, PPP and PKB are all moderate Islamist parties, while the others have come from a more nationalist background, with Gerindra and Hanura both led by former generals. In 2009, SBY was able to put together a 366-seat coalition of the DP, Golkar, PAN, PPP and PKB, leaving the opposition with a total of 194 seats. However, voting can be more fluid than this suggests, with parties and deputies sometimes breaking ranks with others in the same block. The DPR is chaired by the speaker, currently Marzuki Alie. It also has some 11 important commissions, each with a different area of responsibility. The commissions exercise oversight functions, as well as formulate bills for the DPR’s consideration.

Under new, 2012 rules aimed partly at reducing their number, parties standing in the 2014 legislative elections must have at least 30% female membership, be represented in all provinces and comply with all other statutory rules. At time of writing, 16 parties had met these requirements, while 18 had failed, raising questions over which will be able to run in 2014.

GOING LOCAL: One of the most profound changes in Indonesia during the reformasi period has been the introduction of decentralisation. This has led to a proliferation of regions with significant political powers, while provinces too have gained in importance. Decentralisation has been held responsible for defusing regional tensions and improving democracy, while it has also been accused of hampering development. The balance sheet since the policy was launched in 2001 thus has entries in both the plus and minus columns. Decentralisation is major part of the political scene, as well as a key factor in doing business in Indonesia today (see Regions chapter).

JUDICIAL POWER: At the pinnacle of Indonesia’s judiciary sits the Supreme Court, which has oversight over some 20 high courts and below them around 250 district courts. Since 2003, however, the Constitutional Court presides over all constitutional matters. The Judicial Commission, appointed by the president and the DPR, appoints the Supreme Court justices, who elect the chief justice, who at the time of writing was Hatta Ali. Indonesian law borrows from Roman, Dutch and customary law, while the more autonomous region of Aceh works under sharia law.

In recent times too, another legal institution, the Corruption Eradication Commission (KPK), has achieved a deal of progress in combating graft within the institutions of state at the national and local levels.

OUTLOOK: In the years following independence, the country tackled some huge challenges – not the least of which was moulding this new nation together from such widespread components. That Indonesia now has a successful democracy, wide political and economic freedoms, and a growing economy is a great achievement, with Indonesians justifiably proud of the transition the country has made. Challenges do remain – corruption is a key one, as is the transition to a more open market – and progress in further reforms since SBY’s re-election has also been slow. Yet the social consensus seems widespread that these issues need to be tackled in a way that protects hard-won rights while also moving the country forward. This will be the task facing the new government of 2014.