ABSTRACT
Indonesia has made impressive economic and social progress since recognition of its sovereignty by the Dutch on 27 December 1949. Progress has perhaps been all the more impressive coming, as it did, after about eight years of struggle. The Indonesians endured about four years of Japanese occupation through the Second World War and then had to deal with a four-year revolutionary war against the colonialist occupation (Higgins, 1957). Neither has progress since 1949 been a smooth procession. Indonesia, under both the Japanese occupation (1942–45) and the nationalist-revolutionary leadership of President Sukarno (1945–66), suffered from economic and political instability that stifled economic growth and social development (Booth, 1998), culminating in economic and political crises in 1965. This led many observers to term the country a chronic dropout or a basket case (Hill, 2000) despite the fact that Indonesia is blessed with both natural and human resources, endowments that have drawn the attention of many prominent economists 1 since the early years of independence. Unlike other countries of Asia that gained independence in the immediate post-war period, however, such as India, Myanmar, Pakistan and Sri Lanka, Indonesia encountered economic, social and political difficulties so challenging as to put its viability as a unified nation in doubt for many years.
