Order Code RL32394
CRS Report for Congress
Received through the CRS Web
Indonesia: Domestic Politics,
Strategic Dynamics, and American Interests
Updated April 3, 2006
Bruce Vaughn
Analyst in Southeast and South Asian Affairs
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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Indonesia: Domestic Politics, Strategic Dynamics, and
American Interests
Summary
Indonesia is the world’s fourth most populous country and the most populous
Muslim nation. It is also a moderate Muslim state which is strategically positioned
astride key sea lanes which link East Asia with the energy resources of the Middle
East. Indonesia is also seen by many as an increasingly valuable partner in the war
against radical Islamist militants in Southeast Asia. Jakarta is continuing to
democratize and develop its civil society and rule of law under the leadership of
President Susilo Bambang Yudhoyono, who many view as effective and reform
minded. However, a legacy of abuse of human rights by the military which stems
from the era of former President Suharto remains unresolved.
United States foreign policy concerns have focused on building relations with
Indonesia to more effectively counter the rise of militant Islamist extremists as well
as develop relations with a geopolitically important state through which strategic sea
lanes link the Middle East and Northeast Asia. The United States has also sought to
promote democracy, the rule of law, and human rights in Indonesia in addition to
promoting American trade and investment interests there.
This report surveys key aspects of Indonesia’s domestic politics and strategic
dynamics in addition to providing general background information on Indonesia. It
also provides an overview of the bilateral relationship between the United States and
Indonesia. The report examines issues of ongoing congressional interest, including
Indonesia’s role in the war against violent Islamist extremists, international military
education and training (IMET), human rights, religious freedom, promotion of
democracy and good governance, trade, foreign assistance, and regional geopolitical
and strategic interests. The report seeks to provide a broader context for
understanding the complex interrelated nature of many of these issues, several of
which are explored in greater detail in other CRS reports.
There have been several cases of avian flu in humans reported in Indonesia, and
there have been concerns that Indonesia does not have the resources sufficient to
contain a large scale outbreak should one occur. Thus far the government has been
reluctant to pursue large scale culls of poultry to stem its spread.
For additional information on Indonesia see the following Congressional
Research Service (CRS) reports: CRS Report RL33260, Papua, Indonesia: Issues for
Congress, by Bruce Vaughn; CRS Report RS22136, East Timor Potential Issues for
Congress, by Rhoda Margesson and Bruce Vaughn; CRS Report RS20572,
Indonesian Separatist Movement in Aceh, by Larry Niksch; CRS Report RS21753,
Indonesia-U.S. Economic Relations, by Wayne Morrison; and CRS Report
RL31672, Terrorism in Southeast Asia, by Bruce Vaughn (coordinator), Emma
Chanlett-Avery, Richard Cronin, Mark Manyin, and Larry Niksch. This report will
be updated.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Military-to-Military Ties and Human Rights . . . . . . . . . . . . . . . . . . . . . 2
The Tsunami . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Avian Flu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Historical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Political Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Structure of Parliament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Role of the Military . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Autonomous and Secessionist Movements and
Inter-Communal Strife . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
East Timor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Aceh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Papua . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Inter-Communal Strife and Pan Islamic Movements . . . . . . . . . . . . . . . . . . 14
Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Foreign Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Indonesia and the War Against Terrorism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
United States-Indonesian Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Geopolitical and Strategic Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
U.S. Security Assistance to Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Options and Implications for the United States . . . . . . . . . . . . . . . . . . . . . . . . . . 24
List of Figures
Figure 1. Map of Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
List of Tables
Table 1. U.S. Foreign Assistance to Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . 23

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Indonesia: Domestic Politics, Strategic
Dynamics, and American Interests
Introduction
Indonesia is the world’s most populous Muslim nation and is the world’s fourth
most populated nation overall. It has extensive natural resources. A large percentage
of world trade transits the strategically important straits of Malacca which link the
Indian Ocean littoral to the South China Sea and the larger Pacific Ocean basin.
Indonesia is also perceived by many as the geopolitical center of the Association of
Southeast Asian Nations (ASEAN), which is a key actor in the geopolitical dynamics
of the larger Asia-Pacific region. Indonesia is still emerging from a period of
authoritarian rule and is struggling to consolidate its status as one of the world’s
largest democracies. For the most
part, Indonesia also represents a
moderate form of Islam that has the
Indonesia at a Glance
potential to act as a counterbalance
Population: 242 million (2005 est.) with a growth
to more extreme expressions of
rate of 1.45%, 2005 est. Life expectancy 69.57
Islam. Despite this, radical Islamists
(2005 est)
and terrorist cells operate amidst the
Area: 1,826,440 sq. km (about three times the size
country’s many social, economic,
of Texas )
and political uncertainties. Ongoing
Geography: An archipelagic state of 17,000
islands, including some 6,000 occupied islands,
internal strife and social dislocation
which straddles the equator. Key sea lanes linking
stemming from inter-communal
the Indian Ocean and the Southwest Pacific pass
d i s c o r d , a u t o n o m o u s a n d
through Indonesia.
secessionist movements, political
Capital: Jakarta, 8.8 million 2004 est.
Ethnic Groups: 490 ethnic groups, Javanese 45%,
machinations among elites, Islamic
Sundanese 14%, Madurese 7.5%, coastal Malay
extremism, pervasive government
7.5%, others 26%.
corruption, and a faltering economy
Languages: Bhasa Indonesia, official modified
all undermine stability in Indonesia.
form of Malay, and local dialects including 270
Despite this, Indonesia has begun to
Austronesian languages and 180 Papuan. 13
languages have over one million speakers.
consolidate democratic gains, build
Literacy Rate: 87.9% (2005 est.)
a more robust civil society and
Religion: approximately 87% Muslim.
further strengthen its economy
GDP growth: 5.3% (2005 est.).
which suffered setbacks during the
Per capita GDP ppp: $3,700 (2005 est.)
Asian financial crisis of 1997/98.
Unemployment rate: 10% (2005 est.)
Main exports: Oil, natural gas, appliances, textiles
The report will identify key issues
for Congress before returning to the
Sources: U.S. Department of State, CIA World Fact
broader Indonesian context within
Book, Economist Intelligence Unit, BBC News.
which those issues are set.

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CRS-2
Issues for Congress
A series of policy decisions taken in 2005 mark a fundamental shift in the U.S.
approach toward Indonesia. Specific actions over the past year have helped deepen
the bilateral relationship. The Bush Administration’s lifting of restrictions on
International Military Education and Training (IMET), Foreign Military Financing
(FMF), and Foreign Military Sales (FMS) in 2005 has laid the groundwork for
improved relations. Indonesia has also moved on issues of concern to the United
States. The relationship has improved for a number of reasons as outlined below.1
! The expansion and consolidation of Indonesia’s democracy through
the 2004 parliamentary and presidential elections.
! The election of President S.B. Yudhoyono, who is seen as effective
and reform oriented.
! The goodwill towards, and increased understanding of, Indonesia in
the wake of the December 26, 2004 tsunami.
! The perception of Indonesia as an increasingly valuable partner in
the war against militant Islamist extremists.
! East Timor’s desire to develop positive relations with Indonesia.
! The arrest of Anthonius Wamang, a suspect in the shooting of two
Americans near Timika.
! Progress in peace talks between the government and rebels in Aceh.
! Increasing appreciation in the U.S. of the strategic and geopolitical
importance of Indonesia.
! Prospects that Indonesian military reforms will proceed.
! Indonesia’s position on the East Asian Summit.2
Though there was much positive momentum in the relationship created over the past
year, unresolved human rights issues may yet limit the extent of the bilateral
relationship particularly in the area of military-to-military cooperation. While
President Yudhoyono is seeking to reform the military and prevent future abuses he
may not wish to expend limited political power to prosecute past abuses by the
military.
Military-to-Military Ties and Human Rights. In 2005, the Administration
of President George Bush moved to open International Military and Education and
Training (IMET), Foreign Military Financing (FMF), and Foreign Military Sales
(FMS) programs for Indonesia. This was viewed by many as a first step toward
normalizing the military-to-military relationship. Indonesia is perceived as a key
player in the war against terror in Southeast Asia and as an increasingly important
geopolitical actor in the Asia-Pacific region. Despite these developments, many
1 This is an expanded version of a list developed by CRS Specialist Larry Niksch.
2 Indonesia reportedly worked to have a more expansive membership in the recently formed
East Asian Summit to include Australia, New Zealand and India in addition to the ASEAN
states, China, Japan, and Korea. Other countries, led by China, reportedly favored a more
exclusive grouping that left out India, Australia, and New Zealand. This move was viewed
by some observers as favorable to American interests. Sunny Tanuwidjaja, “The East Asian
Summit and Indonesia,” The Jakarta Post, February 1, 2006.

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CRS-3
continue to have concern over human rights abuses in Indonesia.3 Senator Patrick
Leahy has stated “a key gap remains regarding justice for the victims of atrocities.”
Other Members, however, have emphasized the progress Indonesia has made in
several areas. Senator Christopher Bond, for instance, has stated that President
Yudhoyono has made “a strong commitment to reform, to a recognition of human
rights and to fighting corruption.”4
During the Cold War, the United States was primarily concerned about
communist influence in Indonesia. After the Cold War, congressional views on
Indonesia were more influenced by ongoing concerns over human rights abuses by
the Indonesian National Defense Forces (TNI). The events of 9/11 added the concern
of how best to pursue the war against terror in Southeast Asia. Some Members of
Congress remain dissatisfied with progress on bringing to justice Indonesian military
personnel and police responsible for human rights abuses in East Timor. The January
2006 arrest of Anthonius Wamang, who is thought to have led an attack near Timika
Papua that killed two Americans, may resolve what has been an irritant in the
relationship. As the United States has moved from the post-Cold War world to fight
the war against terror, human rights concerns have increasingly been weighed against
American security interests, and particularly the need to develop effective
counterterror cooperation with Indonesia to combat radical Islamic groups. There is
also increasing appreciation of Indonesia’s geopolitical position within Southeast
Asia among American decision-makers. Many observers view such cooperation as
critical to effectively fight terrorism in Southeast Asia.
Some analysts have argued that the need to obtain effective counterterror
cooperation and to secure American strategic interests in the region necessitates a
working relationship with Indonesia and its key institutions, such as the military.
Other Indonesian observers take the view that the promotion of American values,
such as human rights and religious freedom, should guide U.S. relations with
Indonesia while others would put trade and investment first. Some have viewed
military cooperation between the U.S. military and the Indonesian military during
relief operations following the December 2004 tsunami in Sumatra as having focused
attention on the issue of the need for military to military cooperation. (For further
information see CRS Report RL33260, Papua, Indonesia: Issues for Congress, by
Bruce Vaughn, and CRS Report RS22136, East Timor: Potential Issues for
Congress, by Rhoda Margesson and Bruce Vaughn.)
The Tsunami. On December 26, 2004, an undersea earthquake off the coast
of Sumatra triggered a tsunami wave that killed an estimated 122,000 (with an
additional 114,000 missing) and left over 406,000 displaced persons in Indonesia.
Most of the devastation was in Aceh in northwest Sumatra, which was the closest
landfall to the epicenter of the Indian Ocean earthquake. This disaster led to a
massive international relief effort in which the United States played a leading role.
In Indonesia, this included helicopter-borne assistance from the aircraft carrier USS
3 “US Determined to Restore Ties with Indonesian Military, Naval Chief,” Associated Press
Newswire, May 6, 2005.
4 Ken Guggenheim, “Fight Looms in Congress Over Easing Indonesia Military
Restrictions,” Associated Press, February 2, 2005.

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CRS-4
Abraham Lincoln, which was accompanied by the USS Bonhomme Richard, and the
USS Fort McHenry. Before their departure from the area 2,800 relief missions were
flown, some 2,200 patients were treated, and 4,000 tons of relief supplies were
delivered.5 In the wake of the tsunami, the U.S. government pledged a total of $397.3
million in humanitarian and recovery assistance for Indonesia.6 (For further
information see CRS Report RL32715, Indian Ocean Earthquake and Tsunami:
Humanitarian Assistance and Relief Operations, Rhoda Margesson, Coordinator.)
Avian Flu. Since 2004, the United States Navy Medical Research Unit at the
U.S. Embassy in Jakarta has provided assistance to Indonesia to help Indonesia fight
the spread of avian flu.7 Over 90 people worldwide have been killed by avian flu. Of
that number 20 have been killed by the H5N1 virus in Indonesia. Nine of the 20
killed by the virus in Indonesia have been killed in 2006. This is a larger number of
fatalities than in any other country in 2006. So far most cases are thought to have
been transmitted through contact with birds and are not thought to have been
transmitted between people. There is much concern however, that the virus could
mutate and become communicable between people. One source has stated that the
virus killing birds in Indonesia is different from the one killing humans.8 Indonesian
inspectors have sought to disinfect areas where birds are kept and promote improved
hygiene but face a daunting challenge as many in Indonesia keep small numbers of
birds. It is estimated that some 500,000 birds are kept in Jakarta alone. Authorities
have been reluctant to initiate mass culls of birds.9 (For further information see CRS
Report RL33219, U.S. and International Responses to the Global Spread of Avian
Flu: Issues for Congress, coordinated by Tiaji Salaam-Blyther, and CRS Report
RL33349, International Efforts to Control the Spread of the Avian Influenza (H5N1)
Virus: Affected Countries’ Responses, coordinated by Emma Chanlett-Avery.)
Historical Background
Modern Indonesia has been shaped by the dynamic interaction of indigenous
cultures with external influences — especially the succession of influences of
Hinduism, Buddhism, Islam, Dutch colonial rule, and a powerful and nationalistic
independence movement.10 The geographic definition of modern Indonesia began to
5 “Indonesia: Tsunami Reconstruction,” USAID, May 11, 2005, [http://www.usaid.gov]
6 “USAID Rebuilds Lives After the Tsunami,” USAID Tsunami Reconstruction, March 24,
2006. [http://www.usaid.gov]
7 Embassy of the United States, Jakarta, Indonesia, “More Avian Flu Outbreaks in
Indonesia,” [http://www.usembassyjakarta.org]
8 Frank Walker, “Indonesia Risks Bird Flu Pandemic,” The Sun Herald, February 26, 2006.
9 T. Soetjipto and T. Nathalia, “Indonesia Confirms 20th Human Bird Flu Death,” Reuters,
February 25, 2006.
10 Much of the background information is drawn from a comprehensive chapter by Harvey
Demaine, “Indonesia: Physical and Social Geography,” in The Far East and Australasia
(Surrey: Europa Publications, 2002).

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CRS-5
take shape under Dutch direct colonial rule, which began in 1799.11 The Dutch East
Indies were occupied by Japan during World War II. Following the Japanese
surrender in 1945, independence was declared by nationalist leader Sukarno. After
a four-year anti-colonial insurrection, the Republic of Indonesia gained its
independence from the Dutch in 1949.
Independence was followed by a period of parliamentary democracy, which was
replaced in 1959 by President Sukarno’s “Guided Democracy” that lasted until
1965.12 In the late 1950s the United States provided clandestine assistance to military
rebellions in outlying provinces of Indonesia out of fear that communist PKI was
gaining control of the country.13 On September 30, 1965, the military, under General
Suharto, neutralized Sukarno. The official version of events is that the military
stepped in to avert a communist coup. In the aftermath, over 160,000, and possibly
up to a million, Indonesians lost their lives. President Suharto ruled Indonesia until
1998. During this 32-year period, his authoritarian “New Order” provided the
political stability thought necessary by his supporters for fast paced economic
growth. Indonesia’s economy grew at an average annual rate of almost 7%14 from
1987 to 1997.15
A period of reform, or “reformasi,” followed Suharto’s fall. Suharto was
succeeded by B.J. Habibie (1998-99), Abdurrahman Wahid (1999-2001), and
Megawati Sukarnoputri (2001-04). Despite the political instability during this
period, a number of key reforms designed to enhance good governance and expand
democracy were implemented. However, by 2003, the momentum for reform
appeared to be faltering.16
Key reforms, such as divesting the military of its substantial business interests
and fighting corruption, including corruption in the courts, remain to be completed.
Recent efforts under President Yudhoyono’s administration are viewed by many as
cause for optimism. In 2004 the parliament ordered the military to get out of business
11 Harvey Demaine, “Indonesia: Physical and Social Geography,” The Far East and
Australasia (Surrey: Europa Publications, 2002). p. 493.
12 Michael Vatikiotis, Indonesian Politics Under Suharto: The Rise and Fall of the New
Order (London: Routledge Publishers, 1998). p. 1.
13 John Bresnan, ed. Indonesia: The Great Transition. (Lanham: Rowman and Littlefield,
2005) pp. 245-7.
14 “Background Note: Indonesia,” Department of State, Bureau of East Asian and Pacific
Affairs, October 2003.
15 Michael Vatikiotis, Indonesian Politics Under Suharto: The Rise and Fall of the New
Order (London: Routledge Publishers, 1998). p. xviii.
16 “Survey of Indonesian Electorate,” Asia Foundation, December 9, 2003.

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CRS-6
by 2009.17 Yudhoyono is a former general and went through US IMET training
earlier in his career. He is viewed as sympathetic to military reform.18
The source of legitimacy, or lack thereof, for government has changed for the
Indonesian people over time. The Dutch colonial administration was viewed as
illegitimate. The Sukarno Presidency sought to base its rule on moral concepts but
it did not provide sufficient economic development. This was subsequently provided
by President Suharto until 1997, when the Asian financial crisis undermined his
ability to do so. At that point, with economic growth declining, Indonesians were no
longer prepared to accept what was increasingly viewed as a corrupt and authoritarian
regime. This brought on the era of democratic reform whose energy had appeared to
be dissipating before fully completing its goal of instituting responsive and
representative government. A key test for President Yudhoyono’s government will
be its ability to establish its political legitimacy based on good governance and a
more firmly established civil society while also delivering the benefits of economic
prosperity to the people.19
Political Transition
There are a number of signs that Indonesia has made significant progress toward
institutionalizing its democracy and more firmly establishing civil society.20 The
General Elections Commission functioned well during the 2004 elections.21 A
vigorous and open media has taken root.22 Indonesia’s parliamentary elections in
April 2004, and Presidential elections of July and September 2005, deemed by
international observers to be free and fair, did much to instill confidence in
Indonesia’s democratic process.
Indonesia did much to consolidate its democratic reform process following the
Suharto era. Since his departure, civil society has expanded, and an open media has
emerged. In addition to the first direct election of the president, the military no longer
has seats in parliament and the police have separated from the military.
A distinction also needs to be made between the rise of political Islam and
Islamist radicals. While there is increasing affinity between Muslims on the periphery
17 Donald Greenless, “Indonesia Wants its Military out of Business,” International Herald
Tribune, May 4, 2005.
18 Jane Perlez, “Bush Seeks to Heal Long Indonesia Rift,” The New York Times, February
8, 2005.
19 Muthia Alagappa, ed. Political Legitimacy in Southeast Asia: The Quest for Moral
Authority (Stanford: Stanford University Press, 1995).
20 John McBeth, “The Betrayal of Indonesia,” Far Eastern Economic Review, June 26, 2003.
21 Christine Tjhin, “Civil Society After Akbar’s Acquittal,” The Jakarta Post, February 17,
2004.
22 Tim Meisburger, ed. Democracy in Indonesia: A Survey of the Indonesian Electorate in
2003 (Jakarta: The Asia Foundation, 2003). p. 55.

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CRS-7
of the Islamic world, in places like Indonesia, and Muslims at the perceived centre
in the Middle East, this does not translate into broad-based militancy in largely
moderate Indonesia. Rather, it has increased the importance of issues, such as Iraq,
and Israel and Palestine, on the Muslim consciousness of Indonesia. This process of
identification has been facilitated by an increasingly globalized media which can
serve to link the world-wide Islamic community.
Structure of Parliament. Indonesia’s national legislative structure consists
of three separate bodies. First is a House of Representatives (DPR) of 550 members
elected from party lists in multi-seat districts. The DPR has the primary role in
passing laws. Second is a new 128 seat Regional Representative Council (DPD)
whose members are elected directly. The DPD does not yet have a clearly defined
legislative role. Third is the People’s Consultative Assembly (MPR) which is
composed of members of both the DPR and the DPD. It is responsible for passing
constitutional amendments and conducting presidential impeachments.
The parliament as a whole is still finding its way and is beginning to play a more
proactive role on legislation and with the budget. The support for the parliament is
still under the administration of the executive secretariat, which is under the
executive branch. The DPR has come under criticism for focusing on party concerns
and passing only 10 of 55 bills in the first year of its five-year term. More than 70%
of the 550 legislators who assumed office in September 2004 are legislators for the
first time. Forty-nine percent of legislators have a university degree and 33% have
an advanced degree.23
The Role of the Military
The Indonesian National Defense Force (TNI) is generally regarded as the
strongest institution in Indonesia. Its origins date to the struggle for independence.
The TNI traditionally has been internally focused, playing a key role in Indonesian
politics and preserving the territorial integrity of the nation — largely from internal
threats — rather than focusing on external security concerns. Its strong tradition of
secular nationalism has acted to help integrate the nation. Government expenditures
on the military in 2003 totaled only 1.3% of GDP.24 The key elements of the military
in Indonesia are the Army Strategic Reserve Command, the Army Special Forces
Command, other special forces, and the Military Regional Commands. There are also
Air Force and Naval commands. While the military now has a less formal role in the
politics of the nation than it had in the Suharto era, it remains a key actor behind the
scenes.25 That said, some observers are concerned about its indirect influence over
23 Ridwan Max Sijabat, “DPR Criticized for Bad Performance,” The Jakarta Post, October
4, 2005.
24 Asia Society, “Indonesia,” [http://www.asiasource.org].
25 Rizal Sukma, “The Military and Politics in Post-Suharto Indonesia,” in Thang Nguyen and
Frank Jurgen Richter, eds., Indonesia Matters: Diversity, Unity, and Stability in Fragile
Times (Singapore: Times Media Private Ltd. 2003).

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CRS-8
politics. The Indonesian military has attracted negative attention through reports of
involvement with human rights abuses in East Timor, Aceh, Papua, and Maluku.
Efforts to reform the military that were begun in the post-Suharto reformasi
period now appear to be moving forward once again. Indonesian Defense Minister
Juwono Sudarsono is reported to have estimated that the defense budget of $2.8
billion must be doubled to achieve a professional military and modernized armed
force that does not have to look to businesses and other ventures for alternative
sources of income.26 The government is currently reviewing military-run businesses.
Those deemed inefficient are being turned over to the government.27 President
Yudhoyono has recently nominated Air Force Head Air Marshal Djoko Suyanto to
lead the Armed Forces of Indonesia. The Air Force is the least powerful branch of the
Indonesian Armed Forces. This position traditionally has been held by an Indonesian
Army general. During his “fit and proper” hearing before the House Commission I
on Security and Defense, Suyanto vowed to keep the military out of politics and
move forward with internal reform but stated that he did not see a need to dismantle
the territorial command structure, a move viewed by many as seeking to gain favor
with the relatively powerful army.28 There is speculation that Suyanto will be a place
holder until President Yudhoyono can put General Djoko Santoso in the position.29
Suyanto replaces Sutarto who was viewed as a reform oriented professional.30
President Yudhoyono’s predecessor, former President Megawati Sukarnoputri, had
reportedly preferred a less reform-oriented general to head the armed forces.
During the period of reform, the TNI officially abandoned the doctrine of
dwifungsi, or dual function, which gave it an official role in the politics of the
nation.31 Appointed members to the legislative bodies from the military were
removed while the police were separated from the TNI. Efforts were also begun to
more firmly establish civilian control of the armed forces. Supporters of the reform
agenda in Indonesia would like to see additional measures taken, including reform
of the army’s territorial structure, a full withdrawal of the military from independent
business activities, improving the military’s sensitivity to human rights, and
eliminating links to extremist elements.32
26 S. Kagda, “Reforming the Armed Forces in Indonesia,” The Business Times, February 7,
2006.
27 “Indonesian Government to Take Over Inefficient Army-owned Businesses,” BBC News,
February 1, 2006.
28 Munnigarr Sri Saraswati, “Suyanto Vows to Reform TNI,” Jakarta Post, February 2,
2006.
29 “Indonesia: New Military Chief,” SBS World News, February 8, 2006.
30 “Indonesia’s Future Military Chief Vows respect for Human Rights,” Agence France
Presse, February 1, 2006.
31 For a detailed analysis of earlier role of the military in politics, see Harold Crouch, The
Army and Politics in Indonesia (Ithaca: Cornell University Press, 1978).
32 Angel Rabasa and John Haseman, The Military and Democracy in Indonesia: Challenges,
Politics, and Power (Santa Monica: RAND Corp. 2002).

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CRS-9
Two theories have been put forward as to why the TNI has not acted more
effectively in suppressing ethnic and religious violence in Indonesia. One theory
argues that the military simply lacks the capability to act more effectively. It takes the
view that the chain of command from Jakarta to the outlying provinces has broken
down. The other theory is more complicated. It takes the view that elements within
the TNI have over time “deliberately fomented violence or failed to act against it...
[the objective being to] weaken the national leadership ...”33 to undermine the
democratic reform process as a way of instigating a return to authoritarian rule and/or
insuring that the privileges of the army would not be threatened. There were
allegations of military action independent of civilian authority in the events in East
Timor in the lead up to the violence of 1999 as well as allegations of TNI
involvement with the now disbanded extremist group Lashkar Jihad.
Some analysts of the TNI see it as having regained much of the power that it lost
with the fall of Suharto. In this view, what has changed is that this power is less
formalized. In the past, the TNI budget was estimated to have been between 50% and
70% self-generated. This part of the TNI budget was largely outside governmental
control. The TNI has emerged from the reformasi period with its territorial command
structure intact, even as it lost its military representatives in parliament.34
The TNI will likely continue to play a central role in the evolution of the
Indonesian polity in the years ahead. It could play a largely constructive role
supporting democratic change, or at least not obstructing it, or it could act to slow
change. It also will continue to play a key role in attempting to suppress autonomous
and secessionist movements in Indonesia and it will likely seek to preserve its
prominent place in Indonesian society.35
Autonomous and Secessionist Movements and
Inter-Communal Strife
Center-periphery tensions between the dominant Javanese culture — centered
in Jakarta and outlying areas such as the former province and now independent state
of East Timor — have been sources of political instability and strife for the
Indonesian state. There are signs that Indonesia is adapting its approach to such
tensions to alleviate autonomous or secessionist tension. This relatively more
moderate approach may reach accommodation where other efforts to quell
Indonesia’s fissiparous tendencies have failed.
33 John Haseman, “Indonesia: The Regional Giant,” in Bruce Vaughn, ed. The Unraveling
of Island Asia: Governmental, Communal, and Regional Instability (Westport: Praeger
Publishers, 2002).
34 Col. John Haseman, William Liddle and Salim Said, “The Evolving Role of the TNI,”
USINDO Security Workshop, October 16, 2003.
35 Angel Rabasa and John Haseman, The Military and Democracy in Indonesia: Challenges,
Politics, and Power (Santa Monica: RAND Corp. 2002).

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CRS-10
The primary security threats to Indonesia are generally thought to come from
within. The political center of the Indonesian archipelago is located in Jakarta on
Java. Traditionally, power has extended from Java out to the outlying areas of
Indonesia. This has been true both under Dutch rule and the modern Indonesian state.
Throughout its history there has been resistance in peripheral areas to this centralized
control. This manifested itself in the former Indonesian province of East Timor,
which is now an independent state, as well as in the far west of Indonesia, in Aceh,
and in the far eastern part of the nation, in Papua. Threats to internal stability also
stem from inter-communal strife between various ethnic and religious groups.
There has been debate about whether Indonesia is an organic state or an artificial
creation of Dutch colonial rule. Analysis of early Indonesian history reveals a level
of integration in terms of economics and trade, if not extensive political unity. While
early empires were precursors of the Indonesian state, political unity is generally
considered to have been a product of Dutch colonial rule, including a series of
lengthy wars to subdue outlying islands and independent political units. The Dutch
Aceh War lasted from 1873 to 1913; making it possibly the longest continuous
colonial war in history. It has been suggested that a key lesson of Indonesian history
is that “unifying the archipelago administratively can only be done by the use of
force.”36 Forces of economic integration, or the creation of a national identity
stemming from the nationalist movement which started in Java in 1908,37 could be
other integrative forces.
East Timor
The Portuguese, whose influence in Timor dates to the 1600s, gave up control
of the island in 1975. With the Portuguese departure, three main parties emerged. Of
these, Frente Revolucionaria do Timor Leste Independente (Fretelin), a leftist leaning
group, soon emerged as the dominant party. On December 7, 1975, Indonesia
invaded East Timor with the then tacit compliance of the United States and
Australia.38 Indonesia, Australia, and the United States are thought to have been
concerned that East Timor would turn into another Soviet satellite state similar to
Cuba. A third of the population of East Timor is thought to have died as a result of
fighting or war-induced famine during the subsequent guerilla war fought by Fretelin
against Indonesia’s occupation.39
On August 30, 1999, East Timorese voted overwhelmingly to become an
independent nation. 98.6% of those registered to vote in the referendum voted, with
78.5% rejecting integration with Indonesia. In the wake of the vote, pro-integrationist
36 Merle Ricklefs, “The Future of Indonesia,” History Today, December 1, 2003.
37 Jusuf Wanandi, “Indonesia: A Failed State?” The Washington Quarterly, Summer, 2002,
p. 135.
38 “Ford and Kissinger Gave Green Light to Indonesia’s Invasion of East Timor, 1975,” The
National Security Archives, December 6, 2001.
39 Michael Mally, “Regions: Centralization and Resistance,” in Donald Emmerson ed.
Indonesia Beyond Suharto: Polity, Economy, Society, Transition (Armonk: M.E. Sharp,
1999). p. 98.

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CRS-11
militias attacked pro-independence East Timorese and destroyed much of East
Timor’s infrastructure. Some 7,000 East Timorese were killed and another 300,000,
out of a total population of 850,000, were displaced, many to West Timor. Hardline
elements of TNI formed pro-integrationist militias in East Timor. These groups
sought to intimidate the East Timorese into voting to remain integrated with
Indonesia under an autonomy package being offered by then President Habbibie.40
It is thought that the TNI had two key reasons for trying to forestall an
independent East Timor. First, there was an attachment to the territory after having
fought to keep it as a part of Indonesia. Second was the fear that East Timorese
independence would act as a catalyst for further secession in Aceh and Papua. The
subsequent devastation of East Timor may have been meant as a warning to others
who might seek to follow its secessionist example. Some believe that TNI
involvement in the violence stemmed largely from local “rogue” elements. Others
believe that it was orchestrated higher up in the military command structure. 41
East Timor gained independence in 2002. Since that time Indonesia and East
Timor have worked to develop good relations. The joint Commission of Truth and
Friendship was established to deal with past crimes.42 A 2,500 page report issued in
early 2006 by the East Timorese Commission for Reception, Truth and
Reconciliation (CAVR), which was given to United Nations General Secretary Kofi
Annan, found Indonesia responsible for abuses of East Timorese during its period of
rule over East Timor. The report reportedly found that up to 180,000 East Timorese
died as a result of Indonesian rule.43 This created tension in the bilateral relationship
between Indonesia and East Timor. Nevertheless, President Xanana Gusmao and
President Yudhoyono reaffirmed their commitment to continue to work to resolve
differences between the two countries.44
The United Nations tribunal, which included the Serious Crimes Investigation
Unit, shut down in May 2005. During its six-year operation, the tribunal convicted
some East Timorese militia members for their role in the atrocities of 1999 but was
unable to extradite any indictees from Indonesia. A parallel Indonesian investigation
ended in acquittals for all Indonesians. A 2005 U.N. Commission of Experts found
the Jakarta trials for crimes committed in 1999 to be “manifestly inadequate.”45 (For
further information on East Timor see CRS Report RS22136, East Timor: Potential
Issues for Congress, by Rhoda Margesson and Bruce Vaughn.)
40 John Haseman, “Indonesia,” in David Wiencek, ed. Asian Security Handbook 2000
(Armonk: M.E. Sharpe Publishers, 2000).
41 Emerson, p. 356.
42 “Indonesia: International Relations,” The Economist Intelligence Unit, May 17, 2005.
43 Sian Powell, “Xanana and SBY Let Shame File Slide,” The Australian, February 18,
2006.
44 Rob Taylor and Olivia Rondonuwu, “”Gusmao, Yudhoyono Meet in Bali,” AAP Bulletins,
February 17, 2006.
45 Human Rights Watch, “East Timor,” [http://www.hrw.org]

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CRS-12
Aceh
Aceh is located at the extreme northwestern tip of the Indonesian archipelago
on the island of Sumatra. The Acehenese fought the Portuguese in the 1520s as well
as the Dutch.46 As a result of their resistance and independence, Aceh was one of the
last areas to come under Dutch control. Its struggle for independence was carried out
by the group Gerakan Aceh Merdeka (GAM). The 4.4 million Acehenese have strong
religious beliefs as well as an independent ethnic identity. While many Acehenese
had more explicitly Islamic goals for their movement in the past, they shifted focus
on independence with ethnic, rather than religious, identity at the core of their
struggle. Many Acehenese view Indonesia as an artificial construct that is no more
than “a Javanese colonial empire enslaving the different peoples of the archipelago
whose only common denominator was that they all had been colonized by the
Dutch.”47
The current struggle dates to 1976. In the late 1980s, many of GAM’s fighters
received training in Libya. GAM then began to reemerge in Aceh. This triggered
suppression by the TNI from which GAM eventually rebounded. Former President
Megawati then called on the military to once again suppress the Free Aceh
Movement. At the time this was the largest military operation for the TNI since East
Timor. The decision to take a hard-line, nationalist stance on Aceh was popular
among Indonesian voters.48
Indonesia has, under the leadership of President Yudhoyono, been able to
leverage the opportunity presented by the 2004 Tsunami and achieve what appears
to be potentially a lasting peace settlement where previous peace efforts have come
unraveled. Under the agreement, the Free Aceh Movement (GAM) disarmed in
December 2005 as the Indonesian Military TNI dramatically reduced its presence in
Aceh. The next step in the peace process requires action by parliament. Draft
legislation, reportedly favored by the government, would allow local political parties
in Aceh. This would make Aceh an exception as Indonesian law requires political
parties to have a presence in more than half of Indonesia’s 33 provinces. Under the
August 15, 2005 agreement, Indonesia must pass legislation allowing for Aceh to
control much of its own affairs by March 31, 2006. Nationalists in parliament are
reportedly opposed to granting an exception for Aceh.49 Some see this issue as a test
of the extent to which parliament can play a constructive role in conflict
amelioration. (For further information, see CRS Report RS20572, Indonesian
Separatist Movement in Aceh, by Larry Niksch.)
46 S. Wiuryono, “The Aceh Conflict: The Long Road to Peace,” Indonesian Quarterly, 3rd
Quarter, 2003.
47 Kirsten Schulze, The Free Aceh Movement (GAM): Anatomy of a Separatist Movement
(Washington: East West Center, 2004).
48 John Haseman, “Indonesia: A Difficult Transition to Democracy,” in David Wiencek and
Ted Carpenter eds. Asian Security Handbook, 3rd ed. Terrorism and the New Security
Environment, (Armonk: M.E. Sharpe, Inc. forthcoming 2004).
49 Achmad Sukarsono, “Aceh Draft law Set for Indonesian Parliament,” Reuters, February
5, 2006.

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CRS-13
Papua
Papua, formerly known as West Irian or Irian Jaya, refers to the western half of
the island of New Guinea and encompasses the two Indonesian provinces of Irian
Jaya Bharat and Papua. The region is also known as West Papua. Papua has a
population of approximately two million and an area of approximately 422,000
square kilometers, which represents about 21% of the land mass, and less than 1%
of the population of Indonesia. Papua has a long land border with Papua New Guinea
to the east. About 1.2 million of the inhabitants of Indonesian Papua are indigenous
peoples from about 250 different tribes, the rest have transmigrated to Papua from
elsewhere in Indonesia. There are some 250 language groups in Papua. Papuans are
mostly Christians and animists. The province is rich in mineral resources and
timber.50
Indonesian Papuans are a Melanesian people and are distinct from the Malay
peoples of the Indonesian archipelago. Like Indonesia, Papua was a Dutch colonial
possession. Papua did not become a part of Indonesia at the time of Indonesia’s
independence in 1949. The Dutch argued that its ethnic and cultural difference
justified Dutch control until a later date. Under President Sukarno, Indonesia began
mounting military pressure on Dutch West Papua in 1961. The United States
sponsored talks between Indonesia and the Dutch and proposed a transfer of authority
over Papua to the United Nations. Under the agreement the United Nations was to
conduct an Act of Free Choice to determine the political status of Papua. The Act
of Free Choice was carried out in 1969, after Indonesia had assumed control over
Papua in 1963. The Act of Free Choice, which led Papua to become part of
Indonesia, is generally not considered to have been representative of the will of all
Papuans. A referendum on Indonesian control over Papua was not held. Instead, a
group of 1,025 local officials voted in favor of merging with Indonesia.
Papuan groups continue to oppose Indonesian control over Papua. The Free
Papua Movement, or Organisasi Papua Merdeka (OPM), emerged in opposition to
Indonesian control over Papua. Many Papuans have a sense of identity that is
different from the main Malay, and predominately Muslim, identity of the rest of the
Indonesian archipelago, and many favor autonomy or independence from Indonesia.51
By some estimates, as many as 100,000 Papuans are thought to have died as the
result of military operations.52 Coordinator of the Institute for Human Rights and
Advocacy John Rumbiak has reportedly stated that “The Government in Jakarta has
allowed the military to prevail in Papua, to take the security approach which has
denied ordinary people their rights and enriched military officers who are making big
money for themselves through dealings with mining, logging and oil and gas
interests.”53
50 “A People Under the Jackboot,” The West Australian, September 18, 2004.
51 “When Jacob Rumbiak was 11,” Port Philip Leader, April 4, 2005.
52 “Indonesian Police, Demonstrators Clash in Papua Province,” Oster Dow Jones, May 10,
2005.
53 “A People Under the Jackboot,” The West Australian, September 18, 2004.

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CRS-14
The recent arrest of Anthonius Wamang, who is thought to have carried out an
attack in 2002 that killed two Americans working for the Freeport mine near Timika,
Papua, may resolve an issue that has been an impediment to closer relations between
the United States and Indonesia. It may also raise further questions as some observers
continue to hold the view that elements of the TNI may have had a role in the attack
that may have been aimed at extracting greater wealth from the mine, which is a
subsidiary of Freeport McMoRan of New Orleans. The Indonesian government
recently issued guidelines for foreign companies seeking military protection for their
operations in Indonesia.54 For additional information on Indonesia see CRS Report
RL33260, Papua, Indonesia: Issues for Congress, by Bruce Vaughn.
Inter-Communal Strife and Pan Islamic Movements
While the vast majority of Indonesians practice a moderate form of Islam, a very
small radical minority seek to establish an Islamic state. Some extremists are hostile
to the Christian minority and an even smaller group would use violence to establish
an Islamic Khalifate throughout the Muslim areas of Southeast Asia. While they
represent an extremely small percentage of the population, such groups have created
much internal turmoil. A distinction can be drawn between groups such as the now
disbanded Lashkar Jihad that focused on Indonesian inter-communal conflict
between Muslims and Christians in the Malukus, and factions of Jemaah Islamiya
(JI), which have used terrorist methods to promote an extreme Islamist agenda with
linkages to al Qaeda. There have also been allegations that Lashkar Jihad was a tool
of hardliners within the military that opposed the reform movement and who
allowed, or possibly even assisted, Lashkar Jihad activities that destabilized the
nation, thereby highlighting the need for a strong military that could impose order.55
There has also been inter-group conflict elsewhere in Indonesia such as between
Muslims and Christians in Poso in Central Sulawezi and between local Dyaks and
internal Madurese migrants to Kalimantan. Communal unrest has continued, albeit
at a lower level of intensity as a final peace settlement has not been achieved.56
There has been a rise in Islamic sentiment in Indonesia in recent years. This is
most notable in a political context with the rise of the Justice Party. Many have
attributed the success of the Justice Party in parliamentary elections in 2004 to its
campaign on a platform of good governance and its party organization rather than to
its Islamist character. Other manifestations of the rise of political Islam in Indonesia
include March 2006 demonstrations outside the American Embassy in Jakarta
sponsored by Hizbut Tharir which used banners that read, “Now is the time for the
54 “Indonesia Says Foreign Companies will Receive Guidelines on Seeking Military
Protection,” Associated Press, February 6, 2006.
55 See Sydney Jones’ definitive work for the International Crisis Group,
[http://www.crisisgroup.org].
56 Amit Chanda, “Seven Killed in Indonesia, as Violence Flares up Again in Restive Maluku
Province,” Global Insight Daily, May 17, 2005.

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CRS-15
Caliphate to rule the world with Sharia” and “Crush the Zionist America and
Israel.”57
Economy
The Indonesian economy was severely damaged by the Asian financial crisis of
1997-98. Per capita GDP fell from $1,088 in 1997 to $475 in 1998. It only partly
recovered to $800 by 2003.58 Indonesia is considered to have a well-balanced
economy with all major sectors contributing. Domestic consumption accounts for
roughly two thirds of Indonesia’s GDP, but expanded foreign investment and exports
are considered crucial for GDP growth.
Indonesian GDP,% Real change
The Economist Intelligence Unit has
described the economic outlook for
1996
7.8%
Indonesia in 2006 as “reasonably good.”
GDP growth has fallen short of
1997
4.7%
government targets but has reached an
estimated 5.3% in 2005. This is projected
1998
-13.1%
to grow to 5.8% in 2006 and 6.0% in
1999
0.8%
2007, although this is still below the
current government target of 6.6%, which
2000
4.9%
is seen as the level at which
2001
3.5%
unemployment and poverty can be
reduced. Private consumption has been a
2002
3.7%
key driver of the economy and investment
2003
4.1%
has been on the rise. Foreign Direct
Investment (FDI) projects approved
2004
5.1%
increased 30% in 2005.59 Realized FDI
2005
5.3% est
reached $8.9 billion in 2005, which is a
dramatic increase but still short of the pre-
2006
5.9% forecast
financial crisis level of $33.1 billion in
Economist Intelligence Unit Database
1997. The United States imported $10.8
billion from Indonesia and exported $2.7
billion there in 2004.60 Indonesia ranked as America’s 30th largest trading partner in
2005.61 Indonesian exports are projected to increase by 10% while imports are
expected to rise by 13% in 2006.62 Foreign businesses have in the past been reluctant
to invest in Indonesia in part because of concerns about the legal and judicial
57 Amy Chew, “5,000 Rally Outside US Embassy,” New Straits Times, March 6, 2006.
58 John McBeth, “The Betrayal of Indonesia,” Far Eastern Economic Review, June 26, 2003.
59 “Indonesia: A Year of Consolidation,” Economist Intelligence Unit, February 1, 2006.
60 “Indonesia: Country Profile,” U.S.-ASEAN Business Council, [http://www.us-asean.org]
61 U.S. International Trade Commission, “U.S. Trade Balance by Partner Country, 2005,”
[http://dataweb.usitc.gov]
62 “Indonesia Exports Tipped to Rise 10.3% This Year,” Asia Pulse, February 9, 2006.

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CRS-16
framework. Concern about transparency and security conditions have also inhibited
past foreign investment.63
Indonesia’s key economic sectors as measured by percentage of GDP include
agriculture, 17%; industry, 41%; and services, 42%. Forty-five percent of the labor
force is occupied in agriculture, while 16% is involved in industry, and 39% in
services. Indonesia’s key exports include petroleum and petroleum products, natural
gas, and clothing and accessories. Indonesia’s major markets include Japan,
Singapore, Taiwan, Korea, the European Union, and the United States.64 (For further
information see CRS Report RS21753, Indonesia-U.S. Economic Relations, by
Wayne Morrison.)
The logging of Indonesia’s forests, both legal and illegal, is an issue of
increasing concern to many. Indonesia has the world’s third largest tropical forests
and the world’s largest timber trade. Rain forests are thought to be an important
possible sink for global atmospheric carbon and play a vital role in climate. Rain
forests contain an estimated two-thirds of the planet’s plant and animal species. It is
estimated that logging and other clearing of rain forests has reduced them from 14%
of the earth’s surface to 6%. A special report by The Economist estimated that some
2 million hectares of Indonesian forest, an area the size of Massachusetts, is logged
each year.
Over the past 15 years, Indonesia has lost one quarter of its forests. Such a rate
of logging is unsustainable. One estimate projects that at current rates of logging
Indonesia’s forests will be logged out in 10 years.65 The destruction of Indonesia’s
forests would likely lead to widespread species extinction. It is estimated that illegal
logging deprives Indonesia of some $3 billion annually. Burning of logged land to
clear it for palm plantations and other uses in Southeast Asia led to widespread haze
over the region which accounted for an estimated 8% of greenhouse gasses
worldwide in 1997.66
The United States and Indonesia moved to begin to address the problem of
illegal logging in April 2006. Bilateral talks were initiated to reach an agreement to
deal with the problem of illegal logging in Indonesia which is estimated to account
for 80% of all logging in Indonesia. If an agreement is reached it will be the first of
its kind.67
63 John McBeth, “Indonesia: Warning Signs,” Far Eastern Economic Review, December 4,
2003.
64 “Indonesia,” CIA World Factbook, 2003.
65 Tanja Vestergaard, “Indonesia Launches Talks with U.S. on Fight Against Illegal
Logging,” Global Insight Daily Analysis, April 5, 2006.
66 “Special Report: The Logging Trade,” The Economist, March 25, 2006.
67 Tanja Vestergaard, “Indonesia Launches Talks with U.S. on Fight Against Illegal
Logging,” Global Insight Daily Analysis, April 5, 2006.

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CRS-17
Foreign Policy
Indonesian foreign policy has been shaped largely by two men, Presidents
Sukarno and Suharto. Once a leading force in the Non-Aligned Movement (NAM)
of the early Cold War era, Indonesia has traditionally sought to remain largely
independent from great power conflict and entangling alliances. Sukarno’s world
view divided the world into new emerging forces and old established forces. Sukarno
sought to fight the forces of neo-colonialism, colonialism, and imperialism, which
brought his government closer to China in 1964-65. Suharto’s New Order lessened
Sukarno’s anti-western rhetoric and focused on better relations with the region.
Under Suharto, Indonesia was one of the founding members of the Association of
Southeast Asian States (ASEAN) in 1967 and played a key leadership role in the
organization. Indonesia’s internal problems since 1998 have kept it largely internally
focused. As a result, it has not played as active a role in the organization as in past
years. Indonesia exerts a moderate voice in the Organization of Islamic Conference
(OIC) and is a member of the Asia-Pacific Economic Cooperation (APEC) grouping.
Under President Megawati the emphasis of Indonesian foreign policy shifted to focus
on trade.
Indonesia’s strategic interests are largely regional. Indonesia signed the Timor
Gap Treaty with Australia in 1991. This provided for a mutual sharing of resources
located in the seabed between Australia and the then-Indonesian province of East
Timor. This lapsed with the independence of East Timor. Australia and Indonesia
also signed a security agreement in 1995 which fell short of an alliance but called for
mutual consultations on security matters. Indonesian displeasure with Australia’s
support of East Timor independence in 1999 led Indonesia to renounce the
agreement. Indonesian ties with the West have at times been strained over alleged
human rights abuses by the TNI. In 1990 Indonesia and China normalized ties, which
had been strained since the alleged abortive coup by the Indonesian Communist Party
(PKI) in1965. Sino-Indonesian tensions remain over disputes related to the South
China sea, particularly near the Natuna Islands at the southern end of the South China
Sea, though in recent years ties have warmed.
In recent years, Indonesia has apparently embarked on a major foreign policy
initiative with China which marks a significant departure from past tensions in their
bilateral relationship. In April 2005, President Yudhoyono and Chinese President Hu
Jintao signed a series of trade, investment and maritime deals which have been
described as a ‘strategic partnership.’68 President Yudhoyono has speculated that
trade between Indonesia and China could triple to $20 billion in three years.69 The
developing relationship will also reportedly include arms sales and assistance.
Indonesian Defense Minister Juwono Sudarsono has reportedly signed a
memorandum of understanding on defense technology which includes arms sales and
68 Amit Chanda, “Economic Pact Between China and Indonesia,” Global Insight Daily, April
26, 2005.
69 “The Indonesia-China Partnership,” The Jakarta Post, April 27, 2005.

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CRS-18
bilateral military cooperation.70 It is also reported that China will work with
Indonesia to develop short range missiles.71
In April and May of 2005, tensions between Indonesia and Malaysia mounted
over a maritime territorial dispute in the Ambalat area of the Sulawezi Sea. Both
Indonesia and Malaysia reportedly have awarded offshore exploration contracts in
the Ambalat area.72 Indonesian Kostrad units were placed on full alert as a result of
the tensions.73 Indonesia and Malaysia agreed to resolve the dispute peacefully after
a Malaysian patrol boat and a Indonesian Navy ship collided in the disputed area.74
Indonesia and the War Against Terrorism
Indonesia has been waging an increasingly successful war against radical
Islamist extremists.75 It appears that the terrorist organization Jemaah Islamiya (JI)
is dividing and changing. Many JI members reportedly were displeased with the 2002
Bali bombing which killed and injured more Indonesians than foreigners. President
Yudhoyono has made it a priority to capture or neutralize key members of JI. Key JI
bombmaker Azahari bin Husin was killed in a shootout in east Java in November
2005. Since that time, authorities have focused on capturing his associate Noordin
Top and have arrested a number of junior militants linked to Top. Top, who like
Husin has been a member of JI, is now thought to head a new terrorist group called
Tanzim Qaedat al-Jihad. It is unclear to what extent this is a new group, or a splinter
group of former JI members, or to what extent it has ties to al Qaeda.76 It was
reported in March 2006 that Al Qaeda helped fund suicide attacks in Indonesia in the
previous four years with money brought to Indonesia through Thailand and
Malaysia.77 Divisions within JI have apparently revolved around the extent to which
JI should focus on western targets as opposed to focusing on instituting Islamist rule
in Indonesia. Some are also focused on imposing an Islamic Khaliphate not only in
Indonesia but also in Malaysia and Brunei and Muslim areas of the Philippines and
70 “China Offers Arms to Indonesia to Secure Malacca Strait Ally,” BBC News, April 26,
2005.
71 “Indonesia, China to Develop Missiles,” Reuters News, May 17, 2005.
72 “Malaysia, Indonesia Agree to Standoff in Sulawezi Sea,” Voice of America, May 6, 2005.
73 “Indonesian Strategic Reserve Troops to Guard Ambalat Waters,” BBC News, April 29,
2005.
74 “Indonesia Alleges Malaysian Navy Ship Collides with Indonesia Vessel,” Associated
Press, April 9, 2005.
75 For further information, see CRS Report RL31672, Terrorism in Southeast Asia, by
Bruce Vaughn, Emma Chanlett-Avery, Thomas Lum, Mark Manyin, and Larry Niksch.
76 Tewily Nathalia, “Indonesia Looks for New Group’s Links to al Qaeda,” Reuters, January
31, 2006.
77 Zakki Hakim, “Al Qaeda Aid in Indonesia Attacks Cited,” Philadelphia Inquirer, March
1, 2006.

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CRS-19
Thailand and in northern Australia. A majority are thought to favor a focus on
Indonesia.78
Many Indonesians view the war against terror in a fundamentally different way
than the United States. This was particularly so prior to the Bali bombing of October
2002 in which some 200 people were killed, including many Western tourists. The
Bali bombing, and Marriott bombing of August 2003, changed the government’s
perception of the threat and evoked a rigorous response from the police. Prior to
these bombings, Indonesia viewed the terrorist organization Jemaah Islamiya (JI) as
foreign and focused on anti-western activities. Since the Bali bombing, U.S. and
Indonesian differences have decreased. Nevertheless, 30% of Indonesians felt in
March 2003 that the root cause of terrorism in Indonesia resulted from oppression
against Muslims in Indonesia or elsewhere, injustice toward Arab countries in the
Middle East, or felt that terrorists are holy warriors against the infidels.79 Domestic
perceptions may limit the ability of President Yudhoyono to take on politically
sensitive issues in Indonesia.80 Although U.S.-Indonesian government-to-
government counterterror cooperation is improving, past polls indicate that the
United States has become very unpopular in Indonesia. Only 15% of Indonesians had
a favorable opinion of the United States in 2003 as opposed to 75% three years
earlier.81 Broad public opposition to U.S. attacks on Islamic countries, Indonesians’
perceptions of U.S. global influence and fear of antagonizing extremist groups that
enjoy rising public support have contributed to the government’s past reluctance to
pursue JI too aggressively. Despite this, the government has made a significant effort
to track down those responsible for the Bali and Marriott bombings.
United States-Indonesian Relations
Although the bilateral government-to-government relationship made significant
progress in 2005 and early 2006, there were a number of areas of friction with
American companies operating in Indonesia. Louisiana-based Freeport McMoRan’s
subsidiary PT Freeport came under increased scrutiny by environmental interests and
was subject to demonstrations, one of which briefly closed some operations in
Indonesia.82 The blockade of the mine near Timika was carried out by disgruntled
small scale local miners who had been prevented from mining the waste from the
78 See Sydney Jones’ definitive work for the International Crisis Group,
[http://www.crisisgroup.org].
79 “Polling on Indonesia,” International Republican Institute, March, 2003.
80 John McBeth and Tom McCawley, “Bleak Prospects Ahead for the Front Runner,” Far
Eastern Economic Review, October 2, 2003.
81 Ellen Nakashima, “U.S. Policy Censured in Indonesia,” The Washington Post, October
21, 2003.
82 Mark Forbes, “Investment Fears Over Mine protest,” Sydney Morning Herald, March 4,
2006.

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CRS-20
mine.83 Texas-based Exxon Mobil Corporation was involved in a dispute with the
Indonesian state owned Pertamina oil and gas company in early 2006 over a joint
venture or rotating ownership arrangement for the Cepu oil block which is thought
to contain 500 million barrels of oil.84 A U.S. judge ruled that a number of Indonesian
villagers can sue Exxon Mobil under U.S. state laws for alleged murder, torture, and
rape committed by Indonesian security forces working for the company in Aceh.85 In
another case, Denver-based Newmont Mining Corporation recently paid a $30
million out of court settlement in order for the Indonesian government to drop efforts
to pursue a civil lawsuit against the company for alleged dumping of mercury and
arsenic into a bay as part of its Buyat Bay gold mining operations.86 Newmont has
denied it has dumped such toxic waste into the bay through its submarine tailing
disposal system. Environmentalists have been critical of the deal.87
Human Rights
Much attention has been focused on human rights aspects of the bilateral
relationship. The State Department’s 2004 annual human rights report, released
February 28 2005, described the Indonesian government’s human rights record as
“poor; although there were improvements in a few areas,” adding that security force
members “continued to commit abuses, the most serious of which took place in areas
of separatist conflict.”88 The East Timor and Indonesia Action Network (ETAN) has
taken the position that the resumption of a military relationship by the United States
with Indonesia will undermine the reform process in Indonesia.89
One investigation and trial that may be viewed as a test case is that against
Pollycarpus Budihardi Priyanto who was convicted of killing human rights activist
Munir Thalib with arsenic poisoning aboard a Garuda flight bound for Amsterdam
on September 7, 2004. During the investigation it became known that Pollycarpus
had numerous telephone conversations with State Intelligence Agency (BIN) official
Major General Muhdi Purwo Prandjono. DPR Commission III had plans to have
83 “Papuans Protesting Daily over Freeport Mine in Indonesia,” Agence France Presse,
March 7, 2006.
84 “Indonesia Leans to Exxon in Cepu Dispute,” International Oil Daily, March 6, 2006.
85 “Exxon to Appeal Decision Allowing Indonesian Suit,” Bloomberg Business News, March
4, 2006 and “Exxon to Face Suit,” Los Angeles Times, March 3, 2006.
86 P. Kyne and I. Sentana, “”Newmont, Indonesia Settle Civil Suit,” The Wall Street Journal,
February 17, 2006.
87 “Indonesia, USA’s Newmont Reach 30m-dollar Settlement,” BBC News, February 17,
2006.
88 U.S. State Department, “Indonesia Country Report on Human Rights Practices 2004,”
February 28, 2005.
89 “Rights Group Blasts Plans for Expanded U.S. Military Cooperation with Indonesia,”
Associated Press, February 28, 2006.

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Police Chief Sutanto discuss the case, but these were postponed. In December 2005,
President Yudhoyono called for further investigation into the case.90
Geopolitical and Strategic Interests
The Malacca, Sunda, and Lombok straits are some of the world’s most
important strategic sea lanes. Close to half of the total global merchant fleet capacity
transits the straits around Indonesia.91 A significant proportion of Northeast Asia’s
energy resources transit these straits. The United States continues to have both
economic and military interest in keeping the sea lanes of communication open.92
Further energy deposits may also be found in the waters of Southeast Asia.
Some analysts are concerned about growing Chinese influence in the region.
China was perceived as being more assertive in the 1990s, for example, by fortifying
a shoal known as Mischief Reef. China is now seen as being more subtle. China
signed a Joint Declaration on Strategic Partnership with ASEAN in October 2003 and
is developing a China-ASEAN Free Trade Agreement to augment its existing
bilateral trade agreements with many ASEAN members. This has been viewed as a
possible “foundation for a strategic partnership.”93 China and Indonesia also
announced a series of agreements amounting to what some have described as a
‘strategic partnership’ in April 2005. At the same time, China is expanding its naval
capability. Over the past year China has reportedly begun construction on 70 naval
vessels and is considering further purchases of Sovremenny class destroyers from
Russia. While usually discussed in the context of a potential conflict with Taiwan,
China’s navy is thought to have the capability to sea lift a division, or roughly 10,000
troops.94
U.S. Security Assistance to Indonesia
Indonesia has participated in the Regional Defense Counter Terrorism
Fellowship Program which includes intelligence cooperation, civil-military
cooperation in combating terrorism and maritime security. Indonesia has also
participated in the Theater Security Cooperation Program with the U.S. Pacific
Command. This has involved Indonesia in counterterrorism seminars promoting
90 “Indonesia Sentences Killer of Rights Activist to 14 years in Prison,” Thai News Service,
January 12, 2006.
91 Ed Masters, Report of the National Commission on U.S. Indonesian Relations (Seattle:
National Bureau of Asian Research, 2003).
92 John Noer with David Gregory, Chokepoint: Maritime Economic Concerns in Southeast
Asia (Washington: National Defense University Press, 1996).
93 Edward Masters, House Committee on International Relations, Subcommittee on Asia and
the Pacific, Testimony for a Hearing on, “The United States and Asia: Continuity,
Instability, and Transition,” March 17, 2004.
94 Edward Cody, “With Taiwan in Mind, China Focuses Military Expansion on Navy,” The
Washington Post, March 20, 2004.

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cooperation on security as well as subject matter expert exchanges.95 Indonesia and
the U.S. held a joint counterterror exercise with Indonesian Marines and U.S. Navy
Seals in May 2005.96 In February 2006 Pacific Command Commander Admiral
William Fallon announced that the United States will help train Indonesian
noncommissioned officers to help them develop their technical skills.97
Military to military ties between the United States and Indonesia have ebbed and
flowed since the 1950s. This has been conditioned by both the disposition of the
regime in Jakarta to the United States and by U.S. perceptions of the TNI’s record on
human rights. A significant relationship was established by the 1960s. This was
expanded in the wake of Sukarno’s demise.
Jemaah Islamiya activity in Indonesia and Southeast Asia highlighted the need
for closer cooperation in the war against terror. In August of 2002, Secretary of State
Powell pledged $31 million to train police, $16 million to build a counterterrorism
unit, and $4 million for army counterterrorism training for Indonesia over several
years. At that time, Secretary Powell reportedly said that the United States and
Indonesia were beginning to normalize military to military ties though “we are not
there yet.”98
The Administration’s policy on assistance to Indonesia is informed by the role
that Indonesia can play in the war against terror. Principal Deputy Assistant Secretary
of State for East Asia and Pacific Affairs Donald Keyser stated in testimony before
the Senate Foreign Relations Committee that counterterrorism is at the top of the
priority list for strategic foreign assistance goals in FY2005. “In Indonesia for
example, we intend to build on the successful efforts, funded by the Non-
proliferation, Anti-terrorism, De-mining and Related Programs (NADR) account, to
continue training and to expand the Indonesian National Police’s Counter-terrorism
Task Force.” He added that the Economic Support Fund (ESF) will be used to
support basic education “as a key element in the effort to combat terror.”99 The
United States and Indonesia cooperate on counterterrorism in a number of areas with
assistance going to the police and security officials, prosecutors, legislators,
immigration officials, banking regulators and others.
U.S.-Indonesian counterterror capacity building programs have included funds
for the establishment of a national police counterterrorism unit and for
counterterrorism training for police and security officials. Such assistance has also
included financial intelligence unit training to strengthen anti-money laundering,
counterterror intelligence analysts training, an analyst exchange program with the
95 “United States-Indonesia Military Relations,” Congressional Record, Senate, Page S734,
February 1, 2005.
96 “US, Indonesian Navies Hold Joint Anti-Terror Exercises,” Oster Dow Jones, May 10,
2005.
97 J. Gittler, “U.S. to Train Indonesian NCOs as Part of Renewal of Ties,” Pacific Stars and
Stripes, February 27, 2006.
98 “Indonesia Gets U.S. Aid Against Terror,” BBC News, August 2, 2002.
99 “Fighting Terrorism Top U.S. Goal,” State Department Press Release, March 2, 2004.

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Treasury Department and training and assistance to establish a border security system
as part of the Terrorist Interdiction Program.100
The State Department budget justification document for FY2006 states that
“Indonesia’s contribution to the Global War on Terror is also a vital U.S. interest.”
It goes on to state that ESF funds will provide technical assistance and training to
Indonesia that will strengthen counter terrorist activities. It also states that FY2006
“counter terrorism training program activity for Indonesia will shift from two years
of Task Force operational training, equipping, formation and development to
program transition, sustainment, oversight, and liaison.”
Table 1. U.S. Foreign Assistance to Indonesia
Account*
FY2004
FY2005 est
FY2006 request
CSH101
$33,000,000
$36,700,000
$27,540,000
DA
33,291,000
27,848,000
48,424,000
ESF
49,705,000
64,480,000
70,000,000
FMF
—
992,000
1,000,000
IMET
599,000
600,000
800,000
INCLE
—
—
5,000,000
NADR-ATA
5,778,000
5,300,000
5,300,000
NADR-EXBS
220,000
—
450,000
P.L. 480 Title II
3,315,000
11,900,000
18,190,000
Source: “FY2006 Congressional Budget Justification for Foreign Operations,” U.S. Department of
State, released February 15, 2005.
The United States is promoting counterterrorism in Southeast Asia on a regional
and multilateral basis as well as on a bilateral basis with Indonesia. Such an
approach is viewed as complementing and promoting bilateral assistance and focuses
on diplomatic, financial, law enforcement, intelligence and military tools. Two key
objectives of the U.S. government are to build the capacity and will of regional states
100 Information drawn from State Department Fact Sheet, “Summary of Counter Terrorism
Assistance for Indonesia,” October 2003 update.
101 Child Survival and Health (CSH), Development Assistance (DA), Economic Support
Funds (ESF), Foreign Military Financing (FMF), International Military Education and
Training (IMET), International Narcotics Control and Law Enforcement (INCLE), Non-
proliferation Anti-terrorism Demining and Related Programs Export Control and Border
Security Assistance NADR-EXBS, Non-proliferation Anti-terrorism Demining and Related
Programs Antiterrorism Assistance (NADR-ATA).

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to fight terror. These objectives are pursued through a number of programs. The
United States-ASEAN Work Plan for Counter-Terrorism has identified information
sharing, enhancing liaison relationships, capacity building through training and
education, transportation, maritime security, border and immigration controls, and
compliance with United Nations and international conventions, as goals for enhanced
regional anti-terrorism cooperation.
The Anti-terrorism Assistance Program, directed at law enforcement training
and associated hardware, has aided Indonesia, among others. In addition, Financial
Systems Assessment Teams and the Terrorist Interdiction Program (which focuses
on border controls) have also assisted Indonesia. The United States has also
supported the Southeast Asian Regional Center for Counter-terrorism in Kuala
Lumpur. Foreign Emergency Support Teams are designed for rapid deployment in
response to a terrorist related event while Technical Support Working Groups work
with regional partners to find technical solutions to problems such as bio-terrorism
warning sensors.102
Options and Implications for the United States
Debate concerning U.S. policy towards Indonesia has in recent years been
largely framed by human rights and security interests. The Bush Administration’s
decision to reestablish military ties with Indonesia in 2005 would appear to present
Congress with several options. From one perspective, Congress can acquiesce,
support, or oppose the Administration’s position on resumption of military ties with
Indonesia. Based on past debate in Congress, individual decision-makers’ approaches
to this question will likely involve a consideration of a mix of American foreign and
strategic policy interests with Indonesia. These will likely include a consideration of
possible tradeoffs between a foreign policy approach that would stress the promotion
of human rights and one that would seek to strengthen bilateral ties in order to assist
in the struggle against violent Islamist extremists and to promote United States
geopolitical interests. Among possible policy approaches, the U.S. might consider the
following options.
! Continue to focus on and give primary consideration to
Indonesia’s pivotal role in the war against radical violent
Islamists in Southeast Asia. Indonesia likely will remain an
indispensable partner in the struggle against violent Islamists in
Southeast Asia for years to come. As such, many would view it as
prudent that the United States maintain a good working relationship
with Indonesia. Such an approach could build on momentum in
developing bilateral military-to-military ties built in 2005 and 2006
and develop enhanced exchanges, training, and military-to-military
relationships in order to bring the full capabilities of the TNI into the
struggle against radical Islamists while continuing to work with the
Indonesian police.
102 Drawn from State Department budget justification material.

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! Continue to focus on human rights concerns over past abuses by
the Indonesian military. Many feel that there remains a serious lack
of accountability for past human rights abuses by the Indonesian
military, particularly the human rights abuses perpetrated by pro-
integrationist militias in East Timor in 1999, and that more could be
done on either a bilateral or multilateral basis, or both, to increase
accountability for past abuses. Such an approach could involve a
closer working relationship with the United Nations and East Timor.
Past efforts by the United Nations — such as the U.N. Tribunal in
Dili including the Serious Crimes Investigation Unit and Special
Panels for Serious Crimes — have been shut down, while the
Indonesian trials ended in acquittals for all Indonesians. A
subsequent U.N.-sponsored Commission of Experts found the
Indonesian trials to be “manifestly inadequate.”103
However, not all U.S. policy options need to be seen in a zero sum context. As
part of its oversight role, Congress may opt to consider a range of policy options for
relations with Indonesia. In this context, the following options for the bilateral
relationship may be of interest. While such policy options are at times mutually
exclusive they often need not be. A non-zero sum approach might seek to blend
American foreign policy interests through a focus on an enhanced emphasis on the
promotion of democracy, good governance, civil society, and the rule of law as well
as human rights and security interests. Such an approach, by not taking a zero sum
view of tradeoffs between human rights and security interests, would be aimed at
achieving both enhanced partnership on security issues and enhanced promotion of
human rights and other interests in Indonesia by promoting and supporting ongoing
democratic and civil society developments in Indonesia. This approach could have
an indirect positive impact on Indonesia’s human rights record as well as reinforce
ties between the two states.
! Place enhanced emphasis on the promotion of democracy and
the rule of law in Indonesia. Such an approach would be consistent
with the president’s national security strategy which emphasizes
“building the infrastructure of democracy.”104 Such an approach in
Indonesia could include additional funding and other support to
continue consolidating democratic reforms, the continued
establishment of an impartial electoral framework, political party
development, member-constituent relations, and strengthening of
national legislative bodies.105 The promotion of democratic values
would also likely have a positive impact on other issue areas such as
the promotion of human rights.
103 Human Rights Watch, “East Timor,” [http://hrw.org]
104 The National Security Strategy of the United States of America, March 2006.
105 For an example of some existing activities see National Democratic Institute, “Asia:
Indonesia,” [http://www.ndi.org]

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! Give the geopolitical importance of Indonesia more weight when
considering bilateral ties. Indonesia’s position on the Straits of
Malacca, as a moderate Muslim country, as the largest member of
ASEAN, and as a state that does not seek to exclude the U.S. from
regional multilateral fora or from the region gives it geopolitical
importance to the United States. As such, and in light of expanding
Chinese influence in the region, it is prudent in the view of many
that relations with Indonesia be developed so that Indonesia does not
seek to move away from the United States in international fora or by
developing alternative strategic relationships. Indonesia remains one
of the least well understood geopolitically important nations to
America. Expanding bilateral educational exchanges, research
grants, and language training could seek to educate Indonesia’s
present and future elites while giving them an enhanced
understanding of the United States and its values. Such educational
exchanges could also provide Americans the opportunity to better
understand Indonesia and the role that it plays in its region and in the
Islamic world.
! Place enhanced emphasis on transnational issues, such as
environmental degradation, including rainforest destruction,
preservation of bio-diversity and global warming, and avian flu.
The United States and Indonesia initiated what would be a first-of-
its-kind agreement to combat illegal logging in April 2006.
Consolidating and extending such initiatives could do much to
protect Indonesia’s environment. Many feel that Indonesia’s bio-
diversity and diminishing environment would likely benefit from
enhanced protection. With only 1.3% of the earth’s surface
Indonesia has an estimated 10% of the world’s flowering plants,
12% of the world’s mammals, 16% of the world’s reptiles and
amphibians, 17% of the world’s birds, and over 25% of the world’s
fish.106 United States assistance to Indonesia to help it protect its
rainforests from illegal logging could do much to protect the
environment upon which Indonesia’s bio-diversity is dependent.
Avian flu has the potential to kill many in the United States.
Addressing the problem of potential human-to-human transmission
in Indonesia may be a highly effective way to contain an outbreak
but thus far Indonesia is generally considered to be underresourced
to handle the threat.
! Do more to advance American trade and investment interests in
Indonesia. In April 2006, U.S. Trade Representative Rob Portman
pointed to developing “building blocks” that could serve as the basis
for negotiating a Free Trade Agreement (FTA) between Indonesia
and the United States.107 Continued emphasis on further developing
106 “Indonesian Bio-diversity,” [http://www.geocities.com/rainforest/4466/biodiver.htm].
107 “U.S. Indonesia Strengthen Economic Ties, Says U.S. Trade Representative,” U.S. Fed
(continued...)

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these building blocks, which include such agreements as efforts to
curb illegal logging and the trade in endangered species, may help
move the two states towards an FTA. American companies have also
encountered difficulties, particularly in the area of environmental
concerns, in Indonesia in recent years and may benefit from
enhanced support or guidance from the U.S. government.
Elements of all of the options discussed here can be found in current American
foreign policy towards Indonesia, though the mix in emphasis has shifted over time.
The most recent shift in 2005 placed increased emphasis on bilateral military-to-
military ties. This was likely the result of an increased appreciation of the importance
of Indonesia in the war against terror as well as the progress that Indonesia made in
developing its democracy in 2005.
107 (...continued)
News, April 5, 2006.

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Figure 1. Map of Indonesia

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