June 26, 2015
Indonesia: Background and U.S. Relations
Overview
In 2014, the U.S. provided Indonesia with over $250
million in assistance, most of it going to health,
With a population of 253 million, Indonesia is the largest
environmental, and educational initiatives. After the 2004
country in Southeast Asia, the world’s most populous
Indian Ocean tsunami, which devastated parts of Indonesia,
Muslim-majority nation, and the world’s third largest
USAID spent $400 million on reconstruction projects in the
democracy (after India and the United States). Its size,
country, and the United States extended military assistance
economic vibrancy, and democratic development have led
including 12,600 military personnel to affected areas.
many observers to consider it an emerging power, whose

voice is increasingly influential on many global and
regional issues. Indonesia is an active member in regional
diplomatic institutions, and the de facto leader of the
Association of Southeast Asian Nations (ASEAN). It
straddles important sea lanes, bordering the Strait of
Malacca, one of the world’s busiest trade routes.
The United States maintains close relations with Indonesia,
and the bilateral relationship has broadened considerably
over the past decade, with closer military and counterterror
cooperation and a range of new educational, environmental,
and energy initiatives. Indonesian trade and economic
regulations, however, are a growing U.S. concern, and
corruption remains widespread.
Political Background
Indonesia has undergone a significant transformation since
1998 when a devastating financial crisis and widespread
riots led to the downfall of its longtime authoritarian leader,
President Suharto. Since then, the country has held three
direct presidential elections, each considered largely free
and fair. The most recent, in July 2014, installed Joko
Widodo as president, marking the first time one directly
elected Indonesian president succeeded another.

Source: Graphic created by CRS. Fact information from CIA World
A former businessman and mayor, Widodo is Indonesia’s
Factbook, 2015 (2014 est. unless indicated otherwise).
first president not to have emerged from either the military
or an elite business family. He also is the first Indonesian
Economic Issues
president whose political coalition does not hold a majority
in Indonesia’s Parliament. Rivalries between parties, and
Indonesia is the world’s 10th largest economy in terms of
even within Widodo’s PDI-P party, may complicate
purchasing power parity. Its economy regularly posts
governance in Indonesia over his five-year term.
growth of more than 5%-6% annually, buoyed in part by its
favorable demographics, as 66% of its population is of
U.S. Engagement with Indonesia
working age. It is the world’s leading exporter of palm oil
and tin and the second largest rubber exporter. Still, about
Over the past decade, the United States has broadened its
half of Indonesian households are around the national
ties with Indonesia. The United States encourages Indonesia
poverty line of $24.40 per month.
to combat terrorism and to develop a more liberal trade and
investment climate, and it has tried to promote Indonesia’s
Indonesia is the 28th largest U.S. trading partner. According
democratic development, religious tolerance, and rule of
to some analysts, U.S.-Indonesia economic relations are
law. In November 2010, the United States and Indonesia
lagging. Indonesia recently imposed several policies
initiated the U.S.-Indonesia Comprehensive Partnership,
criticized by foreign investors, including new foreign
with bilateral working groups on a range of issues,
ownership restrictions in the mining and finance sectors and
including democracy and civil society, security,
the renegotiation of contracts for some energy and mining
environment and climate, energy, and education.
projects. At the same time, President Widodo has actively
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Indonesia: Background and U.S. Relations
courted more foreign investment, particularly in the
Indonesian human rights protections have generally
infrastructure sector.
improved over the past 15 years. However, abuses still
occur, particularly in areas with simmering secessionist
The United States and Indonesia meet regularly under the
movements, such as Papua, Aceh, Maluku, and Timor.
auspices of a 1996 Trade and Investment Framework
Tensions also exist between the central government and
Agreement (TIFA), under which the two sides have
outlying provinces where some minority groups resent the
discussed issues including strengthening Indonesia’s
perceived dominance of the Javanese, the country’s largest
intellectual property rights protections and promoting new
ethnic group. According to some, religious intolerance is
Indonesian investments in U.S. clean energy technology.
rising in Indonesia. Islamist organizations have harassed
and attacked minority religious groups, including Christians
Security and Counterterrorism
and other Islamic sects, such as the Shia and Ahmadiyya.
Oftentimes, the government is reluctant to punish the
U.S.-Indonesia security cooperation has deepened over the
perpetrators. Islamic parties participate in coalition
past decade. Each year, the two militaries conduct over 200
governments, and those parties do not want to risk
joint military engagements. Counterterrorism cooperation is
ostracizing their co-religionists.
close; the United States and Australia helped to create
Indonesia’s elite counterterrorism unit, Densus-88, which
Corruption is widespread. Transparency International (TI)
has weakened militant groups such as Jemaah Islamiyah
ranked Indonesia 107th out of 174 nations in its 2014
(JI), an al-Qaeda affiliate. JI was responsible for the Bali
Corruption Perceptions Index, below other Asian nations
bombings in 2002, which killed 202 people including seven
such as China and the Philippines. Also, after Suharto fell
Americans. The Islamic State does not have a widespread
from power, Indonesia’s government became more
presence in Indonesia, but up to 200 Indonesians are
decentralized. District governments gained more control
believed to be currently fighting with the group.
over their budgets, and corruption and patronage reportedly
became more common. Despite these concerns, many
Military sales have grown with Indonesia’s efforts to
observers believe that Indonesia’s democratic development
modernize its forces. In 2012, the U.S. provided Foreign
and the rapid growth of its civil society have created a more
Military Financing (FMF) to upgrade aging Indonesian
accountable system, in which people have more freedom to
C-130 cargo planes, and sold two dozen refurbished F-16s
choose their leaders and to participate in policymaking
and eight Apache helicopters to the country. Widodo’s
through community or non-governmental organizations.
government has announced plans to increase military
spending to 1.5% of GDP, from levels below 1%, focusing
Environmental Issues
particularly on maritime capabilities.
Environmental cooperation is another focus of the bilateral
Indonesia’s government has worked to moderate territorial
relationship. Indonesia is one of the world’s most bio-
disputes over the South China Sea between China and other
diverse regions. Yet its record of environmental
Southeast Asian countries. Indonesia does not have formal
preservation is constrained by poor rule of law and poor
disputes with Beijing in the heavily contested waters.
land management. Because of deforestation, Indonesia is a
However, China’s maritime claims, as outlined by a
major greenhouse gas emitter, the world’s third or fourth
vaguely defined nine-dash line covering 90% of the South
largest when emissions from deforestation are taken into
China Sea, do overlap with Indonesia’s Exclusive
account. Despite an MOU signed with the United States in
Economic Zone (EEZ), the coastal area over which a state
2006, illegal logging remains rampant, and rainforest cover
has the right to regulate economic activity. Indonesian
has steadily declined. In the 1960s, forests covered 82% of
officials regularly voice concerns about maritime behavior
the country. Today, they cover only 49%.
that is seen as overly aggressive. They have sought to forge
a consistent Southeast Asian stance in discussions with
Indonesia signed the Reducing Emissions from
China on a Code of Conduct in the South China Sea.
Deforestation and Forest Degradation (REDD+) Agreement
in 2010. It stipulates that, over the course of 7-8 years,
Human Rights Issues
Indonesia will reduce greenhouse gas emissions from
deforestation. In return, it will receive $1 billion from
Human rights abuses by the military have been a
Norway. The United States also has devoted considerable
longstanding congressional concern. Following Timor-
resources to environmental and clean energy programs in
Leste’s vote to pursue independence from Indonesia in
Indonesia. In 2011, Indonesia signed a $600 million
1999, Indonesia’s military and its militia proxies killed over
Millennium Challenge Corporation (MCC) compact. Over
1,000 East Timorese. Congress, in response, suspended all
half of the MCC-provided funds—about $332 million—are
International Military Education and Training (IMET)
devoted to a “Green Prosperity” program that will provide
programs with Indonesia until 2002 when they were
technical and financial assistance to renewable energy and
restarted on a limited basis. From 2005 to 2010, the United
land management projects.
States largely normalized military relations with Indonesia,
Ben Dolven, bdolven@crs.loc.gov, 7-7626
bringing professionalization and human-rights training to a
broad part of the Indonesian military. In 2010, it also
Wil Mackey, wmackey@crs.loc.gov, 7-5050
resumed limited IMET programs with Indonesia’s special-

forces unit, Kopassus.
IF10247
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