Updated May 17, 2018
Indonesia
Overview
introduced several economic reform packages, largely
With 258 million citizens, Indonesia is the most populous
aimed at streamlining bureaucratic processes to boost
country in Southeast Asia, the world’s most populous
foreign and domestic investment. Widodo is expected to
Muslim-majority nation, and the world’s third-largest
run again in 2019, and other prominent figures—notably
democracy (after India and the United States). It has the
Prabowo Subianto, former head of Indonesia’s special
world’s 16th-largest economy and the 8th-largest when
forces unit, Kopassus, who finished second in the 2014
ranked by purchasing power parity. Indonesia is an active
polls—are positioning themselves for presidential bids.
member in regional diplomatic institutions and a leader of
the Association of Southeast Asian Nations (ASEAN). It
U.S. Engagement with Indonesia
straddles important sea lanes and borders the Strait of
The United States engages Indonesia across a wide range of
Malacca, one of the world’s busiest trade routes, as well as
issues, encouraging Indonesians to deepen their democratic
the Indian Ocean and the South China Sea. Indonesian
institutions, promote religious tolerance and the rule of law,
leaders speak about the nation’s central place in the “Indo-
develop a more liberal trade and investment climate,
Pacific” region—an important strategic concept for the
combat terrorism and engage on international issues such as
Trump Administration.
climate change and maritime security. In October 2015, the
United States and Indonesia upgraded their bilateral
Some 87% of Indonesians are Muslim, with the vast
“Comprehensive Partnership” to a “Strategic Partnership,”
majority subscribing to moderate, syncretic forms of the
with an annual minister-level dialogue intended to address
religion. Religious diversity is enshrined in the constitution.
maritime cooperation, defense cooperation, economic
Some observers, however, express concern about growing
growth and development, energy cooperation, cooperation
political influence of conservative religious groups who
on global and regional issues, and people-to-people ties. In
have, among other actions, organized mass demonstrations
January 2018, on a visit to Jakarta, Defense Secretary
against non-Muslim politicians. Indonesia has also had a
James Mattis said: “We probably engage with the
recent history of violent extremism: several bombings in
Indonesian military more than any other nation anywhere in
Jakarta and tourist center Bali targeted Westerners in the
terms of mil-to-mil engagements.”
2000s, and the persistence of smaller-scale attacks raises
concerns about the influence of the Islamic State and
dangers posed by Indonesians returning from the Middle
East. In May 2018, a set of suicide attacks in Surabaya
killed 12 civilians, with at least one attack conducted by a
family that had recently been deported from Syria.
The U.S.-Indonesia relationship has broadened in recent
years, with closer military and counterterrorism cooperation
and a range of new educational, environmental, and energy
initiatives. Some Indonesian trade and economic
regulations are of concern to the United States. Corruption
is widespread, and Indonesia is among the world’s largest
greenhouse gas emitters, due in part to extensive
deforestation, both legal and illegal.
Political Background
Indonesia has undergone a significant transformation since
the 1998 fall of its longtime authoritarian leader, President
Suharto. The country has since become a robust democracy,
holding three direct presidential elections, each considered
by international observers to have been largely free and fair.
The most recent, in July 2014, elevated Joko Widodo as
president. Widodo, a former businessman and mayor, is
Indonesia’s first president not to have emerged from either
the military or an elite business family.
U.S. assistance to Indonesia totaled $123 million in FY2017
Widodo has struggled with a shifting political coalition, as
compared with $128 million in FY2016. Most U.S.
rivalries between parties, and even within Widodo’s PDI-P
assistance supports health, environmental, and educational
party, have complicated governance. His government has
initiatives. Indonesia is part of the Southeast Asia Maritime
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Indonesia
Security Initiative announced in 2015, which aims to
working age). It is a large producer of natural gas and oil,
strengthen Naval and Coast Guard capabilities in several
and is a member of the Organization of the Petroleum
nations, under which it received $10 million in FY2017.
Exporting Countries. It is also the world’s leading exporter
of palm oil. Still, about half of Indonesian households are
Security Cooperation
near the national poverty line of $24.40 per month.
U.S.-Indonesia security cooperation has deepened over the
past decade, with the two militaries conducting dozens of
Despite its large population, Indonesia is the 26th largest
regular annual engagements, including efforts to deepen
U.S. trading partner, ranking below neighbors such as
maritime security cooperation and to combat terrorism. This
Singapore, Malaysia, and Thailand. Over recent years,
represents a sharp change from the early 2000s, when U.S.
Indonesia has imposed some policies criticized by foreign
policies enacted in response to earlier human rights abuses
investors, including foreign ownership restrictions and local
by Indonesian forces severely limited bilateral
content requirements in some industries, as well as
engagements. In 1999, Congress suspended all International
renegotiation of contracts for some energy and mining
Military Education and Training (IMET) programs with
projects. President Widodo has sought to lift bureaucratic
Indonesia after Indonesia’s military and its militia proxies
obstacles facing FDI, and has actively courted more foreign
killed over 1,000 in Timor-Leste following Timor’s vote to
investment, particularly in the infrastructure sector.
pursue independence from Indonesia. Programs were
restarted on a limited basis in 2002 and, from 2005 to 2010,
Human Rights Issues
the United States largely normalized military relations with
Most observers believe Indonesian human rights protections
Indonesia, bringing professionalization and human-rights
have improved over the past 15 years. However, abuses still
training to much of the Indonesian military. In 2010, the
occur, including some by members of the military. Alleged
U.S. also resumed limited IMET programs with Kopassus.
abuses are particularly frequent in areas with simmering
secessionist movements such as Papua. Some argue that
Widodo’s government has announced plans to increase
religious intolerance is rising. Islamist organizations have
military spending to 1.5% of GDP from levels below 1%,
harassed and attacked minority religious groups, including
focusing particularly on maritime capabilities. Indonesia
Christians and other Islamic sects, such as the Shia and
has been increasingly involved in rising South China Sea
Ahmadiyya, and, in 2016, large demonstrations by Islamist
tensions. Jakarta does not consider itself to have a formal
groups opposed to Jakarta’s Christian governor raised
territorial dispute with Beijing, but China’s extensive nine-
concerns about creeping intolerance.
dash line claims overlap with Indonesia’s Exclusive
Economic Zone (EEZ), the coastal area over which a state
Indonesia is labeled a Tier 2 nation in the State
has the right to regulate economic activity. Indonesian
Department’s 2017 Trafficking in Persons report, which
officials regularly voice concern about maritime behavior
calls it a “major source country and, to a much lesser
they see as overly aggressive, and have periodically
extent, destination country for women, children and men
confronted or warned off Chinese fishing and law-
subjected to sex trafficking and forced labor.” Corruption is
enforcement vessels seen as encroaching on Indonesian
widespread: Transparency International ranked Indonesia
waters. In 2017, Indonesia elicited a formal diplomatic
96th out of 180 nations in its 2017 Corruption Perceptions
protest from Beijing by renaming waters off the Natuna
Index, below other Asian nations such as China and India.
Islands, north of Borneo, the North Natuna Sea.
However, many observers believe that Indonesia’s
democratic development and the growth of its independent
Militancy and Terrorism
press and civil society have created a more accountable
Indonesia has had a long-running issue of domestic
system in which people can choose their leaders and
militancy, and the Islamic State (IS) has raised concerns
participate in policymaking through community or
among many in Indonesia by conducting recruiting in
nongovernmental organizations.
Bahasa Indonesia, Indonesia’s national language.
Indonesian officials have outlawed public expressions of
Environmental Issues
support for IS. Indonesia is also considering amendments
Indonesia is among the world’s most bio-diverse regions,
that would strengthen its 2003 Anti-Terrorism Law.
but its record of environmental protection is constrained by
weak rule of law and poor land management. Because of
U.S.-Indonesia counterterrorism cooperation is close; the
deforestation, Indonesia is a major emitter of greenhouse
United States and Australia helped to create Indonesia’s
gases—the world’s third or fourth largest when emissions
elite counterterrorism unit, Densus-88, which has weakened
from deforestation are taken into account. Illegal logging
militant groups such as Jemaah Islamiyah (JI), an al-Qaeda
remains rampant. In the 1960s, forests covered 82% of
affiliate. JI was responsible for the Bali bombings in 2002,
Indonesia; today, they cover 49%. Extensive wildfires
which killed 202 people including 7 Americans. Indonesian
cause severe air pollution each year. The United States
authorities have found and killed many of the country’s
conducts numerous environmental and clean energy
most prominent militants, but the persistence of incidents
programs in Indonesia. A $600 million Millennium
like the May 2018 attacks in Surabaya points to the
Challenge Corporation (MCC) compact took effect in 2013,
continued dangers posed by militant groups and leaders.
with about $332 million devoted to a “Green Prosperity”
program aimed at renewable energy and land management.
Economic Issues
In recent years, Indonesia’s economy has frequently posted
Ben Dolven, Specialist in Asian Affairs
growth of more than 5%-6% annually, buoyed in part by its
favorable demographics (66% of its population is of
IF10247
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Indonesia
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https://crsreports.congress.gov | IF10247 · VERSION 8 · UPDATED