Indonesia is a nation formed in 1949. The region was formerly under the control of the Netherlands. Indonesia is composed of the islands of Java and Madura, Sumatra, Borneo, Sulawesi (Celebes), Bangka Belitung, the Riau Archipelago, the Moluccas, and the Nusa Tenggara Islands (including Bali and Timor). In 1963 Indonesia also assumed sovereignty over Irian Jaya, formerly Netherlands New Guinea. In 1976, East Timor joined Indonesia as the 27th province. Indonesia today has a well-diversified economy. Every sector of the Indonesian economy plays an important role. The country has a strong agricultural potential, and thus agriculture has historically been the dominant activity, both in terms of employment and output. The mining sector has also made important contributions as the nation has a vast range of mineral resources. The industrial sector has expanded rapidly and has been given a particular emphasis by the government as a way of diversifying the economy and improving the ability of the country to compete in terms of trade. The importance of the industrial sector, especially the government-owned segment of that sector, will be examined in terms of how it has developed and how it affects the other sectors of the economy.
As noted, Indonesia became independent in 1949, and in the first phase from 1950 to 1965, the society remained deeply divided by ethnic, regional, class, and religious differences. The nation had a unitary political system as defined by the provisional constitution of 1950. The government was a parliamentary democracy, and the government was responsible to a unicameral House of Representatives elected directly by the people. Sukarno was now president, but his powers were drastically reduced compared with those prescribed in the 1945 constitution. There was little in the diverse cultures of Indonesia or in their historical experience to prepare the people for democracy. The Dutch had done nothing to...