Early in the Christian era, Indonesia came under the influence of Indian civilization through the gradual influx of Indian traders and Buddhist and Hindu monks. By the 7th and 8th cent., kingdoms closely connected with India had developed in Sumatra and Java; the spectacular Buddhist temples of Borobudur date from this period. Sumatra was the seat (7th–13th cent.) of the important Buddhist kingdom of Sri Vijaya. In the late 13th cent. the center of power shifted to Java, where the fabulous Hindu kingdom of Majapahit had arisen; for two centuries it held sway over Indonesia and large areas of the Malay Peninsula. A gradual infiltration of Islam began in the 14th and 15th cent. with the arrival of Arab traders, and by the end of the 16th cent. Islam had replaced Buddhism and Hinduism as the dominant religion. The once-powerful kingdoms broke into smaller Islamic states whose internecine strife made them vulnerable to European imperialism.
Early in the 16th cent. the Portuguese, in pursuit of the rich spice trade, began establishing trading posts in Indonesia, after taking (1511) the strategic commercial center of Malacca (see Melaka) on the Malay Peninsula. The Dutch followed in 1596 and the English in 1600. By 1610 the Dutch had ousted the Portuguese, who were allowed to retain only the eastern part of Timor, but the English competition remained strong, and it was only after a series of Anglo-Dutch conflicts (1610–23) that the Dutch emerged as the dominant power in Indonesia.
Throughout the 17th, 18th, and 19th cent. the Dutch East India Company steadily expanded its control over the entire area. When the company was liquidated in 1799, the Dutch government assumed its holdings, which were thereafter known in English as the Netherlands (or Dutch) East Indies. Dutch rule was briefly broken (1811–14) during the Napoleonic Wars when the islands were occupied by the British under T. Stamford Raffles. The Dutch exploited the riches of the islands throughout the 19th cent., but their rule did not go unchallenged by the Indonesians. In 1825, Prince Diponegoro of Java launched a long and bloody guerrilla war against the colonists, and in 1906 and again in 1908 the native rulers of Bali led their subjects in suicidal charges against Dutch fortifications.
The Indonesian movement for independence began early in the 20th cent. The Indonesian Communist party (PKI) was founded in 1920; in 1927 the Indonesian Nationalist party (PNI) arose under the leadership of Sukarno. It received its impetus during World War II, when the Japanese drove out (1942) the Dutch and occupied the islands. In Aug., 1945, immediately after the Japanese surrender, Sukarno and Muhammad Hatta, another nationalist leader, proclaimed Indonesia an independent republic. The Dutch bitterly resisted the nationalists, and four years of intermittent and sometimes heavy fighting followed. Under UN pressure, an agreement was finally reached (Nov., 1949) for the creation of an independent republic of Indonesia. A new constitution provided for a parliamentary form of government. Sukarno was elected president, and Hatta became premier.
Although Sukarno had achieved a major accomplishment in uniting so many diverse peoples and regions under one government and one language, his administration was marked by inefficiency, injustice, corruption, and chaos. The rapid expropriation of Dutch property and the ousting of Dutch citizens (late 1950s) severely dislocated the economy; the country's great wealth was not exploited, and soaring inflation and great economic hardship ensued. A popular revolt, stemming from a desire for greater autonomy, began on Sumatra early in 1958 and spread to Sulawesi and other islands; the disorders led to increasingly authoritarian rule by Sukarno, who dissolved (1960) the parliament and reinstated the constitution of 1945, which had provided for a strong, independent executive (Hatta had resigned in 1956 following a conflict with Sukarno). The army, whose influence was strengthened by its role in quickly quelling the revolts, and the Communist party, whose ranks were growing very rapidly, constituted two important power blocs in Indonesian politics, with Sukarno holding the balance of power between the two.
In early 1962, Sukarno dispatched paratroopers to Netherlands New Guinea—territory claimed by Indonesia but firmly held by the Dutch—forcing the Dutch to agree to transfer that area to the United Nations with the understanding that it would pass under Indonesian administration in May, 1963, pending a referendum that was to be held by 1970. After the referendum, in Aug., 1969, Netherlands New Guinea was formally annexed by Indonesia, and its name was changed to West Irian (Irian Barat), then Irian Jaya, and later Papua. A guerrilla war was begun soon after by the Organisasi Papua Merdeka (OPM; Free Papua Movement), a group seeking Papua's independence.
Meanwhile, Sukarno made (1963) a major propaganda issue of Indonesian opposition to the newly created Federation of Malaysia and staged guerrilla raids into Malaysian territory on Borneo, beginning a conflict that was waged intermittently for three years. Sukarno began to lean increasingly toward the left, openly summoning Communist leaders for advice, exhibiting hostility toward the United States, and cultivating the friendship of Communist China. In 1965 he withdrew Indonesia from the United Nations. He may have known in advance of the abortive army coup that began in Sept., 1965, with the assassination of six high army officials.
The coup was swiftly thwarted by army forces under General Suharto, who blamed the coup on the PKI (the degree of its involvement is unclear); Suharto may have known of the plot in advance. Suharto gradually assumed power (although retaining Sukarno as symbolic leader). Thousands of alleged Communists were executed; people everywhere took the law into their own hands and a widespread massacre ensued (Oct.–Dec., 1965). Estimates of the number of people killed range from 500,000 to 1 million; many ethnic Chinese died, and in E and central Java and in Bali entire villages were wiped out. In 2012 Indonesia's National Commission on Human Rights called the events a gross violation of human rights.
The new government steadily increased its power, aided by massive student demonstrations against Sukarno. General Suharto brought an end (1966) to hostilities against Malaysia, banned the PKI, reestablished close ties with the United States, and reentered (1966) the United Nations. Indonesia became one of the founding countries of the Association of Southeast Asian Nations (ASEAN) in 1967. On Mar. 12, 1967, the national assembly voted Sukarno out of power altogether and named General Suharto acting president.
Suharto was elected president in 1968, and reelected in 1973, 1978, 1983, 1988, 1993, and 1998. His government reinstated an earlier Dutch colonial policy of "transmigration," in which farmers from the overpopulated islands of Java and Bali were moved to underpopulated areas such as Kalimantan, Sumatra, and Indonesian New Guinea. The policy has had mixed results; though more than six million had moved by the 1990s, Java and Bali continue to be heavily populated. The economy began to grow rapidly in the 1970s, due mainly to expanded oil, gas, and timber exports; in the 1980s and 90s manufacturing for export became important.
In 1975–76, Indonesia annexed East Timor (a former Portuguese colony), and incorporated it as a province of the country; the takeover was not recognized by the United Nations. Following the annexation, separatists in the largely Roman Catholic province resisted Indonesian control, suffering substantial loss of life. Indonesia came under increasing criticism from the United States and international organizations for human-rights abuses in the area.
During Suharto's regime, his family held sway over much of Indonesia's economic life, and government corruption increased. While the economic conditions of many Indonesians improved, opposition to his policies continued to be suppressed. In Oct., 1997, the country was plunged into economic upheaval when its currency plummeted. The stock market followed soon after, and the International Monetary Fund (IMF) agreed to provide the country with a $40 billion aid package in exchange for economic reforms. Struggling under a huge foreign debt and Suharto's reluctance to implement the IMF reforms, Indonesia's economy continued to worsen in 1998. Student protests and riots over rising prices broke out across the country, with increasing demands for Suharto to resign. Suharto stepped down in May, 1998, and his vice president, B. J. Habibie, assumed the presidency, pledging reform, clean government, and economic responsibility. In June, the government reached an agreement with foreign bankers on the rescheduling of nearly $80 billion in debt.
Early in 1999, Indonesia and Portugal reached an agreement permitting the people of East Timor to choose between limited autonomy within Indonesia and independence in a referendum. Fighting in East Timor between government security forces and anti-independence militias on one side and separatist guerrillas on the other increased in mid-1999 as the vote approached. In August, voters chose independence, but the territory descended into chaos as pro-Indonesian militias and the army engaged in a campaign of terror and brutality, killing proindependence Timorese and causing thousands to flee their homes. In Sept., 1999, after intense international pressure, President Habibie asked the United Nations to send a peacekeeping force to the area, and in October the United Nations agreed to take full control of East Timor until independence, which was achieved in 2002. Even as the situation in East Timor quieted down, however, calls for independence rose in other provinces, particularly Aceh, in N Sumatra, and Papua.
Meanwhile, in the June, 1999, parliamentary elections, the Indonesian Democratic party of Struggle of Megawati Sukarnoputri, the daughter of Sukarno, came in first with 34% of the vote; President Habibie's Golkar party came in second, with 22%. In the Oct., 1999, presidential elections, Abdurrahman Wahid, of the National Awakening party, became the country's first democratically elected president after Megawati failed to build the coalition needed to win; she was chosen by parliament as vice president. A Muslim theologian and religious leader, as well as a defender of human rights and religious tolerance, Wahid moved to increase civilian control over the military, which lost influence and prestige following Suharto's fall and the East Timor debacle. He also was forced to deal with often vociferous opposition in parliament. The economy began to revive in 2000, although the currency (rupiah) suffered a sharp loss in value.
In Feb., 2001, the parliament censured the president, who was implicated in two corruption scandals. Wahid, who had alienated Megawati and suffered a drop in popularity, was censured again in April. Although he was subsequently cleared of wrongdoing in the scandals, the parliament voted in July to remove him from office. Megawati succeeded Wahid as president. Subsequently the parliament passed laws granting limited autonomy (including substantial control over natural resources) to Aceh and Papua, in the hope of undercutting local secessionist movements, but violence in both provinces has continued. An agreement was signed with the Aceh rebels in Dec., 2002, raising hopes for peace that were dashed six months later when Indonesia ended what it regarded as fruitless talks and resumed military action.
Relations were strained with Malaysia in 2002 when as many as 400,000 Indonesians were forcibly deported under a tough new anti-illegal-immigrant law. Constitutional amendments passed in the same year called for the direct election of the president and the elimination of the seats reserved for the military in the national legislature. Both amendments took effect in 2004. In Oct., 2002, a terrorist bombing at a night club in Bali that was frequented by foreigners killed more than 200 people. The bombing was apparently by Indonesian Islamic radicals linked to Al Qaeda. Terror bombings continued to be a sporadic problem in subsequent years, though none were as deadly as the Bali night club attack. A proposal in 2003 to split Papua into three provinces sparked new unrest there, and after legals appeals Papua was divided (2004) into Papua and West Irian Jaya (now West Papua).
Legislative elections in Apr., 2004, were a setback for Megawati's party, which came in second to Golkar; the latter won slightly more than a fourth of the seats. Seven parties secured significant blocks of seats. Megawati subsequently lost the presidency (Sept., 2004) to Susilo Bambang Yudhoyono, a former general and security minister and the candidate of the Democrat party, after a runoff in Sept., 2004. The election was the first time that Indonesians were able to elect a president directly.
In Dec., 2004, a huge tsunami caused by an earthquake off NW Sumatra devastated Aceh, killing some 167,000 people, and a subsequent earthquake in March, caused much destruction on the islands of Simeulue and Nias, west of Sumatra. There was a polio outbreak in Java in May, 2005, that was linked to the persistence of the disease in W Africa and was believed to have been transmitted to Muslim pilgrims at Mecca. Indonesia began a massive immunization campaign that ultimately brought the outbreak under control. Acehnese rebels signed a peace agreement with the government in Aug., 2005, and subsequently disarmed in exchange for the establishment of local self-government. In May, 2006, an earthquake centered S of Yogyakarta in central Java killed some 5,800 people; a July quake off W Java caused a tsunami that killed some 400 people. Heavy rains caused massive flooding in the Jakarta area in Feb., 2007, forcing as many as 400,000 people from their homes. A series of severe earthquakes in Sept., 2007, caused caused much damage in W Sumatra.
In the parliamentary elections in Apr., 2009, the president's Democratic party won 148 seats; Golkar came in second (108 seats), followed by Megawati's party (93), and six other parties won seats. The July presidential elections were contested by Yudhoyono, Megawati, and, running as Golkar's candidate, Vice President Jusuf Kalla; the president secured a majority, avoiding a runoff election. An earthquake off the coast of W Sumatra in Sept., 2009, caused significant destruction and more than a thousand deaths in Padang and the surrounding area. In Nov., 2009, a scandal concerning attempts by high-ranking law-enforcement officials to damage the reputation of Indonesia's anticorruption agency by bringing false charges against two of its top officials hurt Yudhoyono when he failed to dismiss the law-enforcement officials. Corruption and attacks by Islamic extremists have been significant problems in the early 21st cent.