The Economic Decolonisation of Indonesia: a Bird�s-eye View

Abstract

An oft-quoted statement by the Indonesian nationalist leader Haji Agus Salim runs as follows: The economic side of the Indonesian Revolution has yet to begin. (Higgins, 1957: 102, cited in Lindblad, 2008: 2). The statement was made shortly before or shortly after the transition of sovereignty from Dutch colonial rule on 27 December 1949. At long last, the Netherlands had acknowledged that Indonesia was independent, which brought the Indonesian Revolution to its logical conclusion. But, by the conditions laid down at the Round Table Conference in The Hague in late 1949, the interests of Dutch private capital were still omnipresent in the Indonesian economy. In addition, the Indonesian government was obliged to consult the Netherlands government in matters affecting the economy until the debt of the former colony to the metropolitan mother country had been repaid in full. As Haji Agus Salim rightly stressed, economic and political decolonisation did not coincide but followed different historical trajectories.This contribution offers an abridged account of the process of economic decolonisation as it unfolded between 1945 and 1959, from the proclamation of independence until the nationalisation of the vast majority of Dutch-owned companies that had retained operations in Indonesia after independence.1 Four themes serve as devices tofurther our understanding of the process of economic decolonisation. These four themes, in order of appearance, are below: the new spirit in Indonesian economic life following the transfer of sovereignty; the changing climate of economic policy-making during the 1950s; the response and accommodation by remaining Dutch companies; and, finally, the concluding phase of expropriation and nationalisation.A couple of points of departure need to be spelled out. The ideological basis of the thrust towards economic decolonisation in Indonesia was provided by a small booklet, Ekonomi Indonesia, which made a very timely appearance in 1949. Its subtitle, Dari ekonomi kolonial ke ekonomi nasional, carried an immediate appeal to contemporary public discourse, offering the briefest possible summary of what economic decolonisation in Indonesia was all about. For the remainder, the book offered very little concrete guidance (Hadinoto, 1949). A second point of departure may be traced in the international historiography on Indonesian decolonisation, notably John Sutters voluminous PhD dissertation on domestic developments up to the general election in 1955 (Sutter, 1959). Although providing a wealth of information from government sources and press material, Sutters survey offers little on the fate of private business enterprises; in addition, he did not consult Dutch-language sources. Yet another point of departure in our quest to better understand economic decolonisation in Indonesia is, of course, the wider international context of the Cold War. Decolonisation in Indonesia, whether political or economic, did not take place in a vacuum but was intrinsically linked to Indonesias efforts to position itself in the tension between the Western powers and the Soviet bloc. Just as Sukarnos young republic secured American support against the returning Dutch by heavy-handedly crushing the Communist uprising in Madiun in 1948; did increasing flirtation with the Soviet bloc during the Guided Democracy period alienate Indonesia from the internationalcommunity and bring flows of incoming foreign investment to a virtual standstill?