Although hundreds of ethnic groups have been know as the indigenous of Indonesia for hundreds and thousands of years, Indonesia did not exist in its present form until the turn of the 20th century.
Of the so-called natives of Indonesia, archaeologists have speculated that the first people to populate Indonesia migrated from mainland China some 1,000 years ago and inhabited a stretch of islands along the equator, later known as Nusantara.
Over the centuries they built and refined their statecraft in the form of kingdoms and principalities. Sharing similar characteristics with other Southeast Asian kingdoms, these Nusantara kingdoms based their conception of state more on people than on space or territory. But intercourse with the western world changed the course of history in Nusantara.
In 1511, the Portuguese conquered Malacca, located on the Malay peninsula, which was then still an inseparable part of Nusantara. The Dutch followed in 1512 and landed on Banten shore in Java. At first, the Dutch came more as traders under the trading umbrella of the Royal East Indies Company (Vereniging Oost Indische Compagnie, VOC). For the next two centuries, the Dutch conducted business with the natives, although in many cases the trade was not on equal terms. Often, trade was accompanied by violent pacification processes.
Then the VOC went bankrupt and the Dutch government took over the business in Nusantara (called the East Indies by the Dutch). Starting from about the mid-seventh century and lasting until the arrival of the Japanese in 1942, was the "real colonization" called "high colonialism" in literature. The period was disrupted briefly when the British took over colonial rule in 1811 to 1814. Among other things that the natives learned from colonization was statecraft based on territorial conception rather than on people.
In the early 20th century, the natives of Nusantara learned that as diverse as their ethnicities were, they could imagine themselves as a unified community. A nationalism had grown in a process that Benedict Anderson, a doyen of Indonesian studies, calls an "imagined community". During the first half of 20th century Nusantara, its people built an imaginary nation called Indonesia -- the name itself was borrowed from the West. By the end of the 1930s, it was clear that the end of Dutch colonialism in Indonesia was only a matter of time.
During World War II, 1942-1945, the Japanese occupied Indonesia. Although short-lived, the occupation enabled Indonesians to arm themselves for the very first time. Shortly after Japan's defeat in WWII, Sukarno and Hatta proclaimed Indonesia an independent state, and they became the founding fathers of the new country. The largest archipelago in the world, with over 17,000 islands -- only 3,000 of which are inhabited -- has emerged into a new Indonesia.
When the Dutch returned and tried to reestablish colonial rule, armed Indonesians resisted. The Dutch were forced to recognize an independent Indonesia in 1949.
The new Indonesia adopted a federal system of governance for a short time. But for a longer period, within a five-year span (1950-1955), leaders of the new country were eager to adopt a liberal system of government. Although there is no proof that the system ruined the economy, it was clear that the elite's political stability was shaky. The longest serving prime minister was only two years in office.
The government then held a general election in 1955, the first and only democratic general election Indonesia ever had. But feeling that the country was still unstable two years after the election, president Sukarno, backed by the Army, declared the 1950 Provisional Constitution void and reintroduced the 1945 Constitution. The latter provided an ample opportunity for Sukarno, popularly known as Bung Karno (Comrade Sukarno), to balance three political powers -- the Indonesian Communist Party, the Army and himself.
In the first half of the 1960s, Bung Karno leaned toward the left. On domestic politics, he was trying hard to balance the communists and the Army; on the international stage he was establishing himself as leader of a new world, free from Cold War antagonism. But economic decline and mounting conflicts, especially between communists and noncommunists, the latter of which was backed by the Army, caused him to lose control over the situation.
On Sept. 30, 1965, an abortive coup occurred. There are two conflicting versions of events surrounding the attempted coup. The official Army version insists that the Indonesian Communist Party (PKI) was behind the coup attempt, while the communist version asserts that the coup was an internal matter of the Army. In fact, several members of PKI's central bureau were involved, as well as many Army officers and personnel.
The abortive coup cost Indonesia dearly. It took the lives of seven high-ranking Army generals, followed by a pogrom of communists -- a moderate estimate ranges between 300 thousand and 500 thousand alleged members of PKI. Soeharto, who then was a major general and commander of the Army Strategic Reserves Command, took over leadership and deposed Bung Karno from his presidential seat.
In 1966, Soeharto received a letter known as the March 11 Letter of Instruction which reportedly transferred state power from Sukarno to him.
In 1967, Soeharto unseated Sukarno as president in the special session of the Provisional People's Consultative Assembly (MPRS).
Consolidating his power under a new regime called the New Order, Soeharto launched a "regime cleansing" against the Old Order.
Together with Hamengkubuwono IX, the sultan of Yogyakarta, and Adam Malik -- the three were known as the triumvirate -- Soeharto divided the tasks for economic and political reconstruction. Sultan Hamengkubuwono was assigned to lead efforts for economic recovery, Adam Malik was assigned to redirect Indonesia's foreign policy toward the West, and Soeharto himself was "assigned" to rebuild the lamentable domestic politics.
Soeharto was determined to change Indonesia's course, from its emphasis on politics to prioritizing economic development. He set up the trilogy of development: political stability, economic growth and equality.
To gain political legitimacy, perceived as a prerequisite to economic growth, the government conducted a general election in 1971. The election, however, was far from democratic. Soeharto introduced the "floating mass" concept that banned political parties from operating at village level.
From the 1971 election and throughout the New Order period, the Functional Group (Golongan Karya, or Golkar) served as Soeharto's main political machinery. Golkar legally operated not as a political party, although in fact it was a party. Golkar ran in the 1971 elections against 10 other political parties -- including PKI and Masyumi which were two of the four biggest parties in 1955 but which had been out of political scene -- and won 62 percent of the vote.
In 1974, Soeharto forced all political parties to merge into three: Golkar, the United Development Party (PPP) and the Indonesian Democratic Party (PDI). Again, legally speaking Golkar was not a political party. Five more elections were conducted every five years. During those years, Soeharto tightly controlled politics; not even the slightest room was available for opposition.
There were several cases of serious opposition during the New Order regime. The first came rather as a blow in 1974, when students protested against Japanese investments. Added by political rivalry between Gen. Soemitro and Maj. Gen. Ali Moertopo, student protests in Jakarta turned into riots. The movement ended with the removal of Soemitro from his powerful position as deputy commander of the Armed Forces and chief of staff of the Operation Command for the Restoration of Security and Order (Kopkamtib).
The second serious opposition movement came in 1978. Again it came from students, who protested Soeharto's bid for a second term in office, which would be decided upon by the People's Consultative Assembly in its General Session in March 1978.
Several retired Army officers backed the students, while factionalism was apparent within the Armed Forces. Soeharto moved fast to crush the movement. Hundreds of opposition and student leaders were arrested, dozens of newspapers and magazines were closed down. The movement lost its momentum, and after that Soeharto enjoyed an incontestable position.
If Golkar served as Soeharto's main political machinery, the Army functioned as guardian of the state. And since the state was personalized around Soeharto alone, the Army also served to protect him. Under its dual function role doctrine -- the doctrine argues that the duties of a professional Indonesian Armed Forces includes attending to nonmilitary business, especially if it has to do with politics -- the military intervened in almost all sectors of public life. At its peak, the number of military personnel serving in nonmilitary affairs reached over 40,000. Later, history witnessed excesses of the doctrine.
Some businesspeople, many of whom were of Chinese descent, enjoyed state protection and sometimes two-digit economic growth; some grew to become tycoons and magnates. The privileges that these businesspeople enjoyed sparked resentment from other communities. As a result, racial tension grew.
But Chinese businesspeople were not the only ones to enjoy state protection and preference. Some indigenous businesspeople also enjoyed similar privileges. In general, what Kunio Yoshihara calls "ersatz capitalism", or pseudocapitalism, grew. Those "capitalists" were not real capitalists.
Then the financial crisis came. It first hit in mid-1997, and many believe it was a direct result of Thailand's economic crisis. The crisis worsen with the scheduling of the People's Consultative Assembly's General Session in March 1998, with the main agenda being to "elect" a "new" national leadership. It eventually turned into a political crisis too. But Soeharto was determined to run for his seventh consecutive five-year term in office. Supported by his political machine, Soeharto, as expected, became president again.
The economic and political crises made the political climate like a house of cards. Lacking sensitivity, Soeharto filled his new Cabinet with cronies, and appointed one of his daughters minister of social affairs. Less than two months after the formation of the new Cabinet, political tension mounted to an unbearable level. On May 12, four Trisakti University students were shot dead following a peaceful demonstration.
The shootings immediately sparked the emotions of the masses. To the majority of people, the New Order regime had become soulless. Within a week, Indonesia experienced one of its most tumultuous periods in history. For three days, from May 13 through to May 15, six of the country's largest cities were hit by massive riots, probably the largest riots in Indonesia's history. Days later, hundreds of thousand students and members of the public poured into the streets. Chanting and demanding total reform, thousands marched to the legislative building in Jakarta and occupied it for several days.
This forced Soeharto to step down. Instead of returning the presidential mandate to the People's Consultative Assembly (MPR) he gave the mandate to vice president B.J. Habibie. The new president is weak, but his weakness is one of his strengths. Everyone close to him feels that they can use him, and thus balancing the power is everyone's interest. The government scheduled another general election on June 7, 1999, only two years after the last election.
Forty-eight political parties, instead of three, competed for 462 seats in the House of Representatives, with the remaining 38 seats going to the military. The election was the first democratic poll since 1965, and the results should have a long-term effect on domestic political stability. The Indonesian Democratic Party of Struggle (PDI Perjuangan) won a majority in the House (DPR) with 35 percent of seats, followed by Golkar, the United Development Party (PPP), the National Awakening Party (PKB), the Crescent and Stars Party (PBB) and the National Mandate Party (PAN).
Despite its position as a simple majority party, PDI Perjuangan lost the political battle to install chairwoman Megawati Soekarnoputri as president. In a tight race against a strategic coalition of Golkar and the Axis Force, a coalition of various Islamic parties, PDI Perjuangan also lost the strategic posts of speakers of the House and People's Consultative Assembly. After losing out on the presidency, Megawati was elected as vice president.
— Last updated: May 25, 2001.
Source : http://old.thejakartapost.com/history/history.asp
Yet, to overpower Indonesia, US hardly found a way as this nation was being led by a tough, smart, and difficult president, i.e. Bung Karno. It was no other way, this man had to be eliminated. History had properly written that CIA got involved in any rebel deeds to Bung Karno’s power. CIA also sent its cadets to education subject, approached and steered political party (for example through PSI) tutored its men in local army, etc. After failing for many times in stepping down Bung Karno, in the end of 1965, Bung Karno was successfully abolished. 
