Background:
The Dutch began to colonize Indonesia in the early 17th century; the islands were occupied by Japan from 1942 to 1945. Indonesia declared its independence after Japan's surrender, but it required four years of intermittent negotiations, recurring hostilities, and UN mediation before the Netherlands agreed to relinquish its colony. Indonesia is the world's largest archipelagic state. Current issues include: alleviating widespread poverty, preventing terrorism, continuing the transition to popularly-elected governments after four decades of authoritarianism, implementing reforms of the banking sector, addressing charges of cronyism and corruption, holding the military and police accountable for human rights violations, and resolving armed separatist movements in Aceh and Papua.

Economy - overview:
Indonesia, a vast polyglot nation, faces economic development problems stemming from recent acts of terrorism, unequal resource distribution among regions, endemic corruption, the lack of reliable legal recourse in contract disputes, weaknesses in the banking system, and a generally poor climate for foreign investment. Indonesia withdrew from its IMF program at the end of 2003, but issued a "White Paper" that commits the government to maintaining fundamentally sound macroeconomic policies previously established under IMF guidelines. Investors, however, continued to face a host of on-the-ground microeconomic problems and an inadequate judicial system. Keys to future growth remain internal reform, building up the confidence of international and domestic investors, and strong global economic growth.

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