Sukarno's Guided Democracy and the Takeovers of Foreign Companies in Indonesia in the 1960s.

Abstract

This dissertation investigates the confiscation of foreign enterprises in Indonesia in the early 1960s. In a 28 month period from September 1963 to December 1965, at least 90 foreign companies from various countries were taken over by the Indonesian government. Collectively these companies, which included oil companies, plantations, manufacturing plants and a handful of enterprises in other fields, accounted for virtually all existing foreign direct investment in Indonesia. Moreover, in May 1965 further foreign direct investment in Indonesia was prohibited by law. The virtual elimination of foreign investment in Indonesia during this period was the result of a complex confluence of Indonesian domestic political conflict and instability, Indonesian foreign relations, and domestic economic policy, all interrelated and mutually enforcing. Moreover, these confiscations occurred in separate, distinct waves, generally based upon the nationality of the company, and until 1965 were not the result of a grand plan of the Indonesian government to eliminate foreign investment but rather ad hoc in nature, with their own reasons and logic. The seizures of British firms in two waves in September 1963 and January 1964 by non-governmental actors in actions that clearly contravened government policy resulted from domestic political conflict and instability, in particular the assertiveness of the Communist Party of Indonesia (the PKI) from 1964-65 as it sought to play a more forceful political role. The two waves of takeovers of Malaysian enterprises in late 1963 and American enterprises in early 1965 were both the result of Indonesia’s increasingly strident anti-imperialist foreign policy. The final wave of takeovers of all remaining companies in 1965 and the formal prohibition of new foreign investment were driven by a new program of economic self-reliance, the last economic policy implemented under President Sukarno’s Guided Democracy, in what was the pinnacle of economic nationalism in modern Indonesian history.