• When the exploitation of oil became profitable in the late nineteenth century, petroleum earned a respectable position in the total export package. In the early twentieth century, the production of oil was increasingly concentrated in the hands of the Koninklijke/Shell Group.
Foreign Exports from the Netherlands-Indies, 1870-1940 (in millions of guilders, current values)
• The momentum of profitable exports led to a broad expansion of economic activity in the Indonesian archipelago. Integration with the world market also led to internal economic integration when the road system, railroad system (in Java and Sumatra) and port system were improved. In shipping lines, an important contribution was made by the KPM (Koninklijke Paketvaart- Maatschappij, Royal Packet boat Company) that served economic integration as well as imperialist expansion. Subsidized shipping lines into remote corners of the vast archipelago carried off export goods (forest products), supplied import goods and transported civil servants and military. • The Depression of the 1930s hit the export economy severely. The sugar industry in Java collapsed and could not really recover from the crisis. In some products, such as rubber and copra, production was stepped up to compensate for lower prices. In the rubber exports indigenous producers for this reason evaded the international restriction agreements. The Depression precipitated the introduction of protectionist measures, which ended the liberal period that had started in 1870. Various import restrictions were launched, making the economy more self-sufficient, as for example in the production of rice, and stimulating domestic integration. Due to the strong Dutch guilder (the Netherlands adhered to the gold standard until 1936), it took relatively long before economic recovery took place. The outbreak of World War II disrupted international trade, and the Japanese occupation (1942-1945) seriously disturbed and dislocated the economic order.
A Chronological Survey of Indonesian Economic History The post-1945 period • The Dutch promise a conference on self- government before they leave in 1941. • Sukarno, Mohammed Hatta and Sutan Sjahrir released from jail by the Japanese when they occupied Indonesia in 1942. • Sukarno, Hatta and others formed Putera as a double edge puppet government. • The Netherlands asked Britain to reoccupy Indonesia on its behalf. • The initial British force attempted to occupy Surabaya on November 10, 1945. The result was a bloody one-month long battle. • Negotiations with Dutch led to Linggadjati Agreement in 1947 creating the United States of Indonesia under Dutch sovereignty. The USI was to be part of a larger Netherlands-Indonesian- Surinam-Curacao Union.
The post-1945 period • After independence, the Indonesian economy had to recover from the hardships of the Japanese occupation and the war for independence (1945- 1949), on top of the slow recovery from the 1930s Depression. During the period 1949-1965, there was little economic growth, predominantly in the years from 1950 to 1957. In 1958-1965, growth rates dwindled, largely due to political instability and inappropriate economic policy measures. The hesitant
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