When the Portuguese came in the early 16th century, they found a multitude of small states. These states were vulnerable to the Portuguese, and later other Europeans, who were in pursuit of dominating the spice trade. In the 17th century, the Dutch emerged as the most powerful of the Europeans, ousting the Spanish and Portuguese (except for their colony of Portuguese Timor on the island of Timor). The Dutch influence started with trading by the Dutch East India Company (VOC), a chartered private enterprise constituting a state in all but name, complete with its own fleet and army, which gradually expanded its region of influence and its grip on political matters. As the British, the Dutch would mainly rely on indirect rule, using traditional native elites as vassals, while imposing their will and extracting major income under supervision of its colonial officials. Following the dissolution of the VOC in 1799 by the Batavian Republic (Napaoleon's Dutch satellite state), and the political instability from the Napoleonic Wars including partial British occupation, the East Indies were awarded to the United Kingdom of the Netherlands in 1815. From this time onward, the East Indies were officially ruled as the major colonies of the Dutch crown.

Under the nineteenth-century Cultivation System (Cultuurstelsel), large plantations and forced cultivation were established on Java, finally creating the profit for the Netherlands that the VOC was unable to produce. In a more liberal period of colonial rule after 1870 the Cultivation System was abolished, and after 1901 the Dutch introduced the Ethical Policy, which included limited political reform and increased investment in the colony.

During World War II, with the Netherlands under German occupation, in December 1941 Japan began a five prong campaign towards Java and the vital fuel supplies of the Dutch East Indies. Though Japan captured Java by March 1942, it was unable to find any national leader willing to cooperate with the Japanese government against the Dutch, eventually the Japanese commander ordered that Sukarno be released from his prison island and in July 1942 Sukarno arrived in Jakarta. Sukarno, with colleagues, cooperated with the Japanese occupiers. In 1945, with the war drawing to a close, Sukarno was made aware of an opportunity to declare an independence. Upon lobbying, Japan agreed that Sukarno established a committee to plan for independence. Sukarno, and Mohammad Hatta, declared independence on 17 August.

In an effort to regain control of their previously occupied colonies, the Allies sent in their armies, together with the Netherlands' Army. Indonesia's war for independence lasted from 1945 until 27 December 1949, when, under heavy international pressure, the Netherlands acknowledged Indonesia's independence. Sukarno became the country's first president, with Mohammad Hatta as the first vice president. See Indonesian National Revolution. It was not until 16 August 2005 that the Dutch government recognised 1945 as the country's year of independence and expressed its regrets over the Indonesian deaths caused by the Netherlands' Army.

The 1950s and 1960s saw Sukarno's government aligning itself first with the emerging non-aligned movement and later with the socialist bloc. The 1960s saw Indonesia in a military confrontation against neighboring Malaysia, and increasing frustration over domestic economic difficulties.

Army general Suharto became president in 1967 with the excuse of securing the country against an alleged Communist coup attempt against a weakening Sukarno. In the aftermath of Suharto's rise, hundreds of thousands people were killed or imprisoned in a backlash against alleged Communist supporters. Suharto's administration is commonly called the New Order era. Suharto invited major foreign investment into the country, which produced substantial, if uneven, economic growth. However, Suharto enriched himself and his family through widespread corruption and he was forced to step down amid massive popular demonstrations and a faltering economy by the Indonesian Revolution of 1998.

In the period of 1998 to 2001, the country had three presidents: Bacharuddin Jusuf (BJ) Habibie, Abdurrahman Wahid and Megawati Sukarnoputri. In 2004 the largest one-day election in the world and Indonesia's first direct Presidential election was held and was won by Susilo Bambang Yudhoyono.

Parts of northern Sumatra, particularly Aceh, were devastated by a massive earthquake and tsunami on 26 December 2004. See Impact of the 2004 Indian Ocean earthquake on Indonesia

Politics
The highest legislative body is the Majelis Permusyawaratan Rakyat (MPR, head: Hidayat Nur Wahid) or 'People's Consultative Assembly', consisting of the Dewan Perwakilan Rakyat (DPR, head: Agung Laksono) or People's Representative Council, elected for a five-year term, and the Dewan Perwakilan Daerah (DPD, head: Ginandjar Kartasasmita) or Regional Representatives Council. Following elections in 2004, the MPR became a bicameral parliament, with the creation of the DPD as its second chamber.

Provinces
Currently, Indonesia has 33 provinces (of those, 2 are special territories and 1 capital city territory). The provinces are subdivided into regencies and cities, which are in turn split up in sub-districts. The provinces are:

Bali, Bangka-Belitung, Banten, Bengkulu, Central Java, Central Kalimantan, Central Sulawesi, East Java, East Kalimantan, East Nusa Tenggara, South Sumatra, Gorontalo, Jambi, Lampung, Maluku, North Maluku, North Sulawesi, North Sumatra, Papua (Irian Jaya), Riau, Riau Kepulauan, South East Sulawesi, South Kalimantan, South Sulawesi, West Irian Jaya, West Java, West Kalimantan, West Nusa Tenggara, West Sulawesi, West Sumatra

The special territories (daerah istimewa) are Aceh (or Nanggroe Aceh Darussalam) and Yogyakarta. Special territories have more autonomy from the central government than other territories, and as a result they have unique legislative privileges: the Acehnese government has the right to create an independent legal system and instituted a form of sharia (Islamic Law) in 2003; Yogyakarta remains a sultanate whose sultan (currently the wildly popular Sri Sultan Hamengkubuwono X) is the territory's de facto governor for life.

The capital city territory is Jakarta. Though Jakarta is a single city, it is administered much as any other Indonesian province. For example, Jakarta has a governor (instead of a mayor), and is divided into several sub-regions with their own administrative systems.

East Timor was a province of Indonesia from its annexation in 1976 until Indonesia relinquished sovereignty in 1999. Following a period of transitional administration by the UN, it became an independent state in 2002.

Geography
Indonesia's 18,108 islands, of which about 6,000 are inhabited, are scattered around the equator, giving the country a tropical climate. The largest populated islands are Java, one of the most densely populated regions on Earth, where about half of the population lives, Sumatra, Borneo (shared with Malaysia and Brunei), New Guinea (shared with Papua New Guinea) and Sulawesi. The country borders Malaysia on the island of Borneo (Indonesian: Kalimantan), Papua New Guinea on the island of New Guinea and East Timor on the island of Timor. In addition to the capital city of Jakarta, principal Indonesian cities of high population include Surabaya, Bandung, Medan, Palembang, and Semarang.

Its location on the edges of tectonic plates, specifically the Pacific, Eurasian, and Australian, means Indonesia is frequently hit by earthquakes and the resulting tsunamis. Indonesia is also rich in volcanoes, the most famous being the now vanished Krakatau (Krakatoa), which was located between Sumatra and Java.

Flora and fauna differ markedly between Kalimantan, Bali, and western islands on the one hand and Sulawesi, Lombok, and islands further to the east on the other hand. This ecological boundary has been called the Wallace line after its discoverer. The line is often given as the boundary between Asia and Australasia, as such making Indonesia a bicontinental country.

The country has extensive natural resources outside of Java, including crude oil, natural gas, tin, copper and gold. Indonesia is the world's second largest exporter of natural gas, though it has recently become a net importer of crude oil. Major agricultural products include rice, tea, coffee, spices and rubber. The central bank of Indonesia is Bank Indonesia [1].

Indonesia's major trading partners are Japan, the United States and the surrounding nations of Singapore, Malaysia and Australia.

Despite being the only Asian member of OPEC, Indonesia's fuel production has declined significantly over the years, owing to aging oil fields and lack of investment in new equipment. As a result, despite being an exporter of crude oil, Indonesia is now a net importer of oil and had previously subsidized fuel prices to keep prices low, costing US$ 7 billion in 2004 [2]. The current president has mandated a significant reduction of government subsidy of fuel prices in several stages [3]. In order to alleviate economic hardships, the government has offered one-time subsidies to qualified citizens. The economy is now undergoing a process of rebuilding after the tsunami that struck in December of 2004. The government has stated the cuts in subsidies are aimed at reducing the budget deficit to 1% of gross domestic product (GDP) this year, down from around 1.6% last year.

Demographics
Indonesia's population can be roughly divided into two groups. The west of the country is Asian and the people are mostly Malay, while the east is more Pacific and people on New Guinea are Papuan, with roots in the islands of Melanesia. There are, however, many more subdivisions, which is logical given the fact that Indonesia spans an area the size of Europe or the USA and that it consists of many islands that to a large degree had their own separate development. Many Indonesians identify with a more specific ethnic group that is often linked to language and regional origins; examples of these are Javanese, Sundanese, or Batak. But there are also quite different groups within many islands, such as Borneo, with its Dayak and Punan, who have different lifestyles and skintones.

Most Indonesians speak a local language (bahasa daerah) as their first tongue, but the official national language, Indonesian (locally called Bahasa Indonesia or simply Bahasa, meaning language) is almost universally taught in schools and is spoken by nearly every Indonesian. Originally a lingua franca for most of the region, including present-day Malaysia (and thus closely related to Malay), it was accepted by the Dutch as the de facto language for the colony and declared the official language after independence. The formerly large, influential Eurasian community (locally known as Indos) has largely left the country for the Netherlands, California and Australia, although a few still remain in Indonesia and are highly esteemed models and soap opera stars.

There are also serious ethnic tensions in Indonesia, predominately between Indonesians of Chinese ethnicity and the Pribumi peoples, who are natives of Indonesia. The riotings in Jakarta in 1997 and 1998 highlight this recurring tension. Ethnic relations are strained mostly due to the high level of economic power that the Chinese-Indonesians have relative to the Pribumi peoples, which in turn propels anti-Chinese sentiment. Positions of power and influence in the business sphere are consistently held by ethnic Chinese Indonesians. The Indonesian government is attempting to remedy this problem, but due to widespread corruption and discontent experienced by the poorer citizens of Indonesia ethnic harmony is slow in coming. Corruption, collusion, and nepotism which characterized Suharto's presidency clearly define the origins of Indonesia’s ethnic tensions today.

Islam is Indonesia's main religion, with almost 88% of all Indonesians declared as Muslim according to the 2000 religious census, making Indonesia the most populous Muslim-majority nation in the world. Prior to the arrival of the Abrahamic faiths of Christianity and Islam in the Malay Archipelago, the popular beliefs in region had been thoroughly influenced by Indic religious philosophy through Hinduism and Buddhism. After independence syncretism and intermarriage has decreased somewhat and religious divides sharpened, leading to communal violence in many of the eastern islands as well as in Java. Although Islam was once mainly practiced in Java and parts of Sumatra, the transmigration program has increased the number of Muslims living in Bali, Borneo, the Celebes, the Moluccas, and Papua. The remaining population is 8% Christian (of which roughly three quarters are Protestant, with the remainder mainly Catholic, and a substantial charismatic minority), 3% Hindu and 1% Buddhist with small communities of Jews. Although only about 3% of Indonesian population is officially Hindu, Indonesian beliefs are too complex to classify as belonging to a single world religion. In Java in particular, a substantial number of Muslims follow a non-orthodox, Hindu-influenced form of Islam known as Abangan, while across the archipelago the Hindu legacy, along with the older mystic traditions, influences popular beliefs. Indonesians are required to declare themselves as one of these official religions. As a result, many Indonesian "Muslims" are non-practicing, follow Indonesia's animist traditions (a fact that the government strenuously denies), or are entirely secular.

Culture
Art forms in Indonesia have been influenced by several cultures. The famous Javanese and Balinese dances, for example, contain aspects of Hindu culture and mythology.

Also well-known are the Javanese and Balinese wayang kulit shadow theatre shows, displaying several mythological events. Several islands are famous for their batik and ikat cloth.

Silat is a unique martial art originating from the archipelago.