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Post-World War II

As president, Sukarno moved Indonesia from democracy towards authoritarianism and maintained power by balancing the opposing forces of the military, political Islam, and the increasingly powerful Communist Party of Indonesia (PKI). Tensions between the military and the PKI culminated in an attempted coup in 1965. The army, led by Major General Suharto, countered by instigating a violent anti-communist purge that killed between 500,000 and one million people and incarcerated roughly a million more in concentration camps. The PKI was blamed for the coup and effectively destroyed. Suharto capitalised on Sukarno's weakened position, and following a drawn-out power play with Sukarno, Suharto was appointed president in March 1968. His US-backed "New Order" administration encouraged foreign direct investment, which was a crucial factor in the subsequent three decades of substantial economic growth.

Indonesia was the country hardest hit by the 1997 Asian financial crisis. It brought out popular discontent with the New Order's corruption and suppression of political opposition and ultimately ended Suharto's presidency. In 1999, East Timor seceded from Indonesia, following its 1975 invasion by Indonesia and a 25-year occupation marked by international condemnation of human rights abuses. Since 1998, democratic processes have been strengthened by enhancing regional autonomy and instituting the country's first direct presidential election in 2004. Political, economic and social instability, corruption, and instances of terrorism remained problems in the 2000s; however, the economy has performed strongly since 2007. Although relations among the diverse population are mostly harmonious, acute sectarian discontent and violence remain problematic in some areas. A political settlement to an armed separatist conflict in Aceh was achieved in 2005.