Indonesia’s rise: achieving strategic stability amid great power rivalry

2026-02-03 - 23:26

In recent decades, Indonesia has emerged as a resilient democracy and vibrant economy in Southeast Asia. This Insight explores Indonesia’s trajectory of success, consolidating its geostrategic importance and achieving economic stability in a multipolar world order. Indonesia, being the world’s largest archipelagic state, is strategically located at key maritime chokepoints, i.e., the Lombok, the Malacca, and the Sunda Straits. It is the geopolitical and economic centre of the Asia-Pacific region, as nearly 50% of global oil shipments and trade pass through these routes. Figure 1: Map showing the geo-strategic location of Indonesia Indonesia ranks as the world’s sixth-largest economy, and its GDP has expanded from US$5.7 billion (1967) to US$1.5 trillion (2025), maintaining an average annual growth rate of 5-6%. Since its independence in 1945, Indonesia’s development has been shaped by both Cold and post-Cold War dynamics characterised by great-power rivalry. Indonesia’s transformation, therefore, can be understood by considering three distinct phases of its history. Under President Sukarno’s regime (1949-1965), Indonesia led the Non-Aligned Movement (NAM-1961), yet it leaned towards the Soviet Union. Indonesia-USSR trade was limited and largely aid-driven. i.e., US$1.3 billion (1958-1963); however, during this period, the Soviet Union was delivering large quantities of weapons and defence equipment to Indonesia. By 1962, Indonesia was the biggest non-communist recipient of Soviet bloc military aid. This anti-Western stance, coupled with domestic economic and political challenges, spiralled into the mid-1960s crisis, which paved the way for the military takeover under President Suharto. With President Suharto’s New Order (1967–1998), Indonesia inclined towards the U.S.-led Western bloc as a strategic defence against communism. The resultant U.S. support and influx of foreign investment helped achieve socio-economic progress; however, these did not result in robust institutional capacity-building and long-term stability.