Suharto was concerned to reverse many of Sukarno's policies. The confrontation with Malaysia was quickly ended, and Indonesia rejoined the United Nations. In addition, Indonesia was a major participant in the creation of the Association of Southeast Asian Nations (ASEAN) in 1967. Domestically, the support of the army enabled Suharto to achieve a political stability that had been lacking under Sukarno. But the major policies initiated by Suharto's New Order had to do with economic rehabilitation. Successful negotiations secured a rescheduling of Indonesia's foreign debts and attracted aid through an intergovernmental group of donor countries. The complex regulations governing economic activity were simplified. In 1967 a new foreign investment law provided a framework for new private capital investment.

Suharto

Economic development.

The results of the new economic policies were soon apparent. The inflation rate was quickly reduced and the national currency, the rupiah, was stabilized. Manufacturing expanded rapidly. Oil production increased, thanks partly to exploration by a number of new foreign companies operating through Pertamina, the gigantic state oil corporation. (Pertamina's position as the centerpiece of Indonesia's economic expansion ended in 1975, however, when because of indebtedness it had to be rescued by the government.) Military entrepreneurs played a significant part in these developments. In the mid-1980s the decline in oil prices led to a shift in economic direction toward encouraging private-sector investment and emphasizing manufactured exports as a replacement for the traditional reliance on oil and commodity exports.

These new policies had their critics, both inside and outside the country. To some it seemed that the republic was becoming economically dependent on Western capital and, in particular, on large transnational corporations, that direct foreign investment had created an Indonesian comprador class that battened on foreign companies, and that new wealth had exaggerated existing inequalities rather than removing them. Alternatively, it was argued that long-term improvement depended on the economic growth that would flow from policies designed to encourage large-scale investment rather than small-scale, labour-intensive developments.

The economic achievements of New Order policies were spectacular, and during the 1970s and '80s they transformed the developmental patterns of the archipelago. New investment was especially obvious outside Java. Historically the political centre and the economic hub of the Indies, Java seemed to retain that position within the modern republic, commanding about three-quarters of all new investment projects (excluding oil exploration) from the late 1960s to the early 1980s. The expansion of manufacturing over that period was also concentrated in Java. This apparent dominance, however, was undermined by the density of Java's population. In per capita terms its share of foreign investment was outstripped by some of the outer provinces. Sumatera Utara, the home of the great plantation expansion of the late 19th century, added oil and natural gas exploration and mining to its estate agriculture. Mining and oil had an even greater impact on the development of Aceh, Riau, and Kalimantan Timur, as well as Irian Jaya. In per capita terms Kalimantan Timur, with timber and oil, natural gas, and coal, attracted high levels of both foreign and domestic investment and became one of the most rapidly developing provinces of the republic. By contrast, the Nusa Tenggara Barat, Nusa Tenggara Timur (West and East Lesser Sunda), and Timor Timur were the poorest and least developed provinces in both absolute and per capita terms. Successive five-year plans emphasized the importance of redressing regional disparities and spreading economic growth more evenly.