Preamble

This document is made because of the gradual development process of the Hearts of Iron 4
mod, The New Order: Last Days of Europe; whereas earlier playable versions of the mod
focuses primarily on politics, storytelling, and to a lesser extent warfare, with the release of
Toolbox Theory a new added dimension of economic management necessitates a more
thorough analysis – consisting of comparative study, extrapolation, and conjecture – in order
to fully flesh out a plausible set of starting condition which would then be the basis of how
every political path in Indonesia within the submod Revolution at Sunset tackles economic
challenges believably.

For Indonesia, the world of TNO diverges wildly from our timeline (OTL), in obvious ways; as
Japan became the victor of World War II, the whole archipelago is at their heel, which poses
significant questions regarding the economy. OTL, the Japanese occupation period was a
time of suffering coupled with drastic, foreboding changes, partly due to deliberate Japanese
policies (vague as they may be in the long term), partly due to Japan’s worsening situation
as the war rolled on. Indonesia’s economy deteriorated further after it, due to their own
protracted independence war against the Dutch; as Japan’s war situation differs in TNO, and
as the independence war would not happen, it can be said that any relevant economic,
demographic, and fiscal data of Indonesia would rarely resemble that of OTL. Therefore it is
most prudent to seek answers to these questions:

a) How would a prolonged Japanese occupation with a victorious Japan shape

Indonesia’s economy and its development?
b) How would Indonesia’s export-oriented economy, previously globally connected and
reliant on wide international trade under Dutch rule, cope and reorient itself towards a
Japan-dictated internal trade within the GEACPS?
c) How would it affect Indonesia’s demographics, chiefly labor and population growth?
d) How would these situations bode on Indonesia’s fiscal situation and policy?
e) Most importantly, how do the Indonesian people fare compared to OTL?

These questions, as inferred within the first paragraph, are to be answered below in a
narrative-driven way, with conjectural data for the submod’s purposes included.

The Economy of Indonesia Under the Japanese Yoke

It is already commonly known that Japan invaded Indonesia chiefly to gain access to its oil,
sorely needed for their war effort; but there are several other important commodities and
economic interests to be coveted and exploited. Before the war, Indonesia was one of the
worldwide leading producers of rubber and sugar, while in smaller quantities also a producer
of tea, coffee, cinchona (quinine), and cocoa, among other crops. Its land also contained
proven and exploited quantities of coal, copper, bauxite, tin, gold, and other minerals. As
Japan landed in Indonesia’s islands in 1942, then, they are in full knowledge of the
archipelago’s economic potential. However, the first problem then posed itself; Japan did not
plan on how to take over and exploit these resources long-term beyond vague and generally
short-term thinking. This, coupled with transitional considerations and especially Gen.
Imamura’s comparatively soft predisposition in governing Java, prevented an immediate
forced takeover of assets from occurring. And so for the first few months of occupation,
Allied-owned factories, refineries, and plantations were permitted to do “business as usual”,
with its European administrators and staff at most subjected to basic curfew and travel
restrictions.

As 1942 rolled into 1943, with the Pacific War intensifying, Japanese need for immediate
materiel grew, and the occupational authorities in the Indonesian islands (divided into three
zones; the 16th Army controlled Java, the 25th Army took charge in Sumatra, while the Navy
governed the rest) were increasingly hard-pressed to reap the economic potential of
Indonesia quickly so Japan would not be starved out of the war. Coupled with external
pressures from Tokyo and zaibatsu scions, the takeovers began in earnest from 1943
through 1944. The most important commodity, oil, was reserved temporarily for the Army and
Navy’s full control; a collection of zaibatsu oil subsidiaries came to manage them, which
would be detailed later. Mining operations of coal, copper, bauxite, and gold were taken over
in a straight fashion, mostly to Mitsui and Ishihara zaibatsus. Most of the plantations, except
those owned by Indonesian and Indonesian-Chinese landlords, were apportioned to both big
business, Nomura zaibatsu the chief recipient among them, and to individual Japanese
entrepreneurs. Sugar, however, got administered separately from the other crops, due to a
combination of how the Japanese perceived it as Java’s finest commodity and its wartime
usage as butanol for airplane fuel.

With the exception of oil, the war years saw a decline in production and efficiency, in some
cases drastic, across commodities. This was due to a combination of several factors: the
most important of them is the collapse of both internal and external markets due to
disruptions brought by the war, as the likes of rubber can only be shipped to Japan as its
sole consumer; but almost as damaging in the short term was the haphazard way in which
the takeovers and subsequent transition occurred. In most cases Dutch technicians and staff
were interned, and Japan was not yet ready during the war to replace them in numbers; the
likes of Mitsui, for example, were compelled to open technical schools to train local
Indonesians as skilled labor. While this inadvertently became beneficial in Indonesia’s later
efforts of indigenization, these efforts were seriously stymied for years by the requirement of
Japan’s romusha policy of forced labor requisitions, preventing accumulation of sorely
needed experienced labor. Furthermore, intense pressure towards quick materiel gain forced
the companies to prioritize operations over maintenance, resulting in land and machine
decay, not helped by occasional asset-stripping of rail tracks and machines by the Army for
the war effort.

As Japan returned from the war victorious, war austerity was eased out, gradually ending.
Although for several more years after it military occupation would continue, before transfer
towards a unified civilian administration and then Indonesian independence, Tokyo’s focus in
Indonesia immediately shifted towards how to make their new “little brother” profitable.
Zaibatsus were encouraged to make further investments in Indonesian commodities; the
decline of some commodities’ industrial plantations were irreversible, chiefly rubber which
saw competition from fellow GEACPS members Malaya and Vietnam, and thus switched to
become a primarily smallholders’ crop – but the new wave of investments eventually bore
fruit, returning production to respectable level (in some cases surpassing 1938 level) by
1960, boosted by the formal end of romusha policies brought about by nominal Indonesian
independence in 1955. As of 1962, sugar and oil are Indonesia’s main exports, with coffee
and copra (another primarily smallholders’ crop) some distance behind them.
Japan did try to do more than exploit what’s already available in Indonesia, although the
results are at most mixed. During the war, the government in Tokyo directed the occupying
authorities and zaibatsus to introduce cotton plantations in Java and Sumatra; a recurring
obsession due to Japan’s position as a textile exporter lacking access to cotton. However, a
combination of unsuitable climates, Japanese inexperience in handling the quirks of tropical
cultivation, and mismanagement doomed these ventures. Efforts in forcing peasants to
participate even resulted in several minor local uprisings, especially during famines which
were common during the war years until 1955. Efforts to reduce consumption of rice,
stemming from war austerity, fared better. Crops such as maize and cassava were
successfully promoted, although whether this was the result of propaganda or widespread
poverty and low wages is anyone’s guess. In the bigger picture too consumption of rice still
grew exponentially, as the end of the war recharged population growth, intensified by the
end of forced labor. Their biggest success is in inducing the growth of the tobacco industry,
but this particular industry already existed in Indonesia before, and with higher rates of
indigenous ownership of plantations and cigarette plants.

On the subject of industry, however, Japan did not seriously try to promote manufacturing or
industrialization in Indonesia for the most part. European-owned factories taken over during
the war were handed over to Japanese companies, e.g. Kirin Brewery taking over beer
factories, Morinaga taking over chocolate processing factories and so on, but investment in
these areas were scant especially before 1955, as Japan derived significant profit from
having Indonesia be their captive market. Only later on, especially after 1960, were some
companies compelled to at least explore the possibilities of industrial investment, brought on
by the Indonesian government’s complaints and rising wages in the Home Islands. Thus in
the current makeup of Indonesian economy, companies operating in resource extraction
acquired heavyweight influence, dwarfing more industrial concerns; chiefly,

a) in the oil industry, Mitsubishi (operating primarily in Kalimantan’s oil fields of Tarakan
and Balikpapan), Nippon Oil (operating South Sumatra and Riau oil fields),
Manchukuo Oil (partially government-owned through South Manchuria Railway,
operating Java oil fields), and Teikoku Oil (operating North Sumatra oil field and other
refineries),
b) regarding cash crops, Nomura dominates what remained of rubber plantations, as
well as holding a commanding lead in coffee and palm oil; the exception is sugar, in
which it is crowded out by many smaller Japanese (and a handful of
Indonesian-Chinese) companies, amalgamated as an industrial group in Federation
of Sugar Industry Corporations (Tōgyō Rengōkai/TRK),
c) mining is primarily a domain of four big zaibatsus, Mitsui, Mitsubishi, Furukawa, and
Ishihara,
d) shipping and export-import business are more diverse, as while Mitsui and Nanyo
hold a commanding market share, “Indonesianization” efforts by the government
enabled a new class of indigenous businessmen to participate as local partners of
these companies.

Throughout these developments, the ebb and flow of the economy was generally not
accompanied by wage rises. Japan had admired how the Dutch managed to achieve
maximum efficiency by keeping wages low especially in the plantations, and while at least
some of the occupying authority recognized the risk of discontent, they were determined to
keep it “competitive”, to use the parlance. They readily exploited the fact that outside Java
wages are still paid fully or partly in kind, too, with zaibatsus holding stakes in Chinese rice
estates most eager. It’s not to say that wages do not rise, ever, however it rarely catches up
with inflation, only tempered by Japan’s own need to keep enough buying power on the
Indonesians’ part to prevent famine a la the war years. Labor disputes and minor uprisings
do happen, however, while Indonesian independence, and its government’s relative
tolerance of trade unions as a tool of political pressure, does threaten to shake this status
quo, to say nothing of rising cases of absenteeism or even incidences of workers joining
communist guerilla groups. As 1962 arrived, pressure from some in the Indonesian
government grew for the zaibatsus to sanction a higher minimum wage, but it remains to be
seen whether they’d listen.

The situation regarding Indonesia’s labor pool, meanwhile, has been of intense exploitation.
Right after Japan arrived they began a corvee policy of requisitioning a high quota of labor,
especially from Java, to work on numerous defense and infrastructure projects throughout
the sphere. Commonly known as romusha although officially distinguished by several other
terms depending on the work, at its peak it employed millions, estimates ranging from 1/20th
to 1/5th of able-bodied men from Java. The projects they worked on were typically brutal,
with a tight deadline and abysmal working conditions, such as the Burma-Thai Railway
which claimed north of 10,000 Javanese men dead. In theory, they were paid wages, but it
was usually meager, and borderline useless for those transported abroad. After the war, the
worst excesses of this policy was abandoned, but romusha labor continued to be preferred
by Japan for dangerous projects, and the quotas imposed on occupied Indonesia were not
much reduced. Only after nominal independence was granted in 1955 was the program
formally ended, in part also due to complaints of some zaibatsus whose efficiencies were
stymied as told above; to offset the loss of labor, the program was partially replaced by
migrant work schemes, with a system of maximum quota imposed. While working conditions
for these workers are still far from enviable, at the very least they are now able to send
remittances home, although these schemes are still derided as “romusha-lite”. The end of
the program does enable population growth to skyrocket, however, with a startlingly high
portion of the population born in the years of 1955-1960, according to the 1961 census.

Fiscally, the Indonesian government in place after 1955 experienced and is faced with a
series of challenges. For starters, government income, chiefly tax collection, is limited and
stifled. The tax code is inherited from the Dutch, with several additions dating to the
Japanese occupation, making the already outdated code borderline quixotic. Income tax
collection is still almost impossible, with both widespread poverty, the odd gaps without
money economy in rural areas, and a sentiment against taxation seen as injustice while
Japanese zaibatsus fatten themselves all contributing factors. This made for a government
hinging on tariffs and taxation on exports; but this is, of course, limited by the outsize
influence of companies controlling the major crops. A rejuvenated sugar and coffee boom
did afford the government some room to maneuver during 1958-60, and it spent some to bid
for the Asian Games (to be held in 1962) while building critical infrastructures like schools.

However, the current status quo predisposed Indonesia to be an importer of goods, chiefly
food and consumer products. The economy of Indonesia therefore became especially
sensitive towards inflation, a trend already seen since the war years. This, alongside with
population growth coupled with low wages constantly threatened to make basic goods
prohibitively expensive, while rupiah’s fragile status pegged to the yen does not help, as a
black market exchange rate now exists. The mini-boom years of 1958-60 does, again, afford
some wiggle room, but as it receded, by 1962 Indonesia was walking dangerously close to
uncontrolled inflationary crisis, especially with rising costs associated with hosting the
Games, with Sukarno’s government starting to be reliant on Japanese loans; as with other
sectors of the economy, there is no other major options, with banking (outside of state banks
Bank Indonesia and Bank Industri Negara) controlled by Yokohama Specie Bank and Nanpō
Kaihatsu Kinko.

Comparison with OTL

Overall, compared to OTL 1962, RaS’ Indonesia is poorer, albeit surprisingly encountering
similar challenges, but with a weaker hand. OTL, after a short post-independence surge, the
economy contracted due to a series of inflationary crisis, which the nation would not fully
recover from until the early 70s; however, wages grew at an exponentially faster rate
compared to in RaS, although real wage growth was stifled due to high inflation. Famine and
food security situation at this point in OTL was also better than in RaS, although again,
contractions occur for the same reason, as the avenue of food imports are more numerous
and readily available. The lack of a prolonged romusha policy in OTL also contributes, as
Indonesia OTL experienced a post-war population boom earlier, with very high birth rates
from 1950-60. Lastly the Indonesian government’s hand in OTL 1962 was much stronger,
even as they were hit by numerous security crises and with a more fragile political balance.
They were able to play off powers against each other, force significant concessions from
American oil companies, nationalize Dutch firms; things a fully independent nation is able to
do, that is simply impossible for RaS’ Indonesia to do – for now.

Numbers

Population: 89,646,230 (+Papua)

● Atjeh - 1.4M
● Deli - 2.78M
● Tapanuli - 1.9M
● Minangkabau - 2.1M
● Riau - 1.1M
● Djambi - 557K
● Sumatra Selatan - 2.65M
● Bengkulu - 487K
● Lampung - 1.12M
● Banten - 1.73M
● Djakarta - 5.11M
● Tjirebon - 5.18M
● Pasundan - 7.22M
● Banjumas - 4.77M
● Mataram - 2.01M
● Semarang - 6.59M
● Surakarta - 6.21M
● Madiun - 5.34M
 ● Kediri - 5.65M
● Surabaja - 6.52M
● Bang Wetan - 3.29M
● Bali-Lombok - 2.98M
● Nusa Tenggara Timur - 1.61M
● Timor Lorosae - 413K
● Pontianak - 919K
● Ketapang - 211K
● Borneo - 52.23K
● Dajak Besar - 408K
● Bandjar - 998K
● Balikpapan - 611K
● Kutai - 107K
● Tarakan - 134K
● Sulawesi Utara - 1.51M
● Sulawesi Tengah - 310K
● Sulawesi Selatan - 3.98M
● Sulawesi Tenggara - 411K
● Maluku Utara - 265K
● Maluku - 513K
● (West & East Papua will follow TNO figures)

GDP: 1,018,120,000 (1960 USD) (+Papua) (note: will be changed to 2-3B if too little PU
generated)
● Atjeh - 1.91%
● Deli - 3.11%
● Tapanuli - 1.8%
● Minangkabau - 1.14%
● Riau - 3.17%
● Djambi - 0.98%
● Sumatra Selatan - 3.21%
● Bengkulu - 0.77%
● Lampung - 1.78%
● Banten - 2.7%
● Djakarta - 9.87%
● Tjirebon - 3.39%
● Pasundan - 3.47%
● Banjumas - 3.21%
● Mataram - 2.11%
● Semarang - 4,12%
● Surakarta - 4,08%
● Madiun - 3,51%
● Kediri - 3,72%
● Surabaja - 8.23%
● Bang Wetan - 3.15%
● Bali-Lombok - 2.7%
● Nusa Tenggara Timur - 1.6%
● Timor Lorosae - 0.23%
 ● Pontianak - 2.1%
● Ketapang - 1.1%
● Borneo - 0.05%
● Dajak Besar - 0.45%
● Bandjar - 1.21%
● Balikpapan - 2.9%
● Kutai - 2.4%
● Tarakan - 5.1%
● Sulawesi Utara - 3.3%
● Sulawesi Tengah - 1.1%
● Sulawesi Selatan - 4.03%
● Sulawesi Tenggara - 1.4%
● Maluku Utara - 0.68%
● Maluku - 0.84%
● (West & East Papua will follow TNO figures)

Reserves: 0,138B
Inflation: 6.50%
Base GDP Growth: 5.5%
Expenditures:
● Military Spending - TBD
● Civilian Spending - TBD
● Debt Servicing - TBD
● Other Costs - TBD
Revenue:
● Income Tax - [above poverty weighted 17%, below poverty weighted 3% (this is the
desirable starting outcome, need to look at how it’s coded)]
● Business Tax [40%]
● Excise Revenue [sales 5%, tariff 20%]
● Other Revenue
Economy Type: Dirigisme
Credit Rating: Poor
Poverty: 68.7%