The late Professor Harry Johnson at the University of Chicago defined economic nationalism as ‘the national aspiration to having property owned by nationals and economic functions performed by nationals’ (Johnson 1972:26). Following this definition, the force of economic nationalism in Indonesia, especially during the early independence period, can be easily understood. Economic nationalism was, and still is, reflected in the Indonesian government's economic policies. To a higher degree than in other Southeast Asian countries, economic nationalism in post-colonial Indonesia has been, and continues to be, an important factor affecting government policy. Whereas economic nationalism during the 1950s was primarily targeted at continuing economic dominance of the Dutch and ethnic Chinese business interests, in the years following the Asian economic crisis in the late 1990s economic nationalism came to be directed primarily at perceived interference by international organizations, in particular the International Monetary Fund (IMF), in the formulation of Indonesia's economic policies in order to handle the crisis.

Despite strong economic nationalism, pragmatic considerations have more often than not overruled popular pressures of economic nationalism, particularly after the advent of the New Order government in 1966. As a result, pragmatic economic policies have often been able to offset adverse economic and political effects of virulent nationalism, except during the final years of President Sukarno's rule.

In the following pages the so-called ‘Indonesianization’ policies pursued during the 1950s, when economic nationalism was very strong, will be discussed. Using Johnson's definition, ‘Indonesianization’ (indonesianisasi) is understood here as efforts by the Indonesian government to transfer property, or more correctly, productive assets owned by foreigners or foreign business, especially Dutch business, or residents viewed as foreigners, in particular Indonesians of Chinese descent, to indigenous Indonesians and to transfer economic functions performed by foreigners or residents viewed as foreigners to indigenous Indonesians. The drive towards ‘Indonesianization’ involved various measures taken by the Indonesian government in the 1950s aiming at an ‘economic decolonization’ considered all the more urgent since the Indonesian government already in early 1950 realized that political independence had not been accompanied by economic independence. ‘Indonesianization’ also formed an official response to the strong appeal by several nationalist leaders, such as Sujono Hadinoto of the Indonesian Nationalist Party (Partai Nasional Indonesia, PNI), who wished ‘to convert the colonial economy into a national economy’ (merombak ekonomi kolonial menjadi ekonomi nasional) (Hadinoto 1949:1).