Sukarno had long been impatient with party politics and suggested in a speech on October 28, 1956, that they be discarded. Soon after, he introduced the concept of Guided Democracy. Although the concept was new in name, its various themes had been part of the president's thinking since before the war. In the first years of independence, his freedom of action had been limited by parliamentary institutions. But on March 14, 1957, the liberal phase of Indonesian history was brought to an end with Sukarno's proclamation of martial law. In an unstable and ultimately catastrophic coalition with the army and the PKI, he sought to rescue the fragile unity of the archipelago.
The year witnessed the move of the PKI to the center of the political stage. In provincial elections held in July 1957 in Jawa Barat and Jawa Tengah provinces, the PKI won 34 percent of the vote, ahead of the other major parties--the PNI, Nahdatul Ulama, and Masyumi--although Masyumi defeated the PKI narrowly in Jawa Timur Province. The PKI's success was attributable to superior grass-roots organization, the popular appeal of its demand for land reform, and its support for Sukarno's Guided Democracy idea. As tensions between the republic and the Netherlands over West New Guinea grew, PKI-controlled unions led a movement to nationalize Dutch-owned firms: on December 3, 1957, the Royal Packetship Company (KPM), which controlled most of the archipelago's shipping, was seized and, two days later, Royal Dutch Shell. Some 46,000 Dutch nationals were expelled from Indonesia, and Nasution ordered officers of the Armed Forces of the Republic of Indonesia (ABRI), which had been involved in economic affairs since the late 1940s, to take a role in managing nationalized firms. This action marked the beginning of the armed forces' role in the economy, a role which grew substantially in later years. Control of the oil industry was seized by ABRI, and Colonel Ibnu Sutowo, Nasution's deputy, was placed in charge of a new national oil company, Permina.
On December 1, 1956, Mohammad Hatta had resigned as vice president in protest against Sukarno's growing authoritarianism. Hatta's exit from the political scene did not improve the relations among the central government, Sumatra, and the eastern archipelago, where Hatta was very popular. On February 10, 1958, when Sukarno was out of the country, a group of Sumatran military officers, Masyumi politicians, and others sent an ultimatum to Jakarta demanding Sukarno's return to a figurehead role as president and the formation of a new government under Hatta and Yogyakarta sultan Hamengkubuwona IX. Five days later, the group proclaimed the Revolutionary Government of the Indonesian Republic (PRRI). On February 17, Permesta rebels in Sulawesi made common cause with them. Although the rebellion was not completely suppressed until 1961, decisive action by the military had neutralized it by mid1958 . There were several important consequences: the forced retirement of many officers from Sumatra and the eastern archipelago, making the officer corps proportionately more Javanese (and presumably more loyal to Sukarno); the firm implantation of central authority in the Outer Islands; and the emergence of Nasution, promoted to lieutenant general, as the most powerful military leader. But the army's victory in suppressing regional rebellion caused Sukarno dismay. To offset the military's power, Sukarno's ties with the PKI grew closer.
The PRRI revolt also soured Sukarno's relations with the United States. He accused Washington of supplying the rebels with arms and angrily rejected a United States proposal that marines be landed in the Sumatra oil-producing region to protect American lives and property. The United States was providing clandestine aid to the rebels and Allen Pope, an American B-25 pilot, was shot down over Ambon on May 18, 1958, creating an international incident. Deteriorating relations prompted Sukarno to develop closer relations with the Soviet Union and, especially, the People's Republic of China.
In July 1958, Nasution suggested that the best way to achieve Guided Democracy was through reinstatement of the 1945 constitution with its strong "middle way," presidential system. On July 5, 1959, Sukarno issued a decree to this effect, dissolving the old House of Representatives. This marked the formal establishment of the period of Guided Democracy which lasted six years. In March 1960, a new legislature, the House of People's Representatives-Mutual Self-help (DPR-GR; later, simply DPR) was established. One hundred fifty-four of its 238 seats were given to representatives of "functional groups," including the military, which became known as Golkar. All were appointed rather than elected. As many as 25 percent of the seats were allocated for the PKI. Another body, the 616-member Provisional People's Consultative Assembly (MPRS; later, simply MPR), was established with communist leader Dipa Nusantara Aidit as deputy chairman. In August 1960, Masyumi and the PSI were declared illegal, a reflection of their role in the PRRI insurrection, the MPRS's enmity toward Sukarno, and its refusal to recognize Guided Democracy.
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