1965: Sukarno, hearing of the unauthorized cooperation between the Indonesian and Malaysian militaries, orders the arrest and execution of the responsible officers on charges of sedition and treason. While Sukarno is successful in arresting the officers in question, Lee steps in before they can be executed, arguing that Sukarno needs to have them tried before a tribunal before the execution. The international community, moved by Lee's interjection, overrides Sukarno's execution orders and has the officers put on trial. The officers are found guilty, but are sentenced to life imprisonment instead of execution. On route from their trial, the officers are ambushed and slaughtered. Sukarno is implicated, but charges are never brought forth. Sukarno, furious over Lee's interference, begins mobilizing Indonesia's resources for war. To exploit Indonesia's resources, Sukarno establishes military governors in key areas in Borneo and West Papua, officially to develop the infrastructure and educate the natives, though in actuality the governors were simply there to exploit the resources and keep the locals from interfering. In addition to the military governors, Sukarno established plantations to grow large quantities of cash crops, such as coffee, tobacco, and cotton. By the end of the year, Indonesian exports had grown by over 600%.

Lee, seeing the economic and military mobilization, spared no time organizing Malaysia for battle. First, Lee strengthened the military by passing universal military service for all adult males, regardless of ethnicity or socioeconomic class. This had the added benefit of smoothing over ethnic tensions. He also invited foreign military advisors, especially from Israel, to help train, equip, and supply the Malaysian military. To enrich the economy, Lee diversified the Malaysian economy, investing in cash crop plantations, lumbermills, and oil refineries for export, increasing Malaysian exports by 300%. Using the money earned from the exports, Lee turned his attention to the cities, organizing the people to clear out the slums and replace them with government housing, providing everyone water, sanitation, and electricity. New committees and laws were established to regularly clean and maintain the new cities. Almost from the ground up, Lee rebuilt virtually all of Malaysia's cities, filled with skyscrappers and run by a public transit system inspired by Japan. Finally, Lee subsidized education for all, regardless of faith, ethnicity, or gender, and opened new schools, increasing the percentage of literacy and college applicants. This became especially relevant over the next few years.

1966-75: Over the next three years, the Indonesian and Malaysian economies and militaries continued to grow. Indonesia, thanks to her superior size and population, soon outcompeted Malaysia in annual number of goods exported, especially cash crops and lumber, shipping out more than four times the number of exports that Malaysia was, and earning much more money. She also had a significantly larger military that outnumbered their Malaysian counterparts five to one. Finally, Indonesia had a larger profit margin, as Lee invested heavily in infrastructure, education, and the military, whereas Sukarno invested mostly in the military, trying to produce as many soldiers and weapons as possible.

Underneath it all, though, Malaysia was far from outmatched. While her military was not nearly as large, her infrastructure was much more developed, and enable a much swifter response to attack than that of Indonesia. Furthermore, her soldiers were exceptionally well-trained and able to fight with virtually anything. Finally, her strategic ports, beautiful cities, and economic openness, Singapore being the prime example, attracted businesses from all over the world, including Japan, the United States, and Europe, giving Malaysia much-needed foreign support.

Realizing the urgent need for foreign aid, especially as Indonesia lagged behind in development, Sukarno began inviting investments from foreign businesses, though only the Soviet Union and the People' Republic of China agreed to open negotiations. In August 17th, 1967, Sukarno agreed that in exchange for foreign equipment and funds to develop Indonesia's infrastructure and industry, Kruschev and Mao would receive the majority of Indonesia's exported oil and liquid natural gas exports. Sukarno, however, had to make a few conditions to placate the Islamists, who fear the spread of Communism and its atheist leanings. Though the "faithless" Communists would receive the most of Indonesia's oil and gas exports, they had to invest a large sum for the establishment of the necessary infrastructure, they had to limit their activities to the sea and airports, and they could not travel through Indonesia without an escort. While Sukarno had placated the Islamists, he had only managed to delay the explosion.

Concurrently in Malaysia, tensions were boiling between the Malays and the ethnic Chinese, especially with the influx of foreign businessmen. Lee, realizing the ticking time-bomb, set forth legislation designed to keep foreign influence restricted to trade purposes. Imports were carefully checked, and anything that was deemed "offensive" to Muslims or core Malay values, were prohibited. Furthermore, Muslim was recognized as a state-sanctioned religion, with sponsored pilgrimages to Mecca as a reward for innovative and/or productive workers. These measures, albeit successful, only succeeding in delaying the time-bomb.

Separatist Wars: Fortunately, Lee was about to get a break. The CIA, fearing the growing closeness between Indonesia and the Communist powers, decided to "encourage" Sukarno to change his mind. In 1968, they started covertly arming and training Islamists to conduct guerrilla raids against oil refineries, plantations, munitions factories, and other important targets. The guerrillas, fearing the spread of Communism and enboldened by the CIA's support, declared a jihad against Sukarno and declared their intention to break off and form an Islamist state. Inspired by their boldness and religious conviction, separatists in West Papua, Sulawesi, and Sumatra, particularly Aceh, rose up and seized a string of military-controlled plantations and manufacturing plants, their speed and surprise overwhelming the military. China and Russia, fearing an Islamist takeover and/or the disintegration of Indonesia, began supplying Sukarno with arms and supplies. In response, the CIA increased their arm shipments and began bombing runs.

Over the next few years, Sukarno fought a bitter war against the separatists, eventually re-taking the posts they had seized. Starting with Sumatra in July of 1970, the military launched a two-pronged attack, with the army fighting northward, corralling the separatists into the Aceh region, and the navy patrolling the seas to prevent them from escaping. Within a year, the military had fought its way to the capita, and in the six-month Battle of Banda Aceh, the Indonesian military, fighting from house-to-house, eventually managed to pry the separatists from their entrenchment. In the process, the military suffered horrendous casualites as the separatists, realizing that defeat was inevitable, employed terrorist tactics such as suicide bombing. These tactics, combined with their tenacity and fanaticism, cost the Indonesian military over 30,000 casualties, a rate of over 65%, and left the city in ruins, with millions of civilians dead, wounded, or homeless.

An important legacy of the battle was the recovery of American-made weapons in the ruins of Banda Aceh, planting a seed of suspicion in Sukarno's mind and helped him to bring the Communists and the military to form a more cooperative union. With greater resolve and a stronger union between the military and the Communists, Sukarno ordered a reinvigorated offensive against the guerrillas. In September, 1972, the military launched attacks on bases in Sulawesi and the Spice Islands, relying on the navy to keep the guerrillas from escaping. Expecting a bloody but assured victory, as in Aceh, instead the military found itself embroiled in a quagmire with no end in sight. The guerrillas, learning from the campaign in Aceh, decided to avoid direct confrontation and try to wear the military down.

For the next five years, the guerrillas and the military battled it out, with virtually no change in the strategic situation. Though the military held the tactical edge in battle and maintained control over the coasts and cities, the guerrillas kept to the forests and the mountains, and virtually never engaged the military in battle. Finally, the US, who had remained officially unconnected with the rebellion, continued supplying them with impunity, as the Indonesian air force was undermanned and outdated. The war in West Papua was faring even worse for the military, as the more rugged terrain and smaller coastline hindered the army and navy respectively, preventing the Indonesians from completely cutting all escape. Furthermore, unlike Sulawesi and Sumatra, West Papua shared a border with Papua New Guinea, and the rebels shared a common culture and kinship with the natives across that border, giving them easier access to supplies and hiding places.

Meanwhile in Malaysia, Lee was having a lot of trouble. While Malaysia remained neutral in the conflict and did not assist Sukarno or the rebels, the close proximity and distribution of the wars had a significant impact on the country. The wars displaced hundreds of thousands of lives, many of which fled to neighboring countries, including Malaysia. While Lee and the People's Action Party, the majority party in Malaysia, in a remarkable display of foresight, had prepared the ports and cities so that they could handle the influx of refugees, the xenophobia and mistrust that accompanied their arrival was much harder to combat. Many of the refugees were ethnic Chinese, targeted for their racial and religious difference, fled when the rebels took over the area and initiated a string of race riots, killing hundreds of civilians and businessmen. The violence reached a fever pitch when the Indonesian military pushed them back into Banda Aceh; the rebels, believing the ethnic Chinese had sold them out, began burning down their shops and homes, and killing any they came across. The refugees, bringing back stories of the atrocities, shocked the Malaysians and their Parliament to open debate on the war. While many, regardless of race or religion, agreed that the refugees suffered horrific treatment and deserved a chance to settle down and begin anew, that was virtually all they agreed on.

The main issue was what to do about the ongoing conflict. Many did not want to get involved, thinking that it was a waste of men and money, and that they should not help their enemy. Others wanted to enter the war to varying degrees, arguing that the conflict destablized the region, deterring commerce and trade, especially after Aceh rebelled. Drawing from experience in the Brunei rebellion, they feared that the war would spill over into Malaysia and perhaps inspire potential separatists to follow in their footprints. Lee, fearing for the unity of the nation, decided to hold a compromise between the two sides. Malaysia would not get involved directly, but they would allow Indonesian ships to dock at their harbors for resupply and repairs, for a price. Second, the Malaysian navy would be ready to perform humanitarian duties for displaced or harassed civilians. Furthermore, any rebels that attempted to cross their borders would be arrested and turned over to the Indonesians.

Allen Pope Incident:

In 1978, a CIA pilot was shot down by the Indonesian Air Force while conducting a bombing run. The pilot, alive but unconscious, was captured by the Indonesian military and brought in for interrogation. Under threat of torture, the pilot, Allen Pope, confessed to being an American pilot that was supplying the rebels and conducting bombing runs. Armed with this information, Sukarno threatened the United States to withdraw its support from the rebels or this revelation would go international. Fearing the political backlash, the United States relented, and in exchange for Allen Pope's release, they agreed to disclose the locations of the rebel bases. Sukarno, newly empowered, ordered a combined air and army attack, wiping out the major bases and capturing or killing the majority of the rebels. The rest fled to neighboring countries, such as East Timor and Papua New Guinea. By 1980, the rebels were all but wiped out or dispersed. Some attempted to flee to Malaysia, but Lee, recognizing the threat they posed to Indonesian-Malaysian relations, had them arrested and shipped to Indonesia for trial and execution. This act would play a large role in Indonesian-Malaysian relations in the years to come.

Sukarno's Death:

Sukarno, nearly eighty years old, excited by his victory over the separatists, held a celebration party for the military commanders and Communist overseers. Surprisingly, many Islamists also attended, at an attempt at reconciliation. At the height of the party, Sukarno collapsed while proposing a toast to the future of the Indonesian nation. Thought to be poisoned, the Islamists were arrested and held on suspicion of assassinating Sukarno. While the military and the Communists planned a new purge of the Islamist parties, the doctors, after conducting an autopsy, discovered that Sukarno had suffered a fatal heart attack from over-indulgence and work-related stress. While this discovery cleared the Islamists of their accusation, it also armed them as victims of a ruthless dictatorship and threatened to plunge the country into civil war again. As the two factions fought for supremacy, the country began to suffer from Sukarno's ambition. The market, awash with cheap cash crops and lumber, saw a significant decrease in the prices, slashing the national profit margin. In addition, the emphasis on military production and cash crop production reduced the land and labor available for producing food and other necessary consumer goods. The situation was intensified by the separatist wars alongside mismanagement of collective farms, and torrential rains brought on by El Nino two years earlier.

Famine, poverty, and exhaustion turned the population toward the Islamists in the hope of improved conditions. The Communists and the military, fearing an all-out rebellion, sought out a candidate to rival the Islamists. Hoping to put on a front of unity, they sought to delay a potential explosion and build up their power base. Meanwhile, in Malaysia, Lee looked on the situation with apprehension.

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