For decades, Indonesia has been one of those countries that hovered on the periphery, breaking into the world’s consciousness only with news of coups or natural disasters. Few people in the West know that it is the fourth most populous nation in the world. But it has been quietly stirring over the past few years, and given its size and economic potential it can no longer be ignored.

Hamish McDonald, a senior Australian journalist and specialist in Asia, is a good narrator and guide to the country. He has spent a good amount of time in Indonesia and has a grasp of the language, which sounds like a familiar tongue spoken inside-out. He was even declared persona non grata for a decade after some of his reporting upset the government, which was a badge of honor under the circumstances.

McDonald notes that Indonesia is a fairly unlikely entity as countries go, created by the Dutch during the colonial era out of a patchwork of island kingdoms and provinces. The Dutch East Indies (the name never made much sense) was a sprawling archipelago, covering an area as large as the continental United States, and more than once there were questions over whether colonization was worth the effort. Then oil was discovered, and the equation made much more sense.

After World War II and a period of Japanese occupation, the Dutch tried to reassert control, but their hearts were not in it and the country stumbled into a sort of independence under the charismatic but dangerously wacky Sukarno. His chaotic rule, flirting with communism and mystical nationalism along the way, ended in 1966 with a particularly bloody military coup. A tough-minded general, Suharto, took over and established something he called the New Order regime. He swapped the uniform for a tailored suit and indirect, carefully controlled elections, but everyone knew who was in charge. A roadmap for a transition to democracy was set down, but no one really believed it would happen under Suharto, so the details were moot.

McDonald accepts that Suharto provided much needed stability, but notes that many of the problems that still bedevil the country started during this period. The New Order focus was first to keep the country together as a “unitary state”, despite its apparently federal structure. This was a serious concern; the country was riven not just by geography but also by religious cleavages, economic disparities, and historical grudges. Suharto’s response to conflict was first to crack down and then to institutionalize and control the differences through a series of government-sponsored organizations and councils. The other plank to the strategy was economic development, aimed at a rising tide that would lift even the boats of the dissenters.

The role of the military (which included the police) was critical here. As the largest and most cohesive institution, it adopted the doctrine of dwifungsi (“dual function”), making it the keeper of order and a key economic player. This fitted with U.S. thinking about developing countries at the time, which encouraged military involvement at village level to counter communist infiltration and mobilization. The problem was that the military quickly moved up the value chain, eventually becoming involved in business activities at the highest levels and reaching into every corner of the economy.

Firmer political leadership might have stopped the military from becoming such a dominant feature of the landscape. As McDonald points out, however, cut-through executive determination is not the Indonesian way. Historically, Indonesian leadership has aimed for Zen-like calmness, the refusal to be seen to be driven by events, a preference for detachment over articulation. This model can work very well when the central problem is providing stability, but it tends to collapse when the issues become more complex and require clear answers.

Despite his avowed anti-communism, Suharto—and, indeed, all of Indonesia’s ruling class—never really grasped the concept of free enterprise. Instead, McDonald writes, they preferred to secure government control through licensing, five-year plans, quotas, and subsidies. The quid pro quo for private sector companies was monopoly rights in a huge range of fields, resulting in a top-heavy economy of large conglomerates linked to government agencies. Entities tied to the military played critical roles as well.

It is no surprise, given this cozy structure, that corruption and kickbacks grew to astonishing levels, becoming quasi-official policy in some cases and particularly benefitting Suharto’s family members. Neither is it surprising that the economy slowly ground to a halt. The 1997 Asian financial crisis finally pushed Suharto out, as the IMF bailout package required reforms that the New Order simply could not make. Interestingly, it is here that Indonesia’s transition to demokrasi really began. The odd figure who succeeded Suharto was the Vice President, B.J. Habibie, who many people believed had been appointed to the VP position specifically because he was ineffectual.

Certainly, Habibie did little to inspire confidence, but, McDonald argues, his short reign left some lasting marks. He separated the police from the army, which turned out to be a crucial step in dismantling the dwifungsi culture. He advocated a policy of decentralization, giving some meaningful powers to provincial and local governments. And, critically, he looked for a salve for a long festering sore: East Timor.

McDonald acknowledges that East Timor is a story from which no one emerges very well. The eastern half of the island of Timor, on the southern edge of the archipelago facing toward Australia, had once been a Portuguese colony (not part of the Dutch administration). Due to this heritage, its people were mainly Catholic and fiercely independent. Indonesia annexed East Timor in 1975, but the “province” continued to be a locus of violence and dissent. The issue often poisoned relations with Australia, where there was an established network of pro-independence activists.

Habibie, to his credit, saw that the best option was to cut his losses over East Timor and allow it to leave by way of a vote on independence. This was much bloodier than expected. Factions of the Indonesian military, having spent decades fighting to keep East Timor in the family, secretly worked with West Timor militants to disrupt the process, until an Australian-led UN force stepped in to stop the killing.

Other regional problems were even more intractable. An insurrection in Aceh had been rumbling for years, and not even huge commitments of military force had been able to snuff it out. Habibie’s decentralization policy took the heat from it, but ironically it was the 2004 tsunami, which hit the island hard and killed huge numbers of soldiers as well as civilians, that settled the matter and eventually led to substantial power being devolved to the provincial government.

On the eastern side of the country, the huge but underdeveloped province of Irian Jaya remains a simmering cauldron of resentment, fed by corruption and illegal logging. McDonald does not pretend to know the ending to that story, but he doubts it will be a happy one.

Perhaps the most significant aspect of Habibie’s short tenure was that it ended democratically, with a spectrum of parties and candidates contesting the elections of 1999. The convoluted process eventually threw up a Muslim cleric, Abdurrahman Wahid, but he proved to be astonishingly erratic and elusive. When he was impeached by the parliament on a collection of somewhat technical charges—which would have been unthinkable only a few years before—Vice President Megawati Sukarnoputri, a daughter of the former leader, Sukarno, stepped into the top job. She tried, in an unfocused sort of way, to wind back policies like decentralization, but it became clear that the process had gone too far to be reversed. When she stood for re-election a few years later, she had few achievements to point to.

After Habibie, Wahid, and Megawati, Indonesians could have been forgiven for losing faith in democracy. Indeed, McDonald identifies a strong desire for the ordered days of Suharto, a strand of thinking that goes beyond nostalgia. This might have been a reason for the election of Suslio Bambang Yudhoyono (known widely as SBY) in 2009. A former general, and formerly Vice President to Megawati, whom he defeated, he was seen as bridging the gap between traditional authority and democratic dynamism. He turned out to be an effective administrator, adept at juggling competing interests. With the liberal-minded economist Boediono as his Vice-President, he was able to push through reforms to put the economy on a growth path, if an uncertain one.

McDonald acknowledges that many Indonesians were disappointed with SBY’s tenure, especially his second term, during which his energy faded. But he thinks SBY did fairly well, considering the scale of the problems he inherited. Perhaps his most important legacy will be the broad trust in the democratic process, even in a country as inherently difficult to govern as Indonesia.

McDonald makes clear, however, that Indonesia still faces huge problems. Vast stretches of the economy are heavily—and poorly—regulated, and government decisions are often arbitrary, especially outside the big cities. Many courts are openly corrupt, and foreign firms have a particularly hard time. McDonald notes that crooked police like to insert themselves into commercial conflicts, turning them into criminal cases that involve hefty fines before they can be resolved. In some ways, the corruption of the New Order days was easier, insofar as officials, once bought, usually stayed bought.

Another problem is a growing strand of Islamic fundamentalism. It is still small, and relatively fragmented. A series of bombings took place recently, though they seem to have done more to alienate the social mainstream than mobilize it. Nevertheless, the movement has proven difficult to eradicate. Even if it attracts only half of 1 percent of the population, that is still more than a million people.

The good news is that there is a groundswell of public anger toward corruption and religious extremism, and there has been a string of well-publicized court cases. The past few years have also seen the growth of interest groups pushing for better environmental management and greater equity. The media, both traditional and online, have become willing to investigate problems and to put them before an interested audience. In other words, a civic space has developed.

The narrative of Demokrasi concludes before the elections that took place in July. This might have been a mistake on McDonald’s part: perhaps he should have deferred completion until after the contest. In any case, the election was between Padawo Subianto, a former General, and Joko Widodo, the Governor of Jakarta who, McDonald notes, had built his reputation on fighting corruption. (SBY was unable to run due to a two-term limit.) After a close-fought campaign, Widodo won, narrowly but clearly, though he will not be inaugurated until October. Subianto cried foul on the basis of miscounting, and pledged to contest the result in the courts and the parliament. And this, indeed, shows the degree to which democracy has become the norm: Disputes are settled not by guns but by arguing. Perhaps, too, there is the recognition that democracy is simply messy. Not perfect, but better than all the other options.

Will Indonesia reach its potential over the next decade? McDonald finishes the book on a note of uncertainty. Without doubt, the path ahead will be difficult. But it is moving, at least, in the right direction.