After a long struggle, on 27 December 1949, the Dutch finally recognised Indonesia as an independent state and transferred sovereignty to the Republic of the United States of Indonesia. On 17 August 1950, which was the fifth anniversary of the declaration of Independence, the country was proclaimed the Republic of Indonesia. President Sukarno became the first President of Indonesia and Mohammad Hatta, a highly effective Minangkabau economist from Sumatra, became prime minister.

Indonesia always claimed that the date of independence was 17 August 1945 but the Dutch insisted that the date was 27 December 1949.