While I'm not a historian, I did use to live on Java. Indo has a fascinating history and I'll do my best to write a response suitable for this sub.

The long and short answer are both the same- the dutch segregated individuals by language and race, both of which factored into an individual's socioeconomic outcome.

As Robert Kirkpatrick states in his book, English Language Education Policy in Asia: "...the choice of Bahasa Indonesia as a national lingua franca among culturally and linguistically diverse groups has been made on a supra-ethnic basis where all ethnic groups accepted the decision to build a new national identity". In other words, modern bahsa (a word which means language but is commonly used to refer to Bahasa Indonesia) is a direct response to the colonial rule that Indonesia was subject to.

Now to begin, you have to understand that Indonesia didn't have a single language or national identity. There are thousands of islands and many different languages. Some estimate as many as 700 languages or dialects exist, but I'll leave that debate for someone else.

Dutch was primarily reserved for expats (many of them soldiers or mercenaries) who settled in a new town they called Batvia. You may recognize the current name of this settlement; Jakarta.

To this day, many industries in Indonesia are influenced by these early colonials. These individuals largely engaged in traditional Dutch industries such as dairy farming. If you go to a grocery store today, you'll see very few imported dairy products, but you'll see many different domestically produced edams, goudas, etc. Of course, the other major industry for foreigners was the East India Trading Company.

Due to the influence of the East India Trading company, most colonials forwarded the language of Malaysia rather than their native dutch. We'll touch on this more later.

https://jhna.org/articles/dutch-batavia-exposing-hierarchy-dutch-colonial-city/

Very few Indonesians would have learned dutch. Those who would have learned dutch most likely wouldn't have learned local languages. This is very apparent in the writings of Indonesia's most famous author- Prmoedya Anata Toer. In his semi-autobiographical work the Buru Quartet, the protagonist struggles immensely with writing in local languages. He feels that it's beneath his social status as a dutch speaker. This is a major theme in his work "Child of All Nations". To touch on Kirkpatrick from earlier, liguists often use social class of speaker to categorize languages in Indonesia. While the link below is a review of a dissertation, I think it does an excellent job of explaining this class stratification.

http://dissertationreviews.org/archives/12928

Now arguably, this system of racial / language divide has never ended. To read more about this I recommend Joel S Kahn's paper titled "Idealolgy and Social Structure in Indonesia". If you want a more modern view of how language or race has influenced Indonesia, I recommend the 2012 documentary The Act of Killing.

Now, we have thousands of islands with hundreds of languages and many different organized classes. They are diverse in culture, but become increasingly united against colonialism starting in the early 1900's. This culminates with the second Indonesian Youth Congress in 1928 when the group votes to declare Bahsa Indonesia their national language. The proposal was insanely successful. See "The Development of a National Language in Indonesia and Malaysia".

https://www.jstor.org/stable/3098257?seq=1

For the first time, all of these different social classes were united with a common language. It was chosen as a neutral tongue in order to prevent any particular group or ethnicity from gaining cultural superiority. The success of this policy led to a strong anti-colonial mindset in Indonesia. This anti-colonial political movement even led to the Bandung Conference in 1955. During this conference, Indonesia (among other Asian nations) met with African heads of state / political figures in order to discuss how they could end global colonialism.

While I feel like I'm jumping from topic to topic extremely quickly, I would like to draw your attention to one last point. While bahasa is different than Dutch, bahasa does have many phrases and words from Dutch. This is due to the colonial influence these early settlers of Batvia.

https://www.ezglot.com/etymologies.php?l=ind&l2=nld

Any one of these topics could be expanded on, but I hope this gives you a better idea of the web that led to the adoption of Bahasa.

Edit:

If you're interested in this, I expect you'll be interested in the history of Chinese immigrants in Indonesia. I recommend you research the 1740 massacre and the 1998 massacre.

This is an interesting question, really, and one that takes a lot to unravel. But at it's simplest, it's the nature of Dutch colonialism in Indonesia, compared to the Portuguese, French, English, models, to say nothing of the Spanish hegemony in the New World, coupled with the fact that Indonesia, when the VOC arrived, already had a unifying lingua franca and series of mutually intelligible pidgins in the Indonesian archipelago. Further, Dutch administrative decisions regarding the Dutch language significantly retarded the spread of Dutch as a lingua franca to replace the Malayan dialects that were the preferred precolonial language of regional cross-communication.

Indeed, this standardized version of Malayan, with some small Dutch influences, became the preferred administrative language of the VOC period when the VOC engaged with the local kings and chieftains of the myriad islands of the region. It was chosen because it was a language that the Dutch had, generally, an understanding of, and the relatively small Dutch footprint in the region prior to the early-19th Century did not necessitate a dutchification (to coin a term) of the region. Indeed, the VOC's approach, as a corporate entity fundamentally with coastal factors that served as interface points between the Netherlands and the local polities, ensured that Malayan was a more useful language to the VOC than Dutch, which was largely an internal language, within these enclaves. When going beyond and engaging with the various island polities, the petty kings and chieftains, the sultans and the like of the islands, Malayan became the de facto language of treaties and administration.

And it remained that way until the Dutch period when the VOC was integrated into the Netherlands and the colonies of Batavia and the East Indies were brought under Dutch sovereignty. Dutch at that point became the administrative language of the colonial administration. However, even as the Dutch took hold of things, they took a very separatist view of their control over the region. They saw no reason to teach Dutch to the natives, and thus there was no real sense of Dutch ever replacing the Malayan lingua franca that was becoming bahasa Indonesia. The Dutch were landholders and industrialists, and used Dutch administratively within their state and amongst themselves at least, and were more than happy to continue to use the Malayan-derived lingua franca as the language of interface with the locals, as they had for over a hundred-fifty years beforehand. This othered the natives from the Dutch, as well as each other, as the language of what had been one of trade and nominal unity was all but co-opted for administrative purposes and somewhat enmeshed with the colonial authority. As I’ll mention, shortly, it will be reclaimed in a fashion, but only when the independence movement really starts moving in the 1910s and 1920s.

This was of course in contrast to the French administration of Africa, which tried to deliberately create a culturally and socially French-speaking empire where possible, as the French imposed their language upon the patchwork languages and cultures of Africa and elsewhere. The same could be said of English, in India – doubled as well by the EIC and later Britain’s awareness that it had to harness Indian manpower to a greater degree in order to hold onto the region. Thus a separate language policy was simply impractical for either nation. And in southern Africa, with the Portuguese, the language became a bit of a prestige language amongst the locals in Mozambique and Angola largely due to the Portuguese missionary outlook and the nature of initial contacts when Portugal first set foot in the region, with their preference to use their own language as the language of trade and as the language of the new religion (Christianity) that they brought into the region. As I mentioned to a degree, none of these aspects were really present in the Dutch East Indies. A Dutch bureaucracy ran the colony in a land where its fractured nature already created a common language of sorts for trade and politics, which the Dutch were quick to use instead of imposing their own tongues on the region.

Further, there is the issue too of just what bahasa Indonesia even is. As a language, it's actually a relatively recent development, and came out of a standardization of the Malayan lingua franca we’ve talked about so much, that had predated the Dutch colonial period, as I rather mentioned above. It was a language chosen because Indonesia has over 700 languages in its archipelagos. The majority of them are on a dialectical continuum, and while the Javanese accounted for a significant plurality (some 40% plus) of over half of the nation's L1 speakers, the national identity that the Indonesian state wanted to create was one of pan-Indonesian unity. Thus, a local dialect, which this language was, was simply an unacceptable choice. Further, when it comes to L1 languages, to give a sense of Javanese’s dominance, it’s estimated that while 40% of the nation does speak Javanese as an L1, the next largest L1...sits at about 15%.

The local variety of Malayan, however, was a significant L2 language amongst all of the nations'populations. Indeed, the vast majority of Indonesians, regardless of their L1 language, had a working competency in the Indonesian variety of Malayan. Indeed, even before independence, there was an acknowledgement by many in the Indonesian independence movement that bahasa Indonesia, this Indonesian dialect of Malayan, was the "unifying language" of any future Indonesian state, as it was indeed the most widely understood language, and the one language that was also free of any sort of cultural supremacy, despite its colonial baggage.

That said, if you look at bahasa Indonesia, there are numerous Dutch-derived loanwords that have worked their way into the language, but to get into that is kind of going beyond the scope of this and becomes more of a linguistic exercise, which this has already become a bit too much of instead of, perhaps.

I did some research about this topic a year ago for my class so I’m gonna try to answer.

But let me say this first. I am both Indonesian and Javanese. When I studied history in elementary school, your sentiment was often brought up. “Why do Malaysia and Singapore can speak English while we Indonesian can’t speak any Dutch?”

The Dutch barely educated Indonesian people. They took very “materialistic” attitude in regard of their colonies compared to other colonial power. They really only cared about labors and spices. Dutch governor-generals, like Daendels, are remembered as cruel and sadistic men. Contrast that to Raffles, who is seen as the man who developed Bengkulu Province here in Indonesia. (He also developed Singapore).

It was only after Ethical Policy in 1901 that education was “prioritized” for colonized people. The Dutch’s presence in Indonesia, however, had been going on for 250+ years on that point. But, it was only ~40 years later that Indonesia declared its independence from the Dutch.

But the education was only open to selected people. The only Indonesians who could speak Dutch were the elite, the nobilities, and the rich. The first President, Sukarno, could speak Dutch among other languages and lots of national heroes during that time could also speak Dutch. Some of them were even sent to Netherland and other parts of Europe.

Fortunately for us, the education paid off and the policy backfired against the Dutch. Twenty-ish years later after the Ethical Policy, the number of educated Indonesian became quite significant. These educated people (Sukarno, Moh. Hatta, etc) used the education to fight against the Dutch. One of the strategy was to unite all the Dutch colonies.

Remember, at this point, there was no Indonesian identity. There was no Indonesia as a polity. We didn’t really remember Majapahit Empire or Srivijaya Empire. We only knew Dutch East Indies. Even the word Indonesia is a loanword from a European article.

So in 1928, the educated Indonesian gathered together in the event what is now called Sumpah Pemuda, The Youth Oath. On this conference/event they decided that the people Dutch East Indies should speak one language, Indonesian Language. The language itself was based on a particular version of Melayu language. The language was seen as a “neutral” language. Not Javanese, Batak, Palembangese, Batavia, etc.

This is the turning point. This was the moment that cemented Indonesia as a national language. It was engineered and it was politicized. It gave people from Sumatra, Java, Kalimantan, Sulawesi, Bali, Maluku, Papua, etc something in common. A common language and a common enemy, the Dutch.

Dutch as a colonial power and as a language was rejected. There are many loanwords in Indonesian language taken from Dutch, but the language itself had never taken root here.

Fun tidbit. Since Indonesia is “engineered” purposefully as a national language, there are many old Javanese people who can’t speak Indonesian. They could only communicate in somewhat archaic form of Javanese.

Source:

A History of Modern Indonesia by Adrian Vickers (2013)

A History of Modern Indonesia since c. 1300 by M. C. Ricklefs (1981)