Indonesia Could Be 10th Largest Economy: But here are the Challenges

Indonesia Could Be 10th Largest Economy: But here are the Challenges

To understand how Indonesia’s foreign policy operates, one must look at the basic foundation of its foreign policy: the “independent and active” principle, which originated from the dynamics that emerged at the domestic and international levels in the 1940s. The Cold War brought bipolarity to the international system with the United States and the Soviet Union at its axis and, as a newly established state, Indonesia opted to stay independent from either bloc. Indonesia’s colonial history led it to empathise with other colonised states and, thus, Jakarta pledged to “independently” and “actively” pursue the settlement of international issues, rather than being passive or reactive.

Indonesia Could Be 10th Largest Economy: But here are the Challenges

Jakarta’s Foreign Policy Strategy

Presently, President Yudhoyono projects Indonesia’s foreign policy strategy with the catchy tagline of: “A million friends, zero enemies.” This strategy is the embodiment of multi-directive diplomacy, where Jakarta seeks to play a bigger role regionally while actively strengthening co-operative relations with countries from around the world.

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The manifestation of this multi-directive strategy revolves around the so-called “Natalegawa Doctrine”, which takes its name from Indonesia’s current Foreign Minister, Marty Natalegawa. The doctrine is an optimistic perspective that places Indonesia in a position of “dynamic equilibrium” within world politics. It perceives the current international political situation as being conducive to the emergence of new powers in international politics, with developing states becoming less dependent on the dominant powers. The doctrine sees the rise of new powers, such as India and China, as non-threatening. Within the Indian Ocean Region countries, President Yudhoyono has pointed to the necessity of formulating long-term co-operation based on common interests. This signifies the importance of avoiding the possibility of the region becoming an area of strategic rivalry.

 As Indonesia’s economy grows, Jakarta will endeavour to co-operate closely with other major regional actors, in particular India, China, the US and Australia. Given Indonesia’s unique, and perhaps enviable geographic position, it will have to balance its relations to achieve its foreign policy objectives.

Indonesia-US Relations

From independence in 1949 until 1968, relations with the US were often cool, and sometimes even quite hostile. The Soeharto Government overturned that policy and aligned with the West. Washington welcomed Soeharto’s initiative, as it benefited both countries economically and geopolitically. In 1991, Indonesia-US relations deteriorated following the Santa Cruz massacre in the East Timorese capital, Dili, with Washington cancelling agreements for joint military training. In 1999, President Clinton banned all military sales and contacts after the violence that accompanied that year’s East Timorese independence referendum.

Relations have subsequently improved, especially following the 11 September 2001 terrorist attacks and Indonesia’s support for the “Global War on Terror”. Then-President Megawati Soekarnoputri and US President George W. Bush agreed to collaborate in promoting democracy, countering terrorism and developing a reciprocal partnership based on security interests. Relations, particularly military relations, improved further after the 2004 Aceh earthquake and tsunami, as the humanitarian crisis that followed triggered US extensive assistance and the lifting of the military arms embargo.

Cultural exports became an important part of US foreign policy (the development of soft power), deeply affecting Indonesia. In early 2011, the US launched its first Public Diplomacy Outreach Centre, located at the embassy in Jakarta. The centre aims to facilitate dialogue between the Indonesian public and the US, with a particular focus on youth audiences. Indonesia was chosen to launch the new initiative because of its large number of active social media users, and for the on the government that its educated youth have historically had.

Indonesia’s importance was again highlighted by the United States-Indonesia Comprehensive Partnership which elevates bilateral relations and upgrades strategic consultations. The partnership was launched in November 2011 and was reaffirmed by the US-Indonesia Parliamentary Caucus. The caucus talks focussed on the trade and investment, security, defence, regional stability and cultural exchanges.

With increased US interest in the region, following the much-hyped “pivot”, Indonesia can benefit economically and militarily. First, many US companies are looking towards Asian economies to sell their products and services. The growing consumer base and rising income levels signal the health of the Indonesian market, providing a definite incentive for US investors to invest in Indonesia.

Second, US military exports have suffered a decline over the last 20 years. The percentage of all military goods exported globally has dropped from 60 per cent in 1991 to 30 per cent in 2011. Rising regional tensions may offer the US increased opportunities for defence exports, especially to Indonesia, as its military spending has substantially increased since 2005.

The US made several major arms deals with Indonesia in 2012. The largest was a contract worth $25 million to acquire US missiles to complement the 24 F-16 jets previously acquired from the US and worth over US$350 million, but negotiations for the procurement of eight Apache helicopters, estimated to be worth US$1.4 billion, have been slow. Should the negotiations fall through, the Commander of the TNI, Admiral Agus Suhartono, announced that Indonesia would instead acquire the Sikorsky UH-60Black Hawk utility helicopter.

Indonesia-China Relations

President Soeharto resumed relations with China, which had been suspended in 1967, but Jakarta’s distrust of China meant that relations were not productive until the fall of Soeharto in 1998. The Indonesian view of the relationship with China has perhaps best been described as one of persistent ambivalence.[1]Jakarta has subsequently begun to change its attitude towards Beijing and to be more welcoming of China’s presence in South-East Asia.

China’s engagement in ASEAN and the ASEAN Regional Forum has opened up an opportunity for the establishment of indirect political relations with Indonesia. Although Indonesia initially refused to have direct political relations with China, it welcomed the development of trade and economic relations. The result was a very close economic partnership that led to the official declaration by Indonesia in 2005 of a strategic partnership with China. Indonesia has welcomed China’s involvement in ASEAN+1, ASEAN+3 and the East Asia Summit. As the two countries strengthen their co-operation in defence technology, trade, investment and education, political trust grows with it.

On 22 March 2011, China and Indonesia signed a major Memorandum of Understanding on defence, which encouraged greater military co-operation, technology transfer, equipment upgrades and defence training. Since then, there have been reciprocal visits of both countries officials. On his visit to Indonesia in March 2012, Chinese President Hu Jintao explained that the two countries will further deepen their defence co-operation by expanding their defence and security collaboration, staging joint drills, increasing visits, combating terrorism and cross-border crimes and actively safeguarding the security of their own countries and the region.

In June 2012, the two countries announced the joint production of missiles for the Indonesian Navy. Defence engagement with China is part of Indonesia’s defence policy, known as “Minimum Essential Force”. In addition, the arms embargo placed against it in the past has taught Jakarta to seek armaments from multiple countries, rather than to rely on one main defence supplier. To a large degree, China’s defence involvement with in Indonesia is based on geography. For Beijing, having an ally

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