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  • Writer's pictureHanif Ibrahim

Make it or break it - Indonesia's chairmanship puts ASEAN at a crossroads

Fresh from a successful G20 Summit in 2022, Indonesia will seek to elevate its status as a credible regional power as it helms the ASEAN chairmanship in 2023. This piece will examine how Jakarta’s domestic priorities will influence its foreign policy objectives, and what it means for ASEAN’s political future.


President Joko "Jokowi" Widodo. Photo via East Asia Forum 2021

In a press statement released on 5 Jan 23, Airlangga Hartarto, Indonesia’s Coordinating Minister for Economic Affairs, emphasised his government’s desire to make ASEAN the “anchor of global economic stability” as Indonesia helms the ASEAN chairmanship in 2023. Accordingly, President Joko “Jokowi” Widodo’s administration adopted ‘ASEAN Matters: Epicentrum of Growth’ as the theme of its chairmanship. The vocabulary makes it clear – not only does Indonesia seek to promote regional economic development, its leaders also intend to situate ASEAN at the centre of future global growth trends. This calls into question as to whether Indonesia’s explicitly extra-regional ambitions would entail the de-emphasis of ASEAN’s political challenges, namely the entrenchment of “ASEAN Centrality” amidst the US-China rivalry and the ongoing crisis in Myanmar. This piece posits that Indonesia's domestic economic agenda will make pushing for a resolution to ASEAN’s key political issues challenging as such matters will be deprioritised in favour of promoting trade and investment facilitation, notwithstanding how Indonesian leadership in advancing regional economic integration will provide a springboard for ASEAN’s future political role in the longer term.


Aside from post-pandemic recovery, the Jokowi administration’s economic policy record can be characterised by two key priorities: equalising economic development across Indonesia through infrastructure investments and moving its economy up global value chains (GVCs). To fulfil both agendas, the government has relied heavily on funding from outside the state budget through Public-Private Partnership (PPP) models and attracting foreign capital. Meeting that demand for capital has been China, whose outsized influence in Indonesia’s Foreign Direct Investment (FDI) inflows creates a divergence between the structure of FDI inflows between Indonesia and ASEAN overall.

Despite being slowed by the pandemic, Jokowi’s infrastructure drive received renewed national attention as his push to establish a new capital in Kalimantan gained momentum, which with the Jakarta-Bandung High Speed Rail, were amongst the slew of projects discussed between Jokowi and Chinese foreign minister Qin Gang during his visit to Jakarta in Feb 23. The government also launched the Indonesian Investment Authority (INA) sovereign wealth fund to partner with China’s Silk Road Fund, with transport infrastructure and logistics as key sectors in its investment mandate. Capitalising on the global electric vehicle (EV) boom, Jokowi placed export restrictions on mineral extracts, mainly Nickel, in hopes of encouraging foreign EV manufacturers to grow and support downstream industries domestically including in Nickel processing and EV battery manufacturing. Chinese companies have been responsive, with Wuling and BYD planning to expand in Indonesia, while other investment partners such as the EU remain preoccupied with disputing the export ban in the WTO.

All this is to say that the stage is set for continued Chinese largesse in Indonesia’s economic development plans, even past Jokowi’s term in office, set to end in 2024, given the difficulty for any successor to U-turn on such groundwork. With US and western investment in Indonesia remaining laggard, it is unlikely that Indonesia’s ASEAN chairmanship will meaningfully push back against China’s growing footprint in the region’s economic development.


One might point to security cooperation as a potential bright spot for the strengthening of ASEAN Centrality under Indonesian leadership, but the problem remains that there is a lack of domestic impetus for Indonesia to be active in managing geopolitical tensions beyond maintaining Indonesian non-alignment. Regarding Myanmar’s ongoing civil war, Indonesia arguably does not need to have the same urgency to resolve the conflict as other ASEAN counterparts, primarily because it is not directly affected by its fallout as Thailand and Malaysia are from the resulting humanitarian crisis. Jokowi has therefore stressed that ASEAN “will not be held hostage” by the junta and current arrangements to leave Naypyidaw out of discussions on ASEAN’s economic agenda may unfortunately yield a tolerable status-quo for Jakarta. Additionally, Indonesia is also not a claimant in South China Sea (SCS) disputes which China has with other ASEAN states.

Through its recent actions, Jakarta has demonstrated a clear preference for resolving disputes bilaterally instead of through the ASEAN fora, as shown by the EEZ demarcation agreement with Hanoi in Dec 22. Such factors would mean that the promotion of an ASEAN-led dispute settlement mechanism will not be top priority in 2023. Foreign Minister Retno Marsudi’s introduction of ‘down-to-earth’ diplomacy has further signalled that Jakarta will prioritise its pragmatic national interests and the socioeconomic needs of its population over resolving regional political issues. Indonesia also has a history of looking beyond the ASEAN framework to address regional concerns, as seen from former Foreign Minister Marty Natalegawa’s push for working with forums such as the East Asia Summit (EAS) and Indian-Ocean Rim Association (IORA), avoiding the complications of working with an organisation vulnerable to splitting between pro and quietly anti-China alignments while affording it greater engagement with Australia, New Zealand, India, and Japan. Indeed, the establishment of fresh regional minilateral security arrangements such as the Quad and AUKUS would incentivise Jakarta to be open to options for a post-ASEAN foreign policy. Moreover, given recent successes such as convincing Russia to reopen sea routes for Ukrainian wheat exports and hosting the G20 Summit 2022 in Bali, Indonesia has proven that it is capable of advancing its geostrategic interests outside the scope of ASEAN.


Nevertheless, Jakarta’s policymakers have demonstrated their willingness to steer ASEAN through its challenges as it recognises that strengthening regional security will be crucial to advancing its economic agenda. Indonesia has in fact long desired for ASEAN to evolve past the institutionalised constraints which restrains it from strengthening its political weight. Notably, at the Sep 22 High-Level Task Force for the ASEAN Post 2025 Vision in Kuala Lumpur, Indonesia’s delegates reportedly caused a stir amongst senior officials when it proposed to change the way ASEAN leaders make decisions based on consensus to a majority vote of at least seven members. Indonesia has also been the most proactive in raising the profile of the ASEAN Outlook in the Indo-Pacific (AOIP) agreement, loosely based off Natalegawa’s Indo-Pacific construct, with amendments to include ASEAN member states’ preference for non-binding measures. On Myanmar, Jokowi has signalled his desire to find a resolution to the crisis through military diplomacy, with the idea being that representatives of the Indonesian Military (TNI) would attempt to convince junta leader Gen. Min Aung Hlaing to kickstart his nation’s transition to democracy. Indonesia has also been active in welcoming US reproachment to the region given its potential for delivering greater funding options for its development, with the Foreign Affairs Ministry extending an invitation on 8 Mar 23 for the US to attend the ASEAN Indo-Pacific Infrastructure and Connectivity Forum 2023.

On this note, Indonesia also understands that deeper regional integration will help drive its domestic development agenda. On 10 Feb 23, Indonesia kickstarted the ASEAN Digital Economy Framework Agreement (ASEAN DEFA), aspiring to bring ASEAN closer to a regional ‘digital community’ which would reduce the digital divide within its own borders. Additionally, Indonesia’s desire to establish itself as a regional manufacturing hub will require it to promote the ASEAN single market to enable companies to engage in intraregional sourcing and reap the benefits of the free flow of parts and components.


Ultimately, Jakarta has and will continue to recognise that promoting trade and investment facilitation will require an ASEAN that is stable and predictable for businesses, and that the full realisation of the ASEAN Economic Community (AEC) single market will allow it to capitalise on regional growth opportunities. What this means is that any potential downgrading of ASEAN’s pertinent political challenges in the Indonesian chairmanship’s agenda will be slight, and that Indonesia’s plans to deepen regional integration, albeit borne out of domestic imperatives, will move ASEAN closer towards being an indispensable part of global supply chains. Growing the region’s economic importance would in turn increase its political leverage as a collective bloc and afford ASEAN greater ability to chart its own path and resist great power coercion, enhancing ASEAN Centrality in the long term.

 

Hanif Ibrahim is a research analyst the SMU Economics Intelligence Club (SEIC), and a sophomore Economics and Political Science undergraduate.


The views expressed are the authors’ own and do not represent the official position of the SMU Economics Intelligence Club. This article may not be reproduced without prior permission from SEIC and due credit to the author(s) and SEIC.

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