Witnessing the rise of a Southeast Asian titan

By Amandine Bruchet

Of all the issues raised during Hillary Clinton’s Asia tour in early September of this year, the outcome that came into limelight is the Secretary of State’s recognition and acceptance of the Indonesian mediation in the South China Sea territorial bone of contention between the Philippines, China and Vietnam.

Indonesia already stands out in many ways, including through its peculiar geography – it is the largest archipelago in the world with over 17 000 islands- and its abundant and diverse population – in terms of ethnies, religion and culture­- but this could be the latest clue that Indonesia is also on its way to become highlighted as a world power over the next few decades.

Therefore, could it be that we are witnessing the long-term assertiveness of the Indonesian presence and influence in the global arena or only a contextual favorable phase of the country’s history that won’t last long?

Indonesia has the will and the tools to gain in political might. Indeed, it can rely on many assets to live up to its expectation of global influence, among which its territory size and strategic geographic location astride two oceans, its numerous population –the world’s fourth largest-, inspirational history of early struggle against colonialism, abundant natural resources, recently established democracy and soaring economy.

Indonesia managed to spread new concepts to the outside world such as the “consensus building” in Southeast Asia, to host continental events such as the ASEAN meeting and the East Asia Summit in 2011 and received applause for being a model for “Islamic democracy” and an engine of the ASEAN building. The country is part of the G-20, shows active commitment to many global issues such as climate change, thrives on several bilateral agreements with big league actors –the US and many BRICs countries- and should welcome the 2013 APEC summit.

ASEAN members leaders during the opening ceremony of the 19th Association of Southeast Asian Nations (ASEAN) Summit in Bali, Indonesia, Nov. 2011.

As for economy, Indonesia headed the ASEAN+6 in 2011 with a 6.5% growth mainly generated by a strong demand from its households, representing up to 60% of the PIB, and especially from its expanding middle class. The country attracted global attention thanks to its high resistance to and quick recovery from the 2009 financial crisis, entitling him to a 5.2% average growth between 2000 and 2010 and to a credit rating upgrade to investment grade by Fitch and Moody’s in 2011. Today, Indonesia possesses many assets up its sleeves to face the future: a numerous, “cheap” and young population – over than half is under 30-, generous natural resources – especially oil, natural gas and mining products-, a strategic location, sound public finances and banking system, relatively low inflation and public debt and increasing FDEs. Consequently, Indonesia accessed to the MIKT and Next 11 groups and many specialists are wondering if Indonesia could be on its way to double the I of the BRICS1. According to a recent study by McKinsey, Indonesia should become the 7th largest world economy by 2030, outstripping both Germany and the UK.

However, many obstacles stand between the giant and its dream of an increased global might. To draw on its extraordinary potential, Indonesia will have to take up a demographic challenge and fight against high unemployment, job insecurity, the development of moonlighting –which accounts for about 60% of employment- and poverty with more than half the population currently living on less than 2$ a day according to the World Bank. Indonesia will have to answer skyrocketing infrastructure needs, turn away from over-protectionist policies2 and come up with a solution to rising regional inequalities. From a political outlook, Indonesia is plagued by ubiquitous corruption – it ranked 100/183 in the 2011 Transparency International study-, increased sectarian tensions and religious violence and extremism that claimed the lives of 3 Ahmadiyya men in February 2011 3 and pushed Lady Gaga to cancel her 2012 Indonesian concert 4. Also of note, because of the fragmentation of the political landscape in many parties, Indonesia suffers from relatively long and inefficient decision-making processes.

To me, Indonesia should put social –education- and physical –transports and technology- investment as well as democracy consolidation on top of its agenda. The first would allow lower production costs, rising competitiveness and a more unified market while the second is the indispensable setting for building a trustworthy economy for national and foreign investors and for carrying out much needed macroeconomic reforms. Should Indonesia succeed in fighting off internal threats to peace and democracy and invest heavily in infrastructure, I am confident it will live up to its aspiration of rising global significance. In such a case, beware the moves of the South Asian mammoth because it would have the will and power to wield influence on the architecture of the world.

External articles references:

1-      “Is Indonesia bound for the BRICs” by Karen Brooks, December 2011 (available in EBSCO, Brandeis Scholar section)

2-      “Indonesia’s new trade policy risks repeating past mistakes” by Vikram Nehru, September 2012 on EastAsiaForum

3-       “No model for muslim democracy” by Andreas Harsono in the New York Times, May 2012

4-      “Lady Gaga comments on Indonesian show” by Dave Itzkoff, May2012

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