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Asean Affairs  6  March  2015

Washington Prepares to Welcome New Indonesian President, with Some Caution

Murray Hiebert, Senior Fellow and Deputy Director, and Phuong Nguyen, Research Associate, Sumitro Chair for Southeast Asia Studies, CSIS

Indonesians’ public discourse about their country’s international profile has shifted dramatically over the past few months. New president Joko “Jokowi” Widodo’s administration wants Indonesia’s economy, the largest in ASEAN and 16th largest in the world, to be recognized as much as or more than the country’s oft-cited status as a large, moderate Muslim-majority democracy. His government wants to emphasize economic diplomacy and attracting foreign investment.

Jokowi is widely expected to pay his first visit to the United States in June, a critical trip that could chart the course of U.S.-Indonesia bilateral relations under his government. The two countries this year will mark the fifth anniversary of their comprehensive partnership, announced by President Barack Obama and former president Susilo Bambang Yudhoyono in 2010. As Washington and Jakarta are attaching growing importance to the relationship, Jokowi’s trip could be ideal timing for the two presidents to upgrade existing ties to a strategic partnership.

While Jokowi’s administration has continued many of the nationalist economic policies of his predecessor and intends to implement them with more precision, the United States should nonetheless work with Indonesia on ways to boost trade and investment.

For one, U.S. and Indonesian leaders should seek to establish a joint taskforce on infrastructure, which could liaise between U.S. companies and the interagency task force Jokowi plans to set up within the Foreign Ministry. The Jokowi government plans to obtain the bulk of the financing needed for infrastructure projects through public-private partnerships, and has allocated over $23 billion to such projects in 2015 alone. Deep-sea ports and power plants were identified as areas where foreign investment will be welcome. The United States and Indonesia should also begin preliminary talks on a bilateral investment treaty.

Many economic policies currently being implemented by Jakarta discourage new investment of capital, technology, and innovation from the private sector. The U.S. government will need to raise concerns about Indonesia’s stepped-up efforts to enforce local content rules in the manufacturing sector and the continuing legal uncertainty often faced by foreign investors and their employees in Indonesia. It should do so in the context of sharing ideas for improving the commercial environment.

Many in the private sector fear that forced localization may soon spill from Indonesia’s telecommunications sector into other industries before the country can develop a supply chain to support more advanced manufacturing. The government is in the process of finalizing a regulation that would require companies that want to sell smartphones and tablets in Indonesia to produce 40 percent of their content locally by 2017. This sort of import-substitution flies directly in the face of Asia’s dynamic supply chains, many of which would like to run through Indonesia because of its location, talent, and scale.

There are signs that President Jokowi understands these trends. For instance, he has instructed his cabinet to review the case of Chevron employees sentenced to four years in prison by the Indonesian Supreme Court in 2014 for alleged corruption in what many considered a skewed case against Chevron. Resolving this case, as well as other cases hanging over companies in Indonesia’s judicial system, will help boost investor confidence in Jokowi’s vision for Indonesia’s economy.

Stepping up the already-robust bilateral defense and security cooperation could be one of the more productive areas to focus on during Jokowi’s visit to Washington. His initiative to shape Indonesia into a global maritime nexus connecting the Pacific and Indian Oceans, plans to upgrade the country’s maritime infrastructure and naval capabilities, and efforts to create a new coast guard to monitor the vast waters surrounding Indonesia’s more than 17,000 islands are key areas that could drive greater cooperation.

The United States and Indonesia could sign a memorandum of understanding on maritime security cooperation laying out areas in which they can work together to strengthen Indonesia’s maritime posture. This could include collaboration to boost maritime domain awareness through improved air surveillance and coastal radar, greater intelligence sharing between naval and air forces, and expanded joint naval exercises. The two should also explore ways in which the United States could help equip Indonesia’s still-to-be-formed coast guard. And they should seek to buoy Indonesia’s humanitarian assistance and disaster relief capacity through more training and exchanges of technology, personnel, and equipment.

The United States should consider the future transfer of U.S. Coast Guard cutters and design a package of maritime security assistance that will help train personnel of the new Indonesian coast guard. Washington should also dispatch a U.S. Coast Guard attaché to the U.S. embassy in Jakarta. The U.S. and Indonesian navies should expand the scope and complexity of their cooperation as part of the Cooperation Afloat Readiness and Training exercise to include an air component in the future. The two navies last year conducted a passing exercise in the southernmost edge of the South China Sea. The Indonesian air force has looked at the possibility of acquiring F-16s to replace its aging fleet of F-5s, an area worth discussing during Jokowi’s visit.

Jokowi is still defining his foreign policy. But recent policies, such as seizing and sinking foreign vessels caught illegally fishing in Indonesian waters, show he is reading national sentiment well. Indonesians want to assert their perceived national interests, seeing this as their time. Jokowi has the opportunity to channel that sentiment into supporting Indonesia’s role as a regional and global leader. Indonesia has a key role to play in strengthening ASEAN, engaging on transnational issues like climate change, and promoting peace through religious tolerance and greater connectivity and understanding between more- and less-developed countries.

Getting Jokowi’s inaugural visit to the United States right is one of the highest priorities in U.S.-Indonesia bilateral ties this year. His visit will provide an important opportunity for the United States and Indonesia to take stock of their existing partnership and for Washington to gain a better understanding of the new Indonesia.

Courtesy: This post originally appeared on the Center for Strategic and International Studies, Washington D.C. cogitASIA blog

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