This year marks the 60th anniversary of the establishment of diplomatic relations between Japan and Indonesia in 1958.
Indonesia is a major power in Southeast Asia. With a population of 259 million people, the country accounts for about 41 percent of Southeast Asia's total population of 635 million. Its gross domestic product (GDP) was U.S. $932 billion in 2016, or 39 percent of Southeast Asia's GDP.
Geopolitically, Indonesia occupies a strategic location that links the Indian Ocean with the Pacific Ocean. Since the departure of President Suharto in 1998 amid an economic crisis, democracy has taken root in the country. This is evident from the fact that four general elections and three direct presidential elections have been conducted without confusion since 1999, and the upcoming election for president and the national assembly in April next year is expected to proceed peacefully.
Indonesia is also a "country of youth," with 28 percent of its total population made up by people aged 14 or younger, and the millennial generation, who came of age after the turn of the 21st century, has come to have large political and economic influence. This factor is behind the higher ratio of smartphone use and spread of e-businesses in Jakarta and other major Indonesian cities than in Japan, and it is believed the millennials will determine the outcome of the presidential election next year. In addition, Indonesia has the world's largest Muslim population.
Just running down the list clearly indicates how important Indonesia is for Japan. Since the establishment of diplomatic ties, Japan has always supported Indonesia, through the administrations of Presidents Sukarno, Suharto and during the time of democracies. This is because Indonesia's strategic importance is beyond any doubt.
From Indonesia's viewpoint, however, the time when Japan was overwhelmingly important for the country is coming to an end. Until 2015, Japan had been the largest export market for Indonesia. But in 2016, China overtook Japan. The direct Japanese investment in Indonesia is still larger than the direct Chinese investment, but in the mid- to long-term, it is almost certain that China's share will become larger than Japan's. Indeed, the people of Indonesia know this trend very well.
In Japan, many people still think of their own country as "advanced" and Indonesia as "developing." But this view is rapidly losing currency in Indonesia, and in the broader Asian region. The Indonesian economy grew by 5.6 percent on average per year from 2010 through 2016, and the real GDP per capita grew by 45 percent from 2006 through 2015. During the same period, the real GDP per capita increased only 3 to 5 percent in advanced countries including Japan. As a result, Indonesia and other emerging economies have come to have people thinking that they are doing better and that the 21st century is their age.
In short, the very foundation of the Japan-Indonesia relationship for the past 60 years is changing rapidly. So what shall we do?
One idea is shown in "Indonesia 2045," a long-term project envisioning an Indonesia 100 years since its independence. The plan projects that Indonesia will join the "high income" group of nations in the 2030s, leaving behind the "middle income" group with mid-level GDP per capita. By 2045, the plan says, Indonesia will grow into the world's fifth-largest economy, only after the United States, China, India, and Japan. Its population is expected to expand to 320 million, and the area covering Jakarta and Bandung will constitute a huge metropolitan region, accommodating 25 percent of the country's population, or some 80 million people.
This long-term plan also clarifies the challenge Indonesia is facing: The country must keep meeting the expectations of its people that the economy will continue to grow, new jobs will be created, their income will continue to increase and their standard of living will continue to improve.
The key to realizing this goal is to prepare the infrastructure, train people and conduct research and development. The importance of establishing the right infrastructure is well known. I just want to point out that not only railways, ports, and power generation, but also intra city transportation, water and electricity supply, and other infrastructure for the Jakarta-Bandung metropolitan region and other regional core cities are big challenges.
Another point requiring particular emphasis is educating and training people and carrying out research and development. The Indonesian government intends to move up the ratio of youth attending college from 30 percent in 2015 to 60 percent in the period from 2035 to 2045, and increase the percentage of people with higher education in the workforce from 38 percent to 90 percent during the same period. As for R&D investment, the government plans to increase its ratio to GDP from 0.08 percent in 2015 to 1.5 to 2 percent in the period from 2035 through 2045.
These numerical targets will perhaps be achieved. Everyone understands the importance of human resource development and R&D, and the president, backed by expectations of the millennials, is giving high priority to higher education, research and development, and innovation, especially in e-business projects. The real issue at stake is quality.
Educating and training personnel, as well as research and development, are important for Japan too. It is not about an "advanced" Japan helping a "developing" Indonesia; rather, the millennial generations of the two counties can develop new businesses together, or try out experimental smart cities, to forge new joint partnerships. Such an outcome will add substantial meaning to the "Indo-Pacific initiative" promoted by Japan and the United States, among other countries.
(By Takashi Shiraishi, Chancellor of Prefectural University of Kumamoto)