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Global Perspective: Indonesia's 3 challenges in becoming a Southeast Asian power

A train moves down its track as the hazy city skyline is seen in the background in Jakarta, Indonesia, Thursday, Sept. 16, 2021. (AP Photo/Tatan Syuflana)

With the Quad strategic dialogue between Japan, the U.S., Australia, and India becoming the framework for a "free and open Indo-Pacific," the importance of Southeast Asia is being recognized anew. In October last year, Prime Minister Yoshihide Suga visited Vietnam and Indonesia, and the Japan-Indonesia Foreign and Defense Ministerial Meeting, or the so-called "2+2," was held in March this year in Tokyo. The premier was also scheduled to visit the Philippines from late April, but this plan was postponed due to the spread of COVID-19.

    Collaboration with Vietnam and the Philippines is easy to understand. The two countries are directly confronting China in the South China Sea. But why Indonesia? Indonesia accounts for 40% of Southeast Asia's population and 36% of the region's economy. However, it is not being confronted by China. In fact, Indonesia places great importance on both Japan and China in terms of economic cooperation, and Jakarta has built its own security policy on the premise of a U.S.-centered security system. This posture is reflected in Indonesia's "Association of Southeast Asian Nations (ASEAN)-centric," "non-aligned, neutral," and "free and active" diplomacy.

    However, ASEAN has been adrift for nearly a decade. The confrontation between the U.S. and its allies and partners and China will become more intense. China will probably behave increasingly like an assertive great power. So how is Indonesia likely to change?

    Since the Asian financial crisis of 1997-1998, Indonesia has developed steadily. Between 2000 and 2019, its population grew from 205 million to 268 million, and its GDP in nominal dollars from 0.18 trillion dollars to 1.1 trillion dollars. As a result, its share of the global economy grew from 0.54%, or 27th in the world, to 1.27%, or 16th, and its share of the ASEAN economy grew from 28% to 36%. In other words, Indonesia is an emerging Asian country following China and India in terms of population and economic scale, and if we define a middle power as a country that accounts for 1% to 3% of the global economy, Indonesia is the only middle power in Southeast Asia.

    This recent development is the basis on which Indonesians are envisioning their future. According to the government's "Vision of Indonesia 2045" announced by President Joko Widodo in 2019, the population will reach 320 million in 2045, the centennial of Indonesia's independence. The urbanization rate is expected to rise from 50% in 2010 to 69% in 2045, and the Jakarta-Bandung area around the capital in particular is expected to have 76 million residents in 2035, twice the population of the greater Tokyo metropolitan area. Furthermore, if the economy grows at an average of 5.1% per year between 2010 and 2045, per capita domestic income is expected to reach $19,800 in 2045, making Indonesia the fifth largest economy in the world after the United States, China, India, and Japan.

    This is only a forecast. However, in many cases, a country's grand strategy is decided based on the assumption that the predictions will come true. So what are the challenges? There are three major issues.

    The first challenge requiring a solution is urbanization. The greater Jakarta metropolitan area, as well as regional core cities such as Bandung, Semarang and Surabaya on Java island, Medan and Pakanbaru on Sumatra, Balikpapan on Kalimantan, and Makassar on Sulawesi, are expected to see annual economic growth of more than 9% on average from 2020 through 2030. But even with this economic expansion, when the population of the Jakarta-Bandung region reaches 76 million in 2035, the policy issues that will need to be addressed, from infrastructure development to education and employment, will be huge. Economic cooperation should continue to be greatly welcomed to tackle the issues.

    The second challenge that has to be overcome is human resource development and science and technology innovation. The real national income per capita in Indonesia more than doubled from a baseline figure of 100 in 2000 to 208 in 2019. With such a high growth in income, the people expect that their lives will continue to improve and that their children's lives will be much better. The keys to meeting these expectations are developing advanced human resources, promoting innovation, and attracting investment. To achieve this, Indonesia must remain an internationally open country.

    The third issue is national security. Indonesia's military spending has stagnated from 1.4% of GDP in 1990 to 0.7% in 2000, 0.9% in 2015, and 0.8% in 2021. As a result, Indonesia's military spending is less than 3% of China's, 11% of India's, and even less than Singapore's, according to 2018 figures. However, given that its economy is expected to be the fifth or sixth largest in the world in 2045 and that maintaining the balance of power in the Indo-Pacific is critically important for its own security, it is unlikely that Indonesia will remain a "small military power" in the future.

    Former President Susilo Bambang Yudhoyono spoke of maintaining a "dynamic equilibrium" in the Indo-Pacific. President Joko Widodo has also spoken of Indonesia as a "maritime axis." Early this year, Defense Minister Prabowo Subianto announced a $125 billion defense equipment procurement plan for the period ending in 2024.

    Indonesia will remain a "non-aligned and neutral" and diplomatically "free and active" country. At the same time, it may try to play a far larger role in security affairs beyond the ASEAN framework than it does now.

    However, given the impact of the COVID-19 crisis over the past year and a half, it is difficult to say whether this progress will be as smooth as it has been in the past. The income gap between the formal and informal sectors is widening. As the crisis drags on, households and businesses are losing leeway. It will become increasingly difficult to steer macroeconomic policies. And the Islamists are provoking the regime at every turn.

    It is expected that the economy will recover in 2023, but by that time, the "political season" will have begun, with presidential and parliamentary elections in 2024. This means that the second term of President Joko Widodo will end with his response to COVID-19. Who will become president in the next election under what political and economic conditions? And what kind of ruling coalition will be formed? This will have great significance for Indonesia's future grand strategy.

    (By Takashi Shiraishi, Chancellor, Prefectural University of Kumamoto)

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