The Inward-Looking Regional Power: Indonesia’s Economy-First Diplomacy

High Expectations for Indonesia

As ASEAN chair, 2023 provided an excellent opportunity for Indonesia to demonstrate regional leadership and reverse the recent decline of the international credibility of the Association of Southeast Asian Nations. After all, just one year prior, as G20 chair, Indonesia had demonstrated its diplomatic skill by persuading both the American and Chinese leaders to attend the 2022 Bali Summit and issue a joint statement. This was despite fears that the G20 framework would fall into dysfunction against the background of intensifying US-China strategic competition and conflicts of opinion over the war in Ukraine. Indonesia’s success therefore enhanced its reputation as a global diplomatic player and heightened expectations that Indonesia would similarly lead on Southeast Asian regional issues.

ASEAN has in recent years had to deal with significant intra-bloc tensions over the conclusion of a South China Sea Code of Conduct with China and the relationship with Myanmar following the 2021 military coup. Indonesia’s 2023 Chairmanship represented perhaps the best chance in years to find a resolution to these issues without dividing ASEAN.

In the end, however, President Joko Widodo (Jokowi) devoted few political and diplomatic resources in 2023 to resolving ASEAN’s pressing concerns. The theme chosen by Indonesia for the forty-third ASEAN Summit was “ASEAN Matters: Epicentrum of Growth.” During the summit, Indonesia placed particular emphasis on the leaders’ Gala Dinner, which in its staging seemed to take precedence even over the summit meetings. Instead, this choice enhanced the optics of leadership and Indonesia’s “brand” of diplomacy as a convening power that had notably been on show in Indonesia’s 2022 diplomatic successes. Despite serving as chair, Indonesia seemed to shy away from a more ambitious agenda focused on confronting long-standing tensions and reinvigorating ASEAN.

Jokowi’s Risk-Averse Diplomacy

From a narrower risk-management point of view, however, it may well have been a wise decision. If Jakarta judged that ASEAN’s issues were too difficult to be plausibly resolved, then it made sense to avoid emphasizing them during the summit. Doing so might only bring tensions out into the open, thereby not only jeopardizing Indonesia’s recent hard-won international credibility but potentially hurting ASEAN itself at a sensitive time. The risk of the message becoming “ASEAN Doesn’t Matter” might hurt ASEAN both politically and even economically in the long term.

As the United States and China abandon the concept of ASEAN centrality in their own Southeast Asia policies and switch to more bilateral and unilateral approaches to the region, it is ultimately now up to ASEAN member states to preserve the group’s diplomatic value. As global governance becomes increasingly dysfunctional, ASEAN potentially still has a strategically important role to play in the maintenance of regional peace and stability.

What was required of Indonesia in 2023 as the regional hegemon was therefore to ensure the ongoing commitment to ASEAN of Southeast Asian countries—all with diverse geopolitical interests—and to build confidence in the organization. That is what Jokowi did in April 2021, when, on behalf of the 2021 chair Brunei, Indonesia brought Min Aung Hlaing (commander-in-chief of Myanmar’s armed forces) to Jakarta for crisis talks following the February 2021 Myanmar military coup.

The Paramount Importance of Economic Interests

To understand further why Indonesia did not follow through on an ambitious leadership agenda in 2023, we must also take into account the role of domestic politics and interests—much as we do when considering the foreign policy behavior of the United States or China.

One of the defining characteristics of the Jokowi administration has been its focus on economic growth, both for buttressing its legitimacy and for building Jokowi’s political legacy. Most notable is Indonesia’s national growth strategy, Visi Indonesia Emas 2045 (Golden Indonesia 2045 Vision). Formulated in 2017, it identifies several economic goals for Indonesia to achieve by 2045, Indonesia’s centennial as an independent sovereign state. These aims include economic growth of 5%–6% per year, a GDP per capita of $29,000 for a population of over 300 million, becoming the world’s fourth largest economy, and breaking out of the middle-income trap to join the ranks of developed, high-income countries.

To this end, Jakarta has mobilized its political resources by concentrating on infrastructure building and human-resource development. Foreign policy and diplomacy have, in turn, been formulated in service of realizing these long-term outcomes. Key elements of this strategy have been attracting foreign direct investment, successfully implementing overseas initial public offerings of companies for financing infrastructure, upgrading industries, and expanding exports. Diplomatic strategy inevitably focused on relations with potential investment partners—first with the world’s top two economies, the United States and China, followed by enhanced relations with other large economic powers such as Japan.

Further, when King Salman of Saudi Arabia visited Jakarta in March 2017, Jokowi pulled out all diplomatic stops to give him a truly royal welcome. When it became clear that Saudi Arabia’s investment in Indonesia would fall far short of expectations, though, the Indonesian president did not shy away from expressing his resentment publicly.

The fact that President Jokowi has not attended a single UN General Assembly since his inauguration in 2014 suggests that security and/or shared values are not a high priority for his administration. Indonesia’s foreign policy successes in the Jokowi era have for the most part been primarily evaluated on a profit-loss basis for the domestic economy.

Pandemic Slows Economic Growth

The Golden Indonesia 2045 Vision growth strategy was set forth in 2017, and the predominant focus on the economy was only reinforced by the COVID-19 pandemic. The pandemic-induced slowdown has made it a challenge for Indonesia to reach the original goal of 5.1% year-on-year growth, ensuring that it escapes the middle-income trap by 2038 while the country is still enjoying its demographic bonus. The negative growth experienced in 2020 alone means that 7% annual growth is now required to achieve the long-term target.

There are some tail winds for the Indonesian economy, though. The relocation of the capital from Jakarta to Nusantara, set to finish by 2045, will stimulate both the public and private sectors, and an industrial strategy aimed at positioning Indonesia as an international hub for the manufacture of electric vehicle batteries has been adopted to attract private investment. However, the feasibility of such policies is still questioned. Furthermore, Indonesia still currently relies on sales of natural resources like coal for its foreign currency reserves, due in part to commodity price increases following the COVID-19 pandemic and the invasion of Ukraine. With a growth rate of currently less than 5% per year, the goal of joining the ranks of developed countries by 2045 will be hard to achieve. Some Indonesian economists have even expressed their concern by coining the term Indonesia Cemas (Anxious Indonesia) in place of Indonesia Emas (Golden Indonesia) contained in the headline of the 2045 economic growth strategy.

Diplomacy as a Tool for Attracting Investment

As a response, President Jokowi is focusing on even more aggressive diplomacy to attract investment. When he visited Washington in 2022 to attend the first-ever ASEAN-United States Special Summit, he announced on the official presidential website that his major achievements—perhaps even more than meeting US President Joe Biden—included meetings with Elon Musk and other American business leaders. During his visit to Beijing to attend the Belt and Road Summit in October 2023, Jokowi repeatedly touted his call for investment in the new capital and the downstream nickel industry for battery production.

Furthermore, during the September 2023 ASEAN Summit, Jokowi appeared to be focused more on making the ASEAN Indo Pacific Forum a success than on the ASEAN plenary session. He called on participants to invest in green infrastructure, sustainable financing schemes, and digital transformation. By doing so, Jokowi positioned the ASEAN Summit as an arena for investment opportunities rather than geopolitics. In essence, he redefined the “open” descriptor of Japan and the United States’ “Free and Open” Indo-Pacific visions as meaning “open to investment opportunities” for governments and companies from all over the world.

Given the above, the position of Japan and ASEAN in Indonesia’s current foreign policy strategy is clear. Indonesia urgently needs to accelerate investment and concrete economic cooperation so it can sustain high growth over the long term. Any Japan-focused or ASEAN-related foreign policy initiatives and cooperation proposals will therefore need to address this core element of Indonesia’s national strategy. How they do so will directly impact how Jakarta prioritizes their importance.

This does not mean that Indonesia is completely indifferent to domestic social issues or security challenges. Rather, in the current ordering of Indonesia’s foreign policy priorities, the realization of economic gains on a country-by-country basis is ranked higher than shared political or religious values, human rights, democracy promotion, or even the interests of the Southeast Asian region and regional stability. This has been a constant during the Jokowi administration and will continue until a new president takes over in 2024.

Focus on the Presidential Election

Over the last 25 years, Indonesia has held the freest and fairest elections in Southeast Asia, and 2024 promises to be no different. Due to constitutional limits, a new government is guaranteed to take over in 2024 for the first time in a decade. Depending on who becomes president, Jakarta’s definition of the national interests animating Indonesia’s foreign policy and strategy may continue in line with that seen during the Jokowi administration, or it could change significantly.

Until now, the Indonesian government has avoided explicitly committing itself to realizing the goal of becoming a global great power. Given the current trend in world affairs of major powers prioritizing their own economies, Indonesia’s own economy-first approach is not all that surprising. It is important to remember that Indonesia is a de facto regional power and has the potential to be a global great power. It boasts a massive population, and its economy is already by far the largest in the Southeast Asia region. Therefore, for Japan and other ASEAN nations, which already recognize Indonesia’s geopolitical importance, closely monitoring the nation’s domestic political trends will remain of the utmost importance irrespective of any foreign policy pronouncements on great power ambitions.

(Originally published in Japanese. Banner photo: Indonesian President Joko Widodo and his wife Iriana welcome Prime Minister Kishida Fumio and his wife at the ASEAN Summit Gala Dinner in Jakarta on September 6, 2023. © Reuters.)