The fractured country, which consists of more than 17,000 islands (the government has never quite settled on an official count) spanning a distance equal to that between London and Tehran, is grappling with staggering connectivity challenges. On paper, at least, Indonesia’s economic potential is the stuff of emerging market investors’ dreams. Its population of 264 million is the world’s fourth largest, and by 2050, it’s expected to have the world’s fourth-largest economy (up from 16th today). It’s rich in oil, coal and metals. It sits astride the world’s busiest sea lanes in the world’s fastest-growing region at a time when manufacturing firms across Asia are intensifying their search for sources of cheap, abundant labor. Yet, without a massive infrastructure buildout, Indonesia will struggle to become more than the sum of its many, many parts. To knit together its disparate population centers, remove export bottlenecks, attract foreign manufacturers, and lure shipping business away from ultramodern ports in Singapore and Malaysia, it needs to close an infrastructure deficit estimated to be as large as $1.5 trillion according to the World Bank.
During his first term, Widodo pledged $327 billion in new infrastructure spending on at least 222 “national strategic projects.” The overriding goal, according to the president, is to turn Indonesia into a “maritime fulcrum.” But that’s a hefty sum for a government saddled with so many other needs, and especially for one that routinely struggles to collect tax revenue or free up funds committed to politically touchy outlays like subsidies. As a result, Jakarta wants the bulk of the funding to come from private or outside sources, with the state budget and state-owned enterprises committing less than half. To date, though, Jakarta has fallen around $157 billion short of its fundraising goal. In short, Indonesia needs additional help from a deep-pocketed country with a talent for building infrastructure cheaply and quickly – one, for example, that has built hundreds of thousands of miles of railroad, highways and pipelines in the past decade alone.
From China’s perspective, Indonesia has enormous potential as a strategic partner. Of all the maritime chokepoints in East and Southeast Asia keeping Chinese strategic planners awake at night, Indonesia abuts or straddles three: the Sunda Strait, the Lombok Strait and the all-important Strait of Malacca. If Indonesia were to ally itself with China, it would weaken the ability of the U.S. or another naval power to impose a blockade on Chinese maritime traffic that would bring the Chinese economy to its knees.
Moreover, the overlap between Indonesian and Chinese claims in the South China Sea is limited to oil-rich waters near the Natuna Islands. Jakarta, in fact, does not consider itself a party to any disputes in the South China Sea. It hasn’t been afraid to sink Chinese fishing boats it claims are poaching in Indonesia’s exclusive economic zone, and it has been building new military bases around the Natunas. But among all the Southeast Asian states that could help China resolve its core strategic dilemma, Indonesia is perhaps the least inherently antagonistic toward Beijing. Indonesian military ties with the U.S. and its allies, meanwhile, have ranged from nonexistent to tepid, at most, since the fall of long-ruling dictator Suharto in 1998.
‘Strategic Equidistance’
And its unhappy experiences with colonialism, Japanese invasion and Cold War-era meddling in its internal politics by Washington and Moscow have compelled it to pursue a doctrine of “strategic equidistance” among outside powers. For the most part, Indonesia prefers to keep its foreign relations focused on business and otherwise be left alone to manage its immense internal demands.
To an extent, this suits China just fine. A largely inward-looking country with historical reasons to be wary of getting caught in the crossfire between outside powers may not be willing to side firmly with China on strategic issues. But it’s not eager to throw its lot in fully with potential Chinese adversaries like the U.S. and Australia, either. Its strategic goals notwithstanding, BRI’s primary purpose is keeping Chinese firms busy and exporting surplus labor and industry. With more than a thousand Chinese firms and some 25,000 Chinese workers already in Indonesia, the archipelagic country will remain very good for Chinese business.
But despite its best efforts, Jakarta has never been able to fully extricate itself from the bigger issues unfolding around it – and it will be harder to do so as Indonesia’s economic and military growth inevitably expand its interests and potential to wield regional influence. As a result, it’s been making big moves to modernize its military, focus the military more on the maritime sphere, expand its base infrastructure, and boost defense cooperation with other regional states. China can’t feel good about moves that would allow Indonesia to join an anti-China containment coalition if it ever felt compelled to pick a side. Most notable is its budding naval partnership with India; last year the two countries opened talks on granting each other access to bases near the Malacca, Sunda and Lombok straits.
BRI will give Beijing some degree of influence in Indonesia and may incentivize Jakarta to consider staying on the sidelines as regional competition intensifies, but it won’t give Beijing the sort of leverage needed to force Jakarta to adopt China’s strategic concerns as its own. For one, there’s little evidence that China’s supposed “debt-trap diplomacy” is capable of bearing much strategic fruit. But even if it can, that Jakarta has kept its BRI partnership largely to the private sector means it won’t be as vulnerable to Chinese coercion as governments that are drowning in Chinese debt. It also means that the projects that get greenlit are more likely to be commercially sound than some of the boondoggles plaguing countries like Sri Lanka – and that competition will, ostensibly at least, be open to firms from infrastructure export powerhouses like Japan. Indeed, last year, Indonesia owed Japan more than six times as much as it owed China, according to the South China Morning Post.
Given its need for Chinese investment and its access to China’s voracious commodity markets, Jakarta has ample reason to stay on good terms with Beijing and soft-pedal hot-button issues at least for the time being. Just this week, for example, Widodo – president of the world’s largest majority Muslim country – pretended to be unfamiliar with Beijing’s rounding up of ethnic Uighur Muslims in the Chinese region of Xinjiang. But over the long term, Chinese strategic needs demand a staunch ally along the first island chain. And the sort of influence Beijing can expect to glean from BRI in Indonesia won’t cut it.
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