Indonesia’s new leadership seeks to balance geopolitical rivalries

On Oct. 1, Indonesia’s President-elect Prabowo Sobianto is scheduled to take office after a landslide win in June. Prabowo, as he is known, is the current defense minister and has pledged to continue the policies of President Joko Widodo, known as Jokowi.

In the interesting ways of Indonesian politics, Jokowi campaigned for Prabowo, who is from a different party, instead of supporting his own party’s candidate. Jokowi’s son Gibran will be Prabowo’s vice president.

Despite his declared intention to adhere to his predecessor’s legacy, Prabowo has already raised eyebrows by meeting with President Vladimir Putin at least twice and seeking Russia’s nuclear cooperation, while seeking stronger ties with China, already the most dominant foreign player in Indonesia’s economy. Russia recently announced its design for a multipolar “Eurasian security framework,” and would probably seek Indonesia’s support for this idea, while Western countries would like Indonesia to remain firmly in their camp.

While Jokowi since coming to power in 2014 has tried to carefully navigate geopolitical tensions, Indonesia under Probowo is expected to play a more active role. As a former general, he has indicated that he would give greater importance to the military as president. As a successful businessman, he is expected to reform the economy and make it easier to do business in the country.

The economic challenges Indonesia is facing are prompting Prabowo’s team to seek new and assertive solutions. The realization that the country is punching below its considerable weight is motivating the future president to play a more active role in the world economy. China, Indonesia’s neighbor and top economic partner, could help Indonesia to get results. So would new partners such as the Gulf Cooperation Council countries, which have the funding and entrepreneurship the country needs. Trade and investment with the GCC are currently at low levels, but the two sides are starting free trade talks and have recently adopted an ambitious five-year action plan to spur cooperation in all areas. The new partnership will cover political and security coordination, trade and investment, and people-to-people engagement including through tourism and cultural exchanges.

One of the main motivations for the expected foreign policy directions is the need to avoid the growing polarization between China and the US and between Russia and the West. Polarization is seen as a threat to Indonesia’s regional role and global standing. Cooperation with Russia, China and other partners could be seen as a balance to Indonesia’s traditional partnership with the US and Europe.

For Indonesians, US global leadership has been put to the test recently as it failed to stop Israel’s war on Gaza, now in its 11th month, while it continues to provide Israel with the lethal weapons it has used to kill tens of thousands of Palestinians. As the largest Muslim-majority country in the world, Indonesia is also aware that the US has allowed Israel to continue its occupation of Palestinian lands for more than 57 years, in defiance of UN resolutions. By contrast, Russia and China have sided with the global consensus in support of the Palestinians and in solid opposition to Israel’s genocidal war against them.

Indonesia is the fourth largest country in terms of population and 16th largest economy worldwide. Although its economy suffered considerably during COVID-19, it has recovered since and is now growing at a heathy 5 percent annually. Inflation is under control at 2 percent (July 2024) and unemployment is about 5.5 percent. The government’s external debt is low at 37 percent of GDP.

The economic challenges Indonesia is facing are prompting Prabowo’s team to seek new and assertive solutions. 

Abdel Aziz Aluwaisheg

Indonesia dominates the Association of Southeast Asian Nations in terms of population and GDP. Its population of about 280 million accounts for 40 percent of the bloc’s population, and its GDP of $1.5 trillion accounts for 37 percent of ASEAN’s combined market size.

Indonesia’s trade partners have changed significantly. In 2023, China was Indonesia’s top trading partner, accounting for 26 percent of its exports and 32 percent of its imports. By comparison, the US’s share last year was 12 percent and 5 percent of the country’s exports and imports respectively. The EU accounted for 8 percent and 6 percent of Indonesia’s exports and imports, respectively. 

Singapore, traditionally, has been Indonesia’s biggest investor, but that may be changing. According to a report published earlier this year by Brisbane’s Griffith University and Shanghai’s Fudan University, China’s investment totaled nearly $20 billion across the Asia-Pacific last year, an increase of 37 percent from 2022 and Indonesia was the largest recipient, accounting for about 37 percent, or $7.3 billion. The numbers are a sharp contrast to the 12 percent decline in foreign direct investment from other investors into the emerging economies of Asia last year.

A shortage of skilled labor in key industries, red tape, complex regulations and corruption are among the main reasons investors cite as impeding their work in the country and discouraging others from investing in Indonesia.

One of Indonesia’s key challenges is keeping its large population healthy, employed, educated and skilled for the changing needs of its economy. Its population is young; half of them are below the age of 30. They have reasonable access to education; literacy rates and school enrollment are quite high.

However, given its large population; its per capita GDP is about $5,300 annually, in fifth place after Singapore, Brunei, Malaysia and Thailand. Those living under the official poverty line account for more than 9 percent of the population, but about 59 percent of the population earn less than $2,500 per year, or just $6.85 daily.

Indonesia is facing other daunting challenges, including dependence on natural resource exports, infrastructure gaps and regional disparities.

Climate change is also a tremendous challenge. The capital Jakarta is sinking due to climate changes and excessive groundwater withdrawals have contributed to sinking of up to 10 centimeters in parts of the city. Environmentalists warn that a third of Jakarta could be submerged by 2050 if current rates continue.

The government is now relocating to a new capital, Nusantara, in the Kalimantan region, about 1,300 kilometers east of Jakarta and away from the traditional seat of power on the island of Java, the most populous island. The relocation is scheduled for Aug. 17, the country's independence day. President Jokowi announced plans for it five years ago, shortly after securing a second term, and was keen to inaugurate it before he leaves office on Oct. 1.

For Indonesia to reach its potential and mitigate the growing economic and environmental challenges, it will need to expand its circle of friends and partners. For that purpose, it will seek to strike a balance between competing geopolitical rivals and avoid the growing polarization between superpowers. At the same time, its foreign policy should reflect the country’s moral and traditional values. To achieve that, it will benefit from new partnerships with like-minded countries and organizations such as the GCC, which are also seeking to strike a geopolitical balance while pursuing their push toward economic power and independence and a more equitable global economic and political power structure.

Striking a greater geopolitical balance would make sense on economic, political and moral grounds, as Indonesia seeks to play a greater global role under President Prabowo. 

• Dr. Abdel Aziz Aluwaisheg is the Gulf Cooperation Council assistant secretary-general for political affairs and negotiation. The views expressed here are personal and do not necessarily represent the GCC. X: @abuhamad1