Toward a forward-looking economic partnership

Only time will tell whether Indonesia and China can keep the ramifications of geopolitical forces at bay without distracting their economic development

In October 2023, Indonesia and China will commemorate the 10th anniversary of President Xi Jinping's address before the Indonesian Parliament. The speech was deemed as the beginning of China's Belt and Road Initiative in Indonesia, and many achievements have been crafted since then. With China's support, Indonesia managed to construct the Jakarta-Bandung High-Speed Railway, which would enable rapid mobility of people between the two major economic hubs. Indonesia also secured more investment in nickel processing smelters through partnering with China in the Morowali Industrial Park. The expansion of China's tech company Alibaba Cloud in 2018 also charmed other competitors to tap into Indonesia's captivating market.

Economic partnership between China and the region continues to flourish with Jakarta sitting at the helm of the Association of Southeast Asian Nations this year. The recently adopted ASEAN-China Initiative on Enhancing Cooperation on E-Commerce serves as a real testament to that solid bond. This initiative could not have come at a better time, as ASEAN is pursuing a Digital Economy Framework Agreement with the aspiration of manifesting $1 trillion to $2 trillion-worth of digital economic value by 2030. China's willingness to share experiences on artificial intelligence and block chain, as provisioned in the initiative, would enable ASEAN to thrive under rapid technological advancement as well.

Be that as it may, Indonesia and China cannot continue doing business as usual. The Global Risk Report 2023 estimated that the world will have to navigate concurrent problems, ranging from worsening climate change, geopolitical tensions, cybersecurity, and social fragmentation in the next 10 years. Different climate consequences were initially touted as top long-term economic concerns for many stakeholders. But there is growing anxiety that geopolitics may annihilate the global economy much earlier.

Following the Russia-Ukraine crisis in 2022, geopolitics has further fragmented the world into small blocs and weaponized economic statecraft to undermine time-honored mutual interdependence. The International Monetary Fund has warned about the immense loss from economic decoupling, ranging from 0.2 to 7 percent of global output, contingent on the scenarios. Yet, little to no sign indicates that the tension would de-escalate soon.

In light of this changing global economic landscape, Indonesia and China cannot afford to just sit on the bench and let the Asian century sink. The stake for the former is inevitably high, given its ambition to be a developed country by 2045.That aspiration entails multilateralism to sustain peacefully, and global public goods to not get overshadowed by unhealthy security concerns.

Indonesia has demonstrated its commitment to championing progress over pushbacks during its G20 presidency last year. Despite facing overwhelming pressures, the archipelagic nation insisted on facilitating open dialogue between the Russians and Ukrainians to voice their concerns. Indonesia's non-aligned position also created a safe space for the United States and China to re-establish in-person dialogues between their top leaders, paving the way for more visits, as seen today. Unfortunately, more work must be done to jointly avoid the dangers of a fragmented world.

As a leading economic and technology powerhouse, China can join Indonesia's endeavors in fostering a forward-looking partnership around the globe. A forward-looking partnership would not force its friends to pick sides when it is inconvenient. A forward-looking partnership would not abuse economic dependency for the sake of short-term pragmatic goals. And most importantly, a forward-looking partnership would not be complacent when partners suffer from restricted market access.

Instead, a forward-looking partnership means resorting to every means at its disposal to ensure both parties equally benefit from it in the long term. It will offer high-quality investment that likely safeguards surrounding nature and global climate. It will allow the partners to function beyond a market and more as an integral part of the higher value chain. It will equip local communities with sufficient capacities to place them at the decision-making level. And it will also uphold rigorous accountability measures to prevent corruption within the system. In short, cooperation between forward-looking champions is all that matters today.

It is no doubt that China and Indonesia have what it takes to be those forward-looking champions. A favorable momentum has been there, too, thanks to cordial and frequent interactions between President Xi and Indonesian President Joko Widodo over the past decade. However, two questions remain. How far can the two countries keep the ramifications of geopolitical forces at bay without distracting their economic development? Will the rapport between officials survive the election cycle in Indonesia? Only time will tell.

In the meantime, focus on achieving quick wins sounds more appealing than doing nothing. China may want to consider mainstreaming principles of forward-looking partnership into its future Global Development Initiative projects. Indonesia should do it too when negotiating the upgraded ASEAN-China Free Trade Agreement among others. All in all, managing expectations about what partners can achieve amid the current geopolitical tensions, perhaps, is the better way to maintain sanity these days.

The author is a researcher at the Department of International Relations at CSIS Indonesia. The author contributed this article to China Watch, a think tank powered by China Daily.

Contact the editor at editor@chinawatch.cn.