President Joko Widodo, right, seen here with Vice President Jusuf Kalla, second right, after his arrival at Halim Perdanakusuma Air Base in East Jakarta on Sunday after a five-day trip to China and Japan. (Antara Photo/M. Agung Rajasa)

Chinese and Japanese Investment, Defense Deals Mark Power Shift


MARCH 29, 2015

Jakarta. President Joko Widodo returns home from his trip to Japan and China with more tokens from the latter, raising question as to how this will influence Indonesia’s geopolitical stance in the region and whether it will gravitate more toward China.

Indonesia’s Investment Coordinating Board (BKPM) chief Franky Sibarani said more significant investment commitments were expected from China than from Japan at the end of Joko’s week-long tour that began in Tokyo and concluded in China’s Hainan province on Sunday.

Franky, who accompanied the president during his visits to the two East Asian giants, said Chinese investors were expected to commit a total of $68.44 billion in Indonesia, following Joko’s meetings with Chinese leaders and businesses.

Only $5.6 billion worth of new investments is projected to come from Japan, including those from automakers Toyota Motor and Suzuki Motor. Both already operating factories in Indonesia.

“Toyota is committed to expanding its investment by $1.6 billion, and Suzuki $1 billion,” Franky said. “Other [new] business-to-business collaborations between Indonesian and Japanese businesses are worth $3 billion.”

However, based on the two countries’ investment track records in the archipelago, only one out of 10 Chinese investment commitments can be expected to materialize. The figure for Japan is higher, with a ratio of 1:6, Franky said.

During their meeting in the Great Hall of the People in Beijing last Thursday, Joko and Chinese President Xi Jinping witnessed the signing of eight memorandums of understanding on bilateral cooperation across various sectors. These include an MoU on economic cooperation between Indonesia’s office of the chief economic minister and China’s National Development and Reform Commission; joint development projects for high-speed railways connecting Jakarta and Bandung, West Java; and a joining of hands between Indonesia’s National Search and Rescue Agency (Basarnas) and China’s Ministry of Transportation.

The two countries also inked deals on a space partnership between Indonesia’s National Space and Aviation Agency (Lapan) and the China National Space Administration, on double taxation prevention and on industrial and infrastructure development.

Joko said these MoUs are part of Indonesia’s “comprehensive strategic” partnership with China.

“We will design our plans of action for the next five years and translate the  [partnership] into concrete steps that will benefit the two nations,” the president said after his meeting with Xi. “China is a close friend of Indonesia. [The country is] a comprehensive strategic partner.”

Joko made the statement after he was quoted as saying China had no legal claim over the South China Sea during his trip to Tokyo. He subsequently clarified his statement and reiterated that Indonesia would not side with any country and would remain an “honest broker” in the ongoing regional dispute.

Seemingly unperturbed by Joko’s statement, Xi said he felt “satisfied with the very positive progress our two countries have achieved.”

Meanwhile, Chinese Prime Minister Li Keqiang’s remarks during his speech in a bilateral business forum in Beijing on Friday insinuated that he also remains on good terms with Joko.

In the forum attended by hundreds of business leaders from both China and Indonesia, Li playfully said he was “upset” with Joko’s well-prepared speech for the audience.

Joko had used a PowerPoint presentation to explain investment opportunities in Indonesia, which included his administration’s ambitious plans for large-scale infrastructure projects to boost interconnectivity on and between the archipelago’s sprawling islands, as well as to boost the country’s maritime sector.

“I’m a little bit upset. I didn’t think about using a PowerPoint like Jokowi so that I could give clearer explanations,” Li was quoted as saying by Indonesian media, referring to the Indonesian president with his nickname. “I’m very impressed and satisfied with Jokowi’s speech because it helps us understand Indonesia better by providing a clear idea of its [development] plans for the future. As a representative of the [Chinese] government, I can say that Chinese businesses will be able to help Indonesia realize these plans.”

In comparison, Joko and Japanese Prime Minister Shinzo Abe agreed in their meeting last week to establish a bilateral forum of senior officials to boost partnerships between the two countries in infrastructure development and the maritime industry, citing the need for stronger cooperation in maritime security.

According to a report in the Japan Times, Abe pledged to about 140 billion yen ($1.17 billion) in loans for railway projects, including the Mass Rapid Transit system currently under construction in Jakarta.

Defense and international relations observer Bantarto Bandoro said former president Megawati Soekarnoputri’s influence on Joko might mean Indonesia will gravitate more toward China, instead of Japan or the United States.

Megawati, daughter of Indonesia’s first president Sukarno, is chairwoman of the Indonesian Democratic Party of Struggle (PDI-P), of which Joko is a member. A legacy from her father’s term in office, Megawati has maintained a close relationship with China and even North Korea.

Sukarno was known to have strong ties to communist nations during his leadership of Indonesia, Bantarto said. Former president Susilo Bambang Yudhoyono, on the other hand, was seen gravitating more toward Japan during his 10-year reign in office, he added.

“Historically, Megawati has been closer to China than Japan. If Jokowi echoes her sentiments, he will also probably bring Indonesia closer to China,” Bantarto said in Jakarta on Sunday.

“There is no proof for such sentiments yet [from Joko]. But media reports suggest that Indonesia has more dealing with China. However, I don’t think this is a black-or-white issue.”

Bantarto praised Joko for “betting on two horses” for the benefit of Indonesia’s economic development by reaching to both China and Japan.

This is the first time an Indonesian president visited the two countries in consecutive trip. The move may give us a glimpse of Joko’s quid pro quo “game plan”: if Japan and China wished to see Indonesia cooperate with their interests, they would have to give the archipelago something in return, Bantarto said.

“In defense and security issues, Indonesia tends to ignore Japan a bit and give China more [attention]. But Indonesia still needs Japan more than Japan needs Indonesia, so Indonesia cannot completely ignore the powerful country. We cannot let Chinese investors control all of our businesses,” he added.

“Jokowi is trying to balance Indonesia’s geopolitical and geo-economic interests, and he’s making the right moves. He’s actually not neutral, but he’s pragmatic and realistic."

“He sees close relations with the two countries as beneficial to Indonesia. Besides, he insinuates that Indonesia wants China to be more cooperative in matters concerning the South and East China Sea disputes.”

In his speech in China, Joko called on Asian nations to refrain from engaging in potentially violent conflicts.

“There should be no friction between the countries in Asia,” Joko told the audience at the high-profile Boao Forum for Asia in Hainan on Saturday. “Those are dangerous games and will be very costly. They will benefit no one.”

Joko arrived in Jakarta on Sunday evening after attending the funeral of Singapore’s first prime minister Lee Kuan Yew in the city state.