What to expect from Widodo’s visits to China, Japan and South Korea
25 Jul 2022|

When Indonesian President Joko Widodo visits his country’s three major North Asian economic partners this week, bilateral trade and investment, along with the upcoming G20 leaders’ summit in Bali, are set to head his list of priorities. But whether he likes it or not, they are unlikely to be the only topics on the minds of his principal interlocutors, especially China’s President Xi Jinping.

Widodo’s first stop (26 July) is Beijing, where he will meet both Xi and Premier Li Keqiang. Generally, the leaders will have a good story to highlight during what will be Widodo’s fifth visit to China. Despite an array of international and domestic complications, the value of bilateral trade totalled US$110 billion last year, confirming China’s status as Indonesia’s largest trading partner. Imports from China amounted to five times the value of US exports to Indonesia. During the January–April period this year, Indonesia enjoyed a trade surplus of just over US$1 billion arising from the more than US$44 billion in trade.

China has also consolidated its position in the top three foreign investors in Indonesia (after Singapore and Hong Kong), contributing to a 39.7% year-on-year jump in foreign direct investment in Indonesia’s economy during the second quarter—the biggest rise in a decade. In the first six months of 2022, China accounted for US$1.7 billion of the total of US$15.65 billion in foreign direct investment into Indonesia.

Most of that investment flowed into key sectors in the Indonesian economy, including mining and the metals industry, transportation, telecommunications and utilities. China has been especially active in many of these, notably the expanding smelting industry, in which Chinese companies are becoming dominant actors.

A key deliverable (as foreshadowed by Indonesia’s all-powerful coordinating minister for maritime affairs and investment, Luhut Pandjaitan) is likely to be the renewal of a 2017 memorandum of understanding underpinning Indonesia’s participation in China’s Belt and Road Initiative, which is scheduled to end this month.

But not everything in the economic relationship is rosy. The troubled Jakarta–Bandung high-speed rail project is bound to be a key part of the conversation. A totem of Indonesia’s development cooperation with China (if not an officially acknowledged BRI project), it is being undertaken by a consortium of Indonesian state-owned enterprises and Chinese companies. Under the original arrangement, the China Development Bank was to finance 75% of the project.

But it has been bedevilled by construction problems that have resulted in lengthy delays and a multibillion-dollar cost blowout necessitating an unanticipated, controversial injection of government funding from a reluctant administration. This reportedly prompted Indonesia last year to press China to help defray the rising costs.

Indonesian authorities continue to insist that the project will be completed in time for a trial run to coincide with the November G20 meeting. That would serve the interests of both leaders, showcasing Indonesia’s development achievements and China’s claims as a beneficent and technologically impressive partner. But experience to date and the Indonesian consortium members’ financial problems offer ample grounds for doubt that the trial train will run on time. To help ensure it does, therefore, Widodo’s cap may again be in his hand as it reaches out to shake Xi’s.

Widodo will also doubtless be expecting Beijing’s unbridled support for Indonesia’s G20 presidency and its agenda of post-Covid-19 global economic recovery and resilience. A specific initiative for which Widodo may be seeking Xi’s formal backing is the establishment of a financial intermediary fund to aid in ‘health management under the management of the World Bank’, as Indonesia’s finance minister, Sri Mulyani Indrawati, has outlined. He’s likely to get it, as well as a ringing endorsement for his goal of keeping the G20 as focused on Indonesia’s economic cooperation agenda as the war in Ukraine and the reaction of G7 countries to it will allow.

It’s just as certain that Xi will want a few things in return. One may well be some kind of endorsement of China’s condemnation of AUKUS, specifically in terms of Australia’s planned acquisition of nuclear-powered submarines. Jakarta’s concerns about this issue haven’t been so forcefully expressed as Beijing’s strident remarks, and Widodo is likely to be careful not to align Indonesia too overtly with whatever actions China might be planning to take against Australia in the context of the Nuclear Non-Proliferation Treaty, including at next month’s 10th NPT Review Conference. But Beijing would know that Jakarta’s scepticism towards the submarine program almost certainly persists regardless of the Albanese government’s efforts to reassure its Indonesian counterpart and will likely be aiming to stoke it.

From an Australian perspective, then, the visit underscores the importance of Canberra’s cooperation with its AUKUS partners and the International Atomic Energy Agency towards an answer to the NPT questions posed by AUKUS that will prove acceptable to Indonesia and other sceptics in the region. Hopefully, as he departs from Beijing, Widodo might also reflect on the fact that the same person urging him to condemn Australia’s ambitions for nuclear-propelled—not nuclear-armed—boats is concurrently overseeing the growth of China’s nuclear arsenal contrary to its obligations under the NPT to disarm—an obligation that Indonesia has consistently demanded that nuclear-weapon states meet.

The Tokyo (27 July) and Seoul (28 July) legs of Widodo’s trip are set to be no less heavily centred on economic matters, and especially on spruiking for more foreign direct investment. Widodo is scheduled to hold meetings with business communities in both capitals as well as with his counterparts, Japanese Prime Minister Fumio Kishida and South Korean President Yoon Suk-yeol. Both countries sit among the top six investors in Indonesia, though it won’t have escaped Widodo’s attention that Japan, hitherto among the top two or three providers of foreign direct investment to Indonesia, has fallen to sixth spot in 2022, below the Netherlands and South Korea.

Defence cooperation, however, may well also be an item on the leaders’ meetings in both capitals. Seoul in particular will be interested in where Indonesia is heading on its defence procurement plans in light of the two countries’ cooperation on the KFX fighter program and Jakarta’s apparent deal to procure 42 Rafale fighters from France. It will be especially interested to glean whether Indonesia remains committed to the program and, post-Covid, is ready and able to meet its financial commitments under it.

Both Japan and Korea have also figured in Indonesia’s ambitions to enhance its naval and maritime domain awareness capabilities. Seoul has already provided three new submarines (one of which was assembled in Surabaya) and, earlier this year, the first of several second-hand corvettes that Jakarta hopes to secure.

Indonesia, however, has in the past given both nations reason to question its reliability as a defence partner. Widodo may well have his work cut out when it comes to shifting any such perception.