Indonesia is gradually coming out of a cumulative domestic crisis, consolidating its democratic foundations and continuing its upward economic trajectory in time of global crisis. The country registered 6 per cent annual GDP growth in 2008 and 5 per cent in 2009. While the country is regaining and exuding its confidence, the Asian continent has undergone fundamental transformation epitomised by the rise of new power centres in close geographical proximity – China, India, Indonesia and Japan, the emergence of Asia as an axis of global political and economic discourses, growing vulnerability of Asian continent as hotbed of big-power rivalry and growing vulnerability of marginalisation of small-power-led ASEAN-driven Multilateralism(ADM) by the big powers. In the new matrix of power relations that is beckoning Asia, China shares long-standing hostility with all other three powers, opening the prospect of an anti-China polarization in the continent, a scenario that might further push China towards aggression. While the new outlook necessitates redefining its strategic priorities, the changing dynamics of global politics expects greater contribution from the third largest democracy and the fourth most populous country in the world. Therefore, there are a few critical issues that have begun to have bearing on Indonesia’s foreign policy making processes, and therefore, entail comprehensive reassessment.

The most important issue facing Indonesia today is – in what ways can Indonesia develop a balanced response to two divergent trends towards growing economic dynamism and greater economic integration, and prevailing big-power rivalries in Asia? Indonesia has adopted a two-pronged approach to manage the divergent and destabilising trends – using the ASEAN-driven multilateral processes to facilitate comprehensive economic cooperation with important economies and regions and simultaneous bilateral engagement with big powers of Asia. As an ASEAN member, Indonesia shares FTA agreements with Australia, China, India, Japan, New Zealand, and South Korea. As a member of ASEAN+3 initiative that involves ten ASEAN countries along with China, Japan and South Korea, Indonesia is a part of collective efforts towards creating an East Asian Economic Community.

The most definitive step taken by Indonesia in this direction is augmenting a shift from Suharto’s ‘China-threat’ to an ‘engage China’ policy. The stimulus for change has come from two sources – domestic shift in its policy towards China after the departure of Suharto, and growing desire of developing greater economic linkages with the fastest growing and the second biggest economy of the world. The downfall of Suharto in May 1998, the architect of Indonesia’s China-threat theory, paved the way for Sino-Indonesian rapproachment during the last ten years. The Sino-Indonesian partnership is an Indonesian attempt to normalize and strengthen its relationship with a rising China. The two countries have already signed a strategic partnership, moderated their tone of hostilities and entered into a comprehensive FTA agreement. With the total trade value of US$ 31.5 billion by the end of 2008, Indonesia became the 4th largest trading partner of China within ASEAN. At the same time, China has also emerged as one of the largest investors during the last five years in the country.

Moreover, in order to attract foreign investment and forge greater economic linkages with the rising Asian economies, the country has projected itself as an important supply source of energy, a much-needed commodity to maintain momentum of growth and industrial development in the emerging economies of China and India. After having invested approximately US$ 2 billion as debt to the Bumi Resources in 2008, the largest Indonesian coal company, the China Investment Corporation (CIC) has agreed to invest up to US$ 25 billion in the Indonesian energy sector. China has already invested more than US$ 6 billion in the energy sector, prompting other Asian players, primarily Japan and India to further expand their energy cooperation with Indonesia. Japan remains the largest investor in the Indonesian energy sector. Of late, some of the public and private sector companies of India – National Thermal Power Corporation, Essar, Reliance, Tata Power, the Coal India Limited – are queuing in Indonesia to secure their coal supplies either unilaterally or through joint ventures, paving the way for mergers and acquisitions.

Besides developing relations with China and attracting the rising Asian economies, Indonesia has begun consolidating relations with other important global and Asian players, in an obviously display of what can be referred to as a ‘hedging’ strategy. The strategy is very much reflected in the primary objectives of India-Indonesia Strategic Partnership that stipulates no domination of any single power in Asia, a stable and peaceful strategic atmosphere and an integrated Asian economy benefitting both the small as well as large economies such as China and India. Besides consolidating its relations with the United States, the post-Suharto Indonesia has also engaged Russia, with which the country signed a defence deal of US$ 3 billion in 2007. Russia has expressed support for Indonesian entry into the BRIC (Brazil, Russia, India and China) grouping. 

An important component of Indonesia’s hedge China strategy is an effort towards developing ‘comprehensive partnership’ with the US, an idea proposed by its President, Susilo Bambang Yudhoyono, during his visit to the US in November 2008. As per the joint press release of June 2010, the partnership envisages cooperation in areas such as trade and investment, security and defence cooperation, energy security, food security, environment and health. The press release underscored, “the global significance of enhanced cooperation between the world’s second and third largest democracies, the tremendous possibilities for economic and development cooperation, and the importance of fostering exchanges and mutual understanding between two of the world’s most diverse nations.” Moreover, the Obama administration agreed in July 2010 of resuming defence and security ties with the Indonesian Special Forces that were suspended in 1998 after the reports of their involvement in the large-scale human rights violations in East Timor and other parts of Indonesia.

While Asia is witnessing the rise of new powers in close proximity, the ASEAN-institutions appear to be the lone rangers working towards maintaining power equilibrium since any instability and rivalry will cost them the maximum. The failure of the ADMs, whose conception and agenda lies in managing the big-power relations in East Asia, forecasts a volatile Asia where major powers are left to themselves to manage their affairs. Indonesia has, for long, emphasised on (a) centrality of ASEAN in the East Asian Community-building processes, (b) involvement of all major Asian players in the ADMs, and (c) effective ASEAN deliberation over key challenges facing the continent. Such an approach can be seen in the form of Indonesia supporting multi-polarisation of Asian balance of power and bringing important global players to the ASEAN table for cooperation. Indonesia had played a crucial role during the 1990s in bringing all the parties to the South China Sea border dispute to the ASEAN table for conflict resolution using ASEAN way. Indonesia supported strongly for the entry of India and Australia into the East Asia Summit that was floated in December 2005. 

Nevertheless, the changing strategic landscape of Asia and continued resistance within ASEAN has forced a section of Indonesian thinkers and policy makers to raise questions over the country’s continued advocacy of ASEAN-centrality. Indonesia as an important axis in the ASEAN-driven multilateralism, the most powerful ASEAN member, and an important Asian player faces the dilemma between (a) providing leadership to the ASEAN process and convincing the Asian biggies to work together on the ASEAN table, and (b) engaging Asian and global players independently as a regional power. 

Two questions are being raised. First, is ASEAN an appropriate platform for Indonesia’s strategic projections in Asia? Second, how does Indonesia as a democratic country respond to the challenges being posed by the non-democratic regimes and facilitate continued relevance of ASEAN? Indonesia today represents the most powerful member, the largest democracy and one of the fastest growing economies within ASEAN. Moreover, Indonesia also claims today to be the third largest democracy and the largest Muslim democracy in the world. The new democratic outlook puts the country in the middle of non-democratic countries of Southeast Asia, some of which are not only affecting the regional unity but also rendering ASEAN as a regional cooperative initiative ineffective. Myanmar serves the best example. In other words, Indonesia faces the two-fold challenge of steering the ASEAN cooperative processes as well as rationalise its strategic importance in the fast-changing politico-strategic landscape of Asia. 

The questioning over ASEAN-centrality has come from one of the most dominant think-tanks of Indonesia – Jakarta-based Centre for Strategic and International Studies. It is being argued that the current ASEAN framework is not strong enough to respond to the emerging geo-political complexities facing the continent, nor efficient enough to benefit from the growing Asian economies. As a result, regional powers like Indonesia are being left out of the whole Asian strategic churning within the process unless and until ASEAN reforms itself fundamentally. The formation of Bali Democracy Forum in 2008 and strong Australian support in the process is understood as an Indonesian effort to relinquish its long-standing ASEAN-centrality principle. The continued opposition to the ASEAN Charter, the problem of Myanmar and postponement of ASEAN meetings due to the domestic crisis in Thailand in 2008 and 2009 are examples of deeper malaise within ASEAN.

There is a growing realisation among the Indonesian policy makers that Indonesia as a confident, democratic and powerful Asian player needs to go beyond the existing wisdoms of foreign policy if it wishes to best capitalise on one of the momentous politico-strategic global shift taking place in its close geographical proximity. The long-standing bebas dan aktif (open and active) foreign policy of Indonesia is undergoing a comprehensive churning, achieving, in the process, its intended character and directions after a long time.