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Donald Trump

Indonesia can be a force for regional stability as the US and China duel on the world economic stage

Syahrial Mukhtar says as Beijing and Trump’s America prepare for confrontation over the economic and strategic future of the world, it will fall to Indonesia to perform a balancing act in Southeast Asia

PUBLISHED : Wednesday, 01 February, 2017, 4:31pm
UPDATED : Friday, 07 July, 2017, 12:07am

Something amazing is occurring, but so unsettling are the times that few realise the gravity of the change.

Under its radical new leader, the United States is turning inwards. President Donald Trump used his inaugural address on January 20 to underline a key theme of his campaign: he would restore America to greatness by bringing back American jobs, borders, wealth and dreams.

Under its radical new leader, the US is turning inwards

China, however, is saying the opposite. President Xi Jinping (習近平), speaking at the World Economic Forum in Davos just a few days earlier, mounted a spirited defence of the open economic borders created and sustained by globalisation. Warning against throwing out the economic baby along with the bathwater of problems, he called on countries to adapt to and guide globalisation, cushion its problematic consequences, and deliver its benefits to all countries.

Watch: Xi Jinping says globalisation is the way forward

Here was the pragmatic leader of a communist nation challenging the protectionist ideology of the leader of a capitalist democracy.

Herein lies the gravity of the situation. The US, whose rise to global power since the end of the second world war has rested on the export of a free-trade economic regime, is retreating from the vanguard of globalisation. And China is seeking to inherit the mantle of economic leadership, regional if not yet global.

The irony could not be greater. Yet, so convulsive are the times – marked by another giant rejection of the status quo in the form of Brexit – that few are willing to say what they see: that history is turning a corner.

For Indonesia, the message is clear. Since history is turning that corner, and possibly making a U-turn, Indonesia has to choose between a possibly receding world order based on America’s economic activism, and an approaching Asia-centric order premised on China’s ascendancy.

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Significantly, Indonesia’s choice will have a lasting impact on the economic courses charted by the countries of the Association of Southeast Asian Nations.

Indonesia has to choose between a possibly receding world order based on America’s economic activism, and an approaching Asia-centric order premised on China’s ascendancy

Indonesia is Asean’s largest country by geography, population and economy. If Asean’s centrality is crucial to the way in which the great powers – China, the United States, Japan, Russia and India – interact in Southeast Asia, then there is no Asean centrality without Indonesia’s centrality in Asean.

As the US and China prepare for confrontation over the economic fate, and ultimately perhaps the strategic destination, of the world, Indonesia will play a stabilising role in Southeast Asia.

One of Trump’s first executive acts in office was to withdraw his country from the Trans-Pacific Partnership (TPP), touted as the economic component of his predecessor Barack Obama’s “pivot to Asia” that had a military aspect as well.

The TPP’s original 12 members – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam – represented a colossal gathering of economies that together account for 40 per cent of global GDP and 20 per cent of global trade.

The free-trade deal was seen as the Pacific answer to the continental economic aspirations of the European Union.

Watch: Donald Trump orders US withdrawal from the TPP

Trump has removed the TPP from the theatre of global economics. The partnership is now a lame duck in a much smaller pond than the Pacific.

Since Indonesia was not a member of the partnership, the American move means little to it. (However, there are calls for Indonesia and China to join it, now the US is out.)

The US withdrawal has highlighted the countervailing agency of the China-sponsored Regional Comprehensive Economic Partnership (RCEP). Its 16 members are Australia, China, India, Japan, all 10 Asean members, New Zealand and South Korea.

Indonesia, Japan to deepen defence ties amid China challenge

These countries make up 46 per cent of the global population and are worth 24 per cent of the global GDP. That is less than the TPP’s reach, but RCEP excludes the US – and Trump.

His insurgent streak is unlikely to arrive in China and deflect RCEP from building a formidable Australasian economic entity, united within and open without.

As Trump kills the TPP, can China-backed RCEP fill the gap?

There is another subversive aspect of the American presidency. Within the global economic order that he is trying to trump, the American leader has already made his mark in a key area: energy. The White House has announced that the Trump administration will embrace the shale oil and gas “revolution”, and achieve energy independence from Opec.

Trump signs orders reviving Keystone and Dakota oil pipelines

Indonesia is not a member of Opec and so is not overly concerned with relations between the oil-producers’ cartel and America. However, Trump’s quest for energy independence underlines his desire to increase America’s economic autonomy in global affairs. That autonomy would reduce its stake in the equilibrium of the international oil market on which depend the economic prospects of Asian powerhouses such as China and India.

Here, again, is a demonstration of the dissociation between global forces and American exceptionalism that Trump seeks to achieve. It is his prerogative, but other countries will seek to fill the vacuum that American retrenchment may create in Asia.

Indonesia’s free and independent foreign policy has precluded belonging to the American camp [and] will prevent gravitation to the Chinese camp

It falls on Indonesia to ensure that it is not sucked into a vacuum of others’ making. Of course, this does not mean that Southeast Asia’s lynchpin country will switch from the American camp to the Chinese camp. To start with, Indonesia’s free and independent foreign policy has precluded belonging to the American camp: the same imperative will prevent gravitation to the Chinese camp. However, Jakarta would hope that it does not have to choose between the democratic trajectory that has brought it so close to America, and the economic logic that is making China the default choice of many Southeast Asian nations.

Indonesia’s measured and balanced response will depend on the American project as Trump redefines it – and the Chinese project that is shaping up in response.

Syahrial Mukhtar is vice-president of Indonesia’s state-owned oil and gas company PT Pertamina (Persero). He has a PhD in strategic management