Indonesia-China ties: will president-elect Prabowo confront Beijing or maintain Widodo’s economic deals?

Nur Rachmat Yuliantoro, head of the international relations department at Gadjah Mada University in Yogyakarta, said Prabowo may use Indonesia’s non-aligned position to benefit from both of the superpowers’ competing interests in the country.

“He sees China as a major actor that can be a sufficient counterweight to the power of another major actor, the United States,” Nur said. “Indonesia is likely to continue to take a position in the middle while trying to maximise the benefits of available security guarantees.”

01:48

US President Biden talks potential minerals partnership with Indonesian counterpart Widodo

US President Biden talks potential minerals partnership with Indonesian counterpart Widodo

Money matters

Indonesia has the world’s largest nickel reserves, and in 2020, banned the export of nickel ore as part of a strategy to establish a competitive electric vehicle and battery supply chain. China has been a keen investor, pumping US$3.6 billion into Indonesia’s nickel sector in the first half of 2022 alone.

Chinese investment has also been pivotal under Indonesia’s infrastructure push led by Widodo, notably in projects such as Southeast Asia’s first high-speed rail launched by Jakarta in October.

Several analysts said Prabowo was unlikely to do anything to upend the economic cooperation that Widodo established with China over the years, particularly through Beijing’s Belt and Road Initiative. China is Indonesia’s largest trade and investment partner.

Nur predicted that Prabowo would continue Widodo’s policies and maintain close ties with Beijing, “especially in the context of investment and infrastructure development”.

He argued that the relationship Indonesia had built up with China during Widodo’s time in office was “too valuable to be drastically altered” and that doing so would “only bring losses to Indonesia”.

During a visit to Jakarta last September, Chinese Premier Li Qiang pledged US$21.7 billion in new Chinese investment for Indonesia, adding to the previous commitment of US$44.89 billion when Widodo met Chinese President Xi Jinping last July.

“My best guess is that in the short term, things remain pretty stable because there’s not much incentive for change and Jokowi remains popular,” Pepinsky said, referring to Widodo’s popular nickname.

“And so for Prabowo, in terms of policy, just pressing forward like this is going to be fine.”

Outgoing Indonesia President Joko Widodo has fuelled much of the country’s rapid infrastructure development over the last decade with Chinese investment. Photo: TNS/File

But Pepinsky also said the former general was not likely to get any cosier with China in the hopes of increased infrastructure funding, due to concerns about debt.

“I think he’s aware of the fate of countries like Sri Lanka and Kenya that have found themselves dependent on Chinese investments, and China does not renegotiate those debts.”

During a presidential debate last month, Prabowo said Indonesia was currently in a good position in terms of servicing its foreign debts at a rate that would prevent other countries from subverting its sovereignty.

“It turns out that currently our foreign debt, as a ratio to GDP, is one of the lowest in the world, at around 40 per cent,” he said. “With prudent and good management, and the right economic strategy, especially through downstreaming, we can now strengthen our bargaining position.

“I’m not too worried about other countries wanting to intervene with us. We are highly respected, we never default [on our debt]. We must have a strong defence force so that we cannot be intervened.”

09:10

Between two superpowers: Indonesia’s position in the US-China rivalry

Between two superpowers: Indonesia’s position in the US-China rivalry

Indonesia’s foreign debt in the third quarter of 2023 was recorded at US$393.7 billion, or 28.9 per cent of its GDP, according to data from the central bank.

But Chinese investments in certain areas of Indonesia have also become heavily scrutinised over issues including the large number of Chinese workers involved in these projects, environmental impacts, and worker safety issues, as in the case of Chinese-operated nickel smelters, which have seen numerous accidents and deaths in recent years.

Ahmad Rizky Umar, a lecturer at the School of Political Science and International Studies at Australia’s University of Queensland, said that such scrutiny had led Prabowo’s economic team “to look for other sources of investment” to diversify the country’s portfolio. However, he noted that as long as Chinese investment remained strong, it would likely be sustained.

Sea of contention

One issue Prabowo will certainly face is the South China Sea, which Beijing claims almost entirely as its own. However, in his role as defence minister, Prabowo has expressed a preference for using diplomacy to deal with the territorial disputes between China and Asean members in the resource-rich waters.
In a statement following a 2021 Asean-China defence ministers’ meeting, Prabowo said dialogue and consultations based on mutual trust could resolve all issues in the disputed waterway, and that he supported continued negotiations on a South China Sea code of conduct that would delineate territorial claims and rights between all parties.

“If the South China Sea is well-managed, it will strengthen an equal, mutually beneficial partnership, which is badly needed to create global peace and stability,” he said in the statement.

However, when the topic of the South China Sea was raised during a presidential debate in January, Prabowo emphasised that Indonesia needed to reinforce its maritime defence capabilities so it could defend itself in the North Natuna Sea.

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Segments of China’s unilaterally claimed nine-dash line overlap with Indonesia’s exclusive economic zone near the Natuna Islands, and China has claimed fishing rights within the waters, leading to several confrontations in the past. Prabowo’s talk of increased maritime defences suggests that he might be more strident about enforcing Indonesia’s sovereignty in that part of the ocean.

“I don’t see Prabowo provoking a fight, but it’ll be interesting to see what happens if there’s another incident [in the Natunas], which is almost bound to happen,” said Cornell’s Pepinsky.

Prabowo’s campaign manifesto also describes the South China Sea as a strategic challenge for Jakarta, and that future conflict between the US and China over the disputed waterway should be anticipated to minimise potential threats to Indonesia.

He’s going to be eager to be seen as the type of person who can sit down with Xi Jinping or any other Chinese head of state

Tom Pepinsky, political analyst

That minimisation may come in the form of further diplomacy. Pepinsky suggested that if China continued to pose strategic challenges to Indonesia’s Southeast Asian neighbours in the South China Sea, Prabowo might attempt to play a more “conciliatory” role.

“He’s going to be eager to be seen as the type of person who can sit down with Xi Jinping or any other Chinese head of state,” he said.

On foreign policy in general, the University of Queensland’s Umar said Prabowo would want to take on a more proactive international role than his predecessor.

For example, at a security dialogue in Singapore in June, Prabowo went off script when he put forward a peace proposal for the war in Ukraine without consulting Widodo. Ukraine described Prabowo’s proposal, which included a referendum on disputed territories, as “a Russian plan”.

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Umar also argued that Prabowo would like “strengthen relations with the US at the defence level, especially in the context of the South China Sea”. Like many Indonesian generals, Prabowo gained extensive experience in the West as part of his military training. He received part of his education in the US’ Fort Bragg, now called Fort Liberty, as well as in Germany, illustrating Indonesia’s decades-long ties with the US when it comes to defence, something that would not be replicated by China soon.

“Prabowo will maintain the balance [in the US-China rising rivalry] by building stronger relations with the US in the defence sector, especially in the context of the modernisation of Indonesia’s defence equipment,” Umar said.

Indeed, something the former general has often talked about, both as a politician and as defence minister, is the importance of strengthening Indonesia’s military might, to turn it into a powerful country that is capable of defending its own interests. It remains to be seen if the interests he prioritises during his time in office align with or conflict with those of China.

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