China's Soft Power v America's Smart Power'

Author: Carlyle A. Thayer, UNSW@ADFA

If China has made the running in Southeast Asia on the basis of soft power over the last decade, the tide now seems to be turning and the United States is re-engaging with smart power. The United States has signed the ASEAN Treaty of Amity and Cooperation; President Obama has attended the first ASEAN-United States leadership summit (and will host the second meeting in the US this year); Secretary Clinton has not only attended two ASEAN Regional Forum meetings in a row, but offered US good offices to help settle diplomatically one of the pressing security issues in Southeast Asia, the South China Sea dispute. In sum, Secretary Clinton has turned the multilateral table on China. The United States is back and engaged in Southeast Asia working with the support of regional states.

Continued Chinese bellicosity and diplomatic pique runs the risk of isolating China diplomatically and eroding the soft power gains of recent years. The timing is bad for China as the regional security architecture looks set to gain a new lease on life and expand into new areas of cooperation. The first ever meeting of the ASEAN defence ministers and their eight dialogue counterparts is set to take place in Hanoi on October 12. Later that month, the East Asia Summit (EAS) will convene with Secretary Clinton attending ‘in an appropriate capacity.’ This will set the stage for the United States to join this 16-member grouping, and for President Obama to attend the 2011 EAS meeting in Jakarta.
The emergence of the EAS will scuttle China’s preference for the exclusivist ASEAN+3 process (China, Japan and South Korea) that omits the United States.

For at least the past three years China has been increasingly assertive in advancing its sovereignty claims in the South China Sea. It succeeded in dividing ASEAN and isolating Vietnam. China has even threatened major American companies, such as ExxonMobile, that if they continue to work with Vietnam to develop its marine resources in the South China Sea their commercial interests in China would be threatened.

The Obama administration has directly confronted China and its bullying. China’s claim that the US orchestrated regional states to attack China verbally is disingenuous. It has been China in the conductor’s seat orchestrating the application of muscular diplomacy to divide ASEAN and undermine the network of US alliances and security ties.

US diplomatic initiatives must be placed in the larger context of US-South Korean naval exercises, the prominent surfacing of three Ohio-class submarines armed with conventional Tomahawk long-range cruise missiles in Subic Bay, Busan and Diego Garcia, and the visit of the nuclear carrier George Washington to waters off central Vietnam to mark the 15th anniversary of diplomatic relations. The view that US primacy is in decline seems premature indeed.

Secretary Clinton’s declaration that the South China Sea is a national interest counters China’s recent assertion that the South China Sea is a core interest.

The South China Sea is a vital artery for global maritime trade including the shipping of oil and LNG. For this reason it is unlikely that China will attempt any action that can be viewed as threatening the safety of navigation and transit through the South China Sea.

Since the Taiwan Straits crisis of 1995-96, China has sought to exert naval power in the first island chain in the western Pacific to keep the US Navy at bay. Thanks to North Korean belligerency, the US Navy has returned to exercise in waters adjacent to China, the fraying US-South Korea alliance has been repaired and the drift between Tokyo and Washington halted.

When developments in Northeast Asia and combined with Southeast Asia China’s bellicosity and diplomatic outrage appear to be a sign of weakness rather than strength.

Carlyle A. Thayer is a professor of politics at the University of New South Wales at the Australian Defence Force Academy in Canberra.

This article is an extract from an analysis provided to a leading defence journal.

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The US, ASEAN and China: Emergence of new alignment

August 28th, 2010
Author: Joel Rathus, Adelaide University and Meiji University

In November of last year, President Barack Obama pledged that he would be a ‘Pacific president.’ While the audience in Suntory Hall may have wondered about what exactly that statement meant, few in attendance doubted the sincerity or conviction of the president. As relationships between the US, ASEAN and China have been re-drawn, especially since the latest series of ASEAN-hosted diplomatic meetings in Hanoi, the meaning of a Pacific president is starting to become clearer. Three sites of change in particular warrant special mention; the East Asia Summit, the South China Sea and the Korean Peninsula. In all three cases, the United States and ASEAN states are becoming closer, while China is finding itself distanced from the decision-making process.

The early 21st century phenomena of China-ASEAN relations being closer than the US-ASEAN partnership appears to be reversing itself.
This realignment was first seen in the United States’ advancing its claim for a seat at the East Asian Summit.
On July 21, the US received an expression of general support from the foreign ministers after the Informal Consultation Meeting and Singapore’s Foreign Minister George Yeo later indicated that ASEAN had already decided to include the US in the EAS. That US Secretary of State Hilary Clinton is determined to return to Vietnam in October for the EAS and Obama’s intention is to attend next year’s EAS in Indonesia, This suggests that the US is confident that its accession is assured over the medium term. As a part of this process, ASEAN ministers also welcomed the decision to include the US in the first ASEAN Defence Minister’s Plus Eight Dialogue Partners scheduled for October.

Unsurprisingly, perhaps, the only player which failed to greet increased US involvement in the region warmly was China. China’s Foreign Minister Yang Jiechi was quoted as saying that China ‘took note with an open attitude’ of the ASEAN proposal for an expanded EAS and ‘look[ed] forward to consultations’ with ASEAN on the subject. But while China is dissatisfied with the direction the EAS is taking, this is a battle it already knows it has lost. As Wu Jianmin (a member of the Foreign Policy Advisory Group) observed last year, ‘We know that China could not stop the US if it really wants to join the EAS.’ Indeed, according to the declaration establishing the EAS, membership is determined by ASEAN alone – and while China is influential it simply cannot veto a proposal.

China has seen the US and ASEAN draw closer on issues of major interest, such as the territorial disputes in the South China Sea. Clinton’s identification of this issue as a ‘pivot’ of regional security brings the United States back as a player after more than a decade of diplomatic passivity (to China’s notable discomfort).

The emerging US-ASEAN-China realignment can also be seen in Clinton’s proposal on July 23 (together with 12 other Asian nations, including host Vietnam) for a dispute resolution mechanism over territorial issues to be established. Such a mechanism would build on (or over) the 2002 Declaration on the Conduct of Parties in the South China Sea signed by ASEAN and China. This Declaration can essentially be interpreted as a response to the 1992 Law on the Territorial Waters and Continuous Area and reflects an agreement to shelve the issue rather than resolve it – hence the lack of a dispute resolution mechanism. ASEAN efforts to move from ‘shelving’ to ‘resolving’ this issue have been systematically thwarted by China, and so it is unsurprising that China would again register dissatisfaction. China’s Foreign Minister Yang Jiechi noted, ‘turning the bilateral issue into an international or multilateral one would only worsen the situation and add difficulties to resolving the issue.’ Perhaps Yang meant to add ‘for China’?

Lastly, this realignment can be seen in US-South Korea relations and posturing in the ASEAN Regional Forum over the sinking of the South Korean corvette, the Cheonan. Again, China and the US found themselves in opposite corners on this issue, China reportedly working to remove references to the sinking as a North Korean attack. This disagreement over wording caused the adoption of the Chairman’s statement to be delayed a day. Korea’s growing frustration with China’s role in diplomatically supporting the North has, as in the case of ASEAN, caused South Korea to look to its traditional security provider, the US. The recent war games off the Korean peninsula, while clearly focused on the North, have caused concerns in Beijing. Notwithstanding the repositioning of the nuclear powered aircraft carrier the George Washington on the East side of the peninsula, the US and Korea are willing to disregard China’s warnings. Intriguingly, Japanese officers are keenly observing the joint US-Korean exercises.

A realignment is steadily underway in East Asia. Increasingly, ASEAN (and Korea) are moving closer to the geographically distant US, while China is becoming more distant from its neighbours.

Joel Rathus is a recent PhD graduate (Adelaide) and a former Monbusho Scholar (Meiji). He blogs at Eris in Asia.

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After Years of Inefficiency, Indonesia Emerges as an Economic Model

By AUBREY BELFORD, NY TIMES 05 AUGUST 2010

JAKARTA — After years of being known for inefficiency, corruption and instability, Indonesia is emerging from the global financial crisis with a surprising new reputation — economic golden child.

The country’s economy, the largest in Southeast Asia, grew at an annual rate of 6.2 percent in the second quarter of this year, data released Thursday showed. That is an acceleration from 2009, when gross domestic product expanded 4.5 percent.

The stock market hit a record high last week and has been among the best-performing equities markets in Asia this year, rising more than 20 percent since Jan. 1. The country’s currency, the rupiah, has appreciated nearly 5 percent this year against the dollar, among the strongest showings in Asia besides that of the yen.

Foreign direct investment, which was held in check for years after the 1997 economic crisis in Asia, is also returning. The country had 33.3 trillion rupiah, or $3.7 billion, in foreign direct investment in the second quarter of this year, a 51 percent rise from a year earlier, the Investment Coordinating Board in Indonesia said last week. The country is on track to attract more foreign investment this year than it did in 2008, when it lured in $14.87 billion.


Such statistics have some here cautiously saying that the country, a Muslim-majority democracy and one of the world’s most populous countries, could soon merit the kind of attention that investors now lavish on China and India.

“Indonesia is one of the most interesting, most attractive destinations in the world,” said Lanang Trihardian, an analyst at Syailendra Capital, a fund management firm based in Jakarta. “Foreign investors have been flowing to Indonesia from maybe around mid-2009. We are seeing a lot of liquidity coming into Indonesia, and it is mostly going to capital markets, to bonds, to stocks.”

Undoubtedly, significant obstacles to sustained growth remain. Despite progress on corruption, investors complain of confusing regulations and labor laws that make it difficult to dismiss employees. Little infrastructure has been built since the Asian economic crisis in 1997, and rolling blackouts have plagued the country for years.
While the education system has been successful in fulfilling basic requirements like literacy, the universities and colleges in the country are widely considered archaic.
But more than a decade after the chaotic overthrow of the Suharto dictatorship in 1998 — and subsequent fears of disintegration at the hands of separatist groups, as well as the threat of Islamic militancy — the country seems to have stabilized. It is rich in natural resources like palm oil, copper and timber, commodities that are in great demand in China.

The administration of President Susilo Bambang Yudhoyono has won plaudits for reducing debt and has achieved some success fighting graft. Mr. Yudhoyono was resoundingly re-elected to a second five-year term in 2009, and changes aimed at introducing more democracy have seen power devolved to local governments, where elections have been largely peaceful, orderly affairs.

In one sense, Indonesia appears more attractive these days because much of the rest of the global marketplace looks so gloomy. Its low debt, high growth and a sense of optimism compare favorably with a mood of despondency in developed markets like the United States, Japan and Europe.

The huge consumer market in the country, accounting for more than two-thirds of G.D.P., has largely been credited for maintaining growth. Although the global economic crisis crimped confidence, Indonesia’s relatively young population of 240 million and government stimulus policies, as well as a popular program of direct cash transfers to the poor, have kept consumption humming.

In Jakarta, worsening traffic and a proliferation of megamalls are seen as signs of the growing strength of the middle class. At the center of the capital, the huge Grand Indonesia mall opened in 2007 and expanded during the global downturn, adding theme areas with mockups of New York, Japan, the Arabian Peninsula and Paris, complete with a miniature, spinning Moulin Rouge windmill.

“We’re selling international brands here so Indonesians don’t have to shop abroad for them,” said Teges Prita Soraya, a spokeswoman for the mall, adding that trade, largely in imported luxury brands, had surged ahead despite the global crisis.

The mall is home to the country’s first branch of Harvey Nichols, the upscale British department store, and has boutiques for luxury brands like Chanel, Armani and Dolce & Gabbana — which already have branches in other malls across the city.

Yet there is criticism that economic growth has had less effect than it should have for the majority. About 15 percent of the population lives below the country’s official poverty line of around $1 a day, but advocates for the poor say the percentage would be larger if Indonesia set the bar a little higher, say, at $1.25. Relatively sluggish growth in labor-intensive industries has meant slow progress in curbing unemployment, which is over 7 percent.

The government believes that one solution to moving to a higher level of sustained growth is foreign investment, particularly in industries like manufacturing. The government’s investment coordinating board, known as BKPM, is hoping to attract $30 billion to $40 billion in annual foreign investment by 2015 — three to four times as much as it achieved last year, said Gita Wirjawan, head of the agency.

In an economy currently worth $650 billion a year and expected to grow to $1 trillion in five years, that is not terribly much. But it is “optically” very important for establishing Indonesia as a serious investment destination, he said.
“It’s not a slam-dunk, but it’s achievable,” he said.

Indonesia gets the largest share of its foreign investment from within the Association of Southeast Asian Nations, with non-Asean states like Japan and South Korea, as well as European countries, making up much of the rest.

Indonesia is working to change rules to make it easier to acquire land for infrastructure and is seeing interest in infrastructure investment, Mr. Wirjawan said.
The government recently eased investment rules in areas including health care, construction and electricity generation. At the same time, it is working to put the flow of “hot,” or speculative, money to better use, passing rules on government bonds requiring foreign investors to keep their money in the country for longer.

Such efforts seem to be paying off. The government announced this week that China’s sovereign fund, China Investment Corp., was hoping to invest $25 billion in infrastructure projects in Indonesia. Posco, the South Korean steel giant, signed a $6 billion deal on Wednesday to build a plant in Indonesia with the local producer Krakatau Steel.

While investment in manufacturing still lags behind other sectors, Mr. Wirjawan said that Indonesia, with its relatively low labor costs, was reaping the benefits of rising costs in regional competitors.

“We’re seeing an increasing relocation of factories by the Taiwanese, the Koreans and Japanese from Vietnam and China, given their rising labor costs and given the increased stability that people are seeing in Indonesia from an economic and political standpoint,” he said.

The Indonesian Footwear Association has said that major brands including Asics, Mizuno and New Balance have shifted part of their production to Indonesia this year because of rising costs elsewhere. Indonesia’s footwear industry employs 640,000 people and exported $1.8 billion worth of goods in 2009, said the association’s chairman, Eddy Widjanarko. Producers are hoping to increase that figure to $2 billion this year.

Katja Schreiber, a spokeswoman for Adidas — which has also been aggressively expanding production in Indonesia — said the country, its third-biggest supplier, offered “abundant labor availability, good quality, competitive prices and political stability.” Although production here is growing rapidly, she said, it is not happening at the expense of its top suppliers, China and Vietnam.

The local stock market has reflected the perceived strengths of the economy. Shares related to commodities, Indonesia’s main export sector, have been strong earners. Banking stocks have risen along with the generally upbeat mood on consumption and the relatively good health of the sector, which, for the most part, weathered the credit crisis reasonably well. Major consumer shares like Unilever Indonesia and the car distributor Astra International have been consistent leaders on the local index.

All this exuberance has raised some fears that inflation could become a big problem. The country’s central bank, Bank Indonesia, decided to hold its benchmark interest rate at 6.5 percent this week, despite a jump in annual inflation to 6.22 percent in July.
Regardless, many feel that Indonesia’s time has come again.

“In Asia there is a feeling that after you invest in China and after you invest in India, where are you going to invest? said Fauzi Ichsan, senior economist for Standard Chartered in Indonesia. “It’ll have to be Indonesia. It’s a natural destination.”

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Indonesia to keep shining

By Robert M Cutler/Asia Times /August 27,2010.
MONTREAL - Jakarta's principal stock market index has more than doubled since President Susilo Bambang Yudhoyono won the July 2009 presidential elections with a margin that made a run-off unnecessary.

Yudhoyono's comfortable victory came three months after his Democratic Party coalition won 314 of the 560 seats up for election to the People's Representative Council, the country's legislature. The stage was set for a period of political stability that has encouraged investment by local and overseas companies, including South Korean steel giant POSCO, and consumer spending.

The economy in the second quarter grew 6.2% compared with a year earlier and expanded at a rate 2.8% faster than in the previous three months, according to the country's Central Bureau of Statistics. Yudhoyono has set a 6.6% goal for annual economic growth, and the consensus is that this will probably reach at least 6.0%.

Exports, capital investment, and the consumer sector all contributed to the advance. Domestic consumption, though, was the main driver, accounting for over two-thirds of the country's growth, an atypically high figure for the region. Domestic automobile and motorcycle sales are a backbone of the consumer spending statistic, and gains there translate into Stock market strength - local automaker Astra International accounts for no less than 8% of the capitalization-weighted Jakarta Stock Exchange Composite Index (JCI).

The Indonesian stock market has been one of Asia's stand-outs, with the JCI powering up from 1,111 last October to 3,141 as of Wednesday's close. This growth is equivalent to a compounded rise of almost 4.84% per month consistently for nearly two years. The performance includes a recovery from 2,614 near the end of May to the present level, itself equivalent to a 1.42% compounded weekly increase over the last three months.
The JCI surpassed its previous (mid-January 2008) all-time high of 2,810 in early April this year, then fell back, passed it again in early June and has not looked back since. It has been showing short-term strength for the last two-and-a-half weeks, and this is continuing. That previous all-time high came from the basis of a level at 361 in mid-October 2002, itself a record of over five years of consistent growth of 3.37% compounded monthly.

The JCI has significantly outperformed the country’s other major market index, the LQ45, which is (as Bloomberg News explains) "a capitalization-weighted index of the 45 most heavily traded stocks on the Jakarta Stock Exchange", whereas the JCI is "a modified capitalization-weighted index of all stocks listed on the regular board of the Indonesia Stock Exchange". For example, over the past five years, the JCI has vaulted 216%, but the LQ45 is up "only" 174% during the same period.

Jakarta's stock market capitalization remains relatively small, given the size of the country. The market cap is only one-third of Taiwan's even though Indonesia's population is 10 times as large. At the same time, the country has well-established regional and global political links through membership of organizations such as the Association of Southeast Asian Nations and the Group of 20.

Like many Asian economies, Indonesia's is less financially intermediated by the international banking institutions that find themselves under continuing, if no longer immediate, threat. Its investment regulations are still seen as unfriendly in comparison with many Asian peers, and administrative steps have been under way for some time to improve the climate for foreign capital. Endemic red tape, corruption, and poor infrastructure complicate attempts to realize the potential of the country’s natural resource base.

HSBC economist Wellian Wiranto nevertheless remarked this month that "[F]oreign direct investment may be contributing more and more to growth, judging from the gathering interest among international companies seeing Indonesia as a big market with a large pool of labor force, right where the raw materials are", as quoted by India's Economic Times. POSCO, South Korea’s largest steelmaker, is only one of the latest to sign an agreement with an Indonesian firm for a new industrial plant (a steel mill in West Java with Krakatau Steel).

Relatively low interest rates are spurring consumption, although with annual inflation reaching a 15-month high of 6.22% in July, up from 5.05% a month earlier, those rates may be increased. Still, companies are plowing profits back into investment.

The only cause for worry would be the increasing unemployment rate, although even this has not worsened as much as feared. About half of the country's total employment remains in the agricultural sector, although it is not clear what proportion of those formally counted in agriculture may migrate seasonally to the cities. The high degree of informal-sector employment is a worry to economists and reformers, but it does provide a cushion of sorts.

At the same time, the country's export structure has the advantage of being more oriented toward Asian economies and therefore less dependent upon the vagaries of the Western consumer resilience. That does not make it immune from following global markets in the wake of periodic financial-crisis downturns, but these tend to be transitory waves of market emotion and not based on fundamental economic realities.

For these and other reasons, it is foreseeable that the Jakarta stock market will continue its stellar performance, other things being equal, even if it suffers the occasional inevitable hiccup. In the short term, for example, it is looking a bit overbought, even if volume has lately been impressive and a number of short-term technical indicators remain favorable. It is attempting to confirm its surmounting of a long-term ascending-tops trend line while it is at the same time at the top of a medium-term ascending-tops trend line.

Dr Robert M Cutler (http://www.robertcutler.org), educated at the Massachusetts Institute of Technology and The University of Michigan, has researched and taught at universities in the United States, Canada, France, Switzerland, and Russia. Now senior research fellow in the Institute of European, Russian and Eurasian Studies, Carleton University, Canada, he also consults privately in a variety of fields.

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Time for China to spend more

by Makmur Keliat, Jakarta | Sun, 08/22/2010 12:29 PM | Opinion The Jakarta Post

In some way, diplomacy could be analogous to someone who wants to travel from one place to another. In order to reach their destination at the right time and to make the journey comfortable, it is necessary to have a road map. This metaphor may be useful to get a broader picture of the diplomatic road that has been built by China in its relationship with Indonesia and ASEAN.

The first attempt to build a road from Beijing to Jakarta was made on April 13, 1950. But it was closed on Oct. 30, 1967 when the New Order regime decided not to continue its diplomatic relations with Beijing. That decision resulted in substantial change in the Sino-Indonesian relationship.

The two countries did not have official diplomatic relations for almost 23 years. The diplomatic road between Beijing and Jakarta was only rebuilt on Aug. 8, 1990. The Indonesian business community at that time had made strong efforts to encourage the Indonesian government to be closer to China. The interruption has shown us that the diplomatic road built by Beijing to reach Jakarta was not made overnight.
Three interesting developments can be identified now the diplomatic road between Beijing and Jakarta has entered the second phase, more than two decades on.
First, China has effectively utilized the road between Beijing and Jakarta to establish a number of intersections through which the country has become well connected and has wider access to other countries and diplomatic forums in Southeast Asia. China has been engaged in the ASEAN+1 and ASEAN+3 mechanisms and is also a member of the East Asia Summit.
It seems the diplomatic road to Jakarta has become an entry point for China to proliferate its diplomatic network and channels to the Southeast Asian region.
Second, China has succeeded in utilizing the Beijing to Jakarta diplomatic road to change attitudes with regard to the communist ideological threat of the 1960s era. Most people in Indonesia no longer see China as a poor country and the bastion of the communist ideological camp, despite the fact that China politically is still ruled by a communist regime. Thanks to media reports, China currently is seen more as a country with the largest reserve of foreign exchange in the world.
Third, China has primarily utilized the entire diplomatic intersection to cope with its large need for energy and natural resources and to speed up regional measures for trade and investment liberalization with ASEAN.
Let us take an example from the case of the ASEAN+1 mechanism. Under the umbrella of the ASEAN+1 mechanism, China in the year 1992 succeeded in persuading ASEAN to agree with the Framework Agreement on Comprehensive Economic Cooperation between ASEAN and the People’s Republic of China.

In fact, the idea of a ASEAN-China Free Trade Area (ACFTA) cannot be separated from, and is an integral part of, policy packages of the Framework Agreement. It is worth mentioning that the first stage of the ACFTA has been introduced without getting widespread public notice in Indonesia.
This can also be considered a diplomatic achievement of China. Formulated as an early harvest program, the target of the first stage has been the reduction of tariff rates for agricultural products to zero percent by the year 2006. That is why, since 2004, Indonesia has received a flood of various agricultural products from China.
In this regard, it would be too much to expect that Indonesia would be able to renegotiate the implementation the ACFTA. China is fully aware that Indonesia is in great need of funding resources from outside for the development of infrastructure.
By utilizing numerous diplomatic intersections it has built with the region, it is more likely that China will do its best to convince Jakarta that the more open the diplomatic road between Jakarta and Beijing, the larger the opportunity for Indonesia to get funding resources from China for building power plants, bridges and roads.
A more realistic option for Indonesia would be to persuade China to accelerate noneconomic cooperation, with the objective that it could be carried out as fast as implementation in the economic field.
The starting point to realize the option is through taking measures to concretize the general points of agreement embodied in the document of strategic partnership signed in 2005.
It is interesting to note the document has not been fully implemented, particularly items related to cooperation in the noneconomic field. China seems to have built a road for economic cooperation with Indonesia like building a highway, but cooperation in a number of other fields such as culture, education and defense seems to have appeared merely as a road map without any real journey being undertaken.
Therefore, the most challenging task that lies ahead in the Sino-Indonesian relationship in the years to come will be how to transform the document of strategic partnership into reality.
Jakarta should do its utmost to convince Beijing that if the focus of cooperation is directed solely on economic aspects, there will be little possibility for China to enlarge its constituency in Indonesia, which could be expected to lend support to the enhancement of Sino-Indonesian relations.
The constituency so far has mainly come from, and been limited to, the business community in this country. China should not repeat the bitter experience of Japan, which was regarded in Indonesia as an economic animal in the early 1970s.
In this regard, enlarging the scope for philanthropic activities, for instance through giving more scholarships to the academic community, might be useful to broaden the constituency. However, this is only possible if China accepts the idea that it is time for the country to spend more and earn less in its bilateral relationship with Indonesia.
The writer is chairperson of the Postgraduate Program, Department of International Relations, School of Social and Political Sciences, the University of Indonesia.

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Indonesia, the region and the world

Author: Dewi Fortuna Anwar, Kyoto University
The visit by United States President Barack Obama to Indonesia later in 2010 will undoubtedly put Indonesia in the limelight. Obama’s visit is seen by many as recognition of Indonesia’s international standing as the largest country in Southeast Asia, the largest Muslim majority nation, the world’s third largest democracy, and one of the world’s 20 largest economies. Much was also made of Hillary Clinton’s visit, which made Indonesia the second country that she visited after being appointed as the US Secretary of State in early 2009. Recently, a number of Indonesian and foreign observers have noted Indonesia’s return to regional and international activism after a period of crippling domestic crises.

It is sometimes said that Indonesia is the most important country that the world knows least about. For the most part this is due to the style of foreign policy implemented throughout Suharto’s more than 30 year rule. In response to President Sukarno’s ‘lighthouse’ foreign policy in which Indonesia strutted as the global spokesman for newly independent nations, and confronted the western colonialist-imperialist powers, Suharto pursued the opposite course. Indonesian foreign policy under Suharto was deliberately low profile, narrowly focused on peace and stability in Southeast Asia, and designed to bring direct economic benefits to Indonesia though trade and investment. While mostly successful in its immediate development objectives, Indonesia lost its profile in the international arena, even though it was still recognised as first among equals within ASEAN.
Indonesia, supported by the major western powers during the Cold War as a staunch anti-communist bulwark, was mostly known to the wider international community for its holiday resorts in Bali, and for its military occupation of East Timor. The end of Suharto’s rule was followed by incessant news of riots, communal conflicts, regional insurgencies, religious extremism and terrorist bomb attacks. For many people not familiar with the country these events summed up Indonesia: an unfamiliar and dangerous place.
Today a successful democracy has replaced Suharto’s authoritarian regime. The economy is recovering from the global crisis, and Indonesia’s status as the world’s largest Muslim majority nation with a predominantly moderate brand of Islam has suddenly become an asset. The international community, and especially the West, now has a higher expectation of the country. In a global climate marred by Islamic religious extremism and threats of terrorism, Indonesia, with its claim as a country in which Islam, democracy and modernity go hand-in-hand, is seen as a credible force of moderation.
Within ASEAN, Indonesia’s resurgence has been welcomed with both anticipation and unease. A revitalised Indonesia clearly helps to reinvigorate ASEAN, but an Indonesia that is strident about democracy and human rights is very different from the familiar champion of the ‘ASEAN Way’ which upheld the principle of strict non-interference in each country’s internal affairs. Indonesia has also been basking in international attention, exemplified by the forthcoming visit of President Barack Obama and invitations to participate in various prestigious forums, such as the 2007 Annapolis conference on Palestine and, most important of all, membership in the new grouping of the world economic powerhouses, the G20. Indonesia is currently the only Southeast Asian member of the G20.
Now calls have become much louder for Indonesia to once again walk tall on the world stage, to play a role as a peace-broker in various international conflicts, to act as an interlocutor in the dialogue between the Muslim world and the West, to be a spokesman for developing countries in the G20, and to drive ASEAN to respect democracy and human rights.
At the same time, Suharto’s legacy of a more narrowly focused foreign policy aimed at obtaining concrete outcomes for Indonesia’s economic development, given that Indonesia is still a relatively poor country, is equally influential. many have argued that Indonesia’s first priority must be to improve the livelihoods of the people and its foreign policy must, first and foremost, be aimed at achieving economic benefits for Indonesia. It is also argued that Indonesia should get its house in order first, including improving its own democracy and governance, before it tries to promote democracy and human rights elsewhere.
The push and pull between a Sukarno-style ‘lighthouse’ international stance and a more pragmatic, economically-focused effort will likely mark the course of Indonesia’s foreign policy in the years ahead. Which trend will prevail is likely to be determined by the dynamics of internal politics as competing actors seek to influence formulation and implementation of a foreign policy which can no longer be decided behind closed doors.
Dewi Fortuna Anwar is a Research Fellow at the Center for Southeast Asian Studies, Kyoto University, and was previously Assistant to the Vice President for Global Affairs and Assistant Minister/State Secretary for Foreign Affairs in the Indonesian government.

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U.S.-Indonesia Comprehensive Partnership: Will It Work?

Fabio Scarpello | Bio | 27 Jan 2010
World Politics Review
DENPASAR, Indonesia -- Under the leadership of President Susilo Bambang Yudhoyono, U.S.-Indonesia ties have progressively strengthened since he first took office in 2004. Yudhoyono earned a masters degree in the U.S. and has never hidden his liking for the States. So it came as no surprise when, in November 2008, the former general-turned-president called for a U.S.-Indonesia strategic partnership, later renamed a comprehensive partnership.

The move was in turn welcomed by U.S. President Barack Obama, who himself is sentimentally attached to the archipelagic nation where he spent a part of his childhood. Soon after Obama's inauguration, U.S. Secretary of State Hillary Clinton stated the administration's commitment to work toward such a partnership, guided by a concrete agenda.

While the two leaders share a mutual fondness for each other's country, the partnership itself is based on rational foreign policy objectives, and is designed to frame U.S.-Indonesia bilateral relations for the next decade. As such, it is meant to cover issues of importance to both nations -- including educational exchanges, trade and investment cooperation, climate change policy, food security and non-traditional security issues, such as the fight against terrorism, trans-national drug syndicates and people smuggling, among others.

For Indonesia, the partnership is part of a broader initiative that has seen the country inking similar agreements with the major regional powers -- China, India, South Korea and Japan -- as well as with the European Union. It is also an attempt to move the bilateral agenda beyond the limited security issues that dominated Jakarta-Washington relations during the Bush administration.

For the U.S., on the other hand, closer ties with Indonesia, the world's largest majority-Muslim country and a key player in Southeast Asia, fit perfectly with Obama's outstretched hand towards the Islamic world as well as his administration's attempt to regain some of the terrain the U.S. has lost to China in the region over the last few years.

Southeast Asia figures prominently in some of Washington's global preoccupations, including transnational crime, energy and food security, and climate change. It is therefore likely that Washington also sees the partnership with Indonesia as a means to channel its concerns, and desired solutions, for the region.

However, although the rationale to seal the deal is strong and the partnership is expected to be inked when Obama travels to Indonesia sometime during 2010, questions remain about whether it will have any real effect on the ground.

A key problem is Indonesia's capacity to follow up on agreements, which was recently highlighted once more by the desire, among some in Jakarta, to reassess the China-ASEAN Free Trade Agreement, on the basis that it could negatively impact the country's manufacturing sector.

The trade deal, which took effect on Jan. 1, will scrap import duties on thousands of Chinese products, a fact that has led Indonesian industry groups to call for parts of the deal to be renegotiated. The Ministry of Industry initially submitted a letter to the coordinating economic minister in late December 2009 to request that scheduled tariff reductions on 146 products be delayed by one year.

This weekend, Trade Minister Mari Elka Pangestu ultimately declared that Indonesia would not seek to postpone the deal's implementation. Still, the China-ASEAN deal was signed in 2005, after years of negotiations and Jakarta's preliminary studies have shown a lack of depth that should also serve as a warning signal for Washington.

Another question mark is the level of participation of the various Indonesian and American constituencies targeted by the agreement. Obama and Yudhoyono will sign the partnership, but for it to have an impact, it needs the support, supervision and enthusiasm of large segments of the two countries' civil societies and political establishments.

Currently, Indonesia remains off the radar for U.S. civil society, while the U.S. Congress remains wary, due to sensitive issues such as Indonesia's efforts to reform its abuse-tainted army, the Tentara Nasional Indonesia (TNI).

In Indonesia, on the other hand, public opinion regarding the U.S. is split, with the Obama effect mitigating, but not eliminating, the reservations of those who see America as a neoliberal, imperialistic power. This segment of society, which partly coincides with radical Islamic groups, is very active and has a noticeable influence on the political discourse.

Some Indonesian lawmakers as well as senior members of the TNI also remain guarded about the U.S., who they accuse of being a volatile partner. The description refers mostly to Washington's decision to impose a ban on military-to-military relations after the TNI and its militias went on a rampage in the aftermath of East Timor's 1999 vote for independence.

Under the Bush administration, the U.S. lifted restrictions limiting military training and financing as well as weapons sales. But other restrictions remain, particularly regarding U.S. training of Kopassus, the notorious Indonesian special forces.

Moreover, while there seems to be a good chance of improving education-related exchanges -- currently at a historic low, according to the Unites States-Indonesia Society -- it is debatable whether the partnership will lead to any increase in bilateral trade and U.S. investment in Indonesia.

With regards to the latter, U.S. firms have traditionally been interested in Indonesia's natural resources, but that enthusiasm has lately been dampened by Jakarta's nationalistic approach. Despite Yudhoyono's commitment to an open economy, in fact, Indonesia remains cautious in matters of foreign ownership.

More broadly, U.S. investors have often been put off by Indonesia's high level of corruption, red tape and lack of infrastructure. The comprehensive partnership envisages U.S. support for Indonesia's drive towards good governance, but analysts agree that this is mostly an internal battle that must be fought by Jakarta, and which needs time to be won.

In the end, while most observers agree that the partnership is a step in the right direction, few are ready to celebrate it just yet.

Fabio Scarpello is the Southeast Asia correspondent for the Italian news agency Adnkronos International. He is based in Denpasar, Indonesia.

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How is Indonesia’s democracy doing?

Author: Larry Diamond, Stanford

Since the mid 1990s, the proportion of countries in the world that are democracies – countries that meet the standard of at least electoral democracies in the sense that they can choose their leaders and replace them in free and fair elections – has stagnated, at around 60 and 62.5 per cent.

The world is experiencing a democratic recession. There are three dimensions of this.

Firstly, there is levelling off of in the extent of democracy.

Secondly, there has been a rise in incidence of democratic breakdown in the world. Of the 29 democratic breakdowns since the third wave of democratization began in 1974, 17 (59 per cent) have occurred since 1999.

Thirdly many of these democratic breakdowns have happened in places that can be considered big, strategically important states, powers in their regions, and peers of Indonesia.

Indonesia is now labelled by Freedom House as a ‘free country’ – although this is a somewhat misleadingly broad category. Nevertheless, Indonesia is doing better today than any of the democracies that lost democracy were at the time they lost it.

A worrisome trend is the recent erosion not only of democracy but of levels of freedom. The last three years – 2006, 2007, 2008 – are the first three successive years since the end of the Cold War when the number of countries declining in a given year in their levels of freedom exceeded the number of countries improving their levels of freedom.

The fact that Indonesia is holding its own at a relatively good level of political rights and civil liberties is itself a noteworthy achievement.

While Indonesia’s civil liberties, political rights, and levels of governance have improved since 2005, it still has levels of governance, by a number of measures, which are in some respects in the category of vulnerability. The trend recently has been to suggest that Indonesia has either consolidated democracy or is very far along the path of doing so. There are grounds for being a little more sceptical.

Nevertheless, the level of public support for democracy in Indonesia compares favourably compared to other regions of the world. Globally there is a growing ambivalence toward democracy.

In East Asia and Africa only about half of respondents, in various surveys, on average rejected all of the 3 authoritarian options put to them: the military coming back to power; one party rule; and getting rid of parliament and having a strong ruler decide everything.
The cause of this is basically the reputation a government has in respect of bad governance.

So, how do Indonesia’s levels of governance and democracy fare in these comparisons?

A common story is that Indonesia began, at its moment of democratic transition in 1998, with pretty bad governance on most measures.

One measure of governance is economic performance. Indonesia’s average rate of GDP growth during the past decade has been respectable compared to a set of other significant emerging market democracies regionally and globally.

Indonesia’s Human Development Index (HDI) score, perhaps the most meaningful measure of economic development – incorporating standards of living, health, and education – improved almost 10 per cent between 1995 and 2006, reaching 73 per cent. This rate of improvement is greater than many of its peers, such as the Philippines and Thailand, and Indonesia has now almost caught up with the Philippines in terms of its HDI score.

A number of measures of governance used by the World Bank are also useful.

In 1998 Indonesia was in the bottom quintile in the world in terms of its level of voice and accountability. Only about 7 or 8 countries have improved their voice and accountability score as dramatically as Indonesia has. It now outranks several other countries, even Turkey surprisingly, and has overtaken the Philippines as well. But Indonesia is still out ranked by some more established democracies in East Asia.

In control of corruption Indonesia’s improvement in performance has been even more dramatic. But it started from an incredibly low level at the 9th percentile that it is still in the bottom third in the world. While Indonesia has now taken a higher position than the Philippines in terms of control of corruption too, it clearly needs to go further.

The rule of law in Indonesia has barely improved at all, and is still very weak. This is something we should worry about. And this is why we should exercise some caution in advancing a judgement that democracy in Indonesia is now consolidated. Even with respect to some not very well performing countries in the region, in terms of rule of law Indonesia finishes dead last among the democracies or quasi democracies in Asia.

Indonesia has of course improved it Freedom House score dramatically more than any of the countries in the sample. But again, it started from such a low level that it still has ground to catch up despite the improvements.

On the rule of law and political stability, things got worse between 1998 and 2003. Here you can really see the impact of the Yudhoyono presidency in terms of bringing about, or at least witnessing, significant improvements in the quality of governance.

An encouraging sign is how Indonesians view and value democracy relative to their peers in 5 other Asian countries. On a scale of 1 to 10 – with 10 being most democratic – survey participants were asked ‘to what extent they think their country is a democracy today?’ Indonesians gave an average score of 7 out of 10. Asked ‘to what extent do you want your country to be a democracy?’, Indonesians ranked very highly giving an average score of 8.5 out of 10.

Asked whether they supported democracy, 65 per cent of Indonesian said yes. And asked whether they were satisfied with the current democratic system 59 per cent answered yes.

Also, 56 per cent of Indonesians rejected authoritarianism. This is a reasonably healthy figure. If this was increased to 70 per cent, and was sustained for a prolonged period of time, we could more surely say that democracy has been consolidated. But it is premature to say it is already consolidated. Nevertheless, given the history and turbulence in Indonesia this is a surprisingly high score.

Support for liberal values is surprisingly high in Indonesia at 47 per cent. This vastly outstrips Thailand and the Philippines. Since this is usually highly correlated with education and economic development, and given limited years of experience with democracy, Indonesia is way ahead of where you would expect the country to be on the liberal values scale. They are much closer to Korea and Taiwan. And this is the single most telling indicator.

Looking in historical terms, and in comparative terms, what Indonesia has achieved in the last 10 years (in terms of the development and improvement of democratic institutions, a critical and substantial base of public support for democracy, of trust in public institutions, and, surprisingly perhaps, robust support for liberal values relative to elsewhere in the region) is quite remarkable and is deserving of admiration.

Yet democracy in Indonesia will not stand or fall on how well it is doing relative to other democracies in the world. It will stand or fall in terms of how well it is doing in itself.

It is worrying when somebody tries to set up a serious counter corruption institution and then it falters, never gets off the ground, and an audit commission never develops momentum, autonomy, vigour, and real capacity, because its just too threatening to vested interests in the system. This is the canary in the coal mine of democracies.

The conclusion that democracy in Indonesia is secure, for all time, not just for these few years, will be safe only when there has been more progress toward better governance than there has been so far.

Larry Diamond is Director of the Center on Democracy, Development, and the Rule of Law at Stanford University, Senior Fellow at the Hoover Institution and the Freeman Spogli Institute at Stanford, and author of ‘The Spirit of Democracy’.

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Indonesia’s new cabinet: A boost for economic policy and reform

Author: Hal Hill and Chris Manning, ANU

President Susilo Bambang Yudhoyono (universally known as SBY) announced the cabinet for his second five-year term shortly after his inauguration on October 20. Its composition and quality provide one of the best indications of the president’s policy priorities, as well as his political strategy.

SBY’s Democrat Party emerged as the major, though minority, party at the April parliamentary polls, while he had a resounding victory in the July presidential election. He is therefore in a much stronger position than in 2004. In May, he made a surprising choice of Dr Boediono as his vice presidential running mate, a ‘non-politician’, a respected economic policy maker (and also an Australian graduate).

Despite greater success in the polls, however, he has still decided to opt for ‘rainbow cabinet’ with an eye to getting bills passed in the DPR, the lower house of parliament. The new cabinet reflects these compromises. The majority of the 37 portfolios have gone mostly to party people. Overall SBYs grand coalition of Muslim parties received twelve, Golkar three and SBY’s own party seven. The balance has gone to professionals, most notably in the field of economics.

Consistency in economic policy and a clear agenda for policy reform were two stumbling blocks for the previous administration. This time it might be different. Unlike the previous Vice President, Jusuf Kalla, Boediono can be expected to provide greater coherence in economic policy. Working with him will be three highly accomplished women, all with doctorates in economics.

Sri Mulyani Indrawati, an able, tough and outspoken Finance Minister, continues in that position, and is certain to want to continue her wide-ranging reform agenda.

Mari Pangestu, like Boediono an Australian graduate, and the most knowledgeable trade minister in the region, retains her post. One item already on the bilateral agenda is the Australia-Indonesia Free Trade Agreement which Minister Pangestu (who has written widely on the benefits of an open trade regime) is committed to completing. She is likely to strike a tough but reasonable bargain on sensitive issues such as agriculture.

They will be joined by a newcomer, Armida Alisjahbana, as planning minister, who should give that agency a much-needed boost in its main task of coordinating development policies, after several years in the doldrums.

Overall, the economics team is arguably the most highly credentialed in the Asia-Pacific region and signals a commitment to conservative macroeconomic management, an open foreign trade and investment regime and an active role in regional and international forums. Their Australian counterparts will find them to be natural allies on a range of regional and global issues, from the G20 to the East Asian Summit.

Greater consistency in economic policy is also likely to result from the appointment of a special Presidential Unit for Management of Reform (Indonesia’s ‘West Wing’) under the respected Kuntoro Mangkusubroto, former Head of the Aceh Nias Reconstruction Agency.

Two businessmen who join the cabinet as head of the Department of Industry and the Investment Coordinating Board can both be expected to promote the interests of domestic business strongly. But this is unlikely to accompany any significant increase in restrictions on foreign trade or investment.

Other professional appointments have been made to the important ministries of foreign affairs, home affairs, education, health and public works. SBY has dropped some controversial ministers, including the protectionist agriculture minister and the conspiratorial health minister. The removal of both bodes well for greater international cooperation.

The President’s desire for a more activist role for Indonesia in regional and global affairs should be furthered by the appointment of Dr. Marty Natalegawa, as Foreign Minister. Dr. Natalegawa is an eloquent and internationally respected former Head of the Indonesian Delegation to the United Nations (and also an Australian graduate).

This has been a very good year for Indonesia. A decade ago, the economy was on the ropes, there was nasty ethnic conflict, and the possibility of territorial disintegration could not be discounted. Twelve months ago there was great uncertainty, both about the effects of the global financial crisis and the conduct and outcome of the parliamentary and presidential elections. In the event, the former has had a surprisingly mild effect while the latter went off smoothly. In the economic field, at least, SBY’s new cabinet can be expected to consolidate these gains. It would be a pity if the Australian media focus on boat people and Balibo distracted our attention from these hugely important developments.

Hal Hill and Chris Manning are economists with the ANU’s Indonesia Project.

This article first appeared in the Australian Financial Review.

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Thinking about the Asia Pacific Community

December 6th, 2009

Authors: Hadi Soesastro (CSIS, Jakarta) and Peter Drysdale (ANU, Canberra)

The idea that regional architecture in Asia and the Pacific is not up to the tasks it now needs to serve has been around for some time. It has been inspired in part by worries about the untidiness in the competing structures — across the Pacific, of APEC, and within East Asia, of ASEAN +3 and the East Asia Summit (EAS). There has also been a hankering after ‘robust’ regional institutions modelled on the arrangements in Europe or North America, however unsuited they are to Asia Pacific circumstances.

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What is different about the thinking that led to Prime Minister Rudd’s Asia Pacific Community proposal is that these worries are incidental to its main strategic motivation. The Rudd idea is grounded in the reality of the big shifts taking place in the structure of regional and world power. These shifts in the structure of power have two main implications.

First, Asia’s growth is changing the structure of the world economy and shifting global economic power, and ultimately, strategic weight towards Asia, in particular China and India. Economic and political changes in Asia and the Pacific challenge the primacy of some dimensions of American power. These developments underline the gap in the framework for regional political and security dialogue in Asia and the role that such dialogue could play in helping to manage the long-term change in the structure of Asian economic and political power and political security relations between Asia and America.

Second, the scale of Asia’s impact on the global economy means that there is urgency in energising regional efforts to deliver on Asia’s global responsibilities – in the financial and macro-economy, in trade policy and on climate change – and how that might be assisted through regional structures.

Until the collapse of world financial markets and world trade in the global financial crisis, the East Asian region, including Australia, was preoccupied with managing all aspects of the China boom – the pressure on energy, resource and food markets, the macroeconomic pressures, the looming foreign direct investment and commercial presence – and beginning to think about its long-term political consequences. India too was more and more caught up in the wave. All was premised on the continuing strength of North American and European markets.

East Asian economies should have been more conscious of their role on the world stage and the need to reposition quickly to manage the global system consequences of their own economic success and the dangers presented to its sustainability that the huge imbalances had created on the way. East Asia bore no responsibility for America’s squandering the beneficence of East Asia’s success – the apparently never-ending supply of cheap credit negligently guarded by the private and public custodians of the developed world’s financial system. But in this and in many other global system-making or system-destroying economic and political affairs, East Asia had significant prudential responsibility and it failed collectively at every stage to exercise it.

The reason for this failure is simple.

Despite the emergence of East Asia as a major economic force in the world – China, Japan and the rest of East Asia through to Australia and New Zealand reaching out to India – the East Asian economies collectively could not step up to the mark because regional structures were still not up to the task of effective global participation. The stage was still set for the wrong play – reactive responses to regionalism in other parts of the world, the trivia of regional FTAs and ‘mickey mouse’ financial cooperation – and there was no platform on which to perform globally.

In East Asia, like elsewhere in the world, the risks that we now face in recovery from the global financial crisis, not only economically but also politically, are a consequence of failure in the architecture of governance, including regional architecture, that frustrated a coherent East Asian and international response to the big problems of the day in their global context.

The global financial crisis and the emergence of the G20 has changed all this dramatically and propelled the G20’s Asian members to assume a new role and their proper responsibilities in managing the world economic order. ASEAN is the fulcrum of Asian cooperation arrangements, including APEC, ARF, ASEAN+3 and the East Asian Summit (EAS) but, with the rise of the bigger powers in Asia, and the G20, this is changing.

How can regional architecture be restructured to relate effectively to the new global arrangements?

The starting point is to understand that, while they may have failed to connect Asia’s regional with its growing global interests and responsibilities and they have other weaknesses, the regional arrangements we have in place are huge assets in going forward. APEC is entrenched as the primary trans-Pacific arrangement. ASEAN+3 and the East Asian Summit have assumed an important role in developing the Asian regional agenda. APEC, in its first twenty years, has provided a workable strategy in trade and economic diplomacy in East Asia and the Pacific supporting policies of liberalisation and structural reform, organised around the principle of open regionalism (a strategy well suited to the development, objectives and diversity of the Asia Pacific region). But after the Asian financial crisis and the global financial crisis, these regional arrangements (APEC, ASEAN +3, ASEAN+6) must now relate more strategically to the global arrangements (the G20 group). And there is a whole new political and security agenda to navigate within the Asia Pacific region.

Clearly, the Asia Pacific Community idea needs to relate to these established regional structures – APEC and East Asian arrangements – if it is to be both accepted and serve its underlying political-security purpose. It will only be worthwhile and practical if it limits dialogue to the major players. Hence, although it cannot encompass all APEC’s membership, or all the membership of EAS, a dialogue on political and security affairs needs to represent both as they are presently constituted. It needs to link to, be coordinated with, and draw on the base of all of the established trans-Pacific and East Asian arrangements.

While none of the existing regional institutions addresses all of the key dimensions of regional cooperation that they now need to – providing a collective forum for regional leaders to address the full range of regional and global issues; dealing effectively with the consequences of economic integration, particularly its trade and investment but also its financial and macro-economic dimensions; addressing issues of political change and security; and educating the public and opinion leaders about the region – nor should any one organisation need to perform all these roles. Each of these forums has evolved to serve some or other of these roles and they can all make an input across the range of issues that are now important.

This points to the need for a new heads of government meeting that transcends APEC and EAS (encompassing the Rudd and Hatoyama proposals) that can address the full range of regional and global issues, including issues that might arise in APEC, EAS, ARF or other regional forums and feed into the G20 and other global processes. This summit could eventually constitute an Asia Pacific Council, underpinning the continued development of the regional community. It would not need its own secretariat but draw on APEC and the ASEAN-based groups to develop issues for consideration.

There may be sensitivities in creating a new summit involving a limited number of countries, the ‘larger’ players in Asia and the Pacific. But so long as it is structured so that it is representative of all the regional arrangements, these sensitivities need not be important. The most practical proposal and most logical starting point is that this summit should begin by including the Asia Pacific members of the G20, and meet adjunct to the APEC summit. A dialogue among these countries does not entail creating an additional institution as G20 leaders will continue to meet beyond the current financial crisis, encompass the core players in APEC and EAS and meet in conjunction with the annual APEC summit . These are all important considerations in taking the next steps towards realising vision of an Asia Pacific and East Asian Community.

The clear message is that ‘no one wants more meetings’ and that there is ‘no appetite for additional institutions.’ But there is strong support for developing more effective alignment of regional strategic purpose, a sentiment that is at the core of the idea of an Asia Pacific Community.

If this is an idea that seeks to anticipate and shape our regional political and economic future, it is an idea that cannot be put on hold, take a decade to implement or wait until the United States signs on to EAS, an ASEAN-based, primarily Asian-oriented and still nascent grouping.

The next APEC meeting in Japan, provides an excellent opportunity to convene a side-dialogue of this group, including India, on these issues, likely just prior to the G20 meetings in Seoul, to lay the foundations for a representative Asia Pacific Council that can give leadership to taking the Asia Pacific Community idea forward.

Dr Hadi Soesastro is a senior economist with CSIS in Jakarta and Peter Drysdale is Emeritus Professor in the Crawford School of Economics and Government at the Australian National University. The original version of this essay was submitted as background to the Asia Pacific Community Conference held in Sydney at the instigation of Australian Prime Minister, Kevin Rudd, 3-5 December 2009.

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Backgrounder: Indonesian former president Wahid

JAKARTA, Dec. 30 (Xinhua) -- Indonesian former president Abdurrahman Wahid passed away at the age of 69 in the country's landmark hospital Cipto Mangunkusumo (RSCM) on Wednesday, due to complications of stroke, kidney and heart problems.

Wahid was born on Sept. 7, 1940 in Jombang, East Java, as the eldest child among six siblings. His grandfather is Hasyim Asy'ari, co-founder of Nahdlatul Ulama (NU), which is one of the largest independent Islamic organizations in the world. And his father Wahid Hasyim was appointed as Indonesia's first Minister of Religious Affairs.


Wahid began to receive his education in Jakarta since 1949. In 1957, he graduated from the junior high school and went to a Muslim school in Magelang for two years. After that, he went back to his hometown to continue his education while taking his first job as a teacher and later headmaster of a Muslim school. He also got a journalist job for magazines in the period.

In 1963, Wahid received a scholarship from the Ministry of Religious Affairs to study at Al Azhar University in Cairo, Egypt, while working for the Indonesian Embassy. He left for Egypt in November 1963 and received another scholarship at the University of Baghdad in 1970. after that, Wahid visited Netherlands, Germany and France before going back to Indonesia in 1971.When returned to Jakarta, Wahid joined the Institute for Economic and Social Research, Education and Information, an organization which consisted of intellectuals with progressive Muslims and social-democratic views. He continued his career as a journalist of magazine Tempo and Kompas newspaper, building up a reputation as a social commentator. thanks to his well-received articles. In 1974, Wahid became a Muslim Legal Studies teacher at a Muslim school in Jombang, and in 1977, he joined the Hasyim Asyari University as Dean of the Faculty of Islamic Beliefs and Practices.

Wahid had his first political experience in 1982, when he campaigned for the United Development Party (PPP) in Legislative Elections. PPP is an Islamist Party which was formed as a result of a merger of 4 Islamist parties including NU. In 1984, Wahid was elected as the new Chairman of NU. He was re-elected to a second term and third term as Chairman of NU at the 1989 National Congress and the 1994 National Congress.

In 1998, Wahid approved of the formation of PKB and became the Chairman of its Advisory Council with Matori Abdul Djalil as Party Chairman. He promoted PKB as a party that is non-sectarian and open to all members of society. On Feb. 7 1999, PKB officially declared Wahid as their Presidential candidate in Indonesia's 1999elections.

Wahid's PKB entered the legislative elections in 1999, winning 12 percent of the votes. In July, the Central Axis, a coalition of Muslim parties, was formed, and it officially nominated Wahid as a Presidential Candidate in October. In the same month, Indonesian People's Consultative Assembly (MPR) convened and began electing for a new President. Wahid was then elected as Indonesia's 4th President with 373 votes.

Wahid founded his first Cabinet as a coalition which consisted of members of various political parties in 1999. He went on to make two administrative reforms by abolishing the Ministry of Information and disbanding the Ministry of Welfare. He visited China in December.

In March 2000, Wahid's government began to open negotiations with the Free Aceh Movement (GAM). In May, the two sides signed a memorandum of understanding to last until the beginning of 2001, by which time both signatories would have breached the agreement.

In January 2001, Wahid made the announcement that Chinese New Year was to become an optional holiday. Wahid followed this up in February by lifting the ban on the display of Chinese characters and the importations of Chinese publication.

On July 23, 2001, the MPR unanimously voted to impeach Wahid and to replace him with Megawati as President. www.chinaview.cn 2009-12-30 23:53:15

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Indonesia’s Obama, Washington’s Indonesia

Guest Author: Donald K. Emmerson, Southeast Asia Forum, Stanford University
Jakarta, Indonesia—‘When will he come?’ Again and again in this city I have been asked when US President Barack Hussein will visit Indonesia. I cannot remember a time, since my first trip here in 1967, when Indonesians have looked forward more eagerly to hosting an American president.

No Shoes
Hillary Clinton’s visit in February 2009 not only stoked local hopes of welcoming her boss. It was a big success in its own right. Never before had an American secretary of state traveled to Jakarta so soon after taking office. Long accustomed to being overlooked by Washington, Indonesians were flattered.
Secretary Clinton voiced admiration for Indonesia’s ability to combine Islam with democracy and modernity. Her host liked that. Indonesian Foreign Minister Hassan Wirajuda spoke warmly of a new ‘partnership’ with the United States. His guest liked that.
President Barack Hussein Obama, when he comes, will bring with him his memories of childhood in Jakarta, his accent-free facility in Indonesian, his Muslim-sounding name, and his willingness to reach out to the world in a way that his predecessor in the White House never could. Indonesians like him.
Unlike then-President George W. Bush in Baghdad in December, Hillary did not have to dodge thrown shoes. An Indonesian official laughed at the very idea that it might have been necessary to warn local journalists to keep their footwear to themselves.
As for Obama, during the US presidential campaign, a BBC poll had Indonesians preferring him to his rival John McCain by a margin of more than 4 to 1. Across 22,000-plus respondents in Asian or Pacific countries, only Australians were more pro-Obama. Indonesian photographer Ilham Anas’s uncanny resemblance to the US president was enough to make Anas an instant celebrity here.
When I reverse their question by asking Indonesians ‘When should Obama come?’ they nearly always say ‘Soon!’ It is I, not they, who caution against an American president dropping by at such an intensely political time in their country.
On 9 April, up to 170 million eligible voters marked ballots in Indonesia’s parliamentary elections. On 8 July and again, if needed, in a run-off election on 8 September, millions of Indonesians will return to the polls to choose a president and a vice-president for the next five years.

November is Nice

Obama should not come to Indonesia now. Not in the middle of this Year of Politicking Vigorously. Incumbent President Susilo Bambang Yudhoyono (SBY) is campaigning hard for re-election. The stakes are as high as the competition is fierce. Hosting the leader of the world’s most powerful country would arouse SBY’s opponents to accuse Washington of interfering in domestic Indonesian politics. One hard-line Islamist group has already slammed SBY as ‘America’s pet’.
It was once thought that Obama might visit Indonesia early in his presidency. He plans instead to travel, in April, to Turkey. The most appropriate window for his trip to Indonesia will open in November, either before or after he attends the summit of leaders of the Asia Pacific Economic Cooperation (APEC) forum in Singapore in the middle of that month. Singapore is only slightly more than an hour by air from Jakarta.
By November, Indonesia’s electoral cycle will be over, partisan tempers should have cooled, and a new government will be in place to receive and host Obama. On the US side, insofar as recession-weary Americans may expect their president to be focused on economic matters, the ‘E’ in APEC will help the White House justify his trip.
Forging a ‘new’ American-Indonesian ‘partnership’ is likely to be a theme of Obama’s visit to Jakarta. Good relations with Indonesia are hardly new. The US has long been, and remains, widely engaged in Southeast Asia. But if engagement between people augurs the would-be permanence of marriage, engagement between countries is contingent and requires constant reassurance.
Indonesia’s need for reassurance is heightened when the other party is a distant and globally committed superpower prone to fits of distraction by crises and concerns elsewhere. Jakarta’s need is further intensified when another big and powerful country - China - is permanently nearby, not far out of sight and never out of mind. Traditionally among foreign-policy realists here, Washington’s indifference has helped sustain a kind of low-level anxiety over long-run Chinese dominance and Indonesian dependence.
Obama’s ascent has already reduced this concern, and his actual arrival will shrink it further. Policymakers in this city are not so naïve as to think that the US president’s childhood years here have made him wholly or forever pro-Indonesian. But in local eyes, the fact of Hillary Clinton’s visit and the prospect of Obama’s are clear and welcome signals of Washington’s desire to upgrade its ties with Jakarta.
On 8 March, Chinese vessels harassed an American intelligence-gathering ship in disputed waters south of China’s naval base on Hainan island. I asked a panel of Indonesian defense-policy analysts and officials whether they supported Beijing’s or Washington’s view of the incident. Publicly, they were noncommittal. Others in Indonesia’s defense establishment, however, implied privately that regional security was being served, not undermined, by American monitoring of Chinese submarines. It is not widely realized that the US and Indonesian personnel take part in more than a hundred instances of defense and security cooperation every year.

Beyond Photo Ops

There are differences between Jakarta and Washington as to how their ties should be improved. The Indonesian side wants a ‘comprehensive partnership’ to be announced in a joint statement by the two presidents, SBY and Obama. The statement’s details would then be filled in by mid-level officials in Jakarta and Washington. In contrast to this top-down approach, the American side is more comfortable negotiating upward—deciding on the details first and then treating them as building blocks of enhanced bilateral engagement.
The planning and timing of the partnership will be affected by the results of this year’s elections in Indonesia. The presidency is SBY’s to lose. Conventional wisdom views him as a shoo-in for re-election, perhaps even in the first round of voting for president and vice-president on 8 July. Between now and then, however, the global economic crisis could damage Indonesia enough to boost his rivals’ chances. In months to come, the less likely SBY’s continuation in office appears to be, the more tentatively will Jakarta and/or Washington approach their proposed partnership.
There is, in any case, still time and opportunity to reach agreement by November on both the principles and the specifics of cooperation. SBY and Obama will meet at the G20 summit in London in early April, and bilateral advisory discussions are planned for mid-April in Washington.
As these conversations begin, some things are already clear regarding the US president’s trip. Thoughtful Indonesians are not interested in merely serving as extras in news footage of Obama smiling and waving to cheering crowds. They want the partnership to have substance. Development assistance, including especially cooperation on education, figures high on the list of Indonesian priorities. So does the Middle East. Makers and analysts of foreign policy join moderate Islamist politicians here in hoping that, before coming to Jakarta, Obama will have taken concrete steps, however modest, toward an eventual two-state solution to the Israeli-Palestinian conflict.
That said, the symbolics of Obama’s visit will matter. Indonesian enthusiasm for him is real and widespread. But his meteoric rise in local esteem reflects in part just how low America’s image sank under his predecessor. Indonesian-language books on sale here that focus on America as opposed to Obama are overwhelmingly, even polemically, critical of US actions and motives. In Goodbye, Bush! the Iraqi journalist who threw his shoes at Obama’s predecessor in Baghdad is praised for standing up to ‘American arrogance and hegemony’. Another paperback exalts Iranian President Ahmadinejad as a courageous David braving the savage megalomania of the American Goliath. Deadly Mist claims Washington purposely engineered deadly epidemics such as AIDS, SARS, and avian flu. Anti-Semitic literature that demonizes Israel as an attack dog of Washington in its putative war on the Muslim world is also available for sale.
Yet these titles are outnumbered by a raft of short, quickie books that laud Barack Obama, while a smaller genre specializes in celebrating his wife Michelle. Typical of these hagiographies is Obama: American President and Child of Menteng. Menteng is the Jakarta neighborhood where he lived in 1967-1971 between the ages of six and ten. Among the admiring ‘facts’ about Obama listed on Obama’s cover are that he ‘was once an Indonesian citizen’ and that, as president, he ‘will stop the policies and actions that have destroyed the moral authority of America’.

Wishful Seeing
It is not entirely facetious to suggest that observers of Obama’s run for the White House in 2008 and SBY’s campaigns for the State Palace in 2004 and 2009 should be forgiven if at times they forgot which country they were in. The Democratic Party of Obama is nearly identical in name to the Democrat Party of SBY. On American television last November, the states that voted for Obama were colored blue to distinguish them from the red states that went for McCain. SBY’s chosen campaign color is blue, in contrast to the red posters, flags and t-shirts preferred by his chief competitor for the presidency, Megawati Sukarnoputri. Obama’s campaign slogan in 2008 was ‘Yes We Can!’ SBY’s 2004 presidential campaign motto was ‘Together We Can!’
Such parallels drove one leader of SBY’s party, Anas Urbaningrum, to hope that the Democratic Party’s ‘blue victory in America in 2008 will, Allah willing, be followed by a victory for the Democrat Party in Indonesia.’ Not to be outdone, SBY’s rival Megawati said she was driven by her own ‘Obama spirit’ to ‘do the best for the Indonesian people’.
Indonesians are well aware that Obama is the first American president with, as they put it, ‘black skin’, and this breakthrough, too, has inspired local analysts to draw local lessons. SBY is Javanese. Javanese are the country’s largest but by no means its only ethnic group. Traditionally their political influence has been more or less comparable to that of Caucasians in America. Political scientist Mohammad Qodari has gone so far as to argue that Obama’s success and popularity in the US have helped Indonesians to rethink and abandon the prejudicial notion that their own president has to be a Javanese.
The subjective appropriation of Obama’s iconic image and success to serve domestic Indonesian uses stands in dramatic contrast to the invisibility of the world’s fourth most populous country to most Americans. Nevertheless, inside the Beltway that encircles Washington DC, SBY’s Indonesia is being used by policy influentials to justify hopes and allay fears that are distinctively American in character.
When American public figures praise Indonesia as a ‘moderate Muslim democracy’, or use other words to that effect, they are satisfying a characteristically American need for reassurances: that Islam really is a moderate religion; that Islam and democracy are compatible; and that the one country with more Muslims than any other is now an apparently stable and successful democracy.
If Indonesians have embraced Obama as a not-Bush, Indonesia is to Americans a not-Iraq—or, insofar as the locus of quagmire may have shifted from Baghdad to Kabul, a not-Afghanistan. If Obama’s success serves Indonesian purposes, Indonesia’s success serves American ones. Appropriation turns out to be a two-way street.
One may even discern in this symbolic American cooption of SBY’s Indonesia an echo of the American appropriation of an earlier Indonesia—the one ruled for more than three decades by President Suharto. That regime was autocratic and corrupt, but it was also politically stable, economically dynamic, and notably anticommunist. For those in Washington who supported and prosecuted the war on communism in Southeast Asia, Indonesia became a reassuring not-Vietnam. Indonesia was even used to justify the Vietnam War with the self-serving and solipsistic argument that, absent the American effort to crush communism in Indochina, Suharto would not have been emboldened to do so in Indonesia.
Objectively, Indonesia and America differ greatly. When it comes to subjectivity, however, each one tends to see in the other what, for its own home-grown reasons, it would like to see. This is normal and, in principle, helpful. There is nothing wrong with reassurance. In months to come, however, if and as Indonesian and American negotiators proceed to shape a ‘comprehensive partnership’ between their two countries, they would do well to monitor and limit the distance between what one partner really is and what the other partner wishes it to be.

Professor Donald K. Emmerson heads the Southeast Asia Forum in the Shorenstein Asia-Pacific Research Center at Stanford University. He is a co-author of Islamism: Contested Perspectives on Political Islam (Stanford University Press, November 2009) and Hard Choices: Security, Democracy, and Regionalism in Southeast Asia (Stanford / ISEAS, 2008). An earlier version of this essay was published in Asia Times 25 March 2009.

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US gives a long overdue nod to Indonesia

Guest Author: Ann Marie Murphy, Whitehead School of Diplomacy
Hillary Clinton deserves credit for making Indonesia the second country she visited as Secretary of State. Indonesia may be the world’s fourth most populous country, third largest democracy, and home to the world’s largest community of Muslims, but it is also the most important country Americans know virtually nothing about. Clinton’s visit sends an early signal to Jakarta that Washington recognizes Indonesia’s growing international clout and builds a firm foundation for future cooperation.
Clinton’s trip had multiple goals: to highlight the example Indonesia’s transition to democracy sets for the broader Muslim world; to reinforce US interest in Southeast Asia by visiting the Secretariat of the Association of Southeast Asian Nations (ASEAN) and to lay the foundation for a strategic partnership with Indonesia. Indonesian officials welcomed US attention to their country and recognition of its achievements over the past decade.
Much of the commentary on Clinton’s visit has focused on the example that Indonesia sets as a political democracy in a majority Muslim nation. Clinton praised Indonesia’s political transformation for illustrating that ‘Islam, democracy and modernity cannot only coexist but thrive together.’
Such statements ignore Indonesia’s religious pluralism. Yes, Indonesia is home to the world’s largest community of Muslims. Eighty-eight percent of its 245 million people profess the Islamic faith, which means that Islam has more adherents in Indonesia than in all Arab states combined. But it is not an Islamic state. Indonesia recognizes Islam, Catholicism, Protestantism, Hinduism, Buddhism, and Confucianism as official religions. Most Americans are surprised to learn that Christmas and Good Friday are national holidays in Indonesia.
Clinton noted that Indonesia could help the Barack Obama administration by serving as a bridge to the Muslim world. Many Indonesians believe that their experience with economic development, political reform, and Islamic terrorism gives it the authority to speak to the challenges facing the Islamic community such as poverty, oppression, and ‘Islamophobia’. In a speech in Saudi Arabia, Indonesian President Susilo Bambang Yudhoyono stressed that Islam was once not only a religion of peace, but also one of progress. He argued that Muslims should respond to current challenges by embracing technology, modernity, and a culture of excellence. US interests are clearly served when the leader of the world’s largest Muslim country makes such statements. Indonesia, however, has never played a large role in the broader Islamic world, and many Arabs view Indonesians as second-class Muslims. Whether Indonesia can influence its Islamic brethren remains to be seen.
Divergent stances toward Middle East peace also complicate Indonesia’s ability to serve as a bridge to the Muslim world. The US supported Israel’s 2006 war against Lebanon and its recent invasion of Gaza; Indonesia loudly condemned both. In Jakarta, Clinton acknowledged Indonesian anger over the actions in Gaza. She stated that the Barack Obama administration favored a two-state solution to the crises and would work hard to resolve what she termed a painful and difficult issue. Many Indonesians have high hopes that the Obama administration will move away from what they viewed as the Bush administration’s knee-jerk support of Israel and adopt a more even-handed approach. This may reduce tensions between Washington and Jakarta, but it will remain a thorn in the relationship until some comprehensive solution is reached.
Indonesia has also taken steps to promote democracy abroad. It insisted that a commitment to democracy and human rights be included in the new ASEAN charter. Jakarta has pressured the Myanmar junta, albeit unsuccessfully, to reform politically. In December 2008, Indonesia launched the Bali Democracy Forum, which will bring together over 30 Asian countries for annual meetings to share experience and work out best practices on political reform.
While a boon to US interests, democracy promotion Indonesian style differs greatly from its US counterpart. Most Americans have never lived under anything but a democratic system, so democracy promotion is often an ideological crusade by people who lack an appreciation of the difficulties involved in building viable democratic regimes. Indonesians, in contrast, lived through decades of authoritarianism before embarking on a transition to democracy in 1998. Indonesia’s efforts to promote democracy, therefore, are based not only on ideology, but also on a pragmatic appreciation of the benefits. Many Indonesian diplomats claim that what gives their democracy promotion efforts credibility is their ability to tell others, ‘if we can do it with all of our problems, you can do it too’.
Clinton’s trip to Indonesia also underscores the Obama administration’s intention to pay more attention to Southeast Asia. In Jakarta, Clinton visited the ASEAN Secretariat - the first by a US Secretary of State. Her announcement that the US would begin the process of signing ASEAN’s Treaty of Amity and Cooperation, the organization’s regional code of conduct, was widely welcomed in Asia. Ratification of the treaty, however, must be approved by the US Senate, and it is far from clear whether that support will be forthcoming.
The US and Indonesia both signaled a desire to forge a ‘comprehensive partnership’ that would expand and deepen all aspects of the bilateral relationship and create a framework to advance common interests, such as environmental protection, climate change, trade and investment, democracy, health, education, counter-terrorism, and regional security issues. Precisely how this might evolve is unclear.
Despite strong Indonesian opposition to the Bush administration’s military invasions of Iraq and Afghanistan, relations improved dramatically during Bush’s second term. Washington lifted the military embargo against Indonesia, extended US$157 million of educational aid, rescinded its travel ban, and supported the Aceh Peace Process. Officials on both sides agree that US-Indonesian relations are the best they have been in decades.
In a December 2008 speech in Washington, President Yudhoyono called for a ’strategic partnership’ with the US, but Indonesian officials have backed away from this term in favor of ‘comprehensive partnership’. Indonesians remember with gratitude US relief efforts in the wake of the devastating 2004 tsunami. US restrictions on military-to-military relations and on sales of equipment in earlier years, however, have created a perception among Indonesian defense officials that the US is unreliable and made them wary of over-dependence on the US as a supplier of military equipment. Moreover, Indonesians are staunchly nationalist, guard their national sovereignty jealously and would never permit foreign military bases on Indonesian soil. These factors place limits on future security cooperation.
Environmental concerns, particularly climate change, are issues that both sides see as a basis for strategic cooperation. Indonesia is an archipelagic state that has lost a number of its 17,000 islands to climate change and is one of the world’s largest emitters of greenhouse gases due to deforestation. But there are significant domestic obstacles in both countries to environmental cooperation. For Indonesia, grappling effectively with deforestation will entail cracking down on illegal logging and plantation building, both of which are backed by powerful interests. The Obama administration will likely face significant hurdles attempting to secure congressional support for his environmental initiatives. In the absence of significant domestic support, it is difficult to envision how the US and Indonesia can embark on ambitious cooperation on environmental issues.
Obama is widely popular in Indonesia, and his inauguration has created a new opening for US-Indonesian relations. This is not only because he lived in Indonesia as child, but also because of what his election signals about the US. An America willing to elect a man whose father was a Muslim immigrant from Africa and who had an Indonesian stepfather is a country tolerant of diversity and one that lives up to the ideals of equal opportunity it espouses abroad. It is a country that Indonesians can identify with.
Clinton was wise to seize the opportunity Obama’s election created to enhance relations with Indonesia, despite the obstacles already discussed. What makes Indonesia a unique international actor is its membership in a number of important global communities: it resides physically in Asia but is part of the broader Muslim world, the developing world, and the community of democracies. Its ability to navigate between these important constituencies in the service of international peace and prosperity makes Indonesia a potentially valuable international player. American attention to Indonesia is long overdue.
Ann Marie Murphy is assistant professor at the John C Whitehead School of Diplomacy & International Relations, Seton Hall University, adjunct research fellow at the Weatherhead East Asian Institute, Columbia University, and an Asia Society associate fellow.

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A surprise choice? Dr Boediono is selected as SBY’s running mate

May 15th, 2009
Author: Chris Manning, Indonesia Project, ANU
It’s all but official, yet still a surprise. Economic analyst, manager and academic, Dr Boediono, the current Central Bank Governor, has been named as President Yudhoyono’s choice of running mate for the first round of Presidential elections in July.

Some nine political parties have been jostling for influence in Indonesia’s emerging political make-up for 2009-2014. Many, especially in the main Muslim parties, would dearly have liked their leader to be selected by the popular President as the ‘CA-WA-PRES’, SBYs Vice Presidential running mate. In return, they would surely pledge their political support.
So why select a technocrat? Is SBY hankering for the bad old Soeharto days, when technocrats proposed and the President decided on policy, seemingly oblivious to social forces around him?
The announcement has come after several weeks of intense speculation as to who would be chosen by SBY. Although the Democrats are expected to be the largest party in the new parliament, they will hold only around one quarter of all seats. SBY will need the support of several minor parties to govern effectively.
Why then select a seeming rank outsider to the political game, who might seem to offer little in terms of bolstering the stocks of the President in the parliament?
An obvious answer might be that it’s the economy, stupid. SBY expects the Indonesian people to find comfort in the selection of a highly regarded and experienced manager as their Vice President, in the context of the global economic crisis. Boediono could thus be expected to bolster SBY’s popularity in the Presidential race at a time of uncertainty, even if he contributed little to shoring up political support in the parliament.
Such an interpretation would suggest that SBY is thinking more about the short term advantage, rather than winning the longer term battle of pushing reform through the legislature.
But there is a catch. The Indonesian economy has been doing remarkably well, amidst the tumbling fortunes of its neighbours. Prices have actually fallen, including those of important staples, for several months in 2009. SBYs popularity is high precisely because of the seeming economic success of government policies (and a little bit of luck). One can also point to the impact that Boediono’s calm and steady leadership of Bank Indonesia has had on confidence in financial markets, during a difficult time.
So why change a winning formula? Perhaps the answer to the puzzle lies in two other key areas, rather than in the economic credentials that Boediono brings to the Presidential ticket. The first relates to the role that the current Vice President, Jusuf Kalla, has had in policy making, and his relationship with SBY in the past five years.
While Kalla was often seen to be given a free reign in pushing key economic policy decisions (such as the oil price hike in 2005), his impetuous, can-do style, fashioned from years of experience as a businessman, is said to have grated with the President.
Further, not infrequently SBY was forced to share the limelight with his Vice President. And there was always a sense that the Vice President was ready to cut corners to get the job done, sometimes undermining the carefully crafted image of rules-based government projected by SBY.
Boediono could be expected to offer equally valuable advice on the economy. But he is likely to do so in a more measured fashion and away from the cameras, as he did for several years as the Economics Coordinating Minister. As many have been quick to point out, he has shown no sign of political ambition, which cannot be said of many other potential contenders for the Vice Presidency. And he is pronounced by all to be squeaky clean.
It is also worth pointing out that although Boediono is not a politician, he certainly does not appear politically naïve. He has laboured hard in selling the government’s economic policies to cocky and often self interested parliamentarians, since his elevation to Finance Minister in the Megawati government in 2001.
Second, selection of Vice-Presidential candidate from any one of the Muslim parties risked alienating the others. Representatives of all the Muslim parties (and especially those of PKS and PAN) have mouthed their disapproval of Boediono’s selection, rather than a choice of one of their own candidates. Nonetheless, if another Muslim party candidate had been chosen by SBY, one senses the disenchantment of the others would have been much deeper and politically harmful to the President’s would-be coalition with the Muslim parties. The case is different for a politically neutral candidate. It is less likely that any of the parties will risk being sidelined simply because their leader was passed over by SBY in his choice of a running mate.
Time will tell, in politics as well as in policy, whether the President has made the right choice. Selecting a reliable lieutenant with a similar cautious bent, another Javanese, might seem to go against the grain in Indonesian politics. But if he is elected for a final term, perhaps having a soul mate in the Palace will give SBY more leeway and greater confidence to take stronger stands on big policy issues, both nationally and internationally, in his second and last term in office.
Of course, he still has to be elected. But at the time of writing few political pundits are betting on the opposition teams.
Dr Boediono was a strong supporter of the establishment of EABER and launched it in Bandung Indonesia in 2005 when he was Minister for Coordinating Economic Affairs.
This article was originally published on ANU’s Indonesia Project blog, and may be found here.

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