Introduction

Electric vehicles (EV) from China are gaining popularity in Indonesia, with 66% of consumers viewing them positively. This is driven by their affordability, innovative features and comfort.

Wuling Motors leads as Indonesia’s most popular EV brand, winning awards and achieving high sales. Other Chinese brands like BYD, DFSK, Seres, Chery and Neta are also making significant strides in the market.

This has been facilitated by the Indonesian government that is actively supporting EV adoption through substantial subsidies and incentives, totaling US$445.6 million, and has attracted large investments, such as the US$1.3 billion from BYD. Local production initiatives – such as Chery’s in Bekasi – and partnerships like Sokonindo aim to bolster Indonesia’s position in the global EV supply chain.

The focus extends to electric motorcycles, with several manufacturers establishing factories in Indonesia. PT. Sunra Asia Pacific Hi-Tech, PT. RPM and PT. Yadea Teknologi Indonesia are leading this initiative, with Luyuan planning a significant market entry through domestic partnerships.

Agreements

The influx of Chinese EV manufacturers into Indonesia is a result of recent cooperation agreements between the two countries, which have spurred efforts to enhance investment cooperation, particularly in EV batteries, automotive manufacturing and spare parts production. This is reflected in an MoU signed during Jokowi’s visit to Beijing in 2023. However, discussions on EV cooperation had been ongoing between the two countries since before this visit.

Furthermore, B2B collaborations have been established – such as between China’s GAC Aion New Energy Automobile Co. Ltd. and Indonesia’s PT. Indomobil Energi Baru – to distribute GAC Aion EV in Indonesia. This partnership aims to provide environmentally friendly vehicles including sedans, SUVs and supercars.

Additionally, another Chinese company, Zeekr, has partnered with PT. Premium Auto Prima as the Brand Holder Agent (APM) to introduce SUV and MPV models in Indonesia.

Other renowned manufacturers like Great Wall Motor will also enter the Indonesian automotive market in the second quarter of 2024 with a specific focus on hybrid models.

The growing entry of Chinese can also be attributed to the government’s efforts to revise the incentive scheme for electric vehicle manufacturers, such as relaxing VAT taxes, adjusting the Domestic Component Level and relaxing Completely Built Up (CBU) vehicle imports, all of which aim to attract foreign investors to invest in the country.

This also causes Chinese EVs to flood the Indonesian market compared to products from Japan or South Korea. This popularity is due to the low price of Chinese EVs compared to the price set by producers from other countries. In fact, Chinese EVs are even cheaper than normal cars in circulation today. This competitive price can be attributed to low production costs and component quality.

The increasing popularity of Chinese EVs in Indonesia actually plays well into the government’s goals to reduce independency on foss

Challenges

The use of EVs in Indonesia still faces a number of challenges. For example, 71.2% of respondents in a survey two years ago considered it difficult to find public EV charging stations. This concern proves true even today, as charging stations remain limited an unequally distributed.

As of April 2024, the number of charging station stood at 1,380 units and almost half (656) were located in Java. Interestingly, charging stations remain limited in Sulawesi and Maluku, the two places where Indonesia’s nickels are mined and processed. This seems to suggest that the local population has not really benefitted from the downstream products of nickel extracted from their areas.

Moreover, 62% of respondents expressed concerns about the high price and maintenance cost, which goes to show their unfamiliarity with the minimum cost of charging an EV. In addition, a number of respondents also acknowledged the limited range and distance that EVS can cover as well as concerns about the long charging time for EV battery.

Another challenge concerns the handling of battery waste. The government needs to be more proactive and agile in creating clear regulations regarding the processing of battery waste, whether they will be recycled or repurposed to support sustainable battery use. Without clear regulations and adequate supervision, battery waste could potentially lead to new environmental issues.

Besides, the burgeoning presence of Chinese EVs in Indonesia could have several implications on the latter’s political and economic landscape.

Firstly, it would create inconsistent policy dynamics. The competition between manufacturers from China and other countries over EV imports and production would result in the inconsistencies of Indonesia’s policy frameworks, as manufacturers from Japan and South Korea would require different conditions. This lack of coherence in policies can lead to uncertainties for investors and hinder the sector’s sustainable growth as well as competitiveness.

Another important point is concerns over the exploitation of nickel resources in Indonesia, a crucial component for EV batteries. Indonesia’s abundant nickel reserves present a double-edged sword in the context of EV production. The rush to exploit nickel reserves without standardized environmental and labor regulations raises significant concerns about sustainability and social responsibility. The lack of standardized practices combined with the prevalence of cheap nickel prices raise concerns about environmental sustainability and fair economic practices. Indonesia risks becoming merely a raw material supplier without substantial value addition if proper regulations and strategic industrial policies are not implemented.

Moreover, Indonesia’s role in the EV supply chain is predominantly assembly, with the more technologically advanced components such as batteries and core EV technologies sourced from China. This condition limits Indonesia’s ability to capture higher value-added segments of the EV market, reinforcing dependency on foreign technological expertise and potentially stifling local innovation and industrial growth.

Related to this, the intensifying entry of Chinese EVs could increase Indonesia’s reliance on China. This dependency could include crucial components like batteries, electric drivetrain technologies and charging infrastructure, all primarily sourced from China. This would deepen Indonesia’s dependency on Chinese industrial strategies and market dynamics, potentially limiting its autonomy in shaping domestic EV policies and priorities. If, for example, China’s domestic market is shaken by geopolitical tension, its impacts would reverberate across Indonesia’s EV market.

Another concern relates to the recent announcement by the Indonesian government to implement up to 200% increase in import duty on textile products from China. This might induce a modicum of anxiety on Chinese exporters from all industries and sectors, including EV producers, if not communicated and managed well. For now, however, the impact of this announcement on the EV sector remains to be seen.

Lastly, EV is in no way going to be a panacea to the urban congestion problem in Indonesia’s major cities. The emphasis on increasing private EV ownership, as opposed to developing an effective public transportation system, coul

Conclusion

Indonesia needs coherent policies amidst the influx of Chinese EVs and lack of competition in the sector. Clear policies are vital to attract investments and foster industrial growth.

Addressing nickel resource exploitation is critical. Indonesia should adopt standardized mining practices and fair pricing mechanisms to sustainably manage its reserves, minimizing environmental impact and maximizing economic benefits.

To strengthen its EV supply chain role, Indonesia must focus on developing domestic capabilities beyond just assembly. This includes technology partnerships, R&D in EV components like batteries and incentives for local innovation to reduce reliance on foreign technologies and enhance economic gains. Rather than solely promoting private EV ownership, Indonesia should prioritize enhancing public transportation infrastructure and technologies. This approach – involving investments in mass transit, adopting EVs for its public transport fleets and promoting sustainable mobility solutions – can ease urban congestion and lower emissions.

Introduction

This year has been yet another vital period for China-Indonesia relations, where cooperation in various sectors intensified.

Four areas shall be considered: increased engagement frequency, multilateralism, trade and investments, and the South China Sea.

Frequent Engagements

Both sides have been actively busy meeting each other since the beginning of the year.

In February, Chinese State Councilor and Foreign Minister Qin Gang met his Indonesian counterparts Retno Marsudi at the 4th Joint Commission for Bilateral Cooperation (JCBJ) and discussed cooperation in trade, investment, health sector and people-to-people exchange. In the same month, Qin Gang also went to Jakarta to meet with President Joko “Jokowi” Widodo, where the latter invited the former to invest in Indonesia’s new capital city.

Two months later, Qin also hosted Indonesia’s Coordinating Minister of Maritime Affairs and Investment Luhut Binsar Pandjaitan in Beijing. The two discussed ways to strengthen trade and investment between the two countries.

In the same month, Luhut co-hosted the Meeting of China-Indonesia High-level Dialogue and Cooperation Mechanism, where he met with Director of the Office of the Central Commission for Foreign Affairs Wang Yi. 

In July, Jokowi met with Chinese President Xi Jinping in Chengdu for talks about joint projects that include Indonesia’s new capital as well as cooperation in health, research and technology, and other regional issues. During the visit, Jokowi also met with Chinese firms to discuss possible investments in Indonesia, especially in the petrochemical and renewable energy.

Jokowi then hosted Chinese Premier Li Qiang in September – which was the latter’s first visit to an Asian country – to discuss ways to expand trade and investment between Indonesia and China. In that meeting, an investment worth US$21.7 billion was committed by China. Six new agreements were also signed – these are in the areas of e-commerce, industrial cooperation, support for enterprises, agriculture, science and technology, as well as fisheries. Soon after, Indonesian Vice President Ma’ruf Amin visited the Chinese premier in  Nanning to discuss ways to strengthen bilateral ties between their countries, especially in the sectors of renewable energy and halal industry.

In the same month, Indonesia’s Coordinating Ministry for Maritime Affairs and Investment also had a first of its kind high-level dialogue between Indonesian and Chinese officials on cooperation on energy transitions. The meeting, which was co-hosted by the Ministry, brought together representatives from both countries’ institutions, industry leaders and CSOs to exchange views on China’s role in Indonesia’s energy transition programs.

October 2023 was the commemoration of the 10^th anniversary of the Belt and Road Initiatives (BRI). During the meeting, China expressed its willingness to cooperate with Indonesia on several sectors, including digital economy, photovoltaics, new energy vehicles, as well as the import of agricultural and fishery products. It was also mentioned that the two countries would deepen the integration of industrial chains and supply chains, as well as jointly promote the establishment of a “regional comprehensive economic corridor”.

Apart from 10 Memoranda of Understanding (MoU) being signed, it was also during this meeting that the two countries established the 2022-2026 Plan of Action for Strengthening the Comprehensive Strategic Partnership, aimed to strengthen the ties between Jakarta and Beijing. In addition, both also agreed to establish the 2+2 Dialogue Mechanism for Foreign Ministers and Defense Ministers, which is expected to expand high-level channels for strategic communication and dialogue platforms for political, defense and security cooperation.

It is crucial to note that the 2+2

In a separate meeting with Li in Beijing, Jokowi also asked China to pour its investment to help build Indonesia’s new capital. Before Jokowi’s departure for Beijing, acting Chief Investment Minister Erick Thohir also said that Indonesia also aimed to seek China’s assistance for renewable energy and infrastructure projects.

In essence, the frequency of bilateral engagement between the two is considered highly unusual, even more frequent than China’s engagements with other ASEAN countries. This is quite remarkable considering Indonesia’s position as ASEAN Chair at the time. It would be interesti

Despite this, it can be seen that the multiple visits are a manifestation of the pragmatic nature of this bilateral relationship, especially with economic and investment considerations forming parts of its foundation. Missing from the broader scope is the critical aspects such as the environmental and societal impacts of Chinese investments as well as the issue of labor rights.

Moves towards Multilateralism

Beyond frequent bilateral meetings, in 2023 we also saw the growing move towards multilateralism.

The most crucial one was Indonesia’s participation in the 2023 Brazil, Russia, India, China, and South Africa (BRICS) Summit. While the idea of Indonesia joining the BRICS was raised many years ago with the support of China, in July 2023, Indonesia finally accepted the invitation to participate in the Summit, held a month later. Despite this, during the Summit, Jokowi and his entourage did not issue many statements, seemingly trying to avoid media attention on the delegation’s presence at the event. As we argued elsewhere, Indonesia does not yet see any pragmatic reason for joining the group.

In addition, a trilateral dialogue between Indonesia, Russia, and China was conducted on the sidelines of the ASEAN Summit a few months ago. The trilateral dialogue discussed collaboration plans based on mutual concerns about the current great power divide. Furthermore, the three countries also agreed to coordinate towards achieving economic stability in the Global South as well as strengthening security architecture in the ASEAN and wider Asia-Pacific region.

While the continuity of the Russia-Indonesia-China Trilateral Meeting has been the topic of much discussion, a new window of opportunity appears to be opening for the tripartite relationship. While there has been some speculation about a tripartite bloc, it is unlikely to happen anytime soon.

Trade and Investments

While China remains a top trading partner for Indonesia, concerns have emerged that the ongoing slowdown of Chinese economy and the decline of its domestic property market is likely to have considerable impact for Indonesian commodities. In this case, efforts to diversify Indonesian export destinations for commodities is important.

For example, in recent years, Indonesia’s export market for crude palm oil (CPO) and coal has been focused on China. Nonetheless, the decline in Chinese demand can be felt in 2022, as evidenced by the decrease in CPO export by 18.4% and coal by 55.7%. In this case, exploring new destinations can be a step forward accompanied by increasing the value add of commodities to increase its revenue.

O

During Jokowi’s visit to the BRI Forum in October, 31 private firms and state-owned enterprises (SOEs) from Indonesia signed deals totaling US$13.7 billion with Chinese firms. According Minister of State-Owned Enterprises

Earlier in September, China and Indonesia also signed four new agreements which will be launched in the Yuanhong Investment Zone in Fuzhou, th

It is crucial to note that “Two Countries, Twin Parks” is a new model of cooperation featuring two countries establishing industrial parks. China and Indonesia have included three other Industrial parks, namely the Bintan Industrial Estate, the Aviarna Industrial Estate and the Grand Batang City.

Meanwhile, Jokowi’s visit to Chengdu in July allowed him to secure billions of dollars in investment commitment from Chinese firms. One of the biggest was an US$11.5 billion commitment from one of the world’s largest glass makers, Xinyi, to build a manufacturing plant in Indonesia.

The role of international exhibition must not be downplayed. This year, major Chinese companies signed MoUs on projects located on Bintan Island and East Kalimantan in the smart city sector, which was facilitated by an exhibition in May by the Chinese Indonesian Association (INTI).

Furthermore, two business fairs held in Jakarta in February and May saw 36 deals worth around US$9 billion being sealed. Meanwhile, another fair organized in in May secured 10 projects with a total investment of 4.55 billion yuan.

Most of the investments signed by the two countries in 2023 focus on renewable energy and energy transition. In May, for instance, Indonesia inked an MoU with Chinese electric vehicle (EV) firm BYD in Shenzhen to explore the possibility of Chinese investment in Indonesia’s EV industry.

Problems with Chinese Projects

Despite all these positive steps, this year also saw several problems emanating from Chinese projects in Indonesia. A particularly scandalous one saw the eviction of some 7,500 people from the island of Rempang for the construction of an Eco-City with a giant Chinese-owned glass factory Xinyi, which is mentioned above.

Local people feel that the project threatens their livelihood as they are forced to relocated to new areas, far from their traditional fishing community. It is important to note that during the clashes between residents and police to demonstrate the project, tear gas and rubber bullets were used against protesters, which critics denounced as an excessive use of force.

Another inconvenience comes from the mining sector, whereby Chinese involvement in nickel mining has caused major environmental and labor impacts in Indonesia. Dispute among workers in Chinese projects have also been reported, with a major incident occurring in January whereby an Indonesian worker and a Chinese worker were killed during a protest at the Chinese-owned smelter in Morowali. A new report published this year shows that while Indonesian workers are treated unfairly in Chinese projects, Chinese workers also experience very poor living conditions in these projects.

Another issue was the arrest of Chinese citizens for involvement in cross-border telephone and online romance scam operation in Batam. Similar arrest was also reported in 2019, suggesting that the problem had been ongoing for years.

South China Sea

The South China Sea remains an important issue. As early as January, a tension flared up after Indonesia announced that it had approved plans to develop a large natural-gas field near the Natuna Islands and sent warship to monitor Chinese coast guard vessel in the area.

Under the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), the country’s oil and gas regulator, the project is estimated to entail a US$3.07 billion investment. It will be operated by the British company Harbour Energy and the output will be exported mainly to Vietnam.

However, since the location of the Natuna field is in the southern section of the South China Sea, Indonesia is taking some risks and must be prepared for how China responds.

While China protested against the explorations, as the gas exploration site lies under Indonesia’s continental shelf and in its Exclusive Economic Zone (EEZ), Jakarta has the sovereign right to exploit all the natural resources in its water column, on the seabed and its subsoil, as dictated by the United Nations Convention on the Law of the Sea (UNCLOS).

At the same time, Indonesia also attempts to balance China’s activities in the South China Sea by expanding Super Garuda Shields, a joint drill led by the Indonesian and US militaries.

While negotiations on the Code of Conduct (COC) was one of the topics discussed during the ASEAN Summit in July, its effectiveness and implementation remain to be seen.

Soft Power

Aside from the above issues, the cooperation also continued in the soft power realm.

Science and technology cooperation was a highlight. This was demonstrated recently when Indonesia was chosen as the guest of honor at the 11^th China (Mianyang) Science & Technology City International High-Tech Expo in Mianyang City, China. The event also witnessed the meeting between both countries’ representatives for potential cooperation in the field of science and technology.

Also in November, there was co-operation in innovative research in the fields of sustainable development, environmentally friendly technologies, development of the mining sector, resource recycling and development of new energy resources. This cooperation was agreed upon by China’s Central South University, GEM Co., Ltd. and Bandung Institute of Technology.

Several events also accentuated the close relationship between China and Indonesia. These include the reception celebrating the 74^th Anniversary of the Founding of the People’s Republic of China, the Mid-Autumn Festival and Indonesia’s participation at the ASEAN-China Week 2023.

Indonesia is also determined to promote the people-to-people exchange. The Ministry of Tourism and Creative Economy set up the Wonderful Indonesia Sales Mission in Shanghai and Hangzhou, aimed at increasing the number of Chinese tourists to Indonesia to 361,500.

Future Outlook

The ties between China and Indonesia are expected to grow and expand in 2024. People-to-people exchange may be increased given that Indonesia is considering granting visa-free ent

However, it all depends on who is elected as the next Indonesian president. The most likelihood scenario is that whoever is elected would continue to prioritize economic ties with China.

The question is whether the new Indonesian president would recalibrate the opportunities and risks of the Sino-Indonesian relationship.

There are still a few months until the presidential election in February 2024. Indonesia’s relationship with China, however, will undoubtedly remain an important component of Jakarta’s foreign policy, with ramifications to Southeast Asia, the Indo-Pacific and the world at large, given Indonesia’s geopolitical heft and status.

Introduction

The Asian Infrastructure Investment Bank’s (AIIB) 2023 Climate Action Plan (CAP 2023) highlights the institution’s strategy for renewed energy sector aimed at pushing back against the climate

While such a policy pronouncement projects a confident and convincing narrative, the implementation of this strategy still leaves room for improvement.

CAP 2023 highlights four main commitments. First, AIIB aims to meet the needs of its members for a “Just Approach on Climate Finance” by customizing climate solutions based on individual needs and circumstances. Second, it intends to take a wholesome approach through proposing solutions which “simultaneously mitigate climate change, build resilience, enhance adaptation, and offer cobenefits for biodiversity and nature conservation.” Third, it aims to mobilize funding for climate projects. Lastly, AIIB will promote technological innovati

The document also highlights specific efforts that will be carried out by AIIB. First, AIIB will not channel funds to coal-related projects. Second, despite stopping funding coal projects, AIIB will still invest in the oil sector to ensure energy provision in remote areas. Third, AIIB will be strictly selective in deciding on projects related to natural gas. Fourth, AIIB will emphasise on climate adaptation and resilience for energy infrastructure, while also further emphasizing on gender equality.

However, from these commitments, AIIB still appears to be hesitant on its anti-climate crisis and sustainability agendas. These two imperatives are interrelated and complementary. When funding goes to projects that do not support sustainability, the climate as a whole will be affected.

This is why it is important for AIIB to align its funding scheme to the Environmental, Social, and Governance (ESG) standards, while also obligating recipient countries to adhere to their sustainability and climate action commitments.

Questions about Commitment to Climate Action

Prior to CAP 2023, AIIB has been seemingly hesitant in investing in clean energy. This is demonstrated from its investment pattern in recent years, where most investments were

AIIB had also indirectly financed such sectors through intermediaries. In 2017, the AIIB backed the IFC Emerging Asia Fund (EAF) in its acquisition of the equity of Shwe Taung Cement to construct a new kiln aimed at increasing cement production. Interestingly, higher cement production means higher demand for coal from a nearby coal mine.

Furthermore, EAF has also channeled funds to Summit Power International, a Singapore-based company, which operates 13 power plants in Bangladesh with fossil fuels. This investment is also considered a high risk, considering the potential implications on land acquisition problems and pollution.

Therefore, CAP 2023 can be seen as an attempt by President of AIIB, Jin Liqun, to temper down such concerns (e.g. no longer funding coal-related projects).

Coal was highlighted because majority of its investments in the coal energy sector goes to Asian countries including Indonesia. Considering the Asia-Pacific region produces the largest volume of Greenhouse Gases (GHG) –  including half of carbon dioxide worldwide – the region is thus vulnerable to the impacts of the climate crisis. This might have been one of the reasons prompting AIIB to transition to renewables across Asia.

While the recent strategies laid out by AIIB is well-intended, there is still a lack of clarity on achieving the desired outcomes. This could lead to questioning the institution’s commitment towards instilling positive changes. For example, AIIB does not have a specific GHG emission reduction target.  Unlike AIIB, the Asian Development Bank (ADB) appears to be more serious, targeting to peak GHG emissions by or before 2030. ADB and other Multilateral Development Banks (MDBs) have also pledged to channel US$175 billion per year in climate finance by 2025, as announced at the UN Climate Action Summit in 2019. Though AIIB has stated that it will strictly select natural gas projects for funding, without clear oversights, there is a still a possibility of AIIB pivoting largely to funding to gas exploration. Though   

Meanwhile, the

Que

Despite the push for renewables, CAP 2023 still falls short on ensuring sustainability, especially on issues relating to social and environmental commitments. Similarly, there are no specific targets set to address these issues in the funding segment.

AIIB’s Environmental and Social Framework (ESF) also fails to comprehensively address labor rights and protection.  Furthermore, AIIB’s Environmental and Social Standard

These highlighted issues indicate that the AIIB’s commitment to sustainability still has room for improvement.

Impact on Indonesia

Indonesia has been a part of AIIB since its establishment in 2015. In fact, the Vice President and Chief Administration Officer of AIIB today is Luky Eko Wuryanto, an Indonesian.

Since 2016, there have been 11 projects funded by AIIB in Indonesia. Of these 11 projects, the most problematic is the aforementioned Mandalika Project worth US$248.4 million in 2018. On this issue, AIIB is considered negligent in conducting due diligence to avoid and minimize the risk of involuntary resettlement and eviction of affected indigenous peoples. Even before the project was greenlit, land disputes were rampant in Mandalika, West Nusa Tenggara.  

Based on a survey from the Indonesian Infrastructure Development Monitoring Coalition (KPPII), as many as 98% of respondents were not a

This is despite the requirement in AIIB’s ESF for its clients to consult affected communities and provide evidence of support from indigenous peoples. The survey results strongly indicate a possible violation of AIIB’s ESF itself, due to the institution’s lack of due diligence.

KPPII also reported that affected women have been ignored in consultation meetings with the Indonesia Tourism Development Corporation (ITDC) and AIIB. Many

The above case reflects that AIIB’s sustainability standards are still inadequate, which is also exacerbated by the Indonesian government’s ineffectiveness to anticipate this problem and supervise the project properly. Thus, there is a need for all stakeholders to continue to supervise/monitor AIIB’s investments in the country.

In addition, in the context of supporting the energy transition agenda, AIIB might be seen as a more “lenient” investor as it imposes no strict conditions and requirements when it comes to social and environmental protections, compared to Western-led funding schemes such as the Just Energy Transition Partnership (JETP). However, the implication is that the implementation of its projects often results in social and environmental problems, such as the Mandalika Project above.

Regardless, the Indonesian government should not solely rely on AIIB as an investor, considering the institution’s ongoing struggle to become “greener” in its financing schemes. The government should look at other funding opportunities from Western countries and most importantly, it needs to encourage AIIB to properly implement CAP 2023 to ensure destination countries can fully benefit from the projects it funds. While investment in infrastructure projects would certainly be beneficial economically to countries like Indonesia, the sustainability aspect of such projects should be considered, so that it could assist the countries in meeting its commitments in the Environmental, Social, and Governance (ESG) sphere.

Introduction

Recent news about the sinking of Chinese fishing vessel Lu Peng Yuan Yu 028 brought to the fore the hardship faced by Indonesian ship crews.

The vessel, which sank in the Indian Ocean last May, allegedly carried 39 crew members – 17 of which are Indonesians – who went missing.

The Chinese government ordered a search and rescue for the missing mariners, while its Foreign Ministry launched an “emergency mechanism for consular protection” involving embassies and consulates in Australia, Sri Lanka, the Maldives, Indonesia and the Philippines.

Seven bodies of the crews have since been found, though the whereabouts of the Indonesian crews remains uncertain. So

This incident, which is the latest of a series of incidents involving Indonesian ship crews in Chinese vessels, should be a wakeup call for Indonesia and China to take this issue more seriously in their relations.

Repetition upon Repetition

Indonesia’s Ministry of Foreign Affairs has successfully conducted two repatriations of cr

In November 2020, 157 crew members who were stuck on Chinese ships were repatriated through a handover process in the middle of the North Sulawesi Sea. Two among those were already dead. In December of the same year, the Ministry received six crew members from a Chinese ship in Batam waters, one of which was dead.

The number of dead crew members is certainly a concern, even as the Indonesian Institute for Destructive Fishing Watch (DFW) reported that there is an increasing number of Indonesians being forced to work on Chinese vessels.

Some of these workers were duped into fake agreements or arrangements, initially promised a work opportunity elsewhere but ended up being forced to work on Chinese vessels. These workers also experience poor and degrading treatments, such being forced to work for more than 18 hours a day, subjected to violence and served fish bait and distilled water from the sea as daily consumption. Sick crews often suffer for 30-45 days before succumbing to death, during which period they were also forced to work.

Corpses are thrown into the sea on the pretext of preventing disease transmission, an activity labeled as “sea burial”. In one case, some Indonesian crews attempted to persuade the ship’s captain to have the corpse “stored” in the fridge before a proper burial on land could be conducted. This idea was rejected by the ship’s captain.

Recruiters often try to cover up the fact of the death. For example, in 2019, PT. Karunia Bahari Samudera contacted the family of a dead crew and gave them a letter in Chinese from the captain of the ship and Rp50 million for insurance coverage. Nonetheless, the company asked the family to claim the insurance on the condition that they give approval for the body to be thrown into the sea. PT. Karunia Bahari Samudera also asked family to sign a statement letter not to sue the company, the ship owner and the ship’s captain.

The same thing happened to Ari, who passed away on 31 March 2020. PT. Karunia Bahari Samudera only informed his family of his death on 9 April 2020 and the family gave their approval for a sea burial four days later. However, to make it appear as though the family had given approval, the letter was backdated to March 31.

Although the

Moreover, these workers are often paid very little. Some of the crew members did not receive a salary and some had their wages deducted – which means the contractual agreement was violated. There are also crew members who received a meagre salary of US$120 or the equivalent of Rp1.7 million for 13 months of work.

Some workers went missing. For instance, a woman from Tegal wrote an open letter to President Joko “Jokowi” Widodo after her husband, who was suspected to have been forced into labor, disappeared. By that time, her husband had worked for one year as a crew member on the Fu Yuan Yu ship. The last time they communicated, she was told that her husband had experienced inhumane treatment at work and was not allowed to go home.

Later, she received news from a crew member that her husband was transferred to another ship. After that, the trail went cold.

In other cases, crews got stranded in other countries. For example, 13 Indonesians were stuck on Somali waters for about eight months, where one died and another disappeared.

Another case involved to a crew member who worked on Luqing Yuan Yu 623. He died on board and his body was found in Somali waters. This death was allegedly due to the torture he received while working on the ship. This incident occurred in the last week of January 2020, but the news only arrived at the Ministry of Foreign Affairs in May, about four months later.

The Indonesian government had tried to evacuate them but had not been successful because their location was difficult to reach.

Problems compound as their passports are confiscated by the ship captain and the Chinese fishing boat company that refused to return them to Indonesia, prompting some crews to jump off the ship. For instance, two Indonesian crew members on board the Lu Qian Yuan

Ways Forward

Over the years, the Indonesian government has asked the Chinese government to investigate these cases and hold shipping companies responsible. Minister of Foreign Affairs Retno Marsudi once said the cases experienced by Indonesian crew members “will be followed up strictly through a parallel legal process by both the PRC authorities and the Indonesian authorities.”

Indonesia has also summoned China to ask for clarification regarding vessels allegedly mistreating Indonesian crews, with some resulting in death.

However, in response, the Chinese government claimed to be paying special a

Therefore, the issue needs to be addressed in the interactions between Indonesia and China. Laws relating to the protection of crew members working on foreign ships already exist, but these need to be enforced properly by the government. In addition, the government should also look into illegal agency companies that actively recruit young people with the promise of money, only to end up enslaving them.

Indonesian authorities need to coordinate with China’s law enforcement to investigate both Indonesian and Chinese companies that employ crew members from Indonesia.

It is also crucial to coordinate over data collection on crews’ placement on Chinese vessels as a safeguard against potential problems down the lane, such as the cases presented above.

Indonesia also needs to ensure that the rights of the deceased crew members are properly channeled to their heirs and family members. They also need assistance and protection so as to not be manipulated by irresponsible agents.

Moreover, Indonesian law enforcement officials need to investigate a number of recruitment agencies who delivered the bodies of dead crew members because they are partly responsible for these human tolls. Lastly, attention is also needed on the existence of several pending issues, including returning stranded Indonesian crews, upholding their labor rights, improving workplace conditions and fostering law enforcement through mutual legal assistance.

Introduction

Prabowo’s has had a long and colorful political career after leaving the military, currently serving as Indonesia’s defense minister.

Amidst the ups and downs of his political journey, he has contested several times either as vice presidential or presidential candidate in the past three elections. He is also on track to become Gerindra’s candidate for the top office in the upcoming 2024 political contestation.

His multiple losses have not deterred him from contesting again and again, perhaps as a testament of his character as an unyielding soldier of Indonesia’s National Armed Forces.

His first taste of the contest was in 2009 as Megawati Soekarnoputri’s running mate, who was and still is the chairwoman of PDIP. He ran as presidential candidate in 2014 with Hatta Rajasa of PAN in his ticket and five years later with Sandiaga Uno. Incumbent President Joko “Jokowi” Widodo defeated him on the last two counts, but made a decision to co-opt Prabowo and Sandiaga as ministers in his current cabinet. Next year’s election will be Prabowo’s fourth.

While we have covered Anies Baswedan’s interactions and views on China in another piece, this piece aims to highlight Prabowo’s interactions with China. A minister in Jokowi’s cabinet, Prabowo is part of the system which foreign policy aligns closely with China’s interest.

If Prabowo wins next year, would his vision sustain or disrupt the close Indonesia-China relationship that has been cultivated by Jokowi?

Formal Engagements as a Minister

Prabowo is one of the Indonesian officials who frequently interacts with China, especially considering his position as defense minister. In November 2019,  for example, Prabowo met with General Wei Fenghe, his then-Chinese counterpart, at the 6^th ASEAN Plus Ministerial Meeting in Bangkok. A month after, the two held a face-to-face meeting in Beijing, where they discussed the possibilities of fostering cooperation in the defense ind

In return to this, Prabowo also received a visit from the Chinese Defense Minister in Jakarta in September 2022. The escalation of the South China Sea tension was the subject of this occasion. Prabowo emphasized Indonesia’s unwavering stance to uphold its free and active foreign policy and will continue to push for peace in the region as well.

Then in November 2022, Prabowo again flew to Xi’an to meet with General Wei Fenghe. The two ministers discussed continuing cooperation in areas that were delayed by the Covid-19 pandemic, such as joint military exercises and military education.

Prabowo’s Statements on China

On the sidelines of the 2023 Shangri-La Dialogue in Singapore, Prabowo took the time to hold a meeting with the new Chinese Defense Minister Li Shangfu. According to Prabowo, the Indonesia-China relations must be maintained like the ties between siblings, especially to encourage the creation of regional and global stability and peace. He also expressed his full support for optimizing the relationship between Indonesia and China to achieve a comprehensive strategic partnership.

He sought to enhance bilateral cooperation through the formation of the 2+2 Indonesia-China forum. The forum, according to Prabowo, is expected to significantly enhance comprehensive cooperation between the two countries, particularly in the field of defense and security in the future.

Engagements such as this potential forum are not an alien concept in the bilateral relations. Over the years, the Indonesia-China relations has been strengthened through the annual bilateral meeting forum known as the Defense Industry Cooperation Meeting (DICM). This has also become an avenue in which Prabowo meets with his

The defense industry also saw dynamic activities during Prabowo’s stint as minister. During his tenure, Prabowo sought to strengthen cooperation with Chinese companies. Recently, for example, the Ministry of Defense discussed the possibility of a defense cooperation between state-owned enterprises such as PT. LEN, PT. Indonesian Aerospace and PT. Dahana with Chinese companies.

But it was obvious Prabowo’s interest goes beyond the realm of defense, which has been recorded since before his 2019 attempt at running for presidential office. In 2019, Prabowo stated that Indonesia must imitate China’s endeavor in poverty alleviation, which he considered to be a success story within a relatively short time. Interestingly, this was conveyed during one of the debates between 2019 presidential candidates.

It not a secret that Prabowo holds China in high regard. During China’s 69^th Independence Day celebration in Jakarta in 2018, he mentioned that China is an important country for Indonesia, necessitating the importance to cultivate good relations with the Middle Kingdom.

In the same month, Prabowo held a meeting with Chinese Ambassador Xiao Qian in Hambalang, Bogor. The meeting was organized as the Ambassador’s way of conveying his gratitude to Prabowo and Gerindra, who had always give warm welcome to the Chinese diplomat. This further accentuates the close relationship between Prabowo and China.

Prabowo responded by stating that anyone who sacrifices their time and energy to travel and meet the Indonesian people truly displays the virtue of sincerity, and thus must be considered a good friend. He also stated that China is a big country with big influence in the world.

These are just snippets of how high Prabowo regards China, but can also be simply interpreted as his efforts to attract China’s money and helping hand. The fact that these statements were delivered before his run in the 2019 presidential election means his approach to China as a potential president could have been a parallel to Jokowi’s own in his administration, which has attracted a lot of Chinese investment and projects over the years.

Things to Consider

The frequency of Prabowo’s interactions with China is indeed noteworthy as an indicator of his potential engagement with China. However, the frequent interaction cannot be extricated from the fact that many of these engagements were made as part of his official post as a minister in Jokowi’s cabinet, which does not make secret its positive sentiment towards China. Thus, part of Prabowo’s display of closeness with China must be viewed from the lens of Jokowi’s larger foreign policy direction.

However, it needs to be underlined that it is possible that Prabowo will remain on good terms with China if he were to clinch the top post in the 2024 presidential election. Prabowo likes to display his views and expertise in foreign policy and global affairs, and thus presidential debates and his first few months as a potential presidential will be critical to gauge his attitude towards China. Of course, a closer alignment with China, under his potential presidency, begs the question of whether he would dial down relationship with Indonesia’s traditional western partners such as the United States and Australia.

There are other factors too. The cooperation between Gerindra and the Chinese Communist Party (CCP) actually exists, even though it is not as intimate as the latter’s engagement with PDIP, Jokowi’s political vehicle. Time will tell if Gerindra would play a bigger role in engaging China under Prabowo’s purported administration.

It will be interesting to see the direction of Prabowo’s foreign policy if he assumes the presidency. However, it can be argued that the next Indonesian president – whether it be Prabowo, Ganjar Pranowo or Anies Baswedan – will still maintain good relations with China, considering that China’s influence is already so entrenched in Indonesia. However, there may be a different style of strategy in navigating the bilateral relations compared to Jokowi’s own. It is also important to note that despite his experience in interacting with China, Prabowo lacks experience in discussing economic issues with China. Thus, it would be vital for a Prabowo administration, if he wins, to handpick its chief economist who can translate Prabowo’s views and objectives into sound economic relations with China, provided that the bilateral relations is already dominated by economic matters.

Introduction

On 23-24 May 2023, President Seyyed Ebrahim Raisi of the Islamic Republic of Iran made his first visit to Indonesia since being elected into office in 2021. President Joko “Jokowi” Widodo welcomed this special guest at the Bogor Palace.

This meeting discussed the current world geopolitical conditions, especially regarding the crises in Palestine and Afghanistan. It gave birth to a memorandum of understanding (MoU) to strengthen bilateral cooperation in at least 10 areas. These are trade, science and technology, visa exemption, halal products, medicines, and cultural exchanges, among others

It seems that the two countries will take adva

Both leaders also stated that they wanted to increase cooperation in technology transfer and joint production with Indonesia’s state-owned enterprises in the fields of biotechnology and nanotechnology, especially in the health, energy, agriculture and environmental sectors.

Furthermore, the signing of a Preferential Trade Agreement (PTA) was special. The PTA had been in discussion since 2021 in the virtual meeting between foreign ministries of both countries.

These steps forward in the bilateral relations have been in the

The rest of this piece will look into the intent of both countries to collaborate closely in these two sectors.

The Political Dimension

Tension due to Iran’s nuclear power development has stirred some dynamics in the relationship between Iran and Indonesia.

Major powers have put in place serious sanctions against Iran for its development of nuclear power. The consequences of these international sanctions have impeded Iran’s effort to expand its cooperation with the rest of the world.

However, a Joint Comprehensive Plan and Action (JCPOA) was signed in 2015 to limit Tehran’s nuclear program. JCPOA is an agreement for Iran to cancel its nuclear program in accordance with the limits set in the JCPOA, with the aim of fostering regional security. It was served to the table by the five members of the United Nations’ Security Council (UNSC) plus Germany. Iran has approved JCPOA as well.

This might appear as a curtailment of Iran’s national interest on the surface. For Indonesia, however, this initiative is a breath of fresh air to establish stability in the Middle East. For example, relations between Iran and Southeast Asian countries have continued to improve rapidly after the JCPOA was inked.

However, after a couple of years, President Trump unexpectedly withdrew the United States from the JCPOA in 2018. This is merely a manifestation of his many questionable policies towards the Middle East since his election into office.

The US’ withdrawal plunged Iran’s relations with other countries into uncharted territories. Old and new sanctions were imposed again not only against Iran, but also against any country that purchases oil from Iran and any financial institution that transacts with Iranian banks.

As a form of support for Iran, and also to display its policy of neutrality, Indonesia chose to abstain in the 2020 vote on UN resolution  to extend the arms embargo on Iran proposed by the United States. Indonesia’s decision was also motivated by what it perceives as the inconsistency between  the draft resolution and the JCPOA.

The Economic Dimension

The bilateral economic relations between Iran and Indonesia is also worth reviewing. The two countries certainly have a strong desire to strengthen trade relations, especially in the energy sector.

For example, President Susilo Bambang Yudhoyono (SBY) paid a visit to Iran in 2008 which resulted in the agreement to form a collaboration in industrial projects, one of which is building an oil refinery that can produce 300,000 barrel per day and in Indonesia. This collaboration is one of the joint ventures between Indonesia’s Pertamina and the National Iranian Oil Company. In addition, the two companies also agreed to build a plant that can purify as much liquid gas as many as 360,000 barrels per day and a urea factory that can produce 1 million tonnes per year in southern Iran.

Under Jokowi’s administration, energy cooperation continues to be expanded. In 2015, a trilateral cooperation between Indonesia, Iran and China was fostered for a project to build an oil refinery with a capacity of producing 500,000 barrels per day in East Java, Indonesia.

Apart from that, the increase in cooperation was even more obvious when Indonesia declared its support for the JCPOA in 2015. Not long after that, the two countries followed up their earlier agreement the development of an oil refinery that can produce 300,000 barrels per day in Indonesia, a project known to carry the price tag of US$ 8.4 billion.

Moreover, in December 2016, Jokowi brought his delegation of 60 Indonesian businessmen to visit Iran to encourage the expansion of trade and investment cooperation in Iran.

Despite these steps, both countries cannot avoid obstacles caused by prolonged sanctions by the United States and its allies in 2018. Nonetheless, in 2021 the total exports from Iran to Indonesia reached US$20.4 million. In contrast, in the same year, Indonesia’s exports to Iran reached US$187 million.

Iran, as an energy-rich country, certainly benefits from selling petroleum coke which is estimated at US$3.22 million, in addition to tropical fruits worth US$ 3.39 million and gas turbines (US$ 6.1 million).

Meanwhile, Indonesia, as an agricultural country, is known to export the most agricultural products, for example, nuts US$ 55.8 million and palm oil US$ 33.4 million.

The Factors

What causes Iran’s growing interest in Indonesia?

The most important factor is Indonesia’s strategic location. Located at the crossroads of the Pacific Ocean, the Strait of Malacca and the Indonesian Ocean, Indonesia could offer Iran strategic waterways for its shipping. It is important to note that Iran’s ties with other ASEAN countries, Australia and the Pacific have been increasing in recent years. Therefore, for Iran, securing Indonesia is a crucial step.

Nonetheless, in the past several years, there have been cases of Iran trying to exploit Indonesia’s strategic location for its transnational illicit activities. In 2021, for example, Indonesian authorities deta

At the same time, Indonesia’s large population and the depleting natural resources is seen from Tehran as a market for Iranian exports.

This is also compounded by the fact that Iran, given its strained ties with the West and its neighbouring countries, has been trying to expand its international cooperation. Indonesia, as an increasingly promising global actor with its position as a leading member of G20 and now chairman of ASEAN, is a propitous target of friendship.

The second factor is Iran’s religious soft power. According to Rizwan Togoo’s study, following the 1979 revolution, Iran announced its intention to spread its ideology of revolution across the Muslim world, which is contained in its constitution. Given Indonesia’s status as a nation with the largest Muslim population, it is seen as an important avenue to spread its ideology.

AlthoughSunnis make up the bulk of Indonesian Muslims, at least 1 million Shiites live in Indonesia, especially in Jakarta, Makassar and Bandung. Over the years, Iran has been seeking to spread its influence through a number of platforms such as providing scholarships to Indonesian students, religious scholars, and academics to study in Iran. Some of them, especially those who had studied in Iran during the Iranian revolution, have now returned to Indonesia and are very active in the field of da’wah whereby many people are encouraged to join the sect.

This has been supported by the dissemination of Iranian literature in well-known Indonesian universities, as well as the establishment of “Iranian corners” in campuses and the Iranian Islamic Cultural Center (ICC) in Jakarta, which can be accessed easily by public and university libraries. Interestingly, this literature will be easily understood by local people because it has been translated into Indonesian.

Diplomatic exchanges have also contributed to this, wher

In addition, Iran has attempted to intensify its soft power by investing capital in the media sector. This is mainly done through journalist and media exchanges and the screening of Iranian films on several occasions, such as in the 15^th Jogja-NETPAC Asian Film Festival, at the National Library and at the 14^th Bali International Film Festival. As for cultural activities, the Iranian Embassy in Jakarta annually organizes Nowruz or the Persian New Year every year by the Iranian Embassy.

Overall, Iran’s growing ties with Indonesia are mainly factored by Tehran’s economic interests to strengthen its presence in the Indonesian market and in the wider Asia-Pacific, while simultaneously expanding its religious diplomacy.

A Note for Indonesia

For Indonesia, the Middle East is increasingly becoming a crucial partner, given that the region provides large markets for its exports and new investors to many of its development projects. At the same time, the region offers an opportunity for Jakarta to move beyond its traditional partners such as China and the United States. Strengthening ties with Tehran is part of this move.

Similarly, Indonesia needs to present itself as a balanced partner for the Middle Eastern countries. Amid conflicts and political rivalry in the Middle East, Indonesia aims to maintain a neutral position.

Right after Saudi Arabia’s King Salman visited Indonesia in 2017, Jokowi immediately visited Tehran in the same year in an attempt to stay neutral in the Iran-Saudi conflict. Recently, with the growing ties between Indonesia and Saudi Arabia, Indonesia sees the need to also bolster its ties with Iran to maintain its balanced position in the Middle East.

Additionally, Indonesia may face difficulties in maintaining relations with Iran due to the growing conservatism in the country. Therefore, while the government attempts to be seen as neutral externally, it is equally important to develop policies addressing raising conservatism domestically.

Introduction

The interest of two United Arab Emirates’ air carriers – namely Etihad and Emirates Airways – to invest in Garuda Indonesia was announced by the Minister of State-Owned Enterprises Erick Thohir in mid-2022. According to his statement, one of the two airlines will later become the largest airline investor to the struggling Indonesian air carrier.

Before this issue emerged in the public, Erick Thohir and the Indonesian Investment Authority (INA) had held separate meetings with the chairmen of both companies to explore cooperation opportunities.

Garuda Indonesia has been incessantly seeking strategic partners to boost its air logistics ecosystem system after years of financial woes. As an effort to alleviate its troubles, the Ministry of State-Owned Enterprise plans to increase capital without pre-emptive rights, otherwise known as a private placement. The future investment by either one of the two companies would be realized through this channel.

The Etihad-Garuda Cooperation

Etihad arguably has an advantage to be Garuda’s investor owing to its past engagement with the latter.

Previously, Etihad and Garuda have fostered a codeshare since 2012, a cooperation that was further strengthened through the signing of a Memorandum of Understanding (MoU) regarding commercial agreements in the United Arab Emirates-Indonesia Business Investment and Networking B20 forum that preceded last year’s G20 meeting in Bali.

This collaboration is expected to be able to support the strengthening of the national tourism ecosystem in a sustainable manner, especially as both countries continue to boost post-pandemic tourism to support economic recovery. Through this arrangement, passengers from Etihad can enjoy seamless connectivity services provided by Garuda to access various tourist destinations in Indonesia.

Apart from that, Garuda and Etihad have also collaborated in frequent flyer program, which allows passengers from both airlines to earn or exchange their loyalty points and reward tickets when using codeshare flights. In addition, Etihad and Garuda Indonesia have a plan to develop cooperation into cargo business lines, maintenance-repair-overhaul (MRO) services and air training programs.

Why the UAE?

Etihad and Emirates’ plan to invest in Garuda cannot be separated from the flourishing diplomatic relations between Indonesia and the UAE in recent years, which is also marked by increase in trade and investments figures. The economic ties have further evolved into the Indonesia-United Arab Emirates Comprehensive Economic Partnership Agreement

An investment by either Etihad or Emirates in Garuda in the future will add to the growing list of the UAE’s investment in Indonesia. For Indonesia, this can be seen as an effort to diversify its investment partners beyond the traditional players, such as Singapore and China. If such a plan is realized, it would also be another manifestation of the UAE’s “Look East Policy” which has been intensively carried out in the last decade.

Curiously, it should be noted that Etihad has been deliberately investing in airlines that are on the verge of collapse. This could be seen as Etihad’s st

Whether an investment by either Etihad or Emirates gets realized, the government must take note of one critical issue. In its past investments in other companies, Etihad has restructured its partners aggressively, making significant changes to flight routes and schedules. This has been met with resistance, such as from Jet Airways, Air Berlin and Alitalia, the last two of which went bankrupt in 2017.

Nonetheless, not all investments have failed, for example, Etihad’s investments in Virgin Australia and Air Seychelles have been considered quite successful. However, this condition should be a cautionary tale to Garuda and the Indonesian government.

Garuda’s Broken Wings

Garuda might seem like one of the latest nearly-bankrupt airlines that Etihad could play a savior to, though Emirates is also in the picture.

Garuda Indonesia has been on the brink of bankruptcy since September 2021. The company’s equity is in the negative at US$2.8 billion (Rp.40 trillion) with its debt stands at US$9.8 billion, while its assets only amounts US$6.9 billion.

Garuda owes US$6.35 billion to its lessors, making up the majority of its liabilities. Furthermore, its debt to banks amounts to US$967 million in addition to the US$630 million in debt in the form of mandatory convertible bonds, sukuk and Asset Backed Securities Collective Investment Contract.

To illustrate this, Garuda owes Bank Negara Indonesia (BNI) the amount of Rp5.2 trillion. This figure consists of Rp2.3 trillion of debt by Garuda’s main company and more than Rp 2.8 trillion owed by its subsidiaries, specializing in aircraft maintenance as well as food and beverage.

Apart from BNI, Garuda also has a debt to Bank Rakyat Indonesia (BRI), which disbursed Rp3.97 trillion Garuda and Rp2 trillion to the Garuda Maintenance Facility Aero Asia.

Obviously, the Covid-19 pandemic is a factor severely impacting Garuda’s performance in the past few years, debilitating its performance and image as Indonesia’s best airlines.

This financial problem ultimately led to significant reductions in flight routes and the number of aircraft as an effort to restore the financial health of the state-owned enterprise. This has affected both domestic and international flight routes, such as Amsterdam, London and South Korea. The number of Garuda’s flight routes have declined from 237 in 2019 to 140 by 2022 to reflect this.

With reduced routes comes the cut on the aircraft numbers, with only 134 vessels were in use in 2022. This has also affected the types of aircrafts in operation, which are down to six from the initial 13.

However, despite facing financial problems, the Indonesian government is still trying to help Garuda’s declining finances. The government, for example, has injected State Equity Participation funds worth Rp7.5 trillion to Garuda, drawn from the 2022 State Budget.

There are at least two reasons why the government is keen to keep Garuda in the air. First, it is to prevent a monopoly in the domestic aviation industry. For state-owned ente

There are thus the economic and nationalistic rationales for the government to save Garuda from its likely fall. It should be noted that the UAE is not the only players on the table as Garuda has also approached other investors to help its financial condition. Unfortunately, Garuda and the two airlines from the UAE have only had one meeting and there has been no further follow-up regarding the investment plan. According to a statement from Deputy Minister Kartika Wirjoatmodjo, currently Garuda’s cash remains sufficient to keep the company afloat, though one begins to wonder as to how long this would last.

Benefits to Both Sides

Regardless of the problems currently being faced by Garuda, the government will still strive for the sustainability of Garuda by inviting national and international investors and this was also conveyed by Erick Thohir’s optimism. If either Etihad or the Emirates gets to invest in Garuda at the end of the day, this could mean a chance of second flight for Garuda.

Either Emirates or Etihad can boost Garuda’s capital to undertake recovery action and detach its dependency on the state’s money. The recovering aviation market is also expected to support such a process, but it will also be tied to the

Latest number shows promise. During this year’s Idul Fitri period, Garuda saw an increase in the number of flights carrying around 14,000 people a day. This shows that Garuda remains of one of travelling options by a number of Indonesians. Positive figures such as these could convince investors that Garuda is worth their time and money.

For the UAE, an investment by either one of its native airlines could help strengthen its foothold in Indonesia and enable it to compete against Middle Eastern countries, which have been successful in strengthening their presence in Asian countries. As one of Asia’s largest markets, Indonesia is a lucrative investment potential.

Introduction

The good relationship between Indonesia and China, which have been on the upward trend in the past decade, manifests crystal clear in the investment sector.

China was christened as the second largest investor in Indonesia in 2022, with US$5.18 billion worth of realized investment recorded, just behind Singapore.

From a number of investments in Indonesia, the mining sector has contributed IDR 136.4 trillion in investment realization in 2022. Part of Indonesia’s appeal is the government’s focus on down streaming of mining products, which has attracted the attention of Chinese investors.

In the midst of growing investments, there is an increasing proposition that China could become Indonesia’s partner in renewable transition. Nonetheless, China’s investment in the mining sector and environmental destructions found in Chinese projects have hampered the realization of such proposition.

Indonesia’s Energy Transition Plan

A party to the Paris Agreement, Indonesia has committed to increase efforts to achieve the net zero emiss

To attain decarbonization, Indonesia needs a significant long-term investment of around US$ 1.3 trillion in various fields of technology. Here, China can play a role in facilitating energy transfers to Indonesia through cooperative efforts in manufacturing, research as well as investment, taking into account the market potential to increase Indonesia’s energy demand.

In Indonesia’s context, the BRI could facilitate investment in the renewable energy industry which can be done by increasing the complexity of the supply chain, targeting industries specializing in energy transition such as the manufacturing of solar panels, electric vehicles and energy storage.

Perhaps due to awareness of the environmental impacts, President Xi Jinping has made pronouncements to stop the development of coal-fired power plants overseas. Several Chinese companies have also started investing in the new and renewable energy sector, such as solar and wind power plants in South Sumatra and South Sulawesi.

Despite this, the amount of Chinese investment in the renewable energy sector is far less than investment in the mining sector and power plant construction, especially coal-fired power plants. Therefore, as the projects in the latter continue to run, a sufficient monitoring regime should be imposed to prevent further environmental destruction on areas and communities surrounding the sites.

China’s Investments in the Coal-Fired Power Plants

Majority of Chinese financing in Indonesia is still in non-renewable energy. As high as 86% of Chinese funding is channeled to the development of coal-fired power plants, mostly channeled through the China Development Bank (CDB) and China Export-Import Bank (CHEXIM). Curiously, these two banks also adopt a turnkey arrangement with local firms, requiring Chinese firms to provide technical expertise while denying local firms to participate in the engineering process. This means that technological transfer between Chinese and local firms remain at minimum.

Currently, there are three coal-fired power plant projects being constructed with funding from Chinese companies. These projects are also part and parcel of the BRI projects in Indonesia.

The first is a power plant with a capacity of 3×380 megawatt (MW) at the Morowali Industrial Park which began construction in December 2021. The power plant is a collaboration between PT. Bintang Delapan Indonesia (which also owns PT. Indonesia Morowali Industrial Park [IMIP]) and Tsingshan Holding Group of China.

The second is power plant with a capacity of 4×380 MW on Obi Island, North Maluku, a collaborative project between Harita Group Indonesia and Ningbo Lygend China.

The third is coal-fired power plant with a capacity of 380 MW in North Maluku, built by Weda Bay Industrial Park Indonesia (WBIPI) and three companies from China, namely China Tsingshan Group, Huayou Group and Zhenshi Group.

Apart from these three, other Chinese-funded power plants are also underway in Morowali, Southeast Sulawesi, Konawe and Teluk Weda.

Although the Chinese government has promised in 2021 to stop building new coal-fired power plants overseas, this has not inhibited opportunists to see commercial and legal loopholes to advance certain projects.

The concentration of these projects in Sulawesi and North Maluku means these two areas would be disproportionately affected by the attendant environmental damages. In a larger context, this could slow down Indonesia’s target of meeting 23% of primary energy from clean and renewable energy sources. As these areas are also peripheral (seberang), there is a possibility that any negative developments there would escape national attention, which remains Jakarta- and Java-centric.

To reiterate, despite China’s potential in assisting Indonesia’s transition to renewable energy, it is difficult to agree with such propositions given that it remains a major player in perpetuating non-renewable energy usage such as in coal-fired power plants. One cannot commit to cleaner energy and greener Earth while continuing operations that adversely impact the environment.

Environmental Impacts of Chinese Projects

Furthermore, China has an uphill battle to claim the title of Indonesia’s partner in clean energy due to environmental impacts of its existing projects in the country.

PT. IMIP’s activities in Morowali have caused seawater pollution to the point where it turns black in Kurisa Village, Bahodopi. This is presumably caused by excess from large coal deposits being flushed to the sea by rainwater. As a result, the livelihood of local fishermen is severely impacted, dramatically reducing the quantity of fish catch ever since PT. IMIP operated its coal-fired power plant. Products from fish farms also have also dropped as fish tends to die in hot-temperature seawater, a by-product of the power plant’s cooling system.

It should be noted that PT. IMIP depends on coal-fired power plants for its electricity supply. The construction of three power plants with a capacity of around 1,180 MW has exposed residents of surrounding Fatufia Village to coal dust which has invaded their homes. As if this was not enough, PT. IMIP plans to construct seven more of such power plants.

If no action is taken, this project would inevitably cause further environmental damage and threatens the livelihood and wellbeing of the communities attached to the area. The thought experiment that we must all face is whether mining nickel – an integral component of rechargeable batteries for computers and electric vehicles – is worth the destruction of surrounding ecosystem and communities.

The impact is expected to compound following the government’s Deep Sea Tailing Placement plan, which would allow the dumping of waste in Morowali’s deep sea. More than 7,000 fishermen and 3,000 hectares of coral reefs are projected to be affected. Sea pollution of such scale would certainly damage Indonesia’s diverse ecosystem, as well as the livelihood of those who depend on sea products.

Another affected location is Obi Island in North Maluku as a result of Harita Group’s operations in collaboration with China’s GEM and CATL. This project

Obi Island has a sizable population working as fishermen. Pollution from the project’s power plant has turned seawater red and reduced fishermen’s catch. The Harita Group reportedly has also indirectly intimidated the small fishermen, forcing them to operate in areas 20 miles further from their usual location to meet daily needs.

Sadder still, fresh water for consumption is also polluted, imposing further public health risks. One of the water sources near a nickel mine has been contaminated with high levels of hexavalent chromium (Cr6) which can cause liver damage, reproductive disorders and developmental problems when ingested or inhaled. For long-term exposure to this can cause stomach cancer. This doom and gloom picture is not very far off from what was depicted on Erin Brockovich.

Additionally, a fountain in Kawasi, located less than 200 meters from the mining site, tests for a high contamination of Cr6, with 60 parts per billion (ppb). This is in violation of an Indonesian law that allows the maximum contaminant level

Other Chinese-funded energy projects that do not specialize in mining impose stress on the environment as well. The construction of the Batang Toru hydropower plant in Tapanuli, North Sumatra, has eroded the natural habitat of the endangered orangutans, with only 800 of them remaining in the wild. Worse, the hydropower plant is believed to have reduced the volume of water of the Batang Toru River, on which locals depend for their daily supply.

The above depictions of the environmental impacts of China’s projects in Indonesia simply shows that these projects run counter to Indonesia’s commitments to reduce carbon emission before 2030 and both countries’ pledge on the Paris Agreement. China, especially, has also signed a memorandum of understanding (MoU) with the International Renewable Energy Agency (IRENA) to promote carbon neutrality through renewable energy in 2021 but its commitments are not demonstrated in its projects in Indonesia. Clearly, more needs to be done by both countries.

Conclusion

Indonesia and China should work hand-in-hand to be more environmentally responsible for these kinds of projects. The latest Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report paints a really grim picture for the future of the planet and it is on all the countries to strive harder to reduce carbon emission and reverse environmental degradation. This exposition on what occurs on the ground is a warning sign that neither Indonesian nor China can ignore.

Basically, the implementation of these BRI projects demonstrates that Indonesia needs China and vice versa. The BRI is envisioned, among other things, to encourage China’s domestic economic growth such as by job creation abroad, a role that Indonesia can facilitate due to its ever-growing economic space. Nevertheless, Indonesia should take a firmer stance and force China to fulfill its commitments to the environment and renewable energy. Should China find this difficult to achieve, Indonesia should consider looking at other investors with deep commitments to the sustainability cause. The onus is now on the Indonesian government, which must demonstrate whether all of its international commitment to reverse climate change are truly valued or simply declared to increase its international stature.

In the current context, the Indonesian government must adopt a resolute position in terms of regulations surrounding Chinese investments. The government should review the coal projects and force companies to adopt Environment, Social, and Governance (ESG) aspects in their operations in metal mining. Indonesia should also accelerate its process in adopting energy transition and double down its collaboration with China in new and renewable energy sector.

Not less crucial is to identify the domestic actors who cra

Indonesia-United Arab Emirates (UAE) Relations

During President Joko “Jokowi” Widodo’s tenure, bilateral relations between Indonesia and the UAE have not only been bound by diplomatic formalities, but also personal relationship that extends beyond state visits.

The UAE has become the country in the Arabian Peninsula that Jokowi has visited the most as president, especially in his second term. Initially, Jokowi’s friendship with Prince Mohammad bin Zayed (MBZ) began when the latter undertook his maiden visit to Indonesia in 2019. This was the first visit by a UAE leader since 1990. The friendship developed steadily over the years that Jokowi even invited MBZ to attend the G20 Summit in Bali, the meeting of the largest economies in the world held last year.

The personal connection, obviously, coincides with the economic interest of both nations, especially in the post-pandemic dimension. The two countries witnessed an improvement in economic cooperation in 2021 after a slump in the previous year. The economic ties have further evolved into the Indonesia-United Arab Emirates Comprehensive Economic Partnership Agreement (IUAE-CEPA), signed in mid-2022, which is expected to triple today’s bilateral trade figures. It is also hoped that IUAE-CEPA could stimulate further business-to-business collaboration, such as Etihad Airways’ plan to invest in Garuda Indonesia.

The close bilateral relations also translate into the defense sector. Minister of Defense Prabowo Subianto has represented Indonesia in a myriad of engagements with the UAE government over the last few years, such as the signing of a Memorandum of Understanding (MoU) in defense cooperation and a defense industry development cooperation protocol. This year alone, Prabowo led the Indonesian delegation to attend the International Defense Exhibition and Conference (IDEX) 2023, consisting of officials from the Ministry of Defense and eight defense companies such as PT. Dirgantara Indonesia, PT. Pindad, PT. PAL Indonesia and others.

Other collaborations include the health sector, whereby Indonesia received a lot of health assistance from various countries including the UAE as a form of solidarity in fighting the spread of Covid-19. The UAE has provided the Sinopharm vaccine, oxygen cylinders, oxygen concentrators and other medical equipment.

This has likely led to the interest of both countries to formalize cooperation in the health sector. For example, last year the Indonesian Minister of Health Budi Gunadi Sadikin held a meeting with UAE’s Deputy Assistant Secretary for Public Health Policy and Licensing Amin

Evidence of the Jokowi-MBZ Brotherhood

Interestingly, the link between Jokowi and MBZ materialized in symbolic infrastructure.

For example, in 2020, a main road that was formerly known as Al Ma’arid Street, which separates the Abu Dhabi National Exhibition Center (ADNEC) and the Embassy Area, has been renamed to President Joko Widodo Street by MBZ. Jokowi reciprocated by renaming a 37-kilometre toll road – which connects Jakarta and Cikampek – to Sheikh Mohamed bin Zayed Elevated Toll Road in 2021.

This is not the first time an Indonesian figure has been named after a road outside in Indonesia, as we can also find the names of Soekarno, Muhammad Hatta, Raden Adjeng Kartini and Munir in places like Morocco and Netherlands. Jokowi’s enshrined name in a UAE street testifies to the lasting impression

MBZ also awarded a mosque for Jokowi which was built in the latter’s birthplace, Solo, Central Java, where he began his political career. The mosque was designed directly as a replica of the Grand Mosque in Abu Dhabi, costing around Rp300 billion to build on a three-hectares area. Funded entirely by the UAE government, the Sheikh Zahed Al-Nahayan Mosque could accommodate 12,000 worshippers and symbolizes moderation and religious tolerance.

Important events count as well. Jokowi visited the UAE in mid-2022 to offer his condolences on the death of the emir of Abu Dhabi Sheikh Khalifa bin Zayed Al-Nahyan, MBZ’s predecessor. This visit also included a meeting with MBZ who had been appointed as the third president of the UAE and the new ruler of Abu Dhabi. 

In the same year, MBZ sent his youngest son Khalid bin Mohamed bin Zayed to attend the wedding reception of Kaesang Pangarep, Jokowi’s youngest child. Prince Khalid and his entourage were the only state guests present at the wedding.

The Significance of the Brotherhood

It cannot be denied that the UAE has become one of Indonesia’s closest relations since Jokowi took office. Arguably, this is due to (partial, if not whole) alignments in the Muslim worldview, developmental trajectories and geopolitical concerns. The UAE notably plays a role in the spread of Wasatiyyah Islam, or moderate Islam, which is critical for Indonesia’s multicultural setting.

The personal relationship between Jokowi and MBZ also has a s

It is hoped that the “brotherhood” between Jokowi and MBZ will have a wider and more sustainable impact on both countries in the investment, economic, socio-cultural fields, especially beyond Jokowi’s term as Indonesia’s president, which terminates in 2024.

In the remaining time of Jokowi’s leadership, the new face of Indonesian presidential candidate Anies Baswedan, the former Governor of Jakarta, has invited investors from the UAE to invest in the the Urban Redevelopment Project, which includes Mass Rapid Transit (MRT), Light Rapid Transit (LRT) Jakarta, Transit-Oriented-Development (TOD) and electric buses. This offer was made by Anies during the Dubai Expo performance in March 2022, when he was still in office. This ca

Other presidential hopefuls such as the aforementioned Prabowo Subianto and Ganjar Pranowo has also had engagements with the UAE and MBZ himself as part of the coattail effect of the Jokowi-MBZ brotherhood. Despite this, it is too early to predict that they can foster as good a friendship as Jokowi did with MBZ this early in the period, especially as their chance at assuming the president’s seat is less than certain. Regardless, it would be logical for the UAE and MBZ to ensure that their influence, built from long years of cultivated interaction with Jokowi and his administration, would remain even after Jokowi leaves office. It is also too soon to say that Jokowi’s influence in the future would vanish completely – signs of Jokowi building his political dynasty have emerged over the years. The UAE and MBZ might also want to capitalize this as well.

Introduction

The Indonesia-United Arab Emirates Comprehensive Economic Partnership Agreement (IUAE-CEPA) was officially signed on 1 July 2022 in Abu Dhabi, nine months after its launch by the trade ministers of both countries. It was marked by the signing of the Joint Ministerial Statement on the Launching of Negotiation for IUAE-CEPA.

The negotiations, which had been carried out since the beginning of 2 September 2021, were completed within one

This signing is Indonesia’ first trade agreement with a Gulf country and expected to open doors to enhance export to the region, Africa as well as South Asia.

President Joko “Jokowi” Widodo welcomed the launch of the IUAE-CEPA, conveying his pleasure to the Minister of State for Foreign Affairs of the Union of Arab Emirates Thani bin Ahmed Al Zeyoudi, who was on a courtesy visit to the Merdeka Palace.

Some important points of the agreement include trade in goods and services, intellectual property rights, investment, Islamic economy, customs procedures and trade facilities, provisions on the origin of goods, procurement of government goods and services, small and medium enterprises, digital trade, and legal provisions and institutional issues.

Indonesia-UAE Economic Relations

The United Arab Emirates (UAE) is one of the Gulf countries that has a sizable economic relationship with Indonesia, even before the signing of this momentous agreement. The total trade volume between Indonesia and the UAE recorded a 37.8% increase in 2021 after a pandemic-induced deficit, reaching US$ 4 billion. This is the highest figure achieved within a period of seven years.

Indonesia’s export to the UAE in 2021 grew by 52.15% to US$1.89 billion from a year before. Import from the UAE also increased by 27.33% to US$2.14 billion.

Meanwhile, in 2021, the UAE committed US$44.6 billion (the equivalent of Rp636.88 trillion) in investment, which was planned to be realized in 2022-2024. Commitment worth US$26.6 billion will be managed by the Badan Koordinasi Penanaman Modal (Investment Coordinating Board – BKPM) and the remaining US$18 billion by the Indonesia Investment Authority (INA).

From this US$26.6 billion, around US$15 billion of which was an investment by Air Products and Chemicals Inc. (APCI) in PT. Pertamina (Persero), PT. Bukit Asam (Persero) Tbk, and the private sector. This was aimed at developing a downstream industry in the form of coal gasification, intended to convert fossil energy commodities into more high-value materials such as methanol and dimethyl ether (DME) that could facilitate economic transformation.

Apart from that, the UAE is also committed to investing in Indonesia’s port sector Belawan New Container Terminal (BNCT) through the cooperation of Dubai Port (DP) World and PT. Pelabuhan Indonesia Persero (Pelindo). The investment is valued at US$ 7.5 billion.

Furthermore, at the recent G20 Summit, energy companies Masdar and the Abu Dhabi National Oil Company (ADNOC) agreed to collaborate with PT. Pertamina (Persero) to develop a Solar Power Plant in the Rokan Block. The project would start on 12 November 2024 and is projected to last for two years.

The positive trends in bilateral trade and investment seem to signal stronger economic ties between Indonesia and the UAE, of which the IUAE-CEPA is merely a manifestation of it.

Benefits of IUAE-CEPA Cooperation

Director General of International Trade Negotiations Bris Witjaksono stated that the IUAE-CEPA agreement will be able to open market access and wider opportunities to the UAE by reducing and eliminating import duty rates of around 94% of the total tariff items.

This comprehensive agreement can also have a beneficial impact on the Unite Arab Emirates itself. We can see how reducing trade barriers, by reducing trade tariffs on various goods and services, would have a positive impact on the value of bilateral trade between the two countries, which is projected to amount to US$10 billion in 2030. The UAE will enjoy a trade surplus with exports to Indonesia of around US$2.1 billion and imports worth US$1.9 billion. Through this agreement, more t

It is hoped the IUA-CEPA would also spur more investment opportunities to Indonesia beyond those identified above, creating new opportunities in important sectors such as energy, construction, advanced technology, Islamic finance, digital economy, environmental conservation and tourism. This agreement is also an opportunity for the UAE to be able to deepen relationship and become a bridge of communication with other Asian countries.

Apart from trade and investment, the IUAE-CEPA will also be very beneficial for the tourism sector for both countries. Abu Dhabi itself is already very popular among Indonesian travelers, who can now travel to the capital after the UAE reopened its border to foreign tourists.

On the other hand, Indonesia is also intensively promoting the tourism sector for recovery after the Covid-19 pandemic. For example, Indonesia participated in the Arabian Travel Market in May 2022 to attract Middle Eastern tourists. The UAE is one of the largest contributors of tourists to Indonesia and, with Indonesia’s recovering tourism sector, we can expect this trend to continue upward. Minister of Tourism and Creative Economy of Indonesia Sandiaga Uno has stated his hope that the tourism industry could generate potential foreign exchange of more than US$15 billion or around Rp220 billion.

A Natural Outcome

IUAE-CEPA can be seen as the natural outcome of two different things: an intensified diplomacy between the two countries recently and the close friendship between President Jokowi and Sheikh Mohamed bin Zayed Al Nahyan (MBZ), the President of the UAE.

Each president has named a street or a highway after the other in his respe

MBZ has also built a mosque worth Rp300 billion in Jokowi’s hometown of Solo, which is considered a manifestation of not only this friendship, but also the UAE’s soft power projection.

This close friendship is far more intimate compared to Jokowi’s relationship with other Gulf countries, not to mention the fact that the UAE is Jokowi’s most frequent destination visit in any Gulf country. Barring any unpredictable events, we can safely project that the relationship between the two countries would continue to develop in various sectors, be it economic, social or cultural. With Jokowi nearing the end of his presidential term, however, it would be interesting to see how the UAE would further cement their influence in Indonesia, regardless of who presides over Indonesia’s top office.

This might not be an uphill struggle for the UAE, however. Indonesians’ perception of a Gulf country like the UAE is far more positive than their perception towards China. The role of Islam certainly plays a role as well, with the UAE’s Wasathiyah Islam being seen as compatible to Indonesia’s multiethnic and multireligious setting. This is on top of the fact that both are Muslim-majority countries. The UAE and the Arab world are increasingly seen as alternative partners for Indonesia’s strategic interests, beyond its traditional partners the United States and China. We might get to see similar agreements as IUAE-CEPA between Indonesia and other Arab countries, sooner or later.