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 10th 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 Dialogue Mechanism was a follow up of a meeting between Indonesian Minister of Defense, Prabowo Subianto, and Chinese Minister of Defense Li Shangfu in June, where they discussed cooperation in defense sector.
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 interesting to conduct a compare Indonesia’s increased engagement with China vis-à-vis its engagement with the United States throughout the same period.
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.
On the investment side, the most crucial development took place in early October, whereby Indonesia finally inaugurated its China-backed high-speed railway between Jakarta and Bandung. The railway, named “Woosh”, was originally scheduled to launch in 2019 but was delayed due to pandemic-related challenges, land disputes and cost-overrun. The project also has other raised other concerns such as environment and labor issues. Nonetheless, despite the various issues and critics from observers, this year also witnessed the Indonesian government’s plan to extend the railway to Surabaya, with China again as a partner.
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 Erick Thohir, the number was just a portion of potential deals totaling around US$29 billion.
Earlier in September, China and Indonesia also signed four new agreements which will be launched in the Yuanhong Investment Zone in Fuzhou, the site of the Chinese part of the “Two Countries, Twin Parks” project between Indonesia and China. The agreements focused on the wholesale of Indonesian aquatic products, fishing and processing, and others.
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 11th 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 74th 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 entry to several countries including China.
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.
