China’s ‘Belt and Road’ initiative: The Indonesian stop

China is securing its long-term interests in Asia. Indonesia plays an important role in this scheme, but how will it – and the United States – respond?

China’s ‘Belt and Road’ initiative: The Indonesian stop AFP Photo/Wasaki Minoru/Pool

China under the leadership of President Xi Jinping has embarked on a multipronged and far-reaching development drive abroad that will help it secure its long-term interests, and Indonesia plays an important role in this scheme because of its rich natural resource base and vital strategic location. China’s rise has led to conflicting views about its real intentions, but whatever its ultimate goals, the ascent of a new power has led to a renewed focus on Southeast Asia among established players, most notably the United States. 

Despite the dangers inherent in the growing regional tensions emanating from the militarization of the South China Sea, Indonesia could reap considerable benefit as big powers vie for influence in the region. However, mainly due to deeply ingrained skepticism of China within Indonesian society, a major turn toward Beijing is not on the cards in Jakarta.

Dialogue of the deaf

Last July, in West Kalimantan Province, the chief of police in the district of Ketapang, Sunario, was dismissed from his post for claiming the establishment of a joint police station in Ketapang with the Suzhou Public Security Bureau, which is based in China’s Jiangsu Province. On July 12, an image circulated on social media of Sunario holding a placard for the supposed joint police station, which also purportedly involved the Ketapang Ecology and Agriculture Forestry Industrial Park. The picture sparked controversy and triggered accusations of Chinese security forces being stationed in West Kalimantan. “What Sunario did was a violation of police protocol,” National Police spokesman Muhammad Iqbal said. A spokesman for the West Kalimantan Police, Nanang Purnomo, said the placard came from officers of the Suzhou Public Security Bureau during a visit to the district, which was arranged by PT BSM New Material, a China-based logging company operating in Ketapang. 
The odd incident in Ketapang is a microcosm of the contentious ties between China and Indonesia. Beijing is running a growing number of business projects in Indonesia, but the Chinese do not appear to be fully aware of simmering animosity among much of the local population, fueled in many cases more by conceptions about race and religion than by Beijing’s increasingly assertive posture in the region. Overall, ties continue to be marred by misunderstanding and possibly willful ignorance on both sides, making the development of a solid relationship unlikely, and ensuring that in terms of geopolitical and security outlook, Indonesia will remain firmly in the camp of Western powers such as the United States and Australia. 

Debt-trap diplomacy 

But Beijing is not putting all its eggs in one basket. Bertil Lintner, an experienced observer of regional affairs, reported in an article published by Asia Times in June that the Chinese are dead set on gaining economic and strategic access to the Indian Ocean through a deep-water port at Kyaukpyu, in Myanmar’s western Rakhine State, which he says is “a crucial link” in Beijing’s $1 trillion “Belt and Road” project. The idea is that China can bypass the potentially vulnerable chokepoint at the Strait of Malacca between Indonesia and Malaysia by gaining Indian Ocean access through its southern neighbor, which continues to face isolation due to concerns about its human rights record. 

The lack of interest in putting money into Myanmar among Western investors, who are righty concerned about the strategic influence of the military on policy in the former long-time dictatorship, provides Beijing with plenty of opportunities as it offers loans for major infrastructure projects. This enables China to engage in what has been called debt-trap diplomacy, the best-known example of which is Sri Lanka’s Hambantota Port.

“When Colombo was unable to service its China-held debts for the project, a deal was struck in 2016 to sell an 80 percent stake in the port to China Merchants Port Holdings, a state-owned entity,” Lintner wrote. “China’s share was eventually lowered to 70 percent due to trade union and political opposition. But while the port is now referred to as a ‘joint venture’ with the Sri Lankan government, Beijing exercises de facto sovereign control over the strategic facility.”

Conflicting views

In conjunction with its bold economic moves in various parts of the Asia-Pacific and Africa, China has also gained a military foothold in Djibouti, a small but strategically placed Horn of Africa nation where Western powers also have a presence. The Chinese have also become involved in operations to counter maritime piracy in African waters, triggering highly symbolic allusions to Chinese maritime exploration in past centuries. 

China’s rise has led to conflicting views about its real intentions. Some point to the fact that, unlike Western powers, the Chinese haven’t colonized large parts of Asia and Africa, where in some cases empire-building continued well into the 20th century. Some also argue that it is hard to deny China the right to peacefully spread its wings while not raising similar concerns about the global presence of other large states, notably Western powers such as France, Britain and the United States. Others will counter that it is unlikely the Chinese will be happy with anything but global hegemony, considering the country’s growing economic and demographic clout and its previously dominant role in world history. The Chinese absence among global power players since the mid-19th century is the exception, not the rule, this argument goes, and China’s current ascent may well lead to a return of the “normal” world order. 

One of the most prominent skeptics is China expert Elizabeth Economy, from the Council on Foreign Relations in the United States. In a recent essay in The Wall Street Journal, she expressed concern about China’s rapidly changing views about its global role. “In a little-noticed speech [in June], before a packed house of China’s senior foreign policy officials and scholars, President Xi Jinping put the world on notice: China has its own ideas about how the world should be run and is prepared, as he put it, to ‘lead in the reform of global governance,’” Economy wrote. She also warned that “only Xi Jinping appears willing and able to grab the mantle of leadership from a retreating United States” and that US President Donald Trump, with his cultivation of an “America first” agenda, may well be planting the seeds for a “China first” world.

‘Firm and clear’

Confronted by US Defense Secretary James Mattis in June, Xi insisted that China is not intent on creating chaos, but that the country does have the right to occupy the South China Sea islands, at the center of concerns in Southeast Asia and beyond. Runways, aircraft hangars and weapons systems have been installed in recent years on tiny but strategically located islands. “Chinese people must build a strong socialist, modernized country, but we insist on taking the path of peaceful development. We will not follow the path of expansionism and colonialism, we will not bring chaos to the world,” Xi told

Xi keeps insisting the country’s intentions are and will remain benign, but the proof will be in the pudding.

the visiting Pentagon chief, as reported by Agence France-Presse. But Xi, as quoted by Xinhua news agency, added: “While seeing the existing common interests of China and the United States, we also do not shun the differences that exist between the two sides.” He added: “Regarding the issue of China’s sovereignty and territorial integrity, our attitude is firm and clear. From the territory left by our ancestors, [we will not] give up even one inch.” Xi keeps insisting the country’s intentions are and will remain benign, but the proof will be in the pudding. Mere claims cannot be taken at face value in the international policy arena, where every action can set in motion various responses and the overall outcome is hard to predict. 
Complex interdependence  

China claims almost the entire South China Sea, through which $5 trillion in shipping trade passes annually, despite competing claims from Brunei, Malaysia, the Philippines, Taiwan and Vietnam. The waters remain crucial in trade terms, but they also give direct access to the country’s southeastern coastline and key economic centers such as Hong Kong, Shenzhen and the rest of Guangdong Province. This is not just China’s backyard – it can be seen as its front door. It is understandable for that reason that China’s military planners like the idea of forward defense in this region, even if this leads to greater tensions with nations stressing the importance of freedom of navigation. 

Wenyuan Wu, an independent researcher, also warns against oversimplifying China’s intentions with regard to its commercial diplomacy. “Far from helpless victims of exploitation, developing countries and their leaders have learned to use China to service domestic political agendas and mitigate policy pressure from Western counterparts,” she wrote in an article for The Interpreter. “Not that China is acting out of altruistic benevolence; Beijing has enabled illiberal regimes with its principle of noninterference.” She continued: “The Chinese firms at the forefront of the ‘Belt and Road’ initiative often prioritize business objectives and maintain relationships of complex interdependence with the state. For example, China Merchants, the company in charge of building Djibouti’s free trade zone, is a publicly traded subsidiary of the state-owned group. Headquartered in Hong Kong, the firm is more profit-oriented than guided by Chinese foreign policy goals.” 

Hard and soft power

Western nations have not been sitting on their hands while China projects its power further and further from its shores. Australia and Britain have been discussing plans for the British aircraft carrier HMS Queen Elizabeth to be sent to the Pacific amid growing tensions in the South China Sea. “At such a critical juncture in world affairs, we feel it is vital for like-minded nations to join together to promote peace and stability,” Julie Bishop, Australia’s foreign minister, was quoted as saying by The Guardian in July, shortly before leaving her post. “We couldn’t be more delighted that the UK will be taking an increasing role in the Indo-Pacific.” 

On the intelligence front, Britain and Australia, together with their “Five Eyes” partners the United States, Canada and New Zealand, have reportedly been working to close ranks in the face of growing Chinese assertiveness in the Asia-Pacific. The Chinese, meanwhile, have started to embrace tried and tested soft diplomacy measures in the region. The Peace Ark hospital ship recently toured the Pacific to win hearts and minds in a region where Beijing has been trying to gain a more solid foothold for some years now. The ship visited countries such as Papua New Guinea, Vanuatu, Fiji and Tonga – but skipped nations that have diplomatic ties with Taiwan.

Indonesia’s position

Despite concerns about a so-called US retreat from global hegemony, the Americans in recent years have made it clear they intend to remain an Asia-Pacific power to be reckoned with. In conjunction with regular freedom of navigation operations in contested waters, the United States continues to implement the Maritime Security Initiative (MSI), a capacity-building program for Southeast Asian nations including Indonesia that was first revealed by then-US secretary of defense Ashton Carter in 2015. 

Despite fears in Indonesia that the election of Trump in 2016 could derail the relationship with the United States, it appears that despite the 45th president’s rejection of almost everything supported by his predecessor, US policy in Southeast Asia is characterized more by continuity than change. The Indonesian MSI package seeks specifically to improve the country’s maritime patrol capabilities, intelligence, surveillance and reconnaissance integration, and equipment maintenance capacity. The aim is to ensure that Jakarta has the capacity to adequately safeguard its maritime territories and economic resources, and contribute to regional security and stability, according to a note on the MSI program published on a US government website. 

A senior US defense official previously told The Diplomat that the MSI program was geared toward creating “strong, independent partners” in the region, presumably capable of resisting a wide range of threats, including Beijing’s growing assertiveness in the South China Sea. “We want strong, independent partners throughout the region. And the best way to help them become strong and independent is to help them build their capacity in maritime security. So that’s the idea of the Maritime Security Initiative, stated simply,” the US official was quoted as saying. 

In contrast with relative minions such as Djibouti, Myanmar and Sri Lanka, Indonesia is a fairly major player on the global stage: it’s the biggest economy in Southeast Asia and the most populous Muslim-majority country in the world. It is also strategically located between China and the Indian Ocean, and between Australia and the South China Sea. As such, the country appears to be well positioned to benefit considerably if the “great game” for Southeast Asia continues to heat up.  

Chinese vs American influence

Earlier this year, Indonesia’s state-run news agency, Antara, reported that Indonesia and China signed five contracts worth $23.3 billion as part of the “Belt and Road” project. The contracts, signed in Beijing on April 13, consist of a total of $19.8 billion for hydropower facilities on the remote Kayan River in Bulungan district, in North Kalimantan Province, and a $700-million contract to develop facilities to convert coal to dimethyl ether.

Indonesia appears to be well positioned to benefit considerably if the “great game” for Southeast Asia continues to heat up.

The two countries also signed a memorandum of understanding on the development of the Tanah Kuning-Mangkupadi Industrial Park in Bulungan, and on the development of electric vehicles. The contracts also included a $1.6 billion joint venture to build a power plant in Bali and $1.2 billion to develop a steel smelter. 

Luhut Panjaitan, Indonesia’s coordinating minister for maritime affairs, who has been closely involved in dealings with China, said at the time that the country would seek further cooperation in several economic corridors, including those in North Kalimantan, North Sumatra, North Sulawesi and Bali provinces, with an investment value of $51.9 billion. This type of investment, while certainly a boon for the Indonesian economy, can have far-reaching political consequences. While economic nationalism is a powerful force overall in Indonesia, Chinese moves tend to attract a lot more negative attention than investment by Western business, for instance, or their counterparts from Japan or South Korea. 

Influential Indonesian news magazine Gatra in May was very blunt in its summation of Chinese investment in a report under the headline “One Belt, One Road: Colonialism, China-style” – apparently unaware that the initiative has been rebranded “Belt and Road.”

Due to widespread skepticism about its intentions, a largely unfounded but very real fear of communism and a very strong sense of economic nationalism overall, Indonesia is unlikely to turn to Beijing in the near future.

Meanwhile, the Indonesian Armed Forces has received one batch of US-made material after the next, as Washington strives to secure the de facto preferred partner status that America has long enjoyed in Indonesia. While there is no formal security arrangement between Jakarta and Washington, military ties are close. 

Naval special forces from Indonesia and the United States recently concluded a joint exercise dubbed Thunder Iron 2018. The drill involved personnel from the Indonesian Navy’s Special Forces and the US Navy SEALs and underlined the continued importance of Indonesia for US policy makers and military planners. The Indonesian Navy is also reportedly establishing a new squadron to oversee the service’s unmanned naval aviation requirements, with the use of US-supplied drones. The new unit will reportedly be known as 700 Aviation Squadron and be based in Surabaya, East Java. The equipment to be operated by the squadron would include the Boeing Insitu ScanEagle unmanned aerial vehicle. 
The US government will also procure five Hercules C-130 transport aircraft, Indonesian Defense Minister Ryamizard Ryacudu said on June 5. Meanwhile, the Indonesian Army on May 15 inaugurated eight new Boeing AH-64 Apache attack helicopters, also purchased from the United States. In March, the Maritime Security Board and the US Coast Guard agreed to enhance cooperation on maritime security, focusing mainly on capacity-building, while the Indonesian Ministry of Defense in February formally handed over 24 Lockheed Martin F-16 Fighting Falcon jets granted by the United States to the Indonesian Air Force. 

Made in China 2025

While for Indonesia it would be wise to cherish ties with trusted trade and military partners such as the United States and Australia, it would be a mistake to underestimate the changes currently taking place in China. Much of the debate on Chinese power projection in Southeast Asia is understandably focused on military and geopolitical concerns, but in the meantime the Chinese economy keeps evolving and this could have a fundamentally destabilizing effect on all its competitors. 
As part of the “Made in China 2025” strategy, the country will be focusing on 10 sectors in the coming years to boost its high-end capacity. Reuters earlier this year outlined some of Beijing’s key targets, including a much greater reliance on locally produced high-tech equipment. The country will be focusing on chips, robotics, electric vehicles, aviation and shipping technology, and will increasingly be looking to expand overseas. China is also aiming to produce 90 percent of its own farming equipment by 2020 and wants its own companies to capture 70 percent of the market for middle- and high-end medical equipment at county-level hospitals. 
These kinds of claims may sound familiar to those who have been paying attention to what Indonesian policy makers have been saying in recent years, but the main difference is that initiatives such as food self-sufficiency or the development of a competitive local vehicle industry have all been distant pipe dreams in Indonesia, while there is little question about China’s ability to reach the majority of its goals. 

Both sides against the middle 

China’s influence is growing, but due to widespread skepticism about its intentions, a largely unfounded but very real fear of communism and a very strong sense of economic nationalism overall, Indonesia is unlikely to turn to Beijing in the near future. Even serious levels of investment such as in various parts of Kalimantan will not give Beijing decisive influence on national-level policy-making in Indonesia. The regulatory jungle that characterizes Indonesia’s economy will continue to offer authorities plenty of options to limit any business player’s clout if and when that is deemed desirable. 

As the “Belt and Road” initiative investment package in North Kalimantan shows, Beijing has not given up on Indonesia, but the fate of the Jakarta-Bandung high-speed railway, where little progress has been made nearly three years after then ambassador Xie Feng’s optimistic assessment, provides a sobering image. “The project will drive the development of supporting industries such as smelting, manufacturing, infrastructure, power generation, electronics, services, logistics and real estate,” Xie said in 2016, when construction of the Jakarta-Bandung railway project was about to start. “So long as the two sides can accommodate each other, learn from each other and share the risks and benefits together, no difficulty shall stand in our way.” 

For those concerned about the potential for geopolitical shifts, the development of China-Indonesia ties in recent years indicates that Jakarta is keen to reap the benefits from its strategically important position. In terms of military ties, however, it looks like the Indonesian Armed Forces will remain firmly in the camp of the United States and its allies, even though few would dare to admit that openly. Ongoing ties with other players such as Russian and even the occasional Chinese courtesy call will provide a solid alibi for domestic consumption.  

On the economic front, meanwhile, China’s growing clout could have a severe impact on Indonesia, not because of its investment here but because its ambitions as outlined under the Made in China 2025 initiative could have a major impact on the regional and global economic outlook. In the short term, there are fears China will dump some of the products that it is no longer able to export to the United States in countries such as Indonesia. That will further dilute any enthusiasm that Indonesian officials may have for closer ties with their giant northern neighbor.

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