The Five Strategic Challenges Facing US-Indonesia Relations

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The Five Strategic Challenges Facing US-Indonesia Relations

As a new ambassador takes up his post in Washington, Indonesia faces a host of obstacles to a more fruitful relationship with the U.S.

The Five Strategic Challenges Facing US-Indonesia Relations

The Indonesian Embassy in Washington, D.C.

Credit: Flickr/Matthew Benton

On September 14, President Joko Widodo appointed Muhammad Lutfi as the new Indonesian Ambassador to the United States. A seasoned player in business, he is the founder of the Mahaka Group, which has interests in finance, mining, and media. He has also served in a range of governmental posts, including head of the Indonesian Investment Coordination Board, and ambassador to Japan and the Federated States of Micronesia.

In his remarks during a recent Virtual Welcome Event hosted by the U.S.-Indonesia Society, Lutfi shared his vision of the two countries as “new old best friends,” citing the need for Indonesia and the U.S. to reinvigorate and enhance their relationship in a changing world. Flagging President Jokowi’s goal to transform Indonesia into one of the world’s top five economies by 2036, he underlined the need for U.S. involvement in four key domains: infrastructure development, expanded trade, workforce re-enforcement through enhancement of the education sector, and the improvement of the country’s healthcare system.

Despite Jokowi’s struggle to manage his domestic response to COVID-19, the pandemic is unlikely to alter Jokowi’s overriding priorities over the next four years. Economic recovery, a continuation of infrastructure development, and an injection of foreign investment will all be critical to the country’s recovery from COVID-19 and its economic effects. As many experts have argued, Jokowi’s primary foreign policy approach is to look for “friends with benefits,” with economic diplomacy as the main focus. This will be the first challenge for Lutfi as he takes up his post in Washington: to deliver the “benefits” that his president seeks.

Furthermore, the discourse about Indonesia’s relations with the U.S. is currently dominated by the question of how Jokowi is engaging with China. Indonesia has strategic partnerships with both the U.S. and China. But there’s no doubt that during the global pandemic, Beijing has managed to gain more of Jakarta’s attention than Washington. China’s significant contributions to Indonesia in the form of vaccine agreement, monetary aid and other health-related assistance certainly have not gone unnoticed. While it is not Lutfi’s job to oversee the impacts of the inflamed U.S.-China tensions, his second challenge is to convince Jokowi that the U.S. is equally relevant to Jokowi’s domestic goals as China.

Another challenge for the new ambassador is to generate more enthusiasm for the underperforming U.S.-Indonesia economic relationship, which is yet to fulfill its true potential. Over the last 10 years, the trade volume between the countries has stagnated, never managing to grow past the $30 billion mark. Jokowi’s goal to utilize foreign capital and technology to fire up the local economy is often undermined by the protectionist demands of his people. As a result, there has often been a noticeable gap between his rhetoric and actions. Unlike its regional economic rival Vietnam, Jokowi’s administration has pushed for ways to bring Indonesian goods to the international market and attract foreign investment, without making sufficient efforts to liberalize the local economy.

Lutfi has pledged to promote Indonesian products in U.S. and vice-versa. He has also stated his intention to secure the extension of the Generalized System of Preferences trade agreement between Indonesia and the U.S. To achieve these aims, he will need to find more effective ways to strengthen government-to-government dialogues on trade and investment. Not only that, he must creatively include participants from the private sector to make sure these discussions include the right people.

The fourth challenge facing Lutfi is next month’s American presidential election. Two options await him: a second term of Donald Trump’s presidency or a new administration headed by Joe Biden. With Trump, he should expect a continuation of American protectionism and a worsening trade war between the U.S. and China. In that event, U.S.-Indonesia trade relations would likely continue along the current stagnant trend.  Back in 2017, Trump ordered investigations into countries that have trade imbalances with the U.S., including Indonesia. Trump’s “America First” policy would seem to lessen the probability of any significant American involvement in Jokowi’s infrastructure and economic development agenda.

A Biden presidency, on the other hand, might lead to a revival of American global leadership and a repudiation of the Trump era’s unilateral, inward-looking orientation. In this event, Indonesia should be prepared to play its best cards on the question of trade. Biden’s “Made in All of America” strategy does not stray too far from Trump’s, a testament to how much consensus now pertains in Washington on the question of trade policy. In his campaign, Biden brought forward his plan to bring critical supply chains back from China to America. Realistically speaking, however, some of the supply chains will have to stay abroad, and Indonesia must take the opportunity to secure American factory migrations from China to Indonesia.

Lastly, Lutfi will face the challenge of domestic Indonesian perceptions of the U.S. According to a poll by Lingkaran Survei Indonesia (LSI) released early this year, Indonesia’s unfavorability towards the U.S. has worsened, inching up from 28 percent in 2016 to 30 percent in 2019. One of the main contributing factors to this decline is the person of Trump. Surveys conducted by the Pew Research Center show that positive Indonesian perceptions of the U.S. jumped upward while President Barack Obama was in office, possibly due to his childhood connection to the country, but have fallen since Trump entered the White House. Trump’s anti-migration policies and anti-Islamic narratives undoubtedly do not sit well with many Indonesians. Given the extent to which Indonesia’s foreign policy must take into consideration the views of influential conservative Muslim groups, these sentiments need to be dealt with head-on, lest they create obstacles to more robust bilateral relations.

The appointment of Lutfi as the new Indonesian envoy to Washington is auspicious. Yet, Lutfi needs to take into account some of the strategic challenges facing U.S.-Indonesia relations. These challenges could mean that the potential in the relationship remains unfulfilled. Dino Patti Djalal, a former Indonesian ambassador to the U.S., has said that in the Trump era, the U.S.-Indonesia relationship has “lost its soul.” Just like Lutfi’s vision, the two countries must find ways to rejuvenate their relationship and chart a new strategic course, especially in the evolving post-COVID-19 world order.