Strategic Asia Policy Interchange

Discussion Notes

“Globalization and Indonesia’s Foreign Policy”

The seventh Strategic Asia Policy Interchange, held on Thursday, 15. October, 2009, on ‘Globalization and Indonesia’s Foreign Policy’ featured H.E. Mr Biren Nanda (the Indian Ambassador to Indonesia), Mr Eddi Hariyadhi (Expert Staff, State Ministry of State-Owned Enterprises and former Indonesian Ambassador to the UN) and Mr Adrianus Mooy (Director, Strategic Asia). The event was moderated by Mr Satish Mishra (Managing Director of  Strategic Asia).

H.E. Mr Nanda shared his views on the most prominent threats and opportunities that the process of globalization imposes on India and showed where there are parallels between India and Indonesia.

• The rise of BRIIC (Brazil, Russia, India, Indonesia, China) has created a major shift in the global landscape, especially a shift in the center of gravity of consumer markets, investors, producers, and the use of commodities, especially energy.
• The combination of additional consumer power with the education of large numbers of academics and professionals allows India to directly address the special demands of consumers in emerging markets, thereby driving growth.
• There is growing reliance upon institutional mechanisms in solving emerging global and regional issues which give rise to the formation of various cooperation forums.
• Cooperation between Indonesia and India should be taken further on the governmental level in the areas of trade arrangements, double tax avoidance, technical standards and qualification recognition. B-2-B interaction should be well-facilitated and tourism should be promoted. Some of the potential/promising areas of cooperation include: pharmaceutical and healthcare industries, auto-components and automobiles, engineering products, coal, oil and gas, financial services, IT, e-governance and construction.

Mr Hariyadhi stressed the role that ASEAN plays in the formulation and implementation of policy in Indonesia.

• Indonesia’s involvement in ASEAN is important to support Indonesia to position itself in the global economic architecture. ASEAN mechanisms have enabled its member countries to have a stronger bargaining position in negotiations and dialogues with countries outside of the region.  
• Despite the diversity within the area covered by ASEAN, ASEAN has been able to support a stable environment and promote security in the region.
• Indonesia needs to improve the quality of negotiators sent to international negotiations. Lack of understanding of the substance of negotiations can create hurdles to the country towards achieving what lies in the national interest.  A significant gap which should be addressed in the preparations for negotiations is the absence or lack of communication/consultation between MOFA and the relevant technical ministry prior to the negotiations. 
• The shared outcome of the impacts of globalization in Indonesia can be improved. A precondition for this is strong and conclusive negotiations in trade agreements, reflecting national interest.
• Indonesia needs a defined policy toward important international partners, especially ASEAN, India and China.

Mr Mooy took a look at globalization from a broader perspective and gave his thoughts about policy formulation with respect to globalization.

• One of the controversies surrounding the issue of globalization is the fact that countries are not all at equal positions; hence some may be gaining more benefits than others and some may be bearing more costs. Thus, it is important for Indonesia to maximize benefits and minimize costs by increasing competitiveness, improving the investment climate, ensuring a gradual integration and taking an active role in international cooperation.
• Speed and quality of integration is an active policy decision. Integration should happen gradually and every further step should only be taken after according preparation is adequately in place.
• Echoing the earlier speaker’s point, an important implication of Indonesia’s exposure to and participation in globalization is that it has to strengthen its bargaining position and this can only be achieved by developing a clear position on the issue as well as establish a well-prepared negotiating team.

Highlights of the Discussion

• Globalization is not only a question of business. As emerging markets become heavier weights economically, they are also entitled to take a stronger political stand. The enhanced capacity to help define the global agenda gives additional bargaining power that should be used.
• Indonesia has mostly been successful in negotiations, but unfortunately is unable to sustain its role to reap the benefits.  This is primarily due to inconsistencies in policies and approach in the follow-up. It is time for foreign policy to focus much more on self-empowerment and consistent measures to be able to compete and increase Indonesia’s bargaining power.
• National interest clearly is an issue of national and public concern and therefore it needs public consultations in order to define its meaning and content, especially in the context of globalization.  A shared understanding of national interest will help Indonesia to strongly position itself in its bargaining and negotiation efforts in various regional/international forums.
• In connection with the above point, India can share its experience whereby the Government commissioned a special project called “National Interest”. The goal is to help define what that constitutes through a combined process of analysis and public consultations.
• On the way to strengthen competitiveness and advance capacity building, more consistency is needed in Indonesian policy. Both short- and long-term goals should be perused.
• A consistent competition framework or competition law is needed, especially in the context of a globalized setting. This requires more consistency of policy and approach among relevant sectors/ministries.

Conclusions

• Integration and globalization is not a rule of nature that every country has to surrender to. Policy defines the steps and timeline of integrations, and it must ensure the right preparations to be undertaken are clearly laid out.
• Defining the goals to achieve as well as formulating the national interest is a precondition to understand and to choose the policy options that should be implemented. To achieve this, the process is just as important as the outcome.
• Issues should be addressed on the right level. While certain solutions must be found on a global level, Indonesia can gain many benefits from regional integration, through participation in ASEAN and cooperation with other BRIIC economies, especially with India and China.
• While emerging markets create stronger political weight, they should make use of their power. This requires pro-active policy formulation, strong presence in multinational organizations and taking a strong stand in trade negotiations.    
• Indonesia has space for improvement in creating beneficial outcomes of international negotiations, both in terms of goals (having formulated national interest in advance) and means (education, knowledge and experience of those entrusted with negotiations).