Indonesia’s first President became so frustrated with the “West” that he famously declared ” go to hell with your aid”. A combination of the Cold War and misjudgments of Soekarno’s complex ideology (mixing capitalism and socialism) led the US and other countries down several dead ends that almost capsized relations completely. The late 1950’s and early 60’s were tough for Indonesia’s relations with the US: late to implement economic development aid the US lost critical influence. The US State Department was also obsessed with keeping Indonesia out of the orbit of the Soviet Union and China. Soekarno continuously fought against Western imperialism as well as aid with “strings attached”. I heard an echo of Soekarno’s rhetoric at two recent events (and their aftermath) that occurred in Indonesia almost simultaneously: The World Economic Forum- East Asia (WEF) and the 60th Anniversary of the Asian African Conference Commemoration (AACC) in Bandung. In his opening address before the AACC President Jokowi said: “Views stating the world’s economy can only be resolved by the World Bank, IMF and ADB are outdated and need to be thrown away. . .When the rich nations, which comprise a mere 20 percent of world’s population, consume 70 percent of world resources, then global injustice becomes real.” These and other similar remarks led to headlines in Jakarta papers such as “West-led Order Obsolete- Jokowi”. The immediate background to these statements is, of course, the China-backed Asian Infrastructure Investment Bank (AIIB), an institution that Indonesia’s backs wholeheartedly, and America, less so. The US took a direct hit from Finance Minister Bambang Brodjonegoro who commented to reporters right after the WEF: “The US has been very critical, very harsh, about the AIIB and it is unfair . . . The US itself has consistently refused to boost its capital in both the World Bank and the ADB. This has made the situation difficult for us”. Jokowi’s less direct –but just as clear– formulation was: “We’ve urged reform in the global financial architecture to eliminate the domination of a few. The world now needs collective leadership that is just and responsible”. The last time I looked Indonesia’s own Sri Mulyani, former Finance Minister, held one of the highest positions in the World Bank.
The elevated rhetoric is unfortunate but perhaps to be expected given that most Indonesian Presidents are driven by domestic politics to eschew “western influence and dominance”. And perhaps President Jokowi felt it necessary –given the nature of the occasion– to channel his predecessor’s and his party’s nationalist viewpoint in Bandung. Both Jokowi and Brodjonegoro are probably right that Asia needs another multilateral lender (especially one focused on infrastructure) but they are wrong to denigrate the institutions –developed at Bretton Woods out of the ashes of the Depression and WWII– that have helped to lift so much of Indonesia out of poverty. Do these institutions make mistakes and do some of them have their own internal governance issues, yes. But they are not part of some conspiracy to keep countries “down” as Jokowi’s comments imply. The US (along with the IMF, World Bank, and Asian Development Bank) should be actively engaged with the AIIB as it develops with the eventual goal of joining. Indeed, contrary to what Minister Brodjonegoro has said, President Obama has already made supportive statements regarding the AIIB. “We’re all for it if incorporates strong financial, social and environmental safeguards”, he said. However, reforming the world’s “financial architecture” seems less important than reforming the bureaucracies in Indonesia and other developing countries that have had severe problems with leakages, “white elephant projects”, and other implementation difficulties. These will remain and need to be dealt with as the China-led AIIB gets going.
Indonesia’s growth has dropped to below 5%, the rate of foreign investment has dropped, and commodity exports prices have weakened. The President should prioritize economic reform and openness rather than focusing on an untested new institution (AIIB) whose benefits (building infrastructure) will take many years to achieve. Rather than sewing seeds of divisiveness, echoing the nationalism of his predecessor, one might have expected more from Indonesia at these forums. After all Indonesia is a member of the G20 now, it has a seat at the table. It should use its position wisely, not provocatively.