Swing State

November 2020

Commentary by Wayne Forrest
The US election has been focused on swing states, key places where our two political parties contest for electoral votes every four years. Even more than it may have in the past, the US government now sees Indonesia as a swing state, important in our own contest with China.  You may not have noticed, but the US government just completed a charm offensive with SEA’s largest economy. Some parts of it worked well, others, perhaps not. Swing states don’t give in easily.

The charm offensive began a few months ago when the US granted an entry visa for Indonesia’s Defense Minister, Prabowo Subianto. This raised a few eyebrows given that for years Prabowo had been advised not to seek a visa to the US after being shown the door by his superior officers in 2000. The military tribunal found him guilty of kidnapping political dissidents in 1998, among other crimes. But after he entered Jokowi’s Cabinet in October 2019, he was invited by Pentagon chief Mike Esper. Prabowo arrived in mid-October to discuss weapons purchases, South China Sea security, and the US interest in obtaining landing and refueling rights for US surveillance aircraft. Both President Jokowi and Foreign Minister Marsudi rebuffed the Pentagon’s request a few days later in keeping with Indonesia’s long-standing policy of not allowing any foreign troops on Indonesian soil. In 2005, after the horrendous Aceh tsunami, medical teams from the US hospital ship Mercy were not allowed to set up field hospitals and had to ferry victims by helicopter offshore. So, if we couldn’t get medical personnel on Indonesia’s terra firma after a huge natural disaster, why did we think a request to land planes that could spy on one of the country’s most important trading partners would be treated any differently? However, even with the knowledge that this request fell on deaf ears, Secretary of State Mike Pompeo still gamely showed up in Jakarta at the end of October. He pushed on Indonesia to more forcefully protest Chinese “atheist” suppression of Muslim Uighers and launched a broadside at China’s South China Sea claims and its one party system. Indonesia, realizing that some of Pompeo’s rhetoric was also aimed back home, took it all in stride. Still, Pompeo underlined the importance of the US-Indonesia economic relationship and otherwise had a constructive visit.

Although the US may not have budged Indonesia from its nuanced and traditional neutral position regarding China, our economic relations have recently gained ground as a result of separate but related actions on each side. On October 30, US Trade Representative Robert Lighthizer conveyed in a letter that the 2.5 year review of Indonesia’s GSP benefits had ended with no change. A few days later, President Jokowi signed the Omnibus Law on Job Creation, a significant overhaul of the “front end” of the bureaucratic state. Pompeo had praised the law while in Jakarta. Although key implementing regulations have yet to be issued, the law should be a positive for foreign trade and investment. In return for retaining its GSP benefits, which include duty reductions on many of its manufactured exports to the US, Indonesia agreed to open its market to US fruits and vegetables, committed to maintain cross border data flows, and promised to end its local reinsurance mandates. Indonesia believes the new Omnibus Law will attract new manufacturing investment from US companies moving production out of China.  Facilitated by the renewed GSP, the products of these new factories may end up in the US market. A further linkage between GSP and the Omnibus came this week when Indonesia announced it will propose a new limited bilateral trade deal.  (See story on page 2) Several ministers will visit Washington in mid-November to kick off discussions.

One of the characteristics of a swing state is it can’t be counted on to go in any direction for very long.  Indonesians may be like the practical citizens of Michigan, Wisconsin, and Ohio who are less invested in “coastal politics” and look for the best deal regardless of party or ideology.  Perhaps they are the quintessential middle-of-the road types seeking consensus in a bipolar situation.  The US government may be justified in its concern that Indonesia has moved too close to China but it can no longer match its level of investment.  Although a democracy, Indonesia in some ways is more like China, its markets dominated by state owned enterprises that own much of the economy.  But this does not mean it will end up in China’s pocket. Although Indonesia’s “free and active” policy dates back to its birth in the middle of the Cold War, during which it maintained a non-ideological position, it remains relevant today. As a swing state, Indonesia will resist being cornered by any major power, taking what it can from each.

(The writer’s opinions do not necessarily reflect those of the American Indonesian Chamber of Commerce or its members)