Why the US & China both Need Indonesia

Summary

The video explores Indonesia's strategic importance in Asia's geopolitical landscape, highlighting its economic growth, vast natural resources, and military capabilities. As the US and China compete for influence, Indonesia's non-alignment policy allows it to maintain autonomy while benefiting from both superpowers. The archipelago's digital economy, demographic advantages, and military modernization efforts position it as a key player in the region's future, despite challenges such as geographical dispersion and political instability.

Takeaways

• 🌏 The US and China are competing for influence in Indonesia due to its strategic location between the Indian and Pacific Oceans, which controls significant maritime trade routes.
• 📈 Indonesia's economy has grown exponentially, with a projected GDP of $1.5 trillion by the end of 2024, making it a key player in Southeast Asia's economic landscape.
• 🔄 The country has shifted from raw material exports to value-added industries, particularly in nickel smelting, positioning itself as a critical player in the electric vehicle industry.
• 💡 Indonesia's digital economy is thriving, with the largest e-commerce industry in Southeast Asia, fostering a vibrant startup ecosystem and attracting global talent.
• 🌐 Indonesia maintains a policy of non-alignment, balancing its relations with both the US and China to extract benefits without committing fully to either side.
• 🚀 The country is modernizing its military, diversifying its sources of arms to maintain strategic flexibility and independence in its defense policy.
• 🌱 Indonesia's young and growing population provides a demographic dividend that is expected to fuel economic growth and development for decades.
• 🏙️ Geographical challenges, such as the spread of population across numerous islands and urban-rural inequality, pose development hurdles for Indonesia.
• 🏢 The potential relocation of Indonesia's capital due to Jakarta's sinking and flooding risks could have significant economic and political implications.
• ⚖️ Political instability and the risk of democratic backsliding pose challenges to Indonesia's continued growth and its ability to navigate the complex geopolitical landscape.

Q & A

Why are the US and China investing heavily in Indonesia?

The US and China are investing in Indonesia because its strategic location between the Indian and Pacific Oceans gives it significant influence over important maritime trade routes, and its allegiance could tip the balance of power in Asia.

What has been Indonesia's economic growth story since the 1997 financial crisis?

Since the 1997 financial crisis, Indonesia has transformed into an emerging powerhouse, with its economy growing twofold in just over two decades. It is projected to reach a GDP of 1.5 trillion by the end of 2024, making it the 16th largest economy globally.

How has Indonesia's economic expansion affected its poverty rate?

Indonesia's economic expansion has led to substantial strides in poverty reduction. The poverty rate has been cut in half since 1999, which is remarkable considering the country's population of over 275 million people.

What strategic shift has Indonesia made to fuel its economic growth?

Indonesia has made a strategic pivot from raw material exports to value-added industries. This shift includes policies to diversify the economy, such as banning raw nickel exports to build a domestic processing industry.

How has Indonesia positioned itself in the electric vehicle industry?

Indonesia has positioned itself at the heart of the booming electric vehicle industry by increasing its nickel smelting capacity from 16 million tons per year in 2018 to over 100 million tons per year by 2023, making it the top producer of nickel globally.

What is the significance of Indonesia's digital economy?

Indonesia's digital economy is significant as it is the largest e-commerce industry in Southeast Asia, six times larger than that of the Philippines. This digital boom has led to a vibrant startup ecosystem, with 15 startups valued at over $1 billion each.

How does Indonesia's non-alignment policy benefit its foreign relations?

Indonesia's non-alignment policy allows it to maintain independence while avoiding permanent strategic alignments with major powers. It engages with both the US and China, extracting benefits from each while maintaining its autonomy.

What is the impact of China's Belt and Road Initiative on Indonesia?

China's Belt and Road Initiative has led to massive investments in Indonesia, including funding for the Jakarta Bandung high-speed railway, the Morowali industrial park, and the expansion of several Indonesian ports. However, Indonesia has managed to largely outgrow its debt obligations.

How is Indonesia modernizing its military?

Indonesia is modernizing its military through a 20% increase in its military budget in 2023 as part of the 'Indonesia's minimum essential Force plan.' It is acquiring advanced weaponry and equipment from diverse sources, including the US and China, to enhance capabilities and maintain strategic flexibility.

What demographic advantage does Indonesia have for economic growth?

Indonesia has a demographic advantage with a relatively young workforce, which is expected to fuel its economy for at least the next half-century. This gives it an edge over countries like Japan and South Korea, which are facing labor shortages and increased social costs due to aging populations.

What are some of the challenges Indonesia faces in its development?

Indonesia faces challenges such as its geographical spread across more than 177,000 islands, which makes nationwide development complex and costly. Additionally, corruption, political instability, and the potential for democratic backsliding pose risks to its growth and development.

Outlines

00:00

🌏 Geopolitical Tug-of-War Over Indonesia's Strategic Importance

The US and China are competing for Indonesia's allegiance due to its pivotal role in Asia's balance of power. Indonesia's strategic location between the Indian and Pacific Oceans gives it control over crucial maritime trade routes. As tensions rise, the archipelago's allegiance could shape Asia Pacific relations. Indonesia's economic growth, driven by a shift from raw material exports to value-added industries, has been remarkable since the 1997 financial crisis. The country's ban on raw nickel exports to build a domestic processing industry exemplifies its economic transformation. Indonesia's digital economy, with the largest e-commerce industry in Southeast Asia, has fostered a thriving startup ecosystem, positioning it as a tech hub. Economic policies designed to attract foreign investment are bolstering its growth, despite the challenges of a young and dynamic workforce.

05:01

🕊️ Indonesia's Non-Alignment Policy in a Multi-Polar World

Indonesia maintains its independence through a non-alignment policy, avoiding permanent strategic alignments with major powers. This approach, rooted in the 1955 Bandung Conference, allowed Indonesia to secure aid without full commitment during the Cold War. Today, it continues to engage with both the US and China, extracting benefits while maintaining autonomy. Indonesia's military modernization and expansion of joint exercises with multiple countries demonstrate a commitment to broad military cooperation without exclusive alignment. Despite significant economic ties with China, Indonesia has shown resolve in territorial disputes, refusing to negotiate maritime boundaries and conducting military exercises near contested islands. The country's strategic location and essential role in global trade make it a key player in the Eastern hemisphere's influence battle.

10:02

🛡️ Military Modernization and Regional Security Challenges

Indonesia is modernizing its military to address regional security challenges, particularly territorial disputes in the South China Sea. Although not a claimant in the most contentious areas, Indonesia has faced maritime boundary pressures from China. The country's military exercises near the Nuna Islands and refusal to negotiate boundaries demonstrate its resolve. Indonesia's military modernization includes acquiring advanced weaponry from diverse sources, enhancing capabilities while maintaining strategic flexibility. This approach allows Indonesia to deter foreign interference without reliance on a single nation's support. The US has been a beneficial partner, conducting military exercises and exporting arms to strengthen ties. Indonesia's demographic profile, with a young workforce, is a significant advantage for economic growth and military strength.

15:02

🏗️ Indonesia's Economic and Political Challenges Amidst Growth

Indonesia faces several hurdles in its path to becoming a top global economy. Geographical challenges, with a population spread across numerous islands, make nationwide development complex. Inequality between rural and urban areas, especially the concentration in Java, presents opportunities and challenges. Environmental concerns, such as Jakarta's sinking, add to the complexity. Political issues, including corruption and potential democratic backsliding, pose risks to Indonesia's stability. The current president's term limit and political maneuvering for the 2024 election increase tensions on the country's democracy. Despite these challenges, Indonesia's economic growth, demographic dividend, and strategic independence position it for significant influence in the coming decade.

Keywords

💡Indonesia

Indonesia is a Southeast Asian country and archipelago that spans across the Indian and Pacific Oceans. It is the focus of the video due to its strategic geopolitical position and its rapid economic growth. The video discusses how both the US and China are vying for influence in Indonesia, highlighting its importance in the balance of power in Asia.

💡Geopolitical Power

Geopolitical power refers to the influence a country has over others based on its geographic location, economic strength, and military capabilities. The video emphasizes Indonesia's growing geopolitical power, especially due to its strategic location and its potential to tip the balance of power in Asia.

💡Maritime Trade Routes

Maritime trade routes are the sea paths that facilitate international trade. The video mentions that Indonesia's position straddling the Indian and Pacific Oceans gives it considerable sway over some of the world's most important maritime trade routes, which is a key reason for the interest of superpowers in the region.

💡Economic Growth

Economic growth is the increase in the production of goods and services of an economy over a period of time. The video outlines Indonesia's impressive economic growth since the 1997 financial crisis, projecting it to become the 16th largest economy globally by the end of 2024.

💡Value-Added Industries

Value-added industries are sectors that process raw materials into finished goods, adding economic value. The script discusses Indonesia's strategic shift from raw material exports to focusing on value-added industries, such as the nickel smelting industry, which has transformed its economy.

💡Digital Economy

A digital economy is based on digital technologies and the internet, encompassing e-commerce, digital services, and more. The video notes Indonesia's thriving digital economy, which includes the largest e-commerce industry in Southeast Asia and a vibrant startup ecosystem.

💡Non-Alignment Policy

Non-alignment policy is a principle of not formally aligning with or against any major power bloc. Indonesia's long-standing non-alignment policy, as discussed in the video, has allowed it to maintain independence while benefiting from relationships with both the US and China.

💡Belt and Road Initiative

The Belt and Road Initiative is a global development strategy adopted by the Chinese government involving infrastructure development and investments in countries in Europe, Asia, and Africa. The video mentions China's investments in Indonesia as part of this initiative, which includes funding for major infrastructure projects.

💡Military Modernization

Military modernization refers to the process of updating and upgrading a country's military capabilities. The script discusses Indonesia's efforts to modernize its armed forces, including the acquisition of advanced weaponry from various sources, to maintain strategic flexibility and deter foreign influence.

💡Demographic Dividend

A demographic dividend is the economic growth potential that can result from shifts in a population's age structure, mainly when the share of the working-age population is larger than the non-working-age population. The video highlights Indonesia's young workforce as a demographic dividend that is expected to fuel its economy for decades to come.

💡Territorial Disputes

Territorial disputes refer to disagreements between two or more parties about the possession of land or maritime areas. The video discusses how Indonesia has shown willingness to stand firm on territorial disputes, particularly in the South China Sea, refusing to negotiate maritime boundaries and conducting military exercises near the Nuna Islands.

Highlights

The US and China are heavily investing in Indonesia to secure it as an ally due to its strategic location that can tip the balance of power in Asia.

Indonesia's position between the Indian and Pacific Oceans gives it considerable sway over important maritime trade routes.

Indonesia's allegiance is seen as crucial by both superpowers for determining the future of Asia Pacific relations.

Indonesia has experienced remarkable economic growth since the 1997 financial crisis, becoming an emerging powerhouse in Southeast Asia.

Projected to be the 16th largest economy globally by the end of 2024, Indonesia's GDP has grown exponentially in the past two decades.

Indonesia's economic expansion is driven by a strategic shift from raw material exports to value-added industries.

President Joko Woto's policy to ban raw nickel exports has led to a significant increase in domestic processing industry and nickel smelting capacity.

Indonesia is positioning itself at the heart of the electric vehicle industry with its nickel mining and processing capabilities.

The nation has the largest e-commerce industry in Southeast Asia, fostering a thriving digital economy and startup ecosystem.

Indonesia is home to 15 startups valued at over $1 billion each, indicating its growing tech hub status in Asia.

Economic policies in Indonesia are designed to attract foreign investment, promoting its status as a favorable destination for global businesses.

Indonesia's non-alignment policy allows it to maintain independence while engaging with both the US and China for mutual benefits.

Indonesia's military modernization efforts reflect a strategic move to deter foreign powers from meddling in its affairs.

The country's demographic profile, with a young workforce, is a significant advantage for its economic growth and middle-class expansion.

Indonesia's geographical challenges, including its spread across numerous islands and the sinking of Jakarta, pose development and inequality issues.

Corruption and political challenges, including the potential for democratic backsliding, are significant hurdles for Indonesia's continued growth.

Indonesia's strategic location and economic growth make it a key player in the geopolitical landscape of the Eastern hemisphere.

Transcripts

the US and China are both investing

heavily into Indonesia trying to secure

it as an ally why because Indonesia will

tip the balance of power in Asia

Indonesia straddles the Indian and

Pacific Oceans which means it holds

considerable sway over some of the

world's most important Maritime trade

routes as tensions between the US and

China escalate this archipelago with

over 177,000 Islands finds itself at the

center of a high stakes

competition both superpowers recognize

that Indonesia's Allegiance could

determine the future of Asia Pacific

relations but what makes Indonesia so

compelling its economic potential vast

natural resources and growing military

capabilities are just the start of the

story if I ask you to list the best

economic growth stories of this Century

you'd probably start by naming China

after that maybe Vietnam India or

Ethiopia while Indonesia also belongs on

that list since emerging from the Asian

financial crisis of 1997 the nation has

undergone a remarkable

transformation today it's an emerging

Powerhouse reshaping the economic

landscape of Southeast Asia consider

this Indonesia's economy has grown tfold

in just over two decades it's projected

to reach a GDP of 1.5 trillion by the

end of 2024

rising to the 16th largest economy

globally has meant substantial strides

in poverty reduction Indonesia's poverty

rate has been cut in half since 1999

that's incredible when you remember that

this is a population of over

275 million people but what's driving

this explosive economic expansion the

answer lies in Indonesia's strategic

pivot from raw material exports to value

added Industries in the early 2000s

Indonesia's grow grth was primarily

fueled by commodity exports as China's

economy grew it became a voracious

importer of Indonesian copper oil gas

and coal however the nation's leadership

recognized the limitations to this model

and implemented bold policies to

diversify and strengthen the economy

most recently Indonesian president Joko

woto decided to ban raw nickel exports

in a calculated strategy to build a

domestic processing industry the results

have been transformative estimates

suggest that the country's nickel

smelting capacity increased from just 16

million tons per year in

2018 to over 100 million tons per year

by 20123 today the country produces more

nickel than all other nations combin

positioning it at the heart of the

booming electric vehicle industry

between nickel Mining and processing

woto has positioned Indonesia as a

lynchpin of the global supply chain and

this value added manufacturing creates

jobs makes the Indonesian economy more

resilient and entices investors to look

for more Avenues to invest in the

country but Indonesia's economic

Renaissance isn't limited to Natural

Resources the nation has simultaneously

cultivated a thriving digital economy

Indonesia now boasts the largest

e-commerce industry in Southeast Asia

dwarfing that of its neighbors to put

that perspective Indonesia's e-commerce

sector is six times larger than that of

the Philippines this digital boom has

given rise to a vibrant startup

ecosystem Indonesia's home to 15

startups valued at over $1 billion each

a number that surpasses every other

Southeast Asian country except for

Singapore and these unicorns aren't just

creating wealth they're driving

Innovation attracting Global Talent and

positioning Indonesia as a tech Hub to

rival established centers across Asia

this has been supported by Indonesian

economic policies that are deliberately

designed to attract foreign investment

if an investor wants to come to

Indonesia go ahead come to Indonesia as

of 2023 Indonesia boasts the fastest

growing economy in southeast Asia and

one of the fastest growing globally and

this is paired with Indonesia's young

Dynamic Workforce which stands in stark

contrast to the Aging stagnating

economies of a established Asian

players Indonesia's economy is the

foundation of its geopolitical power but

its strategic location unlocks another

substantial opportunity as tensions

between the United States and China

escalate Indonesia finds itself in a

unique position to shape the future of

Asia but how does a country with limited

Military might wield such influence the

answer lies in Indonesia's long-standing

policy of non-alignment this approach

rooted in the 1955 bandang conference

has allowed Indonesia to maintain its

independence while avoiding permanent

strategic alignments with major powers

during the Cold War Indonesia

masterfully played both the United

States and Soviet Union securing

military and economic aid without fully

committing to either side in today's

multi-polar world Indonesia is

continuing this delicate Balancing Act

the nation engages with both the US and

China

extracting benefits from each while

maintaining its autonomy simultaneously

Indonesia has expanded its annual guda

Shield joint military exercises to

include soldiers from 12 additional

countries including Australia and Japan

this move demonstrates Indonesia's

commitment to Broad military cooperation

without aligning exclusively with a

single power but this non-alignment

policy doesn't mean that it's passive on

matters of regional Affairs when it

comes com to territorial disputes

Indonesia has shown a willingness to

hold its ground the nation has refused

China's offer to negotiate Maritime

boundaries and conducted military

exercises near the Nuna Islands

signaling resistance to Chinese

territorial claims yet China remains a

significant economic partner becoming

Indonesia's second largest source of

foreign direct investment and a major

participant in infrastructure projects

since 2013 China has intensified its

focus on oan countries including

Indonesia through massive Investments as

part of the belt and Road Initiative for

Indonesia this is meant funding for the

Jakarta bandang high-speed Railway Mora

wall industrial park and the expansion

of several Indonesian ports while the

financing comes with strings attached

Indonesia has been able to largely

outgrow its debt obligations a feat that

few Belton Road loan recipients have

been able to achieve today Indonesia

does over $130 billion worth of trade

annually with China nearly double the

amount when President woto came to

office but Indonesia can still extract

concessions from its partner due to the

essentiality of nickel to China's EV

industry and Indonesia's strategic value

geographically since Indonesia is the

country that connects the Pacific and

Indian oceans aox approximately 60% of

all Maritime trade passes through

Indonesian Waters this makes it the key

pivot country in the battle for

influence in the Eastern hemisphere the

United States strategy of a free and

open indopacific involves Partnerships

with Japan India and Australia and would

become undeniable with the addition of

the world's fourth most populous nation

now we've already outlined some of

China's belt and Road Investments but

the US has also been a beneficial

partner Indonesia benefits from the US

generalized system of preferences

allowing duty-free entry for over 3,500

Indonesian products into the US market

Indonesia's also part of the US

International military Education and

Training Program which has helped

modernize its

military as tensions simmer in the South

China Sea and great power competition

intensifies Indonesia is quietly

modernizing its armed forces in the

background is it preparing for war

hopefully not but this military

transformation is a calculated move to

make it a credible threat to deter

foreign powers meddling in Indonesia's

neighborhood in 2023 the country

approved a 20% increase in its military

budget as part of a larger long-term

strategy known as Indonesia's minimum

essential Force plan one of the pillars

of the Indonesian strategy is s forcing

Advanced weaponry and equipment from a

diverse array of sources Indonesia's

military modernization efforts include

the acquisition of 33 fighter aircraft

and 103 Leopard 2 battle tanks from

Germany while sourcing scorpion tanks

from Britain this diverse sourcing of

arms serves a dual purpose it enhances

Indonesia's military capabilities while

also maintaining strategic flexibility

reflecting its non-alignment policy by

acquiring c130s and attack helicopters

from the US but missiles and missile

systems from China Indonesia ensures

that no single nation can veto its

modernization plans or put a cap on its

power this strategy does result in

higher costs for maintenance and

operation but Indonesian leadership has

judged that that loss and efficiency is

worth the Strategic Independence over

the past few years the US has conducted

more than 100 military exercises with

Indonesia and trained thousands of its

officers it's also exported more than a

billion dollars worth of arms and

equipment to the country to further

strengthen its ties with approximately

400,000 Personnel Indonesia boasts one

of the largest armed forces in Southeast

Asia and a sizable modernized military

is essential for the Region's most

pressing security challenge territorial

disputes in the South China Sea while

Indonesia is not a claimant on the most

contentious areas of the South China Sea

it has faced pressure from China over

Maritime boundaries near the Nuna

Islands in a show of resolve Indonesia

conducted military exercises near these

islands in June of 2020 shortly after

refusing China's offer to negotiate

Maritime boundaries the South China Sea

issue exemplifies the delicate Balancing

Act Indonesia must strike in its foreign

policy while maintaining economic ties

with China Indonesia has shown

willingness to stand firm on issues of

its sovereignty this stance was further

reinforced when Indonesia doubled down

on its plans to turn the Nuna Islands

into a special economic zone despite

Chinese demands to stop drilling for oil

and natural gas in the area this

exemplifies how Indonesia's hard power

goes hand inand with its Economic

Development a credible military means it

can do what's best for its

people there are a lot of people in

Indonesia with a population of 277

million it's the fourth most populous

country in the world and the country's

demographic profile is particularly

favorable for economic growth unlike

many developed Nations grappling with

aging populations Indonesia boasts a

relatively young Workforce this

demographic dividend is expected to fuel

Indonesia's economy for at least the

next half century giving it a

significant Edge over countries like

Japan and South Korea which are facing

labor shortages and increased social

costs due to their aging populations

meanwhile Indonesia has the workers to

support increasing industrial demands

this should ultimately grow its middle

class into a legitimate economic driver

fueling domestic consumption and

creating a viable internal Market as

more Indonesians join the ranks of the

middle class the demand for goods and

services is surging creating a

self-sustaining cycle of economic growth

Indonesia's GDP per capita is already

twice that of India's and there is

considerable upside yet to be realized

in order to fully leverage its

demographic dividend the country is

working to reform its education system

which lags behind many Regional

competitors only about 10% of

Indonesians speak English which Remains

the de facto language of international

business

this language barrier could potentially

limit Indonesia's ability to fully

integrate into the global economy and

attract foreign investment progress has

been slower than desired and Indonesia

still Trails behind Regional Rivals like

India in terms of an English-speaking

Workforce but the age of the internet

and artificial intelligence May render

that less of a disadvantage as the

decade goes by ultimately there is very

little standing between Indonesia

becoming one of one of the world's 10

largest

economies now there are a few hurdles

that Indonesia must overcome the first

is its geography the country's

population is spread across more than

177,000 Islands making Nationwide

development a complex and costly

Endeavor it also makes inequality

between rural and urban centers

particularly severe Java the most

densely populated island produces about

56 % of all of Indonesia's rice and

contains more than half of the country's

population despite comprising less than

7% of Indonesia's total land area this

concentration of population and economic

activity presents both opportunities and

challenges for balanced National

development Additionally the capital

city Jakarta is sinking into the ocean

and faces severe flooding risks some

predictions suggest that Jakarta will be

submerged by 2050 due to rising sea

levels the government's proposed

solution a giant seaw wall is projected

to cost around $40

billion and has faced controversy over

land seizures environmental concerns and

security risks leaders have also

explored moving the capital to another

Island that would also cost tens of

billions of dollars and create a

Honeypot for exploitation and bribes

corruption continues to plague

Indonesia's political and economic

landscape after making significant

progress in the fight against graft

entering the top half of transparency

International's corruption perception

index in 2019 Indonesia has since

regressed and this could all be

compounded by internal political turmoil

current president Joko wodo is at his

term limit but does not seem interested

in gracefully yielding power he's

campaigning hard for his defense minist

prooo sabano in the 2024 election in

addition to a track record of Human

Rights abuses paoo has selected W Doo's

36-year-old son as his Vice Presidential

nominee this political maneuvering

increases the tension on Indonesia's

relatively young and fragile democracy

woto previously pledged to refrain from

building a family Dynasty that seems to

have been just an empty campaign promise

the potential for Democratic backside

looms large and we've already seen it in

other Southeast Asian Nations like

Thailand and the Philippines Indonesia's

democracy remains vulnerable to

authoritarian Tendencies and populist

appeal the country's ability to navigate

these political challenges while

maintaining its economic growth will

Define how successful it is in the

decade

ahead I think that economic growth is

already baked into the Indonesian story

and they also have the benefit of being

removed from the likeliest flash points

for conflict in East Asia should

Regional tensions escalate in such a

scenario Indonesia would have the

advantage of getting to make a

calculated reaction to events rather

than rushing to respond and in matters

of negotiation the ability to be patient

usually yields greater concessions it

would be wise to keep an eye on

Indonesia's continued growth and how it

aligns itself in the years ahead

I know I'll be watching closely if you

enjoyed this video thank you for

watching check out our other video on a

country with an enormous Muslim

population Pakistan