Why the US & China both Need Indonesia
Summary
TLDRThe 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
🌏 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.
🕊️ 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.
🛡️ 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.
🏗️ 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.
Mindmap
Keywords
💡Indonesia
💡Geopolitical Power
💡Maritime Trade Routes
💡Economic Growth
💡Value-Added Industries
💡Digital Economy
💡Non-Alignment Policy
💡Belt and Road Initiative
💡Military Modernization
💡Demographic Dividend
💡Territorial Disputes
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
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