Indonesia Balances Growing Ties with Taiwan and China

Indonesia Balances Growing Ties with Taiwan and China

Indonesia Balances Growing Ties with Taiwan and China

At a reception celebrating the 74th anniversary of Indonesia’s independence, on September 11, Indonesia’s top diplomat in Taipei said Taiwan is one of Indonesia’s most important partners in trade and education. Didi Sumedi, representative of the Indonesian Economic and Trade Office to Taipei, cited Taiwan’s role in contributing to Indonesia’s 5-percent growth rate in recent years. Despite the lack of formal diplomatic ties between Jakarta and Taipei, both sides have been able to develop and sustain close relations largely on the account of their robust cooperation in trade, education, and science and technology, among other fields.

Indonesia’s current relations with both Taiwan and China are largely motivated by economics, which have formed the basis of bilateral relations for the past several decades. For Jakarta, China and Taiwan are both important economic and trade partners. China has surpassed Japan as Indonesia’s main trade partner and has become the third-largest foreign investor after Singapore and Japan. Meanwhile, Taiwan-Indonesia bilateral trade reached USD $8.9 billion in 2018, an increase of 8.7 percent from 2017. Taiwan’s large imports of natural resources such as crude oil, gas, coal, and rubber from Indonesia have often tilted the trade balance in Indonesia’s favor. Taiwan constitutes Indonesia’s 11th biggest trade partner, exporting machinery, electronics, vehicles, and other goods to the Southeast Asian country.

Historical Baggage

As Indonesia seeks to expand trade and investment relations with both sides of the Taiwan Strait, there is an inherent distance that must be maintained with respect to Beijing. The Chinese Communist Party’s (CCP) early support for communist parties throughout Southeast Asia, including Indonesia, during the Cold War has created a historical legacy of mistrust and suspicion towards China in the region. Beijing provided financial and material support to the Indonesia Communist Party (PKI), rallied ethnic Chinese in Indonesia to support the People’s Republic of China (PRC), and was widely believed to have been involved in the PKI’s coup that killed six Indonesian generals in September 1965. [1] After General Suharto took power in Indonesia in 1966, marking the beginning of the New Order, Jakarta severed diplomatic relations with Beijing on October 30, 1967. The Suharto regime’s discriminatory policies towards its ethnic Chinese minority created a hostile atmosphere that led to an exodus of Chinese Indonesians, some of whom fled to Taiwan, and contributed to the anti-Chinese riots in 1998. Indonesia’s relations with China continue to be complicated by the issue of ethnic Chinese in Indonesia.

Economic Considerations

Although the Indonesian government normalized relations with Beijing in August 1990 out of pragmatic economic considerations, Jakarta remains cautious about being too closely tied to China, both economically and politically. Indonesian elite and public opinions view China as both a threat and a source of opportunity. Indonesian leaders have become sensitive to the influx of Chinese laborers to Indonesia, which have led to local protests. As of 2018, more than 24,000 Chinese nationals are working in Indonesia, with some employed by Chinese state-owned companies working on infrastructure projects throughout the country. The popular perception that Chinese companies are not creating local jobs for Indonesian workers has led to economic grievances against the growing Chinese economic presence in the country. Japan’s major economic presence in Indonesia also led to anti-Japanese protests in the 1970s, underscoring the sensitivity of foreign dominance over the country’s economy. By contrast, Taiwanese companies created one million jobs for Indonesians, according to 2015 data from the Indonesian Investment Coordinating Board. 

Moreover, relations with China became a politicized issue during Indonesian President Joko Widodo (popularly known as Jokowi)’s re-election campaign for the April 2019 presidential election. His rival Prabowo Subianto attacked Widodo’s ties to Beijing and Chinese investment in Indonesia in an effort to throw into question the president’s loyalty to the nation. Under Widodo, Indonesia joined Chinese President Xi Jinping’s Belt and Road Initiative (BRI, also known as “One Belt, One Road”) and the China-led Asian Infrastructure Investment Bank (AIIB). The Indonesian government has looked to China for investment in roads, bridges, and power plants. Beijing has funded major infrastructure projects, notably a USD $6 billion high-speed railway linking Jakarta with Bandung, the capital of West Java, expected to be completed in 2021. Widodo’s re-election campaign, however, tried to downplay his relations with Beijing.

The Widodo administration has spearheaded numerous infrastructure projects and aims to attract massive foreign investment to develop the economy. Indonesia’s economy is projected to grow at 5.1 percent in 2019 and then rise to 5.2 percent in 2020. Widodo had initially set a 7-percent growth target when he came into office in 2014, but observers argue that Indonesia would need to upgrade its national infrastructure and secure large foreign investment, with one estimate at USD $90 billion, in order to reach Widodo’s target. Widodo has launched three special economic zones (SEZs) in East Kalimantan, North Sulawesi, and North Maluku, and wants to attract USD $7.7 billion investment in the SEZs and create 120,000 jobs by 2025, according to the Indonesian government. Jakarta expects Taiwan, China, and Singapore to invest in these SEZs. Back in 2010, Indonesian President Susilo Bambang Yudhoyono conveyed his desire for Taiwan to play a major role in developing Morotai Island in North Maluku and presented Taiwanese officials with a plan for Morotai. Taiwan’s strengths in high technology, fisheries, eco-tourism, shipbuilding, and agriculture provide avenues for enhanced bilateral cooperation. In November 2018, Taipei and Jakarta signed a MOU on comprehensive economic cooperation including in agriculture, infrastructure, investment, and trade. A potential area of cooperation is in the use of Taiwan’s technology to dredge reservoirs in Indonesia, said Taiwan’s Ministry of Economic Affairs.

Indonesia’s Muslim Identity Politics

While Widodo does not want to be seen as being too close to China, he also wants to preserve cooperative relations with Beijing. This may be one reason why he has remained reticent on China’s internment of an estimated one million ethnic Uyghur Muslims in the Xinjiang Uyghur Autonomous Region. In March 2019, Widodo said, “I don’t know the facts there, so I don’t want to comment,” in response to a media question on the incarceration of Uyghurs in China. Despite his re-election campaign’s attempts to present himself as a defender of the Muslim faith in Indonesia, Widodo has refrained from criticizing the Chinese government’s Uyghur policy. By contrast, the president lambasted Myanmar’s treatment of its Rohingya Muslim minority. As a Muslim country, Indonesia faces a dilemma in responding to Muslim affairs in atheist countries such as China. In December 2018, Indonesia’s foreign minister summoned China’s ambassador to “convey the concerns of Indonesian Muslims about the plight of Uyghur Muslims in Xinjiang.” Later, the Indonesian government backed down and said it did not want to “intervene in the domestic affairs of another country.” However, segments of Indonesian society did not share the same sentiments of its government. In late December, hundreds of Indonesian protesters surrounded the Chinese embassy in Jakarta protesting Beijing’s treatment of Uyghur co-religionists.

By contrast, the Taiwan government has promoted a Muslim-friendly image to attract Indonesians to travel, study, and work on the island. According to a September 16 Facebook post by Taiwan President Tsai Ing-wen (蔡英文), Taiwan boasts more than 200 halal-certified (Muslim dietary) restaurants and has set up Muslim prayer rooms at Taiwan’s Taoyuan International Airport, on Taiwan’s high speed rail, and at major tourist attractions including Sun Moon Lake, Ali Mountain, and the National Palace Museum in Taipei. Furthermore, Mastercard-CrescentRating’s Global Muslim Travel Index 2019 ranked Taiwan as the third most popular destination for Muslim travelers among non-Muslim countries. Leaders in Taiwan’s Muslim community have also served as informal intermediaries that help connect Taiwan with Southeast Asian Muslim communities. Former imam at the Taipei Grand Mosque Ma Hsiao-chi commented that doing business with many Southeast Asian countries such as Indonesia necessarily touches upon Muslim culture.

Future of Taiwan-Indonesia Relations

The Indonesian government faces a balancing act of garnering Chinese financial support for infrastructure projects, while also not being too closely identified with Beijing and taking care not to roil interethnic relations in the country. Compared to relations with China, Indonesia’s relations with Taiwan are decidedly less complicated and focused on expanding beneficial economic ties and other forms of cooperation. Taiwan’s ability to maintain close overall relations with Indonesia despite Jakarta’s “One-China” policy is largely due to the strong bilateral economic relationship. Even after Indonesia normalized relations with the PRC in 1990, Taiwan’s relations with Indonesia remained strong. Taiwan’s President Lee Teng-hui made a historic visit to Indonesia in February 1994—the first time that the Republic of China’s (ROC) head of state visited Indonesia. In addition, Taiwan’s government set up two representative offices in Indonesia—the Taipei Economic and Trade Office (TETO) (駐印尼台北經濟貿易代表處) in Jakarta and TETO in Surabaya (駐印尼泗水辦事處). The second office in Surabaya inaugurated in 2015 is aimed at accommodating the many Indonesian workers from East Java that apply for work visas in Taiwan.

Furthermore, Taiwan’s relations with Indonesia will continue to solidify given the strength in people-to-people ties. Around 300,000 Indonesians live in Taiwan, and they constitute the largest group of foreigners on the island. Many of these are domestic workers and caregivers to Taiwan’s elderly population. Some 50,000 Indonesians are married to Taiwanese citizens, while there are currently 10,000 Indonesian students studying in Taiwan. Going forward, these growing informal connections, coupled with the economics-centered relationship, will continue to propel Taiwan-Indonesia relations. 

The main point: Despite growing economic ties between China and Indonesia, Jakarta is likely to remain cautious of Beijing’s intentions and keep China at arms-length for domestic political reasons. That Taiwan’s relations with Indonesia have been able to grow so closely is largely a function of the strong bilateral economic relationship and growing people-to-people ties.

[1] Samuel C.Y. Ku, Indonesia’s Relations with China and Taiwan: from Politics to Economics, Asian Perspective, Vol. 26, No. 4, 2002, pp. 231-232.