MORE ON THE YUDHOYONO VISIT

Some further developments have shaken out of Indonesian President Yudhoyono’s visit to Japan.

Photo: Indonesian President Yudhoyono and Prime Minister Koizumi
Source: Kantei

The Jakarta Post has published an article on Japan-Indonesian FTA negotiations from an Indonesian viewpoint (see below).

Most interesting of all, however, are the elements of Japan-China rivalry that are apparent just below the surface. In this context, a short article by the June 4, 2005, issue of the Nihon Keizai Shinbun is instructive. My translation of the relevant section is also given below:

Indonesia and Japan Agree to Start Economic Partnership Talks
By Reiner Simanjuntak, Jakarta Post

Indonesia and Japan agreed on Wednesday to start negotiations on an Economic Partnership Agreement (EPA), a comprehensive economic cooperation and liberalization drive that would boost trade between the two nations and increase Japan's investment in Indonesia.

Meanwhile, a number of Japanese corporate players pledged to make billions of dollars in fresh investment in Indonesia, an indication of the increased confidence of Japanese investors, who had made no new significant investments in the country for several years.

The deal on the EPA was reached during a meeting between visiting President Susilo Bambang Yudhoyono and Japanese Minister of Economy, Trade and Industry Shoici Nakagawa. It will be formalized by Susilo and Prime Minister Junichiro Koizumi during a scheduled summit here on Thursday. The EPA will not only cover a free trade agreement, but will also include liberalization drives to increase investment and tourism activities between the countries, as well as various other forms of economic cooperation, including in the area of labor exports.

Japan, for example, has agreed to hire up to 10,000 skilled Indonesian nurses. "I expect the negotiations on the EPA can be completed within one year," Coordinating Minister for the Economy Aburizal Bakrie said, adding that the negotiations could start next month.

Susilo and several top government officials are in Japan for a four-day visit ending on Friday. During a one-on-one meeting with Susilo, top Japanese economic institutions such as the Japan External Trade Organization (JETRO), the Japan Bank for International Cooperation (JBIC) and the Japan International Cooperation Agency (JICA) pledged to provide new assistance to help rejuvenate the Indonesian economy. Japan is eager to see a stronger Indonesian economy under the reform-minded Susilo, seen as a key ingredient for the political and economic stability of Southeast Asia, a large market and investment destination for Japan -- which has been trying to counter the growing influence of China in the region.

On Thursday, Susilo is slated to meet with top Japanese firms such as Mitsubishi Corp., Sumitomo Corp., Itochu Corp., Mitsui & Co., Seiko-Epson Corp., Teijin Ltd. and Matsushita, whose CEOs could put on the table billions of dollars worth of investment in Indonesia. Mitsui, for example, is expected to invest $1.3 billion in power plants and another $1.6 billion in automotive and supporting industries, the finance sector, the chemical industry, textiles, liquefied natural gas (LNG), nickel and coal. Itochu's future investment plans could include a mass rapid transportation (MRT) system, the energy sector, textiles and natural rubber. Sumitomo may pour in some $2.5 billion in power plants, $700 million in an MRT and $250 million in roads. Teijin has proposed plans to revamp aging textile machinery in West Java, where 60 percent of Indonesia's textile exports originate from.

Toward Military Technology Exchange with China
The Indonesian President: ‘Japan is a Candidate’ for the Security Council
Nihon Keizai Shinbun

At a reporter’s club meeting in Tokyo on the 3rd, President Yudhoyono of Indonesia clearly indicated that he would pursue military exchanges with China. In regard to UN reform, he reserved giving support to Japan’s efforts to join the Security Council.

The President announced that with China ‘there is an agreement to begin technological cooperation in the spheres of army, navy, and air forces.’ He pointed out that the introduction of Chinese military technologies would help Indonesia to develop its own military industries.

In regard to UNSC reform, although he acknowledged that ‘Japan is a candidate for Security Council membership,’ that Indonesia’s own position on Japan ‘hasn’t yet been decided.’ He strongly asserted that it was important that progress be made in the investment environment and in the positive advancement of Japanese industrial investment.

Finding a Balance between Japan and China
By Makmur Keliat, Jakarta Post

Why doesn't Susilo Bambang Yudhoyono visit Beijing after he visits Tokyo?

One might answer this question by saying that going to Beijing would take longer and needs much more time to produce results. However, this argument is certainly open to debate. One can also raise the following question: Why did Susilo, then, visit the United States? The fact that it took more than 24 hours to reach Washington flying from Jakarta, does not explain why the presidential delegation is not making a trip to Beijing, which is less than 12 hours from Tokyo.

There is a need to analyze the visits Susilo makes not merely by looking at what national leaders say but also by using interpretative lenses. A bilateral relationship does not exist in a regional political vacuum; it is shaped by regional dynamics. In this regard, it is noteworthy that Indonesia, Japan and China through the ASEAN+3 mechanism have been involved actively in a new regional initiative, popularly known as the East Asian Community.

The first signal conveyed by Susilo's visit to Tokyo is actually very clear. Japan has advantages that China does not have in its bilateral relationship with Indonesia. With the exception of China, Japanese naval capability remains unrivaled in the Southeast and East Asia region. Irrespective of this evidence, Indonesia harbors few misgivings about Japan's intention to project its military power into the Southeast Asian region, mainly due to its special relationship with the United States. Most Indonesian strategic thinkers have strong a conviction that Japan can be expected to act as a balancer to neutralize China in the new strategic environment evolving in the East and Southeast Asian region at the end of the Cold War era.

In line with this strategic perception, most Indonesian policy-makers are of the opinion that Japanese economic power is of great importance to transform the Indonesian economy into a modern one. As the largest aid contributor to Indonesia, Japan's Official Development Assistance (ODA) is vital to build infrastructure projects in this country. Closely linked with Japan's ODA policy, the country's multinational corporations through foreign direct investment have had an important role in nurturing the Indonesian manufacturing industry. Along with the United States, Japan is also a major destination for Indonesian exports. Japan possesses other pluses that China does not have. Despite the asymmetric economic interdependency between Japan and Indonesia, most Indonesians are comfortable with the Japanese. The country's philanthropic projects, disbursed through a number of foundations such as the Japan and Toyota Foundations, has played an important role in impressing Indonesians. This factor seems lacking in the Sino-Indonesian bilateral relationship. In addition, Tokyo has not been patronizing when crafting its bilateral relationship with Jakarta.

Hence, the strategic significance of Susilo's visit to Tokyo is understandable. It mainly intends to strengthen the existing bilateral relationship by launching new agendas for economic and trade cooperation. But since bilateral relationships cannot be isolated from regional dynamics, the visit could also convey another signal. It seems both Japan and Indonesia are forging a new common response to the idea of an East Asian Community. Japanese multinationals have played a significant role in the many national economies of the East Asian region by helping to connect and integrate industrialization and trade in the region. Therefore, the idea of the East Asia Community is considered positive and advantageous as it would further cement Japan's influence in the region for the benefit of all. And in the detail of how the East Asia region should be integrated, the Japanese position seems close to that of Indonesia's.

However, it seems necessary to point out that there could be strategic disadvantages for Indonesia if Jakarta was seen as being too close to Tokyo. It could well send a signal to Beijing that Indonesia and Japan are quietly ganging up on China, particularly at this crucial juncture when the Sino-Japanese relationship is souring. Indonesia needs to take this political sensitivity into consideration when it decides the future direction of its relationship with China.

To erase such an impression, it seems there is a need for Susilo to visit Beijing in the near future. Moreover, China has sought to give a higher priority to establishing Free Trade Areas (FTAs) with ASEAN countries rather than Japan or South Korea. Since the latter two countries are perceived as having a more advanced and competitive economies, China, it seems, believes FTAs with Japan and South Korea could hurt its national economy. It is likely then, that China would also feel left out if Indonesia made a commitment to realizing an FTA with Japan without making a similar pledge to China.