Indonesia’s Chairmanship of the G20 –

A Rendez-vous Full of Opportunities

 

 By Peter Schoof, Germany’s ambassador to Indonesia and to ASEAN from 2018-2021

The G20 will be chaired in 2021/22, for the first time ever, by the Republic of Indonesia. This is a particular opportunity to advance the agenda of the G20 as well as to discover this important, often underestimated country and its systemic role in global affairs. In population, Indonesia is the 4th biggest country in the world (around 275 Mio). Its archipelago, with around 17,000 islands covers a distance equivalent to that of Ireland to Iran and contains three timezones. It is one of the richest countries in biodiversity, its rainforest – like in Brazil and in Africa – constitutes indispensable carbon storage for the global ecosystem. And it is the country with by far the largest Muslim population (87 percent out of 275 Mio.) in the world.

With the revolution in 1998, which Indonesians call „reformasi“, the country has become by now a consolidated democracy, Although some remnants of authoritarianism may still be alive, there is a relatively open society, particularly in comparison to other states in the region. While the transformation of 1998 was a direct response to decades of authoritarian rule, it was also the consequence of the trauma and turmoil associated with the „Asia crisis“ of the same year, which had a devastating effect on Indonesia’s economy and upset the entire global financial system. Incidentally this was when the G20 was initiated.

As a lesson of the Asia crisis, Indonesia decided to reduce its external exposure and the potential risks that go with it. Imports and exports are controlled, licenses for foreign companies closely monitored and a tight regulatory framework aims at stabilizing the balance of payments and the exchange rate of the local currency, the Rupiah. The path followed since 1998 has yielded considerable success: During the financial crisis of 2008 Indonesia was one of the least affected economies and managed to avoid recession. Its annual growth (pre-COVID) is largely based on domestic demand and ranges continuously between 4-6 percent. The country has successfully brought down its poverty rate below 9 percent and there is an ever growing middle class with a significant appetite for consumption.

With the government of the current President, Joko Widodo (Jokowi), the country has embarked on a massive infrastructure programme, not least by building highways and new railway lines in the most populated island of Java, by investing in urban infrastructure (the new metro-line in Jakarta is a showcase) or by building new airports. The newest idea is to build a new capital city, from scratch, in southern Kalimantan. The underlying objective for the government is to make Indonesia, by 2050, the world’s fourth largest economy, a scenario inspired by analyses of leading international business consulting firms such as PwC. Further development of infrastructure is key to achieve this ambitious vision; its realisation, however, will depend on a whole range of parameters. Financing needs for the ongoing infrastructure agenda are tremendous, and largely and growingly met by China, which is by far the biggest trading partner and Indonesia’s second investment partner, after Singapore, which serves as an offshore hub for important Indonesian companies and also for business coming de facto from China. While China continues to make ground in Indonesia, the role of development financing is equally important. After all, financing by institutions like the World Bank or the Asian Development not only serves as leverage for private investment but also as a quality label improving the country’s overall international standing.

In apparent contrast to this centralized economic policy, something like a miracle has happened: the highly dynamic start-up scene of mainly young entrepreneurs with an impressive number of unicorns, of which some have matured into „decacorns“. While strategic sectors like energy or extraction of raw materials remain under the close control of the government, space has been granted for start-up companies to cater for app-based and service-oriented businesses, such as the highly successful „GOJEK“, which provides for a wide range of mobility services and is meanwhile expanding to other countries of the region. In parallel, we find an active civil society with groups promoting advocating modern agendas in areas such as climate and gender policy or LGBTIQ. Their activities might collide occasionally with conservative religious values or other vested interests and it happens that the government may intervene. The art scene is also under some scrutiny, but visitors are impressed by the art galleries in Jakarta or Yogyakarta as well as the relatively free discourse on literature, theater and film. It is worth to note that a collective of artists called „ruangrupa“ will curate the upcoming „documenta“-art exhibition, the biggest of its kind, in Germany in 2022.

Indonesia continues to promote a moderate Islam which is rather relevant given its leading share among the world’s muslim population. Like many other countries, the tendency of religious conservatism, which goes across all beliefs, has not spared Indonesia either. This trend has led the government to carefully respect, and on occasions anticipate religious sensitivities, sometimes to the damage of other religious minorities and by bending rule of law. On the other hand, the government scrupulously monitors and resists attempts of a penetration by radical Islam. The potential of sudden and unexpected mobilization became obvious in 2016, when the Christian governor of Jakarta was mobbed out of office in view of an alleged „blasphemy“, with hundreds of thousands of protesters on the streets, who came – to many observers – out of nowhere. In the area of religious affairs, the government walks thus a tight rope. But in spite of growing conservatism, Indonesia clearly continues to promote a moderate Islam, advocates inter-faith dialogue, at home and abroad, and tries to resist interference and sponsoring of fundamentalism by groups mainly from the Gulf states.

What can we expect from this first ever chairmanship of Indonesia of the G20?

Indonesia has chosen the motto: „Recover together, Recover stronger!“ for its G20-chairmanship.  The motto reflects the priority the government attaches to overcoming the consequences of the pandemic, as a global theme. Indonesia had been strongly hit by the pandemic, with widely underreported statistics. There had been some lockdowns, but the strategy of the country clearly was to limit damage to its economic growth prospects. The preferred partner for vaccine delivery was China, as for some time it was believed to be the best option. Internationally, Indonesia is a strong voice advocating equal access to vaccines and medication and is also an outspoken critic of current patent rights rules which add to discrimination of countries in the global south. Indonesia’s Minister of Foreign Affairs, Retno Marsudi, has been elected co-chair of the multilateral COVAX Advance Market Commitment, which aims at a fair distribution of vaccines to the 92 states participating in this mechanism. We can expect that all aspects of international cooperation to overcome the pandemic will be dominating the agenda of Indonesia’s G20 year.

Announcements from different ministries suggest that Indonesia will group its agenda around three central pillars: (a) how to boost productivity and ensure an equitable global recovery, not least by establishing undiscriminated access to vaccines and medication; (b) how to strengthen resilience and sustainability of the global monetary and financial architecture in order to minimize impediments in access to finance and mobilization of resources and (c) how to realize and improve the prospects for sustainable and inclusive growth. It is in this latter cluster that Indonesia will most likely place the discussion on climate and energy.

Indonesia’s profile in the field of climate and energy policy is complex. The country has successfully halted its deforestation, it has decreed a moratorium on palm oil concessions and is actively restoring its mangrove plantations, of which its global share is around 23 percent, thus contributing significantly to carbon storage. It is proud of its outstanding biodiversity and has implemented a broad range of policies to protect it.

On the other hand, Indonesia is the world’s 4th largest coal producer, almost 70 percent of its electricity consumption comes from coal. While annual growth in energy consumption has been at around 3 to 4 percent, the share of coal in electricity is at around 70 percent and still growing. Decarbonisation will thus be a real challenge. After long discussion and in view of significant international momentum around the Glasgow COP26, the country has declared 2056 for its net zero target. Its much respected Finance Minister, Sri Muljani, has hinted at the possibility to bring this target forward to 2040, under the condition that the country can raise 40 Mio. US-Dollars in funding to convert to renewable energy.

This overall context represents a policy dilemma for Indonesia: President Joko Widodo intends to maintain the overriding and ambitious agenda to climb up the ladder further in wealth and growth with the corresponding needs of energy consumption. In theory, an energy turnaround could present a formidable opportunity for a win-win scenario, as development of renewable energy can greatly contribute to growth and new business opportunities. But coal has strong defenders and the politics of decarbonization will be complex. It should be noted that the country shows allergic reactions to fingerpointing and lecturing, let alone pressure from outside. The prospect of „border taxes“ in the EU has provoked criticism and profound displeasure. It remains to be seen how Indonesia will lead and chair the negotiations on advancing the net zero agenda. From my personal view it would be important if the simultaneous chairmanship of Germany in the G7 connect closely with Jakarta with a view to complementary input in these two important platforms of global governance. This could be particularly relevant for the area of climate financing and other tangible incentives in the fields of mitigation and adaptation.

An important feature of the Indonesian G20 chairmanship will also be to highlight the first ever assumption of leadership in global governance by the ASEAN region, all the more, as Indonesia will hold the rotating chair in ASEAN in 2023. ASEAN is a dynamically growing region, with a total population (600 Mio.) exceeding that of the EU, and average growth rates of around 6 percent.  Indonesia is the undisputed heavyweight in ASEAN, accounting for 40 percent of its population and 70 percent of its GDP. Indonesia’s chairmanship presents an opportunity to attract the more than necessary attention to a region that is occasionally underestimated and undervalued: in geostrategic terms, as it surrounds the South China Sea, a maritime space of growing tensions between an ever more assertive China and various ASEAN member states (Philippines, Vietnam, Malaysia among others) who try to uphold their sovereignty on the basis of the Law of the Sea. ASEAN member states (Indonesia, Singapore, Malaysia) further border the entry into the South China Sea, through which more than half of the sea trade of the EU is routed. ASEAN sees China as an indisputable regional power and is looking, as a bloc, to find arrangements which can ensure its centrality and autonomy. There are concerns in ASEAN of becoming a potential theatre of armed conflict between the US and China. As a consequence, ASEAN strives to diversify its partnerships, also with the EU which is, since 2019 one of its „Strategic Partners“. This is all the more a reason to connect as closely as possible between the chairs of G7 (Germany) and G20 (Indonesia). With Indonesia steering the G20, there is also a unique opportunity to demonstrate the substance of the EU’s new „Indo-Pacific Strategy“, which recognizes the central role of the ASEAN region.

In summary, the current G20 presidency of Indonesia is a unique opportunity, for the country and the entire ASEAN region to emphasize its systemic global relevance in the broad range of global issues. But it is equally important, for us, to connect stronger than in the past with a partner and friend with whom we have a lot in common and who can mobilize momentum – particularly in the Global South – for the most pressing global challenges of our times. Let us not miss this opportunity!

Peter Schoof has been Germany’s ambassador to Indonesia and to ASEAN from 2018-2021.

The article reflects his personal views.

 

 

Contact:

Anna Keremen, Communications F20 | anna.keremen@foundations-20.org

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