Thursday, January 16, 2014

Indonesia and the United States “Pivot to Asia”

This post was originally written as the final paper for a course on Global Business Practices and Asia.  The course is a specialty course taken as a part of my pursuit of a Doctorate Degree in International Leadership. 
 
Abstract

Indonesia is the fourth most populated country in the world and the third largest in Asia.  It has a long history of cultural development that was underdeveloped during colonial domination.  As a country it had to find and develop a new identity.  After more than sixty years since becoming an independent country, it appears that Indonesia has finally been able to successfully reinvent itself.  It relationship with the US has often been contentious but since 2009 the relationship experienced a complete turnaround.  The change was directly related to the election of President Barack Obama.  Having spent a portion of his childhood in Indonesia and being the son of a Muslim immigrant, he was an instant hero in Indonesia.  His presidency has coincided with that of President Susilo Bambang Yudhoyono in Indonesia.  Yudhoyono appears to have figured out how to effectively integrate the traditional value of “deliberation and consensus” into a modern democracy.   His leadership is leading to improved relationships with China and the US and greater prosperity for the people of Indonesia. 
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Indonesia is a very unique country in many ways.  Geographically it is made up of several archipelagos spanning a region between the Pacific and Indian Oceans.  It is the fourth most populated country in the world and the third most populated country in Asia behind China and India.  The United States is the third most populated country in the world.  Indonesia is a former Dutch colony and most of the developments in its relationship with the US have occurred since independence in 1949 (Country Profile: Indonesia, 2004).  .  Since independence Indonesia has struggled to find an enduring balance between contemporary political structures and traditional cultural practices.  Overlaying this struggle is the fact that Indonesia has more Muslim citizens (88%) than any other country in the world yet it is not a “Muslim State.”  Like many Asian countries, in spite of its struggles to establish healthy political stability, its economy has seen dramatic improvement since independence. Quality of life indicators such as average life span, healthcare availability, and poverty levels have also substantially improved.  With foreign assistance it has managed to keep its head above water but it has not yet fully capitalized on its potential.  Under President Obama the US has expanded its relationship with Indonesia as a part of the “Pivot to Asia.”  Indonesian public opinion of the US improved dramatically after the election of President Obama.  This shift in receptiveness has been referred to as the “Obama Effect” and paved the way for an improved relationship. 
This paper discusses the developments in the relationship between the US and Indonesia.  Indonesia’s current economic and political conditions have been heavily influenced by the impact of over a hundred years of colonial domination.  Indonesia, like many former European colonies in Asia and other parts of the world, appears to be subject to a double standard in academic and non-academic writings.  It is as if an attitude that the people of Indonesia should be satisfied with the “improvements” in their country in spite of the fact economic conditions continue to lag far behind those of the US, Japan and Western Europe. Finally, strengths and challenges for future development in Indonesia are also discussed.

Historical Overview
There is evidence that modern humans lived in the area now known as Indonesia 40,000 years ago (Country Profile: Indonesia, 2004).  By 5,000 years ago the cultures originating in the cultures of the interrelated archipelagos began to spread and have a significant impact on an area as far west as Madagascar and east into the Pacific. Cloves, found only in the Maluku Islands of Indonesia, had made their way to the Middle East as early as 4,000 years ago.   However, specific artifacts which might tell the story of trade and interaction between the peoples of the Indonesian archipelagos and other parts of the world have been hard to come by.  Artifacts discovered that provide concrete information about the people and their activities date back only to 400 B.C.  Such evidence confirms the development of well-organized societies and trade with India.  Additional evidence is available indicating the presence of well-developed kingdoms based on Buddhist and Hindu traditions beginning around 550 A.D.  Islam entered the archipelago by the eleventh century but did not begin to make significant gains in converts for about two hundred years (Country Profile: Indonesia, 2004). 
Contact with China increased between the tenth and fourteenth century.  Mongol attempts to dominate Indonesia during this period all failed.  During the Ming Dynasty (1368-1644) several attempts to exercise significant influence and control over Javanese power all failed. attempts failed.  It was around this time that Europeans began to express a significant interest in the Indonesian archipelagos starting with Marco Polo and then by the Spanish and Portuguese.  The Dutch and the English began to become involved in the area around 1600.  Europeans had a significant impact on trade and politics in the region, but colonial rule was not established until the mid-nineteenth century (Country Profile: Indonesia, 2004).     

The Colonial Period 
Establishing a Dutch Colony in Indonesia was not the primary goal of the Dutch government in Amsterdam, but the economic realities for the Dutch led to a dependency on the resources of Indonesia and the need to exercise greater control over the region to maintain its trade and economic position among the countries of Western Europe.  The economic reality combined with the popular view of Europeans as being a superior variety of humans made it easy to justify the forcible domination of the people of Indonesia. 
Initially, the Dutch Colonial Rule incorporated a great amount of tolerance for dissident opinion and allowed the development of several indigenous political parties.  Around 1900 with the development of the student organization, Budi Utomo, dissident opinion took a sharply nationalistic turn and increasingly the demand was for Indonesian independence.  The early nationalist leaders (many of them Dutch educated) believed that independence could be achieved through negotiation with the Dutch government.  The cultures of the region are based on beliefs that consensus is always the preferable option.  Early nationalist groups represented different segments of the Indonesian population and included a variety of religious and political beliefs.  Political parties interested in independence included Islamic reformists, Marxists, and social-democrats.  Operating on the principle of consensus being the priority these groups initially worked together to confront the Dutch.  The motto became “one land, one nation, one language.”  In 1926 and 1927 uprisings against the Dutch in West Java and West Sumatra led to the Dutch becoming less tolerant and repressive towards calls for independence (Guan, 2006).  The repressiveness only served to radicalize the independence movement.  Leaders such as Sukarno and Muhammad Hatta were exiled by the Dutch only to return as an Independent Indonesia’s first President and Vice-President. 
As World War II began the conflict between Indonesian Nationalists and the Dutch government was heating up but interrupted with the occupation of Indonesia by the Japanese.  At the end of the Japanese occupation the Sukarno and Hatta returned to declare independence for the Republic of the United States of Indonesia on August 17, 1945 (two days after the atomic bomb fell on Nagasaki, Japan).  However, the Dutch attempted to reclaim Indonesia as a colony.  After a period of additional struggle with the Dutch, Indonesia’s independence was recognized by the United Nations on December 27, 1949 (Guan, 2006).     
The Challenge of Independence
A common thread that runs through the various cultures of the people of Indonesia relates to the value placed on reaching agreement through “deliberation and consensus.” Guan (2006) has suggested that this egalitarian value that is intended to be inclusive and promote political stability may have actually contributed to increased division.  The initial governmental structure adopted by the new independent government of Indonesia was a parliamentary democracy modeled after the Dutch system.  The basic rule for decision making in such a democracy is 50% + 1.  The result is that instead of being more inclusive, political maneuvering could actually leave smaller groups disenfranchised.  The early leaders of the newly independent Indonesia attempted to combine such a system with the traditional value of “deliberation and consensus” with disastrous results.  Several years of parliamentary democracy failed to lead to the political stability and economic development that was anticipated by Indonesian citizens.  With this failure President Sukarno began to call for what he called a “guided democracy” that could more easily incorporate traditional Indonesian values related to “deliberation and consensus” (Guan, 2006). 
Up until the 1960’s the Indonesian Communist Party (PKI) had a seat at the table within Indonesia.  However, Indonesia considered itself a non-aligned country.  As the Cold War began to intensify the pressure grew for Indonesia to pick a side.  According to Guan (2006) the events leading up to the failed coup attempt and the ouster of Sukarno was triggered by the CIA.  One view of the series of events that took place in 1965 was that the CIA facilitated the failed coup attempt by communist sympathizers in the military to provoke a counter coup that would remove Sukarno and replace him with a leadership structure that was very favorable to the US.  With the support of the US, Major-General Suharto, Commander of KOSTRAD, the military’s Strategic Reserve force, lead the counter coup that saved Indonesia from becoming a communist regime.  Sukarno was implicated as a supporter of the communist and discredited.  The military action taken by Suharto, resulted in the massacre of about 500,000 Indonesian communist and suspected communist with many others being arrested and jailed.  Suharto was given the authority to do whatever was necessary to restore and maintain order.  He established what he called the “New Order” that emphasized economic and social growth while discouraging mass participation in the politics of ideology that was encouraged by Sukarno (Guan, 2006). 
Suharto’s New Order was embraced by the US and Western European countries resulting in a substantial increase in foreign aid and investment.  The new capital stimulated economic growth in Indonesia and its citizens began to experience visible improvements in their lives.  Aid from the US alone increased from $200 million in 1967 to $4.8 billion in 1992.  The substantial increase in oil prices after 1970 also helped stimulate economic growth (Country Profile: Indonesia, 2004).  An average GDP growth rate of 4.3% gave credibility to Suharto’s New Order which lasted for 30 years.
The collapse of Suharto and his New Order was due to fact that in spite of significant economic growth and development in Indonesia, the primary beneficiaries of the growth were an elite class of business people and government officials.  By the 1990’s the amount of civil unrest increased and with the collapse of the Soviet Union in 1989 there was less motivation to turn a blind eye to Suharto’s often brutal use of military force against civilians.  International support for Suharto evolved into international criticism of his heavy handed tactics in maintaining political stability.  The final blow to Suharto’s New Order was the Asian financial crisis of 1997.  Political repression, the war in East Timor, increasing levels of inequality within society and finally the economic downturn saw an end to support for Suharto both domestically and internationally.
In 1999, parliamentary elections were held in Indonesia for the first time since 1955.  The change in leadership reopened the door to foreign aid and investment.  The US began warming up in its relations with Indonesia but did not make any significant overtures to expand the relationship.  Anti-American sentiment during the Bush administration at the beginning of the 21st century grew to an all-time low in Indonesia.  America was seen as anti-Islam and as having launched a war against Iraq mainly because it was a Muslim country (Guan, 2006).  However, as will be discussed later in this paper a dramatic and unprecedented turnaround in Indonesian public opinion was about to take place as America Inaugurated a new President in 2009.
Current Indonesian Economic Status
Today Indonesia employs a market economy and is very active in pursuing healthy economic relationships with the US, China, India, Japan and others.  In spite of a near complete financial collapse at the end of the 20th century Indonesia has managed to reestablish growth and development within its economy.  Since 2000 it has made gains in several categories such as GDP, GNI, percent at or below poverty level, and life expectancy at birth (World Bank, 2013). 
Indonesia’s 2012 GDP was $878.0 billion.  Its population was 246.9 million resulting in a per capita GDP of $3,557.  In 2012 the GDP for the US was $16.24 trillion, with a population of 313.9 million resulting in a per capita GDP of $51,749 (World Bank, 2013).  The Indonesian economy has established a more favorable position globally and it is expected that their economy will continue to experience growth.
Indonesia’s main trading partners are Japan, the European Union, the United States, Singapore, and South Korea.   Indonesia recently has been experiencing a 65% trade surplus.  It is one of the world largest producers of liquefied natural gas and has a substantial petroleum industry as well.  The manufacturing sector accounts for about 40% of GDP and employs about 20% of the workforce.  Another 40% of GDP is accounted for by the services sector and employs about 40% of the workforce.
The last ten years has in Indonesia has seen improved political stability with a functioning democracy.  Outside investment and foreign aid is increasing and inflation has slowed.  Corruption has been a significant problem for Indonesia but its anti-corruption efforts appear to be having an impact.  The level of corruption has been decreasing steadily for more than ten years.

US-Indonesian Relations
In 1961 the US became the UN appointed mediator in a dispute involving West Papua.  The dispute involved a plan by the Netherlands to grant West Papua it independence and the Indonesian opposition to the plan claiming that West Papua was a part of Indonesia.  Confronted with the possibility that Indonesia might seek the assistance of the Soviet Union in annexing West Papua, the US position leaned toward support of the Indonesian government.  President John F. Kennedy in explaining why he supported the annexation stated that as the West Papuans were “living, as it were, in the Stone Age,” they would benefit by the modernization the would come as a result of the annexation (Rutherford, 2013).  The reality was that West Papuans were not actually living in the Stone Age.  However, such rhetoric was useful at gaining public support for a position that denied self-determination to the people of West Papua. 
The attitude was similar to the attitude the Dutch had as they began to dominate the people of Indonesia and subject them to a long period of colonization.  Only in the case of President Kennedy the rhetoric was used in favor of an independent Indonesian government.  The US involvement in the negotiations between the Netherlands and Indonesia marked the beginning of an often contentious relationship between the two countries.  President Kennedy was assassinated two years later and Indonesian President Sukarno was removed from office in 1965.  However, with the Cold War raging, Indonesia’s next leader capitalized on the conflict between the two super powers gaining favor with the US and being rewarded with military aid, foreign aid, and US investment (Country Profile: Indonesia, 2004).        
Sukarno’s replacement Suharto demonstrated his strong anti-communist views by completely destroying the Indonesian Communist Party (PKI).  In doing so he endeared himself to the US and other Western European countries.  As a result the US and others became willing for many years to turn a blind eye to the heavy handed authoritarian regime of Suharto.  In 1975, the day after a visit by President Gerald Ford and Secretary of State Henry Kissinger, Indonesia invaded and annexed the former Portuguese colony of East Timor where a leftist leaning political party had become the leading political force.  Thus began East Timor’s long struggle for independence from Indonesia (Timeline: US-Indonesia relations, 2010).
At the end of the Cold War the US and others stopped looking the other way when it came to Suharto’s tendency to use military force against his own people.  In 1991, in response to the Dili massacre the US Congress stopped International Military Education and Training (IMET) assistance to Indonesia.  This action marked the beginning of a long period of contentiousness between the US and Indonesia.  However, with the departure of Suharto in 1998 and the reestablishment of parliamentary elections in 1999 the US attitude toward Indonesia began to warm (Murphy & Suryodiningrat, 2010). 
The next major turn of events that impacted US/Indonesian relations was the terrorist attack in the US on September 11, 2001.  Initially, the Indonesian government came out in support of the US and condemned the attack.  However, when the US invaded Afghanistan and launched a pre-emptive strike in Iraq, President Bush and the US government were accused by the Indonesian government as favoring the attack and invasion of Islamic countries over non-lethal diplomatic solutions.  Public opinion of the US and President Bush fell to an all-time low.  In spite of the antagonism from the Indonesian government the Busch administration worked consistently to improve the relationship (Timeline: US-Indonesia relations, 2010). 
On December 26, 2004 a devastating Tsunami in the Indian Ocean impacted Indonesia.  The US responded with 25 warships and over 13,000 people to assist in relief efforts.  In 2005, the US also removed nearly all restrictions regarding military aid and effectively restored normal relations on the military level.  As a result of the relief efforts and the removal of restrictions on military aid, the relationship between the US and Indonesia warmed up considerably.
The next major event in the improving relationship between the two countries was the election of Barack Obama as President of the United States.  Not only had President Obama spent part of his childhood in Indonesia but he was the son of a Muslim immigrant to the US.  Public opinion in Indonesia of the American President went from an all-time low under Bush to an all-time high under Obama.  The shift in public opinion in Indonesia became known as “the Obama Effect” and it paved the way for improved cooperation between the two countries (Murphy & Suryodiningrat, 2010). 
In 2010, the final military restriction still in place was removed.  Also, that same year President Obama and Secretary of State Hillary Clinton announced sweeping policy adjustments in the US relationship with Indonesia that are designed to support the continued social and economic development of Indonesia and have a positive impact on American business as well.  In December of 2010 the US opened the @america Cultural Center in Jakarta.  It was developed in partnership with American tech companies and is designed to inform Indonesians about America, Americans, and American products (Onishi, 2011).   Whether such centers can further impact Indonesian public opinion of Americans is yet to be seen.

US Public Opinion of Indonesia
While it is very easy to find documentation of Indonesian public opinion of Americans, finding documentation of US public opinion on Indonesia is another story.  American seem to know very little about Indonesia other than the fact that President Obama lived there as a child.  Some have used this fact to make the argument that he was actually born there and is not legally the President.  Others have concluded that since his father was Muslim and he spent time in Indonesia that he must be Muslim. 
American public opinion about Muslims in general is far easier to find.  Perhaps such opinion is exemplified by the woman at a McCain Town hall meeting during the 2008 Presidential campaign, who stated that Obama was a Muslim.  It was stated as if being a Muslim was equivalent to being a terrorist.  McCain’s response did not refute the connotation that being a Muslim was a bad thing; he chose to simply affirm that Obama was not a Muslim and was a good man.  The exchange between McCain and his supporter is a reflection of the opinion of many Americans.  This automatic negative opinion of Muslims has been described as Islamophobia.  Islamophobia is described as; An exaggerated fear, hatred, and hostility toward Islam and Muslims that is perpetuated by negative stereotypes resulting in bias, discrimination, and the marginalization and exclusion of Muslims from social, political, and civic life (Ali, Clifton, Duss, Fang, Keyes and Shakir, 2011).
However in the case of Indonesia, in spite of the fact that it is 88% Muslim and has the largest Muslim population of any country in the world, it is not always perceived as a Muslim country.  Americans tend to be aware that Bali is in Indonesia and perceive it as a great exotic place to visit.  On the other hand, Indonesia’s first President and Vice-President consciously chose not to make Indonesia an Islamic Republic.  As a result, the Indonesian government does not present itself to the world in the same way the leaders of Iran, Saudi Arabia, and the United Arab Emirates would present themselves.  Indonesian cultural tradition tends to be more open than the culture of many other Muslim countries. 

Indonesia, Asia and the World
Indonesian leaders during the past ten years have managed to accomplish what both Sukarno and Suharto desired to do but failed.  Susilo Bambang Yudhoyono, Indonesia’s current President is finding a finding a way to effectively incorporate “deliberation and consensus” into political practice (Spranz, Lenger & Goldschmidt, 2012).  President Yudhoyono entered into a strategic partnership agreement with China in 2005 (Hadi, 2012). Entering into such an agreement with country that could easily over power you is perhaps risky and provides no guarantees of continued compliance.  Then in 2010 President Yudhoyono entered into a strategic partnership with the US.  In doing so agreements with both the US and China are strengthened.  With the possibility of pushing Indonesia closer to the US and away from China, Chinese leaders must be willing to follow through on their agreement of Indonesia.  Likewise, the US would not desire to be left out or excluded of the process in Indonesia’s relationship with China. 
Developing such relationships and remaining very active in the leadership the Association of Southeast Asian Nations (ASEAN), Indonesia has placed itself very strategically in the middle of the not only the Asian market but has garnered a place on the global stage as well. 

Strengths, Weaknesses, Opportunities and Threats for Indonesia
As Indonesia continues its development in the 21st century it has become acutely aware of the fact that it is in a position to play a very active role in the development of Asian and global development.  Indonesia struggled in the years shortly after independence with being able to implement effective democratic processes that did not deteriorate into political gamesmanship and conflict.  In the early days after independence Indonesia had to struggle with internal conflict among its people and skepticism and doubt from the international community.  However, it appears now that the current government has found the path to balancing traditional cultural beliefs and contemporary economic and political realities so that progress can be sustained.  Indonesia’s idea of “deliberation and consensus” is definitely a strength.  It has used this concept to establish a reduction in domestic conflict and to develop and expand key relationships at the international level. 
Corruption is definitely a weakness.  Indonesia has enacted new laws to assist in combating corruption.  Indonesia has a strong military but must be careful to not use its military capability in a self-destructive manner, such as to quiet dissidents.  The concept of deliberation and consensus can go a long way when attempting to settle disputes and complex issues. 
One of Indonesia’s greatest opportunities relates to its location in Asia and its proximity to India and China.  India and China have been two of the fastest growing economies in the world.  Strategic partnerships with China and India can only strengthen its position in Asia.  Strategic partnerships with the US and the EU can only strengthen its position on a global scale.  Our world is changing.  The old colonial and chauvinistic ways of thinking are gradually disappearing.  Opportunities for developing interdependent relationships that are not exploitive will abound if approached with an attitude of openness.
The greatest threats for Indonesia are likely to come from within.  An atmosphere transparency and openness must be created by the government.  Another internal threat relates to making promises and not delivering.  The people of Indonesia expect their leaders to develop, promote and implement processes that result in real economic development that can be experienced by the majority of Indonesians.  If the government fails to deliver the people will once again demand a change.            

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References

Ali, W., Clifton, E., Duss, M., Fang, L., Keyes, E. and Shakir, F. (2011). Fear, inc.: The roots of the Islamophobia network in America. Center for Progress America.  Retrieved from http://www.americanprogress.org/issues/2011/08/pdf/islamophobia.pdf.

 Country Profile: Indonesia (2004).  Library of Congress – Federal Research Division. Retrieved from http://lcweb2.loc.gov/frd/cs/profiles/Indonesia.pdf

Guan, Kwa Chong (2006). Rewriting Indonesian history: The future in Indonesia’s past.   Institute of Defence and Strategic Studies, Singapore. Retrieved from http://www.rsis.edu.sg/publications/WorkingPapers/WP113.pdf

Hadi, S. (2012). Indonesia, ASEAN, and the rise of China: Indonesia in the midst of east Asia’s dynamics in the post-global crisis world. International Journal of China Studies, 3(2), 151-166.

Murphy, A. M., & Suryodiningrat, M. (2010). US rapprochement with Indonesia: From problem state to Partner. Contemporary Southeast Asia, 32(3), 362-394.

Obama announces U.S.-Indonesia comprehensive partnership. (2011). Foreign Policy Bulletin, 21(1), 148-181. doi:http://dx.doi.org/10.1017/S1052703611000104

Onishi, N. (2011).  U.S. updates the brand it promotes in Indonesia. New York Times. Retrieved from http://www.nytimes.com/2011/03/06/world/asia/06indonesia.html?_r=1&

Rutherford, D. (2013). Living, as it were, in the stone age. Indonesia, (95), 1-7,189.

Spranz, R., Lenger, A., & Goldschmidt, N. (2012). The relation between institutional and cultural factors in economic development: The case of Indonesia. Journal of Institutional Economics, 8(4), 459-488. doi:http://dx.doi.org/10.1017/S1744137412000124

Timeline: US-Indonesia relations. (2010). Contemporary Southeast Asia, 32(3), 395-398.

World Bank (2013).World Development Indicators. Retrieved from http://data.worldbank.org/country/indonesia

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