Indonesia’s Two-Pronged China Strategy: Walking the South China Sea Tightrope

Indonesia increases protection over their natural assets in the South China Sea. The move is part of Widodo’s two-pronged approach to dealing with China: court them for investment, but prepare the military for the worst.

By Oliver Ward

In an ominous agreement, laden with undertones, Indonesian Military commander, General Gatot Nurmantyo signed a memorandum with the Energy and Mineral Resources Minister, Ignasius Jonan. The agreement set out the military’s intention to provide increased security to Indonesia’s energy assets, both on land and offshore.

Gatot said “Ministry research has revealed that [off shore drilling] activities have often been disturbed by foreign-flagged vessels. To secure them, Indonesian Navy personnel will be deployed to provide security.”

What remained unsaid, was that the “foreign-flagged vessels” were likely to be Chinese and the collaboration between the military and the Energy and Mineral Resources Ministry is a strong message of Indonesian assertion in the South China Sea.

Jokowi’s policy has shifted

Indonesian President, Joko Widodo’s objectives in the South China Sea have always been to promote peace and stability, while simultaneously preserving Indonesian economic interests and their sovereignty over territorial claims.

Early in his presidency, walking the tightrope to maintain economic growth, while maintaining stability and sovereignty over the disputed territories around the Natuna Islands, manifested itself as Indonesia becoming an active diplomatic pursuer of peace in the region.

When the Jokowi administration came to power, they needed Chinese investment. As a result, when the Indonesian military detained Chinese fishing boats for illegally fishing in Indonesian waters, as they did in 2010 and 2013, the incidents were kept out of the public eye. The ships were quietly released and the incidents avoided developing into an international incident.

Joko Widodo’s government were courting China for increased infrastructure investment and would avoid a confrontation at all costs. They achieved their aims when, in 2015, Jokowi awarded a consortium of Chinese and Indonesian-state owned enterprises the contract for a US$6 billion high-speed rail link between Jakarta and Bandung.

Indonesia has developed a two-pronged strategy

Since 2015, Indonesia’s strategy has shifted. While Indonesia maintains committed to courting China for investment, with the other hand, Jokowi is strengthening the Indonesian military and making extensive defence preparations. A two-pronged approach to China has emerged, which involves upholding economic interests while ensuring the Indonesian military are prepared for a potential confrontation.

By 2020 Indonesia hopes to have a five-fleet naval force with 274 ships. To reach this, Jokowi plans to increase the defence budget to 1.5% of the GDP. In 2016, the government beefed up security for the Natuna Islands. Jokowi outlined plans to deploy F-16 Fighter Jets to the remote region and update the Ranai Airport runway. He also deployed a new radar system, an army battalion, US-made drones and three frigates.

The heightened focus on military strength and preparation to defend Indonesian sovereignty was also evident in the handling of incidents of illegal Chinese fishing. In March of 2016, the military seized a Chinese trawler and towed it back to port. Unlike in 2013 and 2010, when a Chinese coast guard patrol demanded that they return the ship, the Indonesian military refused. The standoff ended when the Chinese Coast Guard rammed the vessel under tow and the Indonesian military had to release it.

In June of 2016, the Indonesian military arrested the crew of one of a group of seven Chinese boats caught illegally fishing near the Natuna Islands. Joko Widodo himself flew to the Natuna Islands in a clear message of Indonesian determination to protect their assets.

Shoring up Indonesian defence capabilities signal to China that the military is ready to protect Indonesian claimed territories. But the other side of Widodo’s policy pursues collaboration and a strong working relationship between the two nations.

Simultaneously, Jokowi is strengthening Sino-Indonesian relations

The other prong of the pragmatic approach to China sees the reinforcement and strengthening of Sino-Indonesian economic ties. China offers a vast export market for Indonesia’s raw materials. Indonesia sends US$18.5 billion of exports to China annually, and they are Indonesia’s second biggest export destination, after the US.  China also makes up 25.7% of Indonesia’s total imports, as of February 2017.

China doesn’t just offer Indonesia an enthusiastic trading partner. Chinese direct investment in Indonesia has more than doubled in the last two years. In 2016, investment from January until September reached US$1.6 billion, a huge step up from the $600 million invested in the whole of 2015.

Indonesia is crying out for infrastructure investment to better connect its ports and outlying islands. China can fill this gap. Their One Belt One Road strategy is an opportunity for Indonesia to secure the infrastructural reforms needed to hit Jokowi’s target of 7% growth by 2019. David Sumal, chief economist at PT Bank Central Asia in Jakarta, said, “we need investment and China they have excess capacity”. He added, “the two countries need each other”.

Indonesia president Joko Widodo shakes hands with China President Xi Jinping on his visit to Jakarta in April 2015

Will Indonesia’s two-pronged approach yield results?

Courting Chinese investment while strengthening military capabilities and asserting their claims in the South China Sea is a pragmatic response from Jokowi to the unique threats presented by Chinese aggression.

The two-pronged policy creates an equilibrium which prevents either prong from extending too far. The defensive policy cannot become too anti-Chinese in nature, while the economic policy maintains strong Sino-Indonesian ties.

The policy hinges on continued Chinese investment. As long as Chinese investment continues to flow and meet Indonesia’s infrastructure demands, the two-pronged approach remains balanced. But if Chinese investment recedes or withdraws, Widodo will have to contend with rising anti-Chinese sentiment and a military policy aimed at neutralising a potential Chinese threat.

Increased Economic collaboration can provide a foundation for innovative solutions

The two-pronged approach could lead to an opportunity to explore innovative solutions to the South China Sea crisis. With a mutually beneficial working economic relationship, there is freedom to explore alternative ideas to bring stability to the region. For example, they could adopt a fishery agreement, like the model adopted in 2013 to solve the Japan-Taiwan dispute around the Senkaku Islands.

They could also begin proceedings on a South China Sea Commission, made up of claimants and international members. Introducing third parties worked in the India-Bangladesh maritime dispute in 2014. However, for the crisis to be resolved in this way, claimants would likely have to delimit their exclusive economic zones (EEZs) and their continental shelf boundaries, which Beijing would be unlikely to agree to.

China’s tactic of chequebook diplomacy offers claimant nations an abundance of economic opportunities for growth. But Widodo is right to proceed with caution. He knows China is a dangerous animal and if tides turn, Indonesia needs to be militarily prepared to protect their claims. While continued investment flows into the country, the two-pronged approach offers a dynamic balance of cooperation and preparation. It could be just what the region needs to avoid the outbreak of open conflict.