Jokowi’s China visit – new deals, old problems

Indonesia President Joko “Jokowi” Widodo completed his sixth official visit to China last week, visiting Chengdu at the invitation of Chinese President Xi Jinping to mark the 10^th anniversary of the Indonesia-China comprehensive strategic partnership.

The visit embodied the calm and pragmatic dialogue we have come to expect from Indonesia’s recent relations with China.

The two leaders discussed regional peace and security but managed to avoid causing waves. Jokowi asked for China’s support for the implementation of the ASEAN Outlook on the Indo-Pacific, and both nations reportedly welcomed the development of a code of conduct to overcome tensions in the South China Sea.

But much like Jokowi’s recent trip to Sydney, the key deliverables from the trip were economic – reflected in the announcement of major industrial investments and eight new bilateral agreements.

 

Eight new agreements

While the visit unveiled eight new agreements, the areas of cooperation were familiar. Jokowi used the visit to again spruik investment in Indonesia’s new planned capital city, Nusantara. A new memorandum of understanding will help China exchange knowledge and expertise throughout the development of Nusantara.

Likewise, trade in food and agricultural products continues to underpin Jakarta-Beijing ties, with the two leaders signing a protocol to open access for the export of konjac flour and tabasheer powder to China. Another agricultural deal agreed to expand research and development in plant breeding and marine cultivation.

Health also remains the key focus it became during the Covid-19 pandemic, when China became a leading supplier of vaccines to Indonesia. A new health action plan will strengthen cooperation on biotechnology and the manufacture of genomic vaccines, reinforcing China’s plans to make Indonesia a regional vaccine hub.

 

A new industrial investment

But perhaps the biggest announcement from the visit was that Chinese glass producer, Xinyi Glass Holdings, will invest $11.5 billion to build a quartz sand processing plant on the island of Rimpang, neighbouring Singapore. The $11.5 billion investment would be Xinyi’s second venture in Indonesia last year’s $700 million investment in glass production in East Java. The Indonesian Minister for Investment, Bahlil Lahadalia, confirmed 95% of production would be for export and the project would employ an Indonesian workforce of 35,000.

Quartz sand is an important ingredient for the manufacture of solar panels. This latest investment from Xinyi Glass Holdings in processing facilities is seen as a step towards the development of Indonesia’s own solar panel manufacturing industry.

This style of Chinese investment in major industrial projects is also not new. This latest deal shares a lot in common with Chinese investment in the Morowali Industrial Park in Central Sulawesi, which has helped make Indonesia a global nickel processing hub and paved the way for the development of the country’s own battery industry.

These types of investments are popular with Indonesian politicians, especially in the lead-up to elections. They offer more than just jobs and returns. Coordinating Minister of Maritime Affairs, Luhut Binsar Pandjaitan, said he likes partnering with China because they are willing to transfer technologies that can help Indonesia climb the value chain.

But while China is happy to transfer its technology, it has also been sharing a range of other problems, such as environmental degradation, cost-overruns and labor issues. Compared to the west, Chinese investments often have a more singular focus on financial returns and set a lower bar from an environment, social, and governance (ESG) perspective.

 

No signs of slowing down

The recent Chengdu visit serves as a reminder of just how far Indonesia-China relations have come under the Indonesia-China Comprehensive Economic Partnership and Jokowi’s tenure as President. China is now Indonesia’s largest trading partner and second largest investor, with last year’s trade value reaching more than $133 billion.

The announcement of eight new partnerships shows that, for now, Indonesia is happy to prioritise its economic relationship with China over social, environmental and strategic concerns – and that gives China leverage. Fearing damage to the Jakarta-Beijing relationship, Indonesia has already become reluctant to respond to China’s aggressiveness in the South China Sea.

In recent years, the China Coast Guard and Chinese ships are often seen entering Indonesian waters. Yet the Indonesian Navy now prefers just to monitor the Chinese ships from a distance rather than directly confronting them.

Similarly, the announcement of another industrial mega-investment shows Indonesia is happy to keep prioritising technology transfer and the development of downstream processing capabilities at the expense of social and environmental factors. While Indonesian did mention the importance of minimising environmental impacts and using local labour, neither country seems interested in implementing concrete measures to achieve these aims.

There is no doubt Chinese capital, technology, and trade can offer economic opportunities over the short term. But the costs of environmental degradation and strategic dependence will accrue gradually and exponentially over time. The end of Jokowi’s presidency in 2024 might allow new policy directions, but the same underlying dilemmas will await the next president because Indonesia’s need for foreign investment will only increase in the years ahead.