China expected to remain key economic partner after Indonesia’s election

Indonesia is China's second-most preferred investment destination, thanks largely to abundant nickel reserves, cheap labour and a vast market.

Yohana Belinda

Yohana Belinda

The Jakarta Post


Central Java Governor Ganjar Pranowo (right) takes a selfie with President Joko “Jokowi“ Widodo and Defense Minister Prabowo Subianto during a rice harvest event in Central Java. PHOTO: PRESIDENTIAL PALACE/ THE JAKARTA POST

September 13, 2023

JAKARTA – Regardless of the outcome of the upcoming presidential election, business and investment relations between Indonesia and China will remain strong, analysts say, though they expect one candidate to bring home slightly more if elected, while another might do the opposite.

The relationship between Indonesia and China was likely to remain friendly under either Central Java Governor Ganjar Pranowo or Defense Minister Prabowo Subianto, according to Wen Chong Cheah, a research analyst at the Economist Intelligence Unit (EIU).

However, under former Jakarta governor Anies Baswedan it is likely to “cool-down” slightly, he told The Jakarta Post on Thursday.

Cheah stated that Ganjar had worked extensively with Chinese officials in a variety of sectors, including tourism, commerce and human resources and had frequently met with Chinese officials and business leaders during his tenure as governor.

Meanwhile, Prabowo has frequently met with Chinese officials. With Prabowo as Defense Minister, Indonesia had rarely, if ever, made negative comments about China’s activities in the South China Sea, he said.

“While ties with China will remain warm if he is elected president, he has only worked with China on matters of defense; it is uncertain if this will translate equally into economic gains,” Cheah said.

Meanwhile, Ganjar was expected to leverage his experience and familiarity to boost ties between the two countries, which could lead to an increase in investment and stronger economic relations, he said.

By contrast, investment and economic relations were likely to deteriorate under an Anies administration, as he was more associated with Western countries and distanced himself from President Joko “Jokowi” Widodo’s China-leaning leadership, Cheah said.

Indonesia and China have strengthened economic ties under Jokowi, especially in investment and commerce.

Indonesia is China’s second-most preferred investment destination, thanks largely to abundant nickel reserves, cheap labor and a vast market.

China has also become Indonesia’s number one trading partner both in exports and imports, according to Statistics Indonesia.

Muhammad Zulfikar Rahmat, Director of the China-Indonesia Center for Economic and Law Studies (CELIOS) said that Anies wanted to change the way the Indonesian people viewed the government, which had been criticized for being too pro-China.

Zulfikar expects that, should Anies be elected, it would not be surprising if one of his priorities would be to diversify Indonesia’s partners while seeking opportunities and widening its connections to build closer cooperation with the West.

“The face of the current government’s foreign policy, which is often seen as pro-China, will likely be transformed,” Zulfikar said in a CELIOS Policy Brief report in August, which he co-authored with CELIOS researcher Yeta Purnama.

Meanwhile, he shared his sentiment that the other two candidates would not differ greatly in foreign policy, but opined that Prabowo lacked experience in discussing economic issues.

“If he wins, it is crucial for Prabowo to select a cabinet that will represent his views and foster a healthy economic relationship with China,” Zulfikar said.

Separately, Zulfikar told the Post on Thursday that Indonesia’s relations with China would remain strong after Jokowi leaves office because there were many ongoing projects involving China, such as investment in the country’s new capital, Nusantara.

However, he expects the elected president to face questions about human rights issues and environmental concerns, such as those regarding the nickel sector, in connection with Chinese investment.

Furthermore, there were implications to debts derived from infrastructure projects built with Chinese funds, he said, citing the Jakarta-Bandung high-speed railway, which resulted in an 80-year concession to satisfy Chinese financiers.

“So, whoever is elected will have a lot of work to do,” Zulfikar said.

Yose Rizal Damuri, executive director of the Center for Strategic and International Studies (CSIS) Indonesia saw it differently. He told the Post on Thursday that Indonesia would be less economically reliant on China regardless of who was elected.

He argued that China had faced tremendous challenges in recent years as economic expansion slowed and domestic economic problems were on the rise.

Meanwhile, Indonesia had been looking for investment on infrastructure and downstream industries from other countries, such as South Korea, so the country did not rely on China alone.

“Indonesia itself has changed, and its strategy may need to be altered in the future. Whoever the government or president is, they will alter the course,” Yose said.

The Chinese Embassy in Jakarta did not immediately respond to a request for comment.

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