Indonesia Should Be at the Heart of US Indo-Pacific Policy

When the Trump administration rolled out the Abraham Accords in 2020, it soon looked to Indonesia as the next logical addition. The agreements aimed to normalize Israeli relations with Arab-Muslim majority countries in the Middle East after decades of political conflict, while expanding trade, investment, and people-to-people ties. Considering Indonesia’s growing economic importance and status as the world’s largest Muslim-majority country, and following quiet bilateral engagement behind the scenes, several analysts argued that the time had come for Jakarta to engage in the Abraham Accords process. The United States floated expanded American investment in Indonesia to sweeten the deal, and Secretary of State Antony Blinken reportedly raised the issue in Jakarta during a high-profile visit in December 2021.

Indonesian officials have downplayed the move publicly and continue to make strong statements against Israel. In private, regional and Indonesian experts pour cold water on the possibility. With an upcoming Indonesian election in 2024, and Israel-Palestine a volatile domestic issue, lower-level contacts in trade and investment are far more likely than Jakarta to sign on formally to the Abraham Accords. Demonstrating the intractability of this issue, FIFA recently barred Indonesia from hosting the 2023 U-20 World Cup after the governor of Bali lodged protests about Israel’s participation in the event.

The episode is a microcosm of key challenges in the US relationship with Indonesia: as both countries work to strengthen economic and diplomatic ties with each other and in the region, ambiguity persists as to how close the partnership can be. Although its growing relationship with Washington builds on a solid foundation, Jakarta prioritizes an independent foreign policy, refusing to reduce ties with China or to follow American preferences without critique. Moreover, the dearth of US economic engagement undermines America’s attractiveness for the growth-hungry developing nation. The ceiling may be lower than many hope.

The United States will have to understand that Indonesia will always hedge between Washington and Beijing, which sets the ceiling in the relationship lower than that with other allies and partners, such as Japan and India.

If the United States wishes to shore up a free and open Indo-Pacific, Washington cannot overlook Indonesia. Maximizing ties with Jakarta within this context will require patient, deft policy to incentivize relations with Washington instead of Beijing on key issues, a greater willingness to engage economically, and an awareness of Indonesia’s reluctance to pick sides.

Indonesia at the heart of the Indo-Pacific

Strategically critical, the world’s fourth-most populous country, largest Muslim-majority nation, and third-largest democracy, Indonesia too often goes under-recognized. It is indisputable that the nation of more than 18,000 islands (6,000 of which are inhabited) plays an increasingly crucial role among Indo-Pacific and developing nations. Washington recognizes this and naturally jockeys for position with Beijing. US Indo-Pacific policy makes little sense without strong relations with the country lying at the geographic heart of the region.

Indonesia has slowly but steadily embraced a newfound role on the international stage. Jakarta led the G20 in 2022, and chaired the Association of Southeast Asian Nations, or ASEAN, in 2023. Two-term President Joko Widodo (often referred to as Jokowi) even attempted to negotiate between Ukraine and Russia prior to the G20 Summit in November 2022. By virtue of its large size, Indonesia is often viewed as a de facto leader within ASEAN, which Jokowi wants to see become an “epicentrum of growth.”

However, Indonesia is often characterized as “punching below its weight in global affairs.” In many ways, this remains the case, with Jokowi emphasizing domestic economic growth over foreign policy. For example, in 2014 Jokowi promised to make Indonesia a “Global Maritime Fulcrum” linking the Indo-Pacific, but the initiative languished. Moreover, Indonesia’s reliance upon diplomacy (both high-level and backdoor) to address ASEAN’s two crises in the South China Sea and Myanmar’s military coup is unlikely to achieve success, further contributing to the perception that Indonesia isn’t as active diplomatically as it could be.

In the realm of great power politics, Indonesia resists choices. Jakarta values its independence in foreign policy, which sometimes leads to seemingly contradictory policies. Although it voted to condemn Russia’s aggression against Ukraine in the UN, Jakarta was equally focused on the war’s impact on Indonesia’s economic and food security, and offered to broker peace between the warring nations. And despite its public condemnations of Israel to assuage domestic political opinion favoring solidarity with Palestine, Jakarta avoids criticism of China’s repression against its Muslim population in Xinjiang.

The floor and ceiling in US-Indonesia ties

At the same time, US-Indonesia ties have grown closer over the past decade, particularly concerning defense. US Secretary of Defense Lloyd Austin visited Indonesia last year following a $14 billion deal to sell 36 F-15 fighters to Jakarta. Indonesian Defense Minister (and presidential contender in 2024) Probowo Subianto has also traveled to Washington, despite previously being barred from entry due to his human rights record. This has resulted in increased arms sales and expanded bilateral military exercises. Beyond security, Indonesia and the United States collaborated to launch joint initiatives on infrastructure and climate change during Jakarta’s tenure as head of the G20 last year.

It is no coincidence that US Secretary of State Antony Blinken chose to lay out the Biden administration’s vision of a free and open Indo-Pacific from a stage in Jakarta. During meetings with Jokowi in the region and in Washington, President Biden has emphasized Indonesia as a “vibrant, critical…partner” and both countries as “two of the largest democracies in the world…working together to preserve the rules-based system and international order.” In many ways, the floor in US-Indonesia relations is fairly high, and Indonesia is not in China’s camp.

Yet, Indonesia reaches out to Beijing in ways that can frustrate Washington. It also works to maintain a balance, such as in its continued concern over AUKUS, the trilateral security pact between Australia, the UK, and the US that, among other forced posture changes, is bringing nuclear-powered submarines to Australia. The United States will have to understand that Indonesia will always hedge between Washington and Beijing, which sets the ceiling in the relationship lower than that with other allies and partners, such as Japan and India.

Fundamentally, Jakarta approaches China from a realistic perspective grounded in the living memory of the Cold War’s devastating impact and Beijing’s role in Indonesia’s development. Contrary to some fears in Washington, there is little love lost between Jakarta and Beijing, particularly within the Indonesian military. But, although Beijing poses a real security threat recognized in Indonesian defense and strategic circles, it also looms far closer geographically than Washington, and its economic promise is attractive and swifter.

Indonesia also recalls the history of US involvement against its first president, Sukarno, and Washington’s role in supporting the brutal anti-communist regime under the next president, Suharto. During the Cold War, Jakarta first attempted to remain nonaligned with either the Soviets or the US but was dragged in anyway, at great cost, when Washington grew concerned at Indonesia’s tilt toward the communists. This is living memory for many Indonesians, and Jakarta fears the fallout of a looming second cold war. Indonesia does not want to make an enemy of Beijing, nor can it afford to shut off the tap.

Maximizing a low ceiling

Luckily, Indonesian hedging also means that Jakarta remains committed to a US role in counterbalancing China. Even if the ceiling may not be as high as Washington would like, Washington can be confident the floor is fairly high and there is further room to grow. Maximizing US relations with Indonesia requires deft policy, and awareness of what Indonesia wants: economic growth and to avoid being dragged into another cold war.

Vis-à-vis China, the United States faces an economic incentive issue in Indonesia, preventing maximization of—or reaching the ceiling in—US-Indonesia relations. The United States may lead in foreign direct investment into ASEAN as a whole with $40 billion in 2020–21 compared to China’s $14 billion, but Indonesia’s foreign direct investment from, and trade with, Beijing are larger than America’s. China is the second-highest foreign investor in Indonesia (behind Singapore), and it increasingly focuses on Indonesia’s strategic resources, such as nickel. It also offers support for Jokowi’s economic priorities that may be less attractive to Western private firms, notably his planned new capital city, Nusantara.

Reaching the ceiling in US-Indonesia ties requires economic engagement, while not crashing into it calls for subtlety, patience, and understanding.

Although Indonesia recognizes the clear risks China poses, it approaches Beijing from the perspective of development and economic growth. Jokowi banked his reputation and electoral appeal on promises of continued growth, including his goal of becoming the world’s seventh largest economy by 2030. Over the past two decades of challenging democratization, the country’s economy has grown tremendously, albeit not without problems.

Washington may be Jakarta’s preferred defense partner, but Beijing’s economy remains more attractive for Indonesia’s core interests. Simply put, Indonesia remains a developing country, one that naturally prioritizes economic growth over other issues. When speaking with Indonesian interlocutors, it is clear that the lack of US economic offerings is the biggest hurdle in the relationship.

Without participation in regional trade agreements or increased material incentives, Washington will find it hard to counteract Beijing’s pull or to set standards that achieve its goal of a free and open Indo-Pacific. Despite a chorus from both allies and partners calling for the United States to join in the region’s expanding trade opportunities—such as Comprehensive and Progressive Agreement for Trans-Pacific Partnership and Regional Comprehensive Economic Partnership—increased market access to the United States is not on the table. Since the 2017 withdrawal from the Trans-Pacific Partnership, no majority in Congress or the White House exists for new regional free trade agreements.

Executive branch policy has limited impact on this perception. The Indo-Pacific Economic Framework attempts to facilitate rule-setting and expanded opportunities across a number of pillars. Negotiations are continuing—including last month in Bali—but they are viewed in the region as hollow, regardless of how Washington frames it. As with the Biden administration’s Build Back Better World and its successor, the Partnership for Global Infrastructure and Investment, follow-through is easier said than done. While the 2022 US-ASEAN Summit may have netted a US-ASEAN Comprehensive Strategic Partnership, it promised new initiatives in the millions, not billions, spread across ASEAN. Moreover, as a market economy, the United States has a harder time than China leveraging private business for strategic gain.

If it wants to maximize relations, Washington will need to provide more material incentive. The almost $700 million for infrastructure under the Millennium Challenge Corporation’s Indonesia Compact is a good start, but greater volumes will be needed. The United States must leverage its private sector more effectively; work with allies and partners, such as Japan, to rule-set and invest together; and follow through on its promised economic initiatives, many of which need sustained commitment. There is tremendous opportunity in Southeast Asia as global supply chains shift and the region continues to grow at a remarkable clip. The challenge is taking advantage of it.

Reaching—but not hitting—the ceiling

Reaching the ceiling in US-Indonesia ties requires economic engagement, while not crashing into it calls for subtlety, patience, and understanding. For one, appearances matter. If Jakarta signs an agreement with the United States, it may feel the need to pursue something else with China to avoid appearing to favor one or the other. Washington may also need to understand that things move slowly in many cases due in part to Indonesia’s quest for “balance” vis-à-vis China. Expecting Indonesia to publicly condemn China in the South China Sea or not chafe at new minilateral security arrangements—such as the Quad between Australia, India, Japan, and the United States or AUKUS—is unrealistic. That doesn’t exclude the United States from pursuing policies that unsettle Southeast Asian partners when necessary, instead suggesting that it will have to live with an Indonesia that prefers nonalignment, even in the face of a threatening Beijing. Relatedly, we should not solely engage Indonesia through the lens of competition with China, but rather on Jakarta’s own merits. Too much focus on China will only elevate Indonesian concerns and obscure opportunities for cooperation on issues unrelated to great power competition.

Given time, Jakarta can warm—or accommodate itself to—the realities of great power competition. AUKUS provides the best example. Jakarta expressed deep concerns in 2021about nuclear proliferation and an arms race in the region. But, following the larger rollout in March 2023, Indonesia’s statement proved much tamer. Instead of deep concerns, it “has been closely following” the pact and “expects Australia to remain consistent in fulfilling its [nuclear non-proliferation] obligations.” Its misgivings remain, but Indonesia accommodated itself to the new security arrangement, even signing a new defense cooperation agreement with Canberra in February.

As the United States continues to shift its attention toward the Indo-Pacific, it cannot ignore Indonesia, which resides at the region’s geographic center. Deft policy work is necessary to maximize Indonesia’s value and role in a free and open Indo-Pacific. In particular, expanded economic engagement and an understanding that Indonesia will go to Beijing in the absence of US attention are paramount. Recognizing the ceiling also necessitates understanding Jakarta’s hedging, and Washington should not expect it to act in the manner of more closely aligned US allies and partners. That said, on issues like AUKUS where a strong case can be made to proceed regardless of concerns within Southeast Asia, Washington can be confident that the floor in US-Indonesia relations remains high enough to survive these temporary challenges. If the United States can calibrate its approach to Indonesia to ensure that America becomes more attractive as an economic partner than China over the long term, it is a good bet that Indonesia will play an indispensable role in wider efforts to ensure a free and open Indo-Pacific.

Lucas Myers is the program coordinator and associate for Southeast Asia at the Wilson Center’s Asia Program, where he administers the Wilson China Fellowship. Professionally proficient in Mandarin Chinese, his research interests include Southeast Asia, Chinese foreign policy, and Indo-Pacific geopolitics. He maintains a particular focus on security issues such as the ongoing conflict in Myanmar and the changing balance of power in the wider region. Before joining the Asia Program team, Myers worked on democracy and human rights issues and as a researcher of terrorism and violent extremism. He is also a member of the Emerging Quad Think Tank Leaders program. Myers’ writing and commentary have appeared in The Diplomat, Foreign Policy, War on the Rocks, and other outlets. He received his MA from Georgetown University’s Security Studies Program and his BA in Political Science and Chinese Language & Culture from Macalester College.

Cover photo: President Joe Biden walks with Indonesian President Joko Widodo as he departs the Apurva Kempinski in Bali, Indonesia Monday, November 14, 2022. Official White House Photo by Adam Schultz.