Indonesia will enter a new chapter of governance, under the elected President Prabowo Subianto for the next five years. While the election was very much filled with many contentious issues, the official announcement has set this current Minister of Defence as the incoming ruling President starting in October 2024.
Prabowo is expected to be a leader with more foreign policy focus, compared to his soon-to-be predecessor. Months before officially being inaugurated, Prabowo began its overseas visits including high-level courtesies to China, Japan, Malaysia and continued to the Middle East where he also spoke at the Qatar Economic Forum.
At that forum, Prabowo was again repeating the same narrative of nationalistic notion of Indonesia’s domestic and foreign policy, with a line ‘every country in the world will fight or protect the national core interest of their people’ while being asked of the country’s tendency of protectionism. That line sounded consistent to what was mostly heard during the campaign period.
His vision of Indonesia’s GDP growth was also corrected up to 8%, which he optimistically conveyed will be achieved in 2-3 years under his presidency. This number requires significant reform in national economic development policies, not putting aside the importance of reviewing the country’s strategy in attracting more foreign direct investment, and increasing more of our global exports.
There are some rumours of how Prabowo will set his Ministerial structure and composition in charge for this matter. For instance, whether the Ministry of Foreign Affairs will be combined with International Trade, modelling the Department of Foreign Affairs and Trade (DFAT) in Australia or even the rumour of having the Ministry of Trade (domestic) and Industry merged to avoid any complicated trade-offs, and miscoordination between these two functions in the future. Everyone will see the fact right after the cabinet is officially formed.
However, months before the inauguration, it is critical to address what should be considered for Prabowo’s foreign economic policy. Besides the momentum of transitioning to the new leadership era, Indonesia is also benefited by the two years in a row of regional and multilateral chairmanship respectively for the G20 and ASEAN. These years of global activism have somewhat elevated Indonesia’s recognition as a country with confidence and strong modality to drive international economic agenda.
Just last year, the ASEAN Outlook on Indo-Pacific (AOIP) for instance was brought into the high table of conversation, with the priority to bring concrete economic partnerships into this regional commitment, adding more values to its traditional heavy political context. Indonesia was then seen with a positive trajectory as an Indo-Pacific power. Thus, with many more eyes looking to Indonesia for its greater economic visibility, there are some suggestions on what Prabowo should have in the pipeline.
First, Indonesia will always require international trade diversification both in partners and products to reduce the risk of economic vulnerability and supply chain disruption due to global uncertainties. Today, Indonesia is integrated into about 45 Free Trade Agreements (FTAs), either signed or under negotiated. However, ratifying the agreement is just an instrument without optimum implementation.
Prabowo’s economic policy must be directed towards the greater execution of such trade agreements. Negotiating to ratify trade agreements may be complex already, but to implement it requires more accelerating platforms. The ongoing process of establishing the RCEP Support Unit, to ensure the effectiveness of RCEP agreement is a good example. Another benchmark is also IA-CEPA Katalis that was established to maximise the benefits in increasing market access, promoting trade and investment between Indonesia and Australia.
If the DFAT scenario is happening, Prabowo needs a well-calibre minister that is able to better strategize the vision of having international trade as one of the significant engines of Indonesia’s economic growth. More technocratic ministers are highly suggested to take care of this journey, with strong portfolio in international
The model of appointing trade envoys might also be considered, despite the role is now very much conducted by Indonesia’s ambassadors worldwide. In the United Kingdom, the Prime Minister appointed trade envoys to engage the respective markets for a more substantial trade and investment relationships, championing the country’s trade potential.
Second, to support such a vision, Indonesia needs an overarching foreign economic strategy that incorporates a unique approach for each region across the globe. It remains debatable whether Prabowo will release a grand foreign policy strategy, although expressed by experts as the necessary foundation the country must have.
As the global economic fragmentation is getting deeper, also the variability and vulnerability in supply chain is differ and more complex among regions, it is critical for Indonesia to review its strategy in engaging almost all parts of the globe. The pandemic has given a push for supply chain resilience and diversification, whereby Indonesia should also look into other geographies both for demands and supplies. This will entail the comprehensive outlook on which regions are the priority for Indonesia’s trade, including the identification of specific countries as the gateway, intermediary and end target.
Third, the crucial step above requires a strong evidence-based and well-researched foreign economic policy formulation. Prabowo may consider the establishment of a prominent research institution that is designed to assist the government with meticulous analysis on the potential, risk, and strategy in engaging the global partners economically. Korea Institute for Economic Policy (KIEP) could be considered as the ideal example. This kind of institution will not only help the function of Foreign Ministry, but also other related economic ministries. As the public might have known, the miscoordination of policy implementation in Indonesia is evident.
On another note, ‘Indonesia Incorporated’ has to be realised effectively on the ground. The effective coordination with the private sectors is critical to assure that Indonesia’s economic presence globally is perceived as a united force, a consolidated effort to defend what Prabowo stated as a ‘national core interest’. After all, an expanded Indonesia’s economic visibility at the international level must benefit all stakeholders, particularly those at home.