Indonesia and New Multipolar World
At the end of World War II, we enjoyed Pax Americana, a period of development and peace with the United States (US) as the superpower.
At the end of World War II, we enjoyed Pax Americana, a period of development and peace with the United States (US) as the superpower.
Prior to the pandemic, no parties had hard and soft powers comparable to that of the US. However, the Covid-19 pandemic has been a black swan event that entails complex consequences and distorts the definitions of normal and deviation.
With the domination of high technology, US privilege seems no longer an advantage. The US and the European Union (EU) are overwhelmed by their attempts to control the pandemic. On the other hand, China has apparently returned to normal life and its economic activity is rapidly reviving. A new multipolar order dominated by the three—the US, EU and China—is dawning and Indonesia should be prepared to benefit from it.
Macro-micro levels of US and China
The domination of technological power and the system of capitalism have made the US in control of high-tech and high value-added segments.
Thriving giant corporations (FANGAM: Facebook, Amazon, Netflix, Google, Apple, Microsoft) have given rise to an elite group of techno oligarchs, such as Bezos and Elon Musk. In 2019, the annual income of largest corporations was estimated at US$14 trillion and the gross domestic product (GDP) of the US has always been the highest over the last few decades.
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Behind the success at the macro level, being the US high-tech domination and economic weight, the cumulative debts of the US have reached US$27 trillion, around 120 percent of its GDP. Major holders of US bonds are Japan and China, followed by a group of EU countries.
At the meso and micro levels, disparities are widening. The rate of backwardness of small corporations and poor people is increasing. People in high-tech industrial centers tend to be wealthier and oriented to the democrats, while people in real-sector industries like the interior regions of Indiana and Ohio tend to be poorer and oriented to the republicans.
When the pandemic prevails, the manufacturing capacity of low-tech and low value-added segments like tissue paper and personal protective equipment, including simple products like face masks, is asker, appears to be weak.
On the other side, FANGAM tends to be based on digital service and the US real sector is even more marginalized. For instance, products of Apple are designed in America, but their production process is carried out in other countries. This tendency has become a source of weakness. When the pandemic prevails, the manufacturing capacity of low-tech and low value-added segments like tissue paper and personal protective equipment, including simple products like face masks, is asker, appears to be weak.
As a cumulative impact, the path of US economic recovery is predicted to take the form of letter K (K-shaped recovery). It means there are two tracks of economic growth that increasingly become farther apart. The first group will rise faster and get richer. The second group, comprising members of middle and lower-middle classes, will grow poorer. The combination of K-shaped recovery, swelling US government debts, economic disparities between people, corporations and regions, populist political promises, Democrat-Republican polarization and the lingering pandemic can lead to a multidimensional crisis. Without corrective measures, all this may only be the beginning of degeneration of the US supreme power.
China is predicted to experience V-shaped recovery. It means its economy will awaken rapidly and sustainably. At the corporate level, although we have often heard about giant high-tech corporations of China, the pandemic shows that China still has a low dan medium-tech command.
Its industries are capable of producing goods ranging from toy cats, face masks to jet fighters. Amid the pandemic, China even can manage to send aid and export such products as tissue, face masks and plastic sacks besides meeting its domestic needs. Its digital-service oriented industries, Baidu, Alibaba, Tencent, Huawei, Xiaomi (BATHX), are almost as big as FANGAM. Its solid low, medium and high-tech command, very massive infrastructure development and political stability consolidation further support quality economic growth. Even when the world poor population proportions were increasing, in November 2020 President Xi Jinping announced his country’s success in relieving people under the poverty line.
If this time China is capable of accumulating not only hard power but also soft power, the new multipolar world order will soon be a reality.
Before the pandemic, when we observed the GDP proportions of the US, EU and China to the world GDP, it was evident that those of the US and EU tended to be stagnant-down while that of China was rising. The pandemic seems to be also speeding up the decline of GDP weight of the US and EU, opening the chance for China to increase. If this time China is capable of accumulating not only hard power but also soft power, the new multipolar world order will soon be a reality.
Indonesia’s strategy
In this multipolar scenario, Indonesia has big capital so that the country will not only rise from the pandemic but can also take advantage of the shift in the constellation of the US, EU and China.
First, the Pancasila state ideology and the constitution provide a strong foundation of the free and active political orientation and the role of preserving world peace. Second, as a democratic country with a strategic location in the Indo-Pacific zone, Indonesia can become a strong stabilizer element.
This handout photo from Malaysia\'s Department of Information taken and released from the official command centre on November 19, 2020 shows Indonesian President Joko Widodo delivering a speech via virtual meeting during the APEC CEO Dialogues 2020, ahead of the Asia-Pacific Economic Cooperation (APEC) leaders\' summit in Kuala Lumpur.
The constellation shift will tighten power rivalry between the US and China in the ASEAN zone. The US foreign policy has prepared this since Hillary Clinton served as secretary of state with the “Pivot to Asia” diplomacy. The Quad Group formation made up of Japan, India and Australia will continue support US interests and absorb Chinese influence.The situation in the South China Sea (SCS) with the passage of 60 percent maritime-route trade will also be heating up. Small countries with US alliance inclination like the Philippines can be used by the US to trigger destabilization of the SCS zone with the potential to disturb China’s trade lane. China won’t hesitate to maintain its interests either. Today countries of Chinese alliance tend to be small like Cambodia, Myanmar and Laos. Therefore, China needs a partner of greater weight, which is Indonesia. Here we can negotiate and gain advantage. China should be invited to make large-scale investments and transfer its technology to strengthen Indonesia’s industries.
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Later, Indonesia also needs to brace itself by further intensifying infrastructure development. Human resources development requires fundamental reform. Data indicate that around 60 percent of our workers have primary school education. So, rather than just allocating incentives, workers’ capacity increase should be emphasized by reforming the curriculum and vocational education that involves industries as end users. This is to prevent any more mismatch between training and the skills needed by end users. In this way, the vision of President Joko Widodo in the human resources sector can be realized and accelerated.
Real-sector industries
The whole world is currently making money. Foreign funds are going to enter. They should be directed at long-term investments in the real sector, not only in the capital market to become hot money and create problems in the future. We have had the Job Creation Law that should be utilized to draw investments in the real sector and generate job opportunities capable of accommodating an increase of at least 3 million new workers annually.
From Left to Right; India\'s Prime Minister Narendra Modi, Indonesia\'s President Joko Widodo, and Japan\'s Prime Minister Shinzo Abe talk before a group photo during the East Asia summit in Nonthaburi, Thailand, Monday, Nov. 4, 2019.
Interfaith congregations chatted in front of the Garuda Pancasila statue at the Cathedral Church, Jakarta, when they gathered with the theme Strengthening Tolerance, Brotherhood and Human Solidarity, on Friday (1/6/2018).Industries in the real sector should be developed in various lines from low-tech to high-tech areas. Based on the difference between the US and China in the pandemic period, this industrial diversification is necessary because such variation has made Chinese industries resilient amid the pandemic and capable of awakening rapidly. Two thirds of the Indonesian territory is covered by the sea. The advantage not enjoyed by other countries should be exploited. The empowerment of fishermen, promotion of industries related to maritime resources, tourism and deep-sea mining will accelerate quality economic growth.
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Indonesia also owns vast areas of forestland. The world needs forests as natural lungs. This role can serve as an asset for negotiation with the EU and its members. In his campaigns, Joe Biden also signaled his orientation of foreign policy concerned about the environment and climate change. Indonesian forests can thus be managed and further utilized through negotiations and intensified cooperation with the US and EU.
In terms of funding, many central banks are now lowering their interest, meaning the world is entering the era of low-cost loans. Indonesia should be able to negotiate for low interest and debt restructuring in order to seize the opportunity for cheap loans to boost development efforts.
Dato\' Sri Tahir
Lastly, in the executive sphere, national development orchestration needs enhancement. For instance, institutionally the capacity and authority of the National Development Planning Agency should be strengthened. Ministries and other state agencies need to apply the key performance index (KPI) so that their progress can be measured and accounted for. In this manner, Indonesia can benefit from the new world order to solidify quality and even development.
Dato’ Sri Tahir, Founder of Mayapada Group
(This article was translated by Aris Prawira).
