Dynamics of 2023

As we navigate the first quarter of 2023, we observe various geopolitical dynamics that will characterize 2023.

Some of them are the subject of this article as the known unknowns, taken from various mass media sources, both domestically and abroad. The author’s kapita selekta (compilation) presents 10 “known unknowns”, international in nature or of concern in our country.

International

First, the issue of climate change will remain an interesting discussion, related to the attitudes of several different countries in terms of area size, economic and political power and interests.

At COP27 in Egypt last year, high-income countries that have historical responsibility for the ongoing process of global warming agreed to provide funds for losses and damage (LnD) that occur as a result of global warming. This funding is expected to help low-income countries vulnerable to hydrometeorological impacts and disasters.

However, developed countries also demand China and India, as countries that currently produce high carbon emissions, take responsibility. The two countries are still not willing to participate in providing these funds.

Nonetheless, the overall picture regarding the determination of nations to deal with climate change is quite encouraging, and it is hoped the November 2023 COP can agree on who should bear the costs and what the mechanism will be.

Also read:

> Indonesia's Economy in 2022 and Prospects for 2023

> Indonesia: Navigating a Difficult Global Economy

Second, the trade war between the United States and China. The US will continue to restrict trade with China, especially to prevent US technology from aiding China's industrial innovation and progress. For one thing, the US is trying hard to thwart the progress of China's electronics industry by limiting the semiconductor trade. Thus, there will be a "geo-economic confrontation" between the two world superpowers, which will distort international free trade practices and negatively affect productivity and efficiency resulting from globalization.

Third, the war between Russia and Ukraine. This war affected the world economy in two important sectors, namely food and energy. Energy and food prices will fluctuate greatly and as a result will affect segments of society that are vulnerable to price changes.

There have been voices calling for negotiations to end the war, including in the form of a United Nations resolution. However, there is no sign the Russian government regime will end the war without showing a significant victory. With any indication China will help Russia, even without being directly involved, the war cannot be expected to end quickly.

Fourth, in the Asia-Pacific, tensions in Taiwan will continue. This area will remain a hot spot. North Korea is constantly demonstrating its long-range fire capabilities with interregional missiles. This political situation has the potential to disrupt traffic in the shipping lanes of the South China Sea and threaten the stability of the East Asia region, which is one of the world's growth centers.

About 60,000 ships pass this shipping route a year, covering one-third of global maritime trade traffic volume, with a trade value of up to US$4 trillion. China's interest is quite significant, because 80 percent of energy imports and a total of 40 percent of its foreign trade pass through this sea route. It seems the region will become a place of potential "eternal" conflict because of conflicting strategic and long-term interests among various powers in this region.

Fifth, in the ASEAN region itself, where Indonesia holds the chairmanship this year, efforts to make ASEAN a region of peaceful economic growth will continue, but what has become a thorn in the flesh of this region is the Myanmar issue.

Indonesia has an interest in continuing to work on the ASEAN Five Points of Agreement to help resolve political problems in Myanmar. However, Indonesia also does not want Myanmar to hold larger interests in the region hostage, in order to improve shared prosperity. This is a challenge that will not be easy for Indonesia to overcome because the military government in Myanmar still does not want to move from the most primitive authoritarian model of government.

In the past, international pressure and economic interests forced the Myanmar military regime to take a step back. It seems that now, such pressure is inadequate against the ruling regime of Myanmar. In 2023, there are no signs there will be a change in the government system in Myanmar.

Domestic

The following are five of the important economic and political issues that will dominate the domestic situation throughout 2023.

First, domestic politics is colored by efforts to prepare for elections, especially presidential elections (pilpres); in particular, by building coalitions. Four groups have been formed, consisting of three coalitions and one party that has thus far shown no signs of forming a coalition.

Of the four groups, in their political narrative, three will continue President Joko “Jokowi” Widodo's development policies and results and one group will be firm in making changes, and has even proclaimed an "antithetical" stance. The three parties have presented the names of presidential candidates, if unofficially. The only party that can nominate its presidential candidate without forming a coalition with other parties is still considering which cadres it will support.

Also read:

> Public Opinion over 2024 Presidential Candidacy

> Political Narratives Affect Political Party Electability

Can it be concluded there will be four pairs of presidential and vice-presidential candidates? The answer can be "yes" or "no". Because everything is still very fluid, coagulation of coalition parties can occur, so the number of participants in the presidential election can be reduced to three or even two pairs.

The most decisive factors are the strength of the parties’ coalitions, and the perceptions of the candidates’ characters and ability to lead this great nation, which will greatly influence the final outcome.

Second, throughout 2023, challenges in the economic sector include: interest rates, which tend to increase; inflation, which is also warming; and a slowdown in the world economy. These three problems are influenced by the dynamics of the global economy, especially those that occurred in the US and Western Europe as a result of the COVID-19 pandemic, which lasted for more than two years, and the Russia-Ukraine war.

These two problems rocked the global supply chain and forced the world's central banks to adopt their policy of increasing interest rates. Indonesia is still in a better position because it is capable of maintaining a fairly high growth rate and controlled inflation. However, additionally, Indonesia needs to be careful in maintaining discipline in its macroeconomic policies.

Third, Indonesia has long wanted to be able to optimally manage its natural resources (SDA), whether agricultural, or plantations and minerals.

In this context, Indonesia is implementing a policy of banning the export of raw materials to support domestic downstream policies. However, Indonesia's efforts to consolidate downstream policies in the mining sector face challenges from high-income countries. Indonesia has lost twice in lawsuits at the WTO regarding the banning of nickel ore exports.

Currently, Indonesia is preparing an appeal, and President Jokowi emphasized Indonesia would continue its downstream policy. How unfair it is, that countries that own natural resources cannot enjoy the added value of their own natural wealth.

Also read:

> Downstream Nickel and Our Natural Resource Story

> Downstream Industry and Paradox of Competitiveness

If downstreaming in the mining and oil and gas sectors continues, as reported by media, President Jokowi projects an increase in GDP of nearly US$700 billion and the creation of around 9 million new jobs. However, Indonesia must also take every step carefully, while prioritizing national interests; it must be careful not to lose important trade partners. This requires sophisticated economic diplomacy.

Fourth, Indonesia succeeded in controlling the COVID-19 pandemic, and in December 2022 the President revoked the provisions for imposing restrictions on community activities (PPKM). This policy increases people’s mobility, so that economic activities can proceed without hindrance. The Indonesian government hopes with this increased mobility, economic conditions in 2023 will be better than the previous year.

However, economic recovery takes time, so the government still has to maintain economic policies that stimulate the business world, but with great care, and are accompanied by inclusive programs, including social assistance for the poor that are affected.

For us, surely Papua is part of Indonesia, like Java or Bali.

Fifth, the problem of armed criminal groups (KKB) in Papua. Recently, KKB took hostage a Susi Air pilot who is a New Zealand citizen. Of course, the KKB's actions, big or small, cause complications overseas.

For us, surely Papua is part of Indonesia, like Java or Bali. Whatever happens in Indonesia is our own business. In addition to efforts to uphold security in the homeland, we must also play a tough and non-defensive diplomacy.

That is a brief description of the problems likely to dominate throughout 2023. Of course, we hope each of these problems can be fully understood by the community, particularly its elites, especially the various problems that have an international dimension, which have a direct or indirect impact on the sovereignty, independence and welfare of the Indonesian people.

KOMPAS/DEONISIA ARLINTA

Ginandjar Kartasasmita

Ginandjar Kartasasmita

Professor at the National Graduate Institute for Policy Studies (GRIPS), Tokyo

This article was translated by Kurniawan Siswo.