Indonesia - A rising superpower?

Many have predicted Indonesia to be the next Southeast Asian superpower based on its rapid acquisition of wealth in the recent past. This essay analyses whether Indonesia will become a superpower in the near future, taking into account society, the economy, and foreign trade. The essay will then turn to evaluating whether Indonesia soon becoming a superpower is a feasible outcome.

Indonesia in brief

Indonesia is a Southeast Asian nation composed of numerous islands and around 350 different ethnicities. With the worlds forth largest population of over 245,000,000, Indonesia certainly has the manpower to thrive on the global stage (Frederick and Worden 2011: xxxii). Economic development in Indonesia, beginning in the late 1970s, followed a highly state-orientated process. The growth of the economy followed the traditional trajectory adhered to by many developing nations, going from agriculturally dominated to one more centred on manufacture and the industrial sector (Elias, Noone 2001: 33). Indonesia's industrial sector continues to be heavily weighted towards less complex manufactured goods, such as food, tobacco and textiles rather than electronic goods, which arguably reflects its position as not yet fully developed (ibid 36). Its largest exports in order are oil (mainly palm oil), coal, and jewellery (OEC 2016), However, fast growth in GDP, which remains at around 5% per annum, shows its continued industrialisation and possibilities for the country's future.

Internal issues

Despite clear economic growth within Indonesia, evident with its status as the world's 16th largest economy, serious issues within society prohibit it being a 'developed' country and thus a Southeast Asian superpower. These problems include poverty, unemployment, inadequate infrastructure, unequal resource distribution and corruption. With the average GDP per person being $12,400, the poverty rate in Indonesia is still high. The Indonesian government have used a very low income of $26.6 per month to measure poverty, which created a rosier image of 10.9% relative poverty in 2016 (Indonesia Investments 1). If using a higher income as many other countries do to measure poverty, the number would most likely be higher. Furthermore, the lack of infrastructure has led to issues for citizens and the economy. Limited adequate roads, bridges, and even electricity in around 52% of villages shows how large measures must be taken in ensuring the development of Indonesia (Tarahita, Rakhmat 2017). Not having sufficient transportation hinders trade as goods aren't able to be distributed to consumers. Transport links are stronger in wealthier areas of the country, which leads to a perpetual and continued cycle of separation between the rich and poor. With an estimated 74% of Indonesians predicted to live in urban areas by 2030, the lagging infrastructure within cities, including inefficient access to clean water, yearly flooding, and the prevalence of slums must be addressed to deal with the expansion of cities. These factors see many think tanks conclude that Indonesia is still a developing country (Human Cities Coalition 2017).

Indonesian population

Yet, Indonesia's population may hold the key to transforming the nation into an Asian superpower. In Indonesia itself, a growing domestic consumer market has led to greater consumption, thus reflecting the increasing wealth of Indonesians. Indicative of Indonesia's potential is the size and age of Indonesia's population. The median age is 28, and the dependency ratio of children and elderly to working-age citizens is low. This illustrates how Indonesia has the potential to increase growth of the economy for at least two more decades, through the young working population (Stephen, Noone 2011: 34). Indeed, McKinsey & Company even predict that by 2030 there will be 90 million middle-class Indonesians, who will follow China and India as the largest consumer market. Indeed, IMF state that "[p]rivate consumption is a large driver of economic growth for the country", indicating that the increase of middle-class Indonesians will only be beneficial to Indonesia's economy.

Foreign trade

Indonesia over the past decade has greatly opened its trade to external forces, which in turn has aided its economic development. These include the 2010 ASEAN-China Free Trade Area (FTA), which now constitutes the world's largest FTA in terms of population, and third largest in nominal GDP (Irshad and Qi 2014: 1). This is beneficial for Indonesia in that China is its largest import (23%) and export (12%) partner, thus facilitating further trade between the two countries and consequently growing the Indonesian economy (OEC 2016). However, some stress that Indonesia's dependency on China, only expected to increase through China's One Belt One Road initiative, will be an issue in the future. Although not a presently looming problem, the slow down of China's economy could have a 'spill-over' effect on Indonesia, who rely on China for much investment and trade. Furthermore, some argue that the ASEAN-China Free Trade Area has inverse effects on Indonesian trade. For example, some state that Indonesian products are being rejected in favour of cheaper Chinese products, uprooting the livelihoods of "local Indonesian economies" which necessitate reforms of industry as well as infrastructure within Indonesia (Indonesia Investments 2).

Conclusion

Although this essay has only reflected briefly on the proponents of Indonesia's growth, it concludes that Indonesia will not become a superpower in the near future. Although Indonesia may gain further power and influence in the world, this power will not be on the level of superpowers. Richard Robinson concisely summarises the three main arguments made for Indonesia becoming the 'Third Giant', and how they are underdeveloped. The first argument is based on Indonesia's economic growth, the second on newly popular Indonesian nationalism, and the third its 'soft power' of operating under a democratic system of governance. These arguments, Robinson asserts, are more idealistic than based on fact. He counters their claims through citing how "market reform has been undermined by continuing state intervention and protective policies", alongside politician ambition dampened by its weak military and diplomatic skills (Robinson 2016). Consequently, Indonesia will not be a superpower in the near future, but its future as a growing power nevertheless remains a bright and achievable prospect.