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Indonesia as an Example of 21st Century Economic Statecraft

Jan 29, 2014


Indonesia’s Rise

In 2013, Indonesia hosted the Asia Pacific Economic Cooperation (APEC) leadership meeting. Established in 1989, APEC has 21 member states that are committed to promoting trade and economic cooperation in the region. The summit was overshadowed by the absence of President Obama, who canceled his trip to manage the partial U.S. government shutdown. Secretary of State John Kerry attended instead. The U.S. was the only country not represented by its head of government. As a result, the stage was wide open for China’s President Xi Jinping, who delivered the keynote address.

The Obama administration understands Indonesia’s potential as a strategic stakeholder with significant political and economic clout in an area of increasing geostrategic importance. Its economy averaged a GDP of $878.2 billion and a growth rate of 6.2% in 2012 (World Bank). The democratic government transition in 1998 advanced economic growth, lowered trade barriers, and advanced foreign investment opportunities. Since 2004, President Yudhoyono has consistently worked towards implementing economic reforms to eradicate corruption, diminish nepotism, and remove bureaucratic hurdles. Indonesia has joined the club of Southeast Asia’s rising “tiger economies” alongside Thailand, Malaysia, and the Philippines. Indonesia now constitutes an economic steam engine in the Asia-Pacific and should be regarded as a centerpiece of U.S. foreign policy in its proclaimed pivot towards Asia.

In her 2009 Senate confirmation hearing, former Secretary of State Hillary Clinton outlined the importance of economic means coupled with diplomatic and military measures to enhance U.S. soft and smart power abroad. Walter Russell Mead (2004) framed the issue in similar terms, stating that it is the skillful combination of soft power with sharp (military) and sticky (economic) power that will ensure U.S. hegemony regionally and globally. As part of his Asia policy in the 1990s, President Clinton detailed a comprehensive foreign policy strategy to engage Asia; he suspended the U.S. trade embargo with Vietnam and improved trade relations with China, measures that expanded diplomatic channels with both countries. Furthermore, Clinton attended the APEC summit eight times, thus demonstrating U.S. commitment to the region vis-a-vis economic policies and trade agreements.

A signature of President Obama’s foreign policy agenda has been engagement with the Muslim world, of which Indonesia is a part. In his Cairo speech in 2009, Obama spoke of the significance of economic cooperation and engagement with Muslim countries: this included regional business promotion, new market creation, and expanded trade partnerships. Obama may have an edge over Clinton’s initiatives in Asia-Pacific countries, due to the Muslim majority in Indonesia, Malaysia, and Brunei. In addition, Obama’s special childhood ties make for a unique opportunity to deepen U.S.-Indonesian relations, an example of which is the 2010 Joint Declaration on the Comprehensive Partnership between the United States and the Republic of Indonesia.

The Essence of Economic Statecraft

Economic statecraft is at the center of the Obama administration’s foreign policy. It is described as “harnessing global economic forces to advance America’s foreign policy and employing the tools of foreign policy to shore up our economic strength” (U.S. Department of State). Apart from a Global Economic Statecraft Day celebrated by U.S. embassies and consulates around the world, the Department of State (DoS) has launched various initiatives – particularly in the realm of public-private partnerships – to supplement its commitment to tightening U.S. economic interests and diplomatic efforts.

Bolstering public-private partnerships within U.S. foreign policy is not new. Economic public diplomacy (PD) also allows for the advancement of partnerships between DoS and the private business sector, which includes U.S. small-to-medium-scale businesses as well as multinational corporations like McDonalds, Coca-Cola, Citigroup, and Apple. The latter are global brands that promote and sell their products abroad, highlighting U.S. culture and values. With its burgeoning middle class, Indonesia presents ample market opportunity. What’s more, the potential of businesspeople as citizen diplomats needs to be exploited more efficiently by DoS via extended integration of, and cooperation with, various businesses.

Within DoS, the Office of Economic Policy Analysis and Public Diplomacy (EPPD) is dedicated to corporate social responsibility as well as private sector outreach. The Secretary of State’s annual Award for Corporate Excellence is given to U.S. businesses that engage local communities abroad and promote U.S. values and economic interests. In 2007, the award went to GE Indonesia. With it, the EPPD has the potential to effectively shape U.S. foreign economic policy through its Advisory Committee on International Economic Policy, a body with members from both the public and private sectors. A third initiative is the Innovation Fund for Public Diplomacy , which recognizes original PD ideas in U.S. embassies and consulates in partner with inventive business concepts.

Accordingly, the U.S. Commercial Service backs public-private partnerships in cooperation with DoS. Usually located in U.S. embassies and consulates worldwide, the U.S. Commercial Service for Indonesia exists outside the diplomatic mission in Jakarta’s central business district. Through specific events such as the “SelectUSA 2013 Investment Summit” and general representation at U.S. and Indonesian trade fairs, the U.S. Commercial Service facilitates interaction between U.S. and Indonesian businesspeople. Additionally, the U.S. Business Visa Program lowers visa application barriers, expedites the application process, and facilitates U.S. travel for Indonesian entrepreneurs.

Another one of DoS’s latest economic PD initiatives is an Information Resource Center at the Pacific Place Jakarta shopping mall. Since 2010, @america has been a space for academic and cultural events that utilize interactive computer technology for its exhibitions and information sessions. It is a prime example of successful private-public partnership, with Indonesian and U.S. companies (Google, Microsoft, and Starbucks) co-sponsoring the endeavor.

With the predicted rise of Indonesia into the major leagues of the international economic community, engaging Indonesian business leaders should be a critical pillar of economic statecraft for what Hillary Clinton called “America’s Pacific Century.”

Tasks for the Future

By encouraging U.S. businesses to invest in Indonesia and facilitating trade partnerships, the Obama administration has laid the groundwork for its vision of 21st century economic statecraft in Indonesia. However, the potential of added PD has yet to be fully explored. Initiatives such as the Innovation Fund for Public Diplomacy are a good start, but DoS could do more, such as: (1) create closer cooperation with the Department of Commerce in crafting, financing, and implementing sustainable economic PD that goes beyond short-term commitments and into building and sustaining communication and transportation infrastructure; (2) offer additional funding for entrepreneurs and start-ups through investment incentives for U.S. businesses; (3) implement increased grants and bilateral exchange agreements targeted at experts and professionals to work in Indonesia; and (4) create and sustain a network of public-private partnerships to finance internships and open professional training opportunities for future leaders in the U.S. and Indonesian business landscapes.

Engaging Indonesian entrepreneurs in an environment conducive to U.S. business interests and foreign policy goals necessitates attendance by the head of state at regional economic summits like APEC. Attending the annual leadership meeting in Indonesia would have furthered U.S. efforts for improved integration and cooperation while also providing a forum for President Obama to accelerate U.S. membership in the Trans-Pacific Partnership. Most notably, President Obama and President Yudhoyono need to reaffirm their commitment toward a comprehensive U.S.-Indonesian partnership. If the U.S. sincerely wants to realize its economic statecraft potential and consolidate its status in the Asia-Pacific region – while curbing that of China – it must propagate deeper engagement with words and deeds.


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I was delighted to read your

I was delighted to read your blog. It fits well with my research The Public Diplomacy of Emerging Powers: Insights from Indonesia and Turkey for USC CPD. I share your opinion that Indonesia’s current status as an emerging power in today’s regional and global politics and businesses and that the impressive developments made since the Reformasi (Reform) period in 1998 as well as its recovery from the Asian financial crisis cannot go unnoticed. While a raising economic statecraft not necessarily equals (increased) investments in public diplomacy at home and abroad, it’s definitely a country that has been watched and courted over the last years, and not just by the US.

Given Indonesia’s rising economic position - despite recent dips - I follow your argument that “in ‘America’s Pacific Century,’ with Indonesia constituting a ‘steam engine’ in the Asia-Pacific region, the country should be regarded as a centrepiece of US foreign policy”; that “the US could do more,” in the context of public diplomacy, and that “it must propagate deeper engagement with words and deeds.” Yet, I think in essence it is not so much a matter of more. Much of the success of US public diplomacy is not dependent on “more words and deeds” from the US, but rather by how all this is perceived by the recipient country, Indonesia.

After all, Indonesia, envisions itself as having “a thousand friends and zero enemies” and no BFF (Best Friend Forever), whether from North or South, East or West. Indonesia’s goal of being on good terms with all countries may entail tightening US-Indonesian relations reflected in a growing number of bilateral public diplomacy projects. Yet it is unlikely that the 21st century will be the “American Century for Indonesia,” and ASEAN and other regional institutions rather than the US remain the centrepiece of Indonesia’s foreign policy. Additionally, for every new initiative begun with the US, there are many others which have been newly set up with other partners such as Australia, South Korea, Japan as well as China. This attitude, relevant for the US’s public diplomacy success rate and limitations today, can be explained by looking a bit back in time.

Over the past century, US-Indonesian relations have been on and off, despite the US expressed intentions and increased investments in Indonesia. Just as with the US, Indonesia’s public diplomacy is tightly wound into its foreign policy. The latter is affected by a combination of both continuity and perpetual flux. Various factors, such as history, geography, demographics, economics, security and national interest have prompted Indonesia to adopt a foreign policy that is “bebas dan aktif,” or, “free and active.” The first element, ‘free,’ implies that Indonesia is trying to follow its own course in world affairs, away from the dictates of major powers and without external pressures or influence. The second element, ‘active,’ means that the country is dedicated to being involved in constructive activities geared towards bringing about and supporting world peace.

This basic foreign policy principle, which influences how Indonesia’s public diplomacy takes its present shape today and how that of other countries is perceived, was espoused in Vice President Mohammad Hatta’s address “Mendajung Antara Dua Karang,” or “Rowing Between Two Reefs,” at a session of the Central National Commission on 2 September 1948 at the height of the Indonesian War for Independence (1). After more than 65 years of existence Indonesia’s basic ‘free and active’ foreign policy doctrine has remained unchanged, though its articulation and implementation have evolved over the years, with crucial differences in attitude towards the US.

Both presidents Sukarno (18 August, 1945-12 March, 1967) and Suharto (12 March 1967-21 May 1998) employed this principle on antipodal agendas. Under Sukarno, the free and active principle was seen as standing against colonialism and imperialism and as promoting post-colonial/socialist alliances to reshape the world. Indonesia became the founder and leading member of the Non-Aligned Movement (NAM) and showed little interest in economic development, which resulted in close relationships with China to the detriment of the US. This lead to allegations from Suharto that this close relationship with China was in fact violating the free and active doctrine. Suharto’s military-dominated New Order regime pursued economic development, froze relations with the Soviet Union and China, joined the Association of Southeast Asian Nations (ASEAN), developed closer relations with the US, and upheld a merely symbolic political commitment to third world solidarity through the NAM (2).
In the post-Suharto period, while his three predecessors all gave the doctrine their own particular spin, Indonesia’s sixth president, Susilo Bambang Yudhoyono (SBY; 20 October 2004-present), introduced his own metaphor of “navigating in a turbulent sea” in response to the transformations in Indonesia’s strategic environment (3).

He envisioned the implementation of the free and active principle through the creation of a ‘new dynamic equilibrium’ wherein foreign policy, of which public diplomacy is a part, was no longer entangled in the East vs. West dialectic, particularly between the US and China.

So, while Indonesia’s relations with the US may have deepened over the years, especially under the Obama presidency, this is not the only country with which Indonesia has developed greater ties, and given its historical context and its current implementation of the free and active principle, it is unlikely to see any country as its BFF or employ any country as the centrepiece of its foreign policy over the coming years.

US-Indonesian engagement through public diplomacy is a fact today, however. To add a few concrete Indonesian examples to the US Public Diplomacy Fund you mentioned in your blog, Indonesia has excellent student exchanges which are financed by the Indonesian Ministry of Education, with which the MFA co-operates in the selection of participants and the gathering of input for the projects’ set-up. These were expanded to the US in 2011. Indonesia and the US have also had a two-weeks-long exchange between Indonesian students selected from different programs’ national competitions and peers in the US to discuss several issues, such as the presidential system. US-Indonesian working groups have also been launched. Civil society actors from both countries were invited to share knowhow and best practices on democratic principles, women’s issues and education as well as on journalistic ethics.

However, this must be put into perspective. It does not really reflect an Indonesian preference for the US, but rather broader changes in the course of Indonesian foreign policy, namely, the tendency of moving towards a more bilateral execution in the expansion of its so-called foreign policy concentric circles in addition to the initial regional and multilateral implementation. Indonesia has expanded the countries it targets over the years, from its Pacific neighbours to Australia, Europe and recently North-America which has undoubtedly affected its public diplomacy activities (4).

It is also unlikely that Indonesia will be a fervent supporter of the propagation/promotion of US values (as is partly intended by US public diplomacy programs in Indonesia). A quick look at the approach of the Bali Democracy Forum, an annual, intergovernmental forum on the development of democracy in the Asia Pacific region, initiated and hosted by the Indonesian government makes this even more evident. The Forum has deliberately avoided using a “club of democracies” model -such as is found in the US-initiated Asia Pacific Democracy Partnership- and includes both democratic and less/non-democratic participants (5).
This has lead to criticism from established Western powers, including the US, but Indonesia has claimed that its approach to democracy is somewhat different from the American model in the sense that it aims to discuss democracy and share experiences rather than force a certain model onto participants. This is well-expressed by former Minister of Foreign Affairs Hassan Wirajuda: “I believe that democracy is a universal value, but universal as it is, we cannot impose it on others, because when we impose values on others they end up rejecting those values…” (6). The way in which Indonesia aims to treat peers reflects the way in which it expects to be treated as well.

Furthermore, realistically, the absence of president Barack Obama at the 2013 Asia Pacific Economic Cooperation leadership meeting and thus the continuous importance of summit diplomacy cannot be mitigated through a series of public diplomacy activities. Both are of equal importance; as the US has learned through experience over the years, public diplomacy is not simply a damage control tool. Also, any strengthening of high-level relations with the US president will, given Indonesian poll numbers, no longer depend so much on current Indonesian president SBY as you suggested, but with whoever his replacement is.

While estimates are just estimates and we must wait for this year’s electoral outcome, the Indonesian press, academic literature, and especially the general population see Yoko Widodo (better known to all as Yokowi), the former mayor of Solo and now the governor of Jakarta, as a potential replacement. His popularity with the public partly stems from his civil-society and Blusukan (unannounced spot-check) approach. His presidential candidacy or election, while so far, far from guaranteed, is seen as a divestment from the old guard and elites or the passing of the torch to those emerging from Indonesia’s democratic present.

Moreover this could also potentially mean a new boost to Indonesian public diplomacy practice on a more transversal and presidential level. Indonesia’s public diplomacy started strong (e.g. interfaith dialogues) but has somewhat stagnated in importance and support within the Kementerian Luar Negeri Republik Indonesia (Indonesian Ministry of Foreign Affairs) and at the higher levels. A boost from a ‘new’ president’s governing style and/or his support of a culture more open to public debate, as was the case in the years following the Reformasi, would be beneficial to Indonesia’s public outreach at home and abroad.
Moreover, what your blog puts to the forefront is that public diplomacy -especially its practice and therefore not necessarily the use of the terminology within governments-, whether in the US or Indonesia, supersedes both countries’ MFAs. In the conversations I had in Jakarta with prominent individuals it became increasingly clear that the practiceof public diplomacy is an interdepartmental responsibility in need for support from the highest-levels. The need to bring in more transversal themes, such as its economic development, which not only give good news but also share experiences on stumbling blocks along the country’s journey as an emerging power into its public diplomacy narrative is key to its future. This will also be elaborated throughout my USC research.

These are just a few out of many thoughts, and there’s much more to discuss and open for research. I am very much looking forward to exchanging more thoughts with you and other interested readers over the course of our research!

Ellen Huijgh
2013-2015 USC CPD Research Fellow

(1) See e.g.Mohammad Hatta, “Indonesia between the Power Blocs,” Foreign Affairs, (April issue, 1958); Ann Marie Murphy, “Democratization and Indonesian Foreign Policy,”
Asia Policy, no. 3, (2012), p. 87; Bantarto Bandoro, “Indonesian Foreign Policy in 2008 and Beyond,” The Indonesian Quarterly, vol. 35, no. 4, (2007), p. 327; Matthew Omolesky,
“Indonesia Between the Reefs,” The American Spectator (21/04/2010)
(2) For more information see e.g. Symasad Hadi, “Indonesian-China Relations in the Post New Order Era,” In: Lam Peng Er, Narayanan Ganesan and Colin Dürkop (eds.)
East Asia’s Relations with a Rising China (Konrad Adenauer Stifting, 2010), pp. 217-241; Ian James Storey, “Indonesia's China Policy in the New Order and Beyond: Problems and Prospects,”
Contemporary Southeast Asia: A Journal of International & State, vol. 22, no. 1, (April 2010), p. 145; Greta Nabbs-Keller, “Growing Convergence, Greater Consequence: The Strategic Implications
of Closer Indonesia-China Relations,” Security Challenges, vol. 7, no. 3, (Spring 2011), pp. 23-41; Franklin B. Weinstein. Indonesian Foreign Policy and the Dilemma of Dependence: from
Sukarno to Suharto ( Ithaca: NY Cornell University Press, 1976); Rizal Sukma, “The Evolution of Indonesia’s Foreign Policy: An Indonesian View,” Asian Survey, vol. 35, no. 3, (1995), pp. 304-315.
(3) See Marty M. Natalegawa, “Indonesia and the World 2010,” Jakarta Post Opinion (annual policy statement on 8/01/2010); Irfa Puspitasari. Indonesia’s New Foreign Policy-
‘Thousand friends-zero enemy.IDSA Issue Brief (New Delhi: Institute for Defense Studies and Analyses, August 10, 2010).
(4) See e.g. Wirajuda Hadianto. Re-thinking the Republic of Indonesia’s Foreign Policy Concentric Circle. The Jakarta Post (4 November 2010).
(5) See e.g.
(6) See Dr. Hassan Wirajuda, “Seeds of Democracy in Egypt: Sharing is Caring,” Strategic Review, vol. 1, no. 1, (2011), pp. 150.


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