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  • Dateline Indonesia

    No mention of avian flu but maybe some indications of a better relationship...



    Dateline Indonesia: Barack, Hillary and Susilo Bambang Yudhoyono

    Indonesia, Diplomacy, Global Economics, Asia, G-20 Summit
    February 16, 2009 ?

    Hats off to Hillary Clinton for making Asia the destination of her first trip overseas as U.S. Secretary of State. It is a powerful counterpoint to the feeling in Asian countries that the United States gave insufficient weight to Asian views during George W. Bush's presidency.

    A tangible uptick in U.S. relations with Asia will surely make it easier for the United States to deal the major challenges of the day, including the global economic contraction, climate change and migration.

    The issues that Secretary Clinton will discuss with leaders in Tokyo, Seoul and Beijing will be reasonably familiar to Americans who follow and care about foreign relations. The agenda for Jakarta, however, is harder to bring into focus.

    Awareness of Indonesia in the United States is astonishingly low ? especially considering that it is the fourth largest country in the world, with a population of 240 million ?not far behind that of the United States, which is currently at around 305 million.

    At the same time, many Americans are aware that President Obama had an Indonesian stepfather and lived in Jakarta from the ages of six to 10. Secretary Clinton's visit to Jakarta may yield some hints about whether a "special relationship" will exist between the United States and Indonesia as long as President Obama inhabits the Oval Office.

    A starting point for thinking about Secretary Clinton's visit to the country is to recognize the intensity of nationalist sentiment in Indonesia. A great many Indonesians will be skeptical about having a special relationship with the United States. Religion is not the only factor driving this sentiment. Indonesians do not want to be "aligned" with any of the great powers. They prefer to have a beneficial partnership with all of them.

    Moreover, their political sensitivities are now at a peak because Indonesia is in campaign mode: a general election for the legislature will be held in April and the first round of voting for the president will be held in July 2009.

    The single best result Secretary Clinton could achieve from her visit may be leaving the impression that she listened carefully and absorbed what she heard.


    One especially sensitive issue Secretary Clinton will not be able to avoid is the Israel-Palestine conflict. It is a "litmus test issue" for Indonesians. A false note could quickly become an issue in the Indonesian elections with potentially destabilizing consequences.
    Unfortunately, most Indonesians view the conflict in black and white terms, which will make it impossible for Secretary Clinton to score any points in this area. The best tactic is probably to stress the importance being given by President Obama to resolving this conflict.

    Perhaps the easiest issue for Secretary Clinton to handle will be preparation for President Obama's eagerly anticipated visit to Indonesia. Many Indonesians were hoping his first foreign trip would include Indonesia ? and feature a major speech on relations with the Muslim world.

    Obama's foreign policy team, however, seems to have been successful in shifting expectations toward a visit in November in connection with his participation in the APEC (Asia-Pacific Economic Cooperation) Summit that will be held in Singapore.


    Indonesians should not feel badly about this timing given the critical domestic and foreign issues that President Obama will have to deal with during his first year in office.

    Broader questions
    The APEC Summit, however, raises two broader and more complex issues ? the U.S. role in ASEAN and Indonesia's role in the G-20.

    While the case for a special relationship between the United States and Indonesia is not compelling, the case for a special relationship between the United States and the 10 nation ASEAN community is exceptionally strong.
    For a variety of historical reasons, ASEAN is at the center of Asia-wide regional cooperation, where it plays a critical balancing role between the major Asian powers of China, India and Japan.

    In several ways, APEC overlaps and competes with ASEAN. For many Asians, the Pacific-oriented APEC forum is a Cold War relic that stands in the way of a more mature relationship between the United States and Asia.

    They would prefer to see the United States put more emphasis on the Asia-oriented ASEAN forum (and its related meetings). Between now and November, the Obama Administration will have to clarify its position on Asian regional cooperation.

    The February 2009 visit will provide Secretary Clinton an opportunity to gain an appreciation of the Indonesian perspective that could tip the balance in the policy debate in Washington.

    The G-20 issue is about cooperation at the global level. While Indonesia is not the most important emerging market member of the G-20, it can play a key role in consensus building because of its non-aligned status and its stellar performance as a new democracy.


    Secretary Clinton's conversations in Jakarta could be useful in preparing for the G-20 Summit in London at the beginning of April, which will be a critical test of President Obama's leadership on global issues.

    The Obama Administration is also grappling with the momentous issue of what to do with the G-8 Summit. One option is to expand it into a G-13 Summit that would exclude Indonesia. Another option is to replace the G-8 with the G-20, which includes Indonesia.

    That may seem like a trifling issue of diplomatic minutiae ? but it will weigh heavily in the balance because of Indonesia's population size, Muslim majority and commitment to democratic rule. Here also, the Indonesian views conveyed to Secretary Clinton during her visit could tip the balance in one direction or the other.

    Other important issues that will presumably be discussed during Secretary Clinton's visit include the impact of the global financial crisis and steps to overcome it, the special role of Indonesia in the global effort to control climate change, a capital increase for the Asian Development Bank, and a possible grant for Indonesia from the Millennium Challenge Corporation.

    Hopefully, the war on terrorism will no longer be on the U.S. agenda, especially since Indonesia record over the past five years has been solid. Human rights issues, however, cannot be avoided, not only in Indonesia but also in ASEAN partner Myanmar.

    For a successful first trip, Secretary Clinton will be looking for positive headlines on substantive issues discussed in Tokyo, Seoul, and Beijing. In the case of Jakarta, in the absence of any hot substantive issues, how well she listens will be the measure of success.

  • #2
    Re: Dateline Indonesia

    Clinton?s Slumming May Boost Asia?s $120 Billion

    Commentary by William Pesek

    Feb. 25 (Bloomberg) -- Eight long years of ?you are either with us or against us? ended in a Jakarta slum.

    It was an apt place to turn the page on a dark chapter of U.S. foreign policy. Secretary of State Hillary Clinton marked it last week by visiting Indonesians most at risk as a crisis that began in the U.S. spans the globe.

    The chants of ?Hillary! Hillary!? greeting arguably the most powerful woman in the world were sign enough that the bellicosity of the Bush years is over. Southeast Asia is anxious for better relations with the U.S., and vice versa.

    Yet the most important moment of Clinton?s Asia tour received scant attention. It wasn?t Clinton talking about the Rolling Stones on a Jakarta talk show. Nor was it urging China to continue buying U.S. debt, calling on North Korean leader Kim Jong Il to chill out, or visiting Japan?s royal family in Tokyo. It involved the rather arcane issue of swap lines.

    Indonesia proposed a currency-swap accord with the U.S. to help bolster the rupiah, the second-worst performer in Asia outside Japan. It would be akin to those the Federal Reserve has with Brazil, Mexico, Singapore and South Korea. It?s the right thing to do and Clinton should expedite her pledge to take the request to U.S. President Barack Obama.

    Impressive Stability

    Much has been said about Indonesia?s impressive stability. Even as the U.S. and Japan slide into deepening recessions, Indonesia?s $433 billion economy is expected to grow about 4 percent this year. Clinton was right to praise Indonesia as a model of how ?Islam, democracy and modernity not only can coexist, but thrive together.?

    Few nations are as geopolitically important. Indonesia is home to the world?s largest Muslim community and the fourth- largest population, spread out on the largest archipelagic state. Imagine overseeing 17,000 islands. Indonesia also is resource rich. The place even has oil.


    Indonesia has found success in the bond market, too. On Feb. 23, the government sold triple the amount it targeted in its first sale of Islamic bonds to local individual investors this year. It raised 5.56 trillion rupiah ($466 million). Not bad considering the state of international credit markets.

    Even so, with per-capita income of $2,271, persistent poverty and rampant corruption squandering output, 2009 won?t be kind to Indonesia. It may be in better shape than, say, politically unstable Thailand, yet global turmoil is closing in.

    Just an ?Appetizer?

    Marc Faber, Hong Kong-based publisher of the Gloom, Boom & Doom Report, makes a good point when he says we have seen only the ?appetizer? of a global slump. The worst is yet to come.

    Finance ministers from Japan, China, Korea and 10 Southeast Asian nations agreed this week to form a $120 billion pool of foreign-exchange reserves that can be used to fend off speculators. It?s a good move for a region that has been unimpressive on the cooperation front during this crisis.


    Not that it?s a cure-all. Investment strategist Simon Grose-Hodge of LGT Group in Singapore says the fund will ?only act to control speed rather than direction and try to keep intra-Asia cross-rates roughly in line? amid increased market turmoil.

    The trouble is, the money leaving economies such as Indonesia isn?t speculative in nature. It?s not hedge funds or banks with highly leveraged proprietary trading desks, but pension funds, insurance companies and mutual funds. They aren?t selling in panic, but analyzing market risks globally. Many are wondering anew about Indonesia.

    Debt Load

    The nation?s currency reserves slid to $50.9 billion at the end of January, from $60.6 billion in July, as the central bank intervened to slow the rupiah?s decline. A low credit rating complicates things. Moody?s Investors Service rates it Ba3, three levels below investment grade. This also is an election year, an added challenge for Indonesia in wooing foreign capital.

    The swap arrangements announced by the Fed in October bestowed a ?Good Housekeeping? seal on economies that are following responsible policies yet feeling the brunt of the credit crisis. Indonesia will fit that category more and more as 2009 unfolds. It would be a mistake for the U.S. not to reach out.

    The risk is that Indonesia will struggle to raise dollars if things darken. Yet not standing by Indonesia ?risks diminishing U.S. influence with an ally and the most populated Muslim country and exacerbating the country?s challenges with the risk of unintended consequences,? Marc Chandler, global head of currency strategy at Brown Brothers in New York, wrote in a note yesterday.

    Asians are livid that their post-1997 recovery has been sidetracked by irresponsible U.S. policies and clumsy crisis management in Washington. While Asians should have done more to reduce their reliance on exports, governments were broadsided by the U.S. economy?s crash. If things worsen, $120 billion isn?t going to do it.

    Clinton saw firsthand how the U.S.?s woes are hurting Asia. The U.S. should put money where its public-relations intentions are. Indonesia is as good a place to start as any.

    (William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

    To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

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