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Indonesia – Indonesia’s opportunistic approach to arms procurement (Ristian Atriandi Supriyanto, East Asia Forum)

The first-ever bilateral defence agreement between Indonesia and Japan was signed on 30 March 2021, which paves the way for Japanese arms exports to Indonesia, including the potential sale of up to eight Mogami-class frigates. The agreement focuses on maritime security with ‘shared serious concerns about the continued and strengthened unilateral attempts to change the status quo’ in the East and South China Seas.

Indonesia’s opportunistic approach to arms procurement (eastasiaforum.org)

Indonesian Navy's KRI Singa-651 leaves the Tanjung Wangi port as the search continues for the missing KRI Nanggala-402 submarine in Banyuwangi, East Java Province Indonesia, 24 April 2021. (REUTERS/Ajeng Dinar Ulfiana)

 

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Indonesia – Urgent lessons from Indonesia’s submarine disaster (Sigit S Nugroho and Keoni Indrabayu Marzuki, East Asia Forum)

On 24 April 2021, Indonesian authorities declared that the Nanggala-402, a Navy submarine that went missing while conducting a naval exercise on 21 April, had sunk. Despite an intensive search and rescue operation involving naval assets from Singapore, Australia, India, Malaysia and the United States, the submarine was unable to be located. Its wreckage was later discovered on 25 April more than 800 metres below sea level. All 53 on board including the Navy’s submarine unit commander perished.

Urgent lessons from Indonesia’s submarine disaster | East Asia Forum

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USA/Indonesia – US–Indonesia relations need a reboot (Alexander R Arifianto, Yohanes Sulaiman, East Asia Forum)

Since gaining independence in 1945, Indonesia has subscribed to the principle of a ‘free and active’ (bebas aktif) foreign policy, which emphasises neutrality and non-alignment. Despite this approach to great power rivalry, Indonesia has enjoyed good bilateral relations with the United States from the time Washington formally recognised Indonesia’s independence in 1949.

US–Indonesia relations need a reboot (eastasiaforum.org)

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Indonesia – 12 innovators improving the lives – and livelihoods – of Indonesia’s informal sector workers (Gulipairi Maimaiti, WEF)

  • Indonesia’s waste management issue has reached an alarming scale and therefore calls for immediate action.
  • The country requires collaboration from all sides, to come up with viable action plans to tackle the problem.
  • The challenge contributes to the Indonesian government’s plan to reduce marine plastic leakage by 70% under the Indonesia National Plastic Action Partnership.

12 innovators improving the lives of Indonesia’s informal sector workers | World Economic Forum (weforum.org)

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Australia/Indonesia – Building stronger Australia-Indonesia ties (Ben Bland, The Interpreter)

When then Indonesian President Susilo Bambang Yudhoyono addressed the Australian parliament in 2010, he argued that the bilateral relationship faced four major challenges: improving mutual public understanding, managing diplomatic differences, boosting economic ties and adapting to emerging regional problems.

More than a decade later, both countries have made steady progress on the last three challenges. However, the 2021 Lowy Institute Poll of Australian attitudes to the world shows that there is still much work to do on the first.

Building stronger Australia-Indonesia ties (lowyinstitute.org)

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Indonesia – Maximising Indonesia’s demographic dividend (Anne Booth, East Asia Forum)

In January, Statistics Indonesia (Badan Pusat Statistik) published the first results from the 2020 population census. While these initial figures are still preliminary, they raise important questions about Indonesia’s demographic and economic future.

Maximising Indonesia’s demographic dividend | East Asia Forum

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Indonesia – Indonesia’s false choice between investment and innovation (Andree Surianta, East Asia Forum)

Despite initial worries about the impact of the COVID-19 pandemic on foreign direct investment (FDI) flows into Indonesia, the country did well to woo foreign investors in 2020. FDI inflows shrunk 24 per cent year-on-year, better than the 31 per cent drop experienced by ASEAN and the 42 per cent collapse globally. The positive signal sent by the Omnibus Law and the ‘debottlenecking’ of investment backlogs by the Indonesia Investment Coordination Board (BKPM) seem to be the main factors to this success.

A worker pushes a wheelbarrow at Walini tunnel construction site for Jakarta-Bandung High Speed Railway in West Bandung regency, West Java province, Indonesia, 21 February 2019 (Reuters/Willy Kurniawan).

An implementing regulation of the Omnibus Law — Presidential Regulation 10/2021 — marks a sea change in the Indonesian government’s approach to FDI. It reduces the number of business sectors restricted to foreign investors by 60 per cent and introduces 245 priority sectors eligible for incentives. Indonesia has also upgraded its investment authority from an agency to a ministry. Due to the maximum number of ministries being set in Law 39/2008, the new Ministry of Investment will come at the expense of the Ministry of Research and Technology. The latter’s functions will either be merged into the Ministry of Education and Culture or delegated down to the National Research Agency.

The decision to ‘sacrifice’ the ministry that deals with innovation in lieu of investment may inadvertently create the impression that the two are at odds. Furthermore, while the promotion of investment is a welcome development, questions remain about the effectiveness of the new ministry in overcoming regulatory obesity and overlap created by the 30,000 ministerial and regional regulations across the country.

Prior to the Omnibus Law, the government attempted to solve the overlap problem by forming the Online Single Submission (OSS) agency. Handed over to BKPM in 2019, the agency processes permits on behalf of other ministries and local governments. Being a permit caretaker means that BKPM has little ability to stop other institutions from setting up permit barriers. Becoming a ministry may finally give the investment authority a seat at the table to appeal impeding policies.

One issue to resolve is whether the new Ministry of Investment remains just a caretaker or becomes the ultimate licensing authority. Cross-institutional coordination seems to be hindering the implementation of a new OSS under the ministry. It is also still unclear whether the new ministry will handle sectors outside BKPM’s current jurisdiction, such as oil and gas, and financial services. A clear division of authority will be critical to avoid new overlaps.

The government should carefully manage public perception of this cabinet reorganisation. Dismantling research in favour of investment can create the perception that innovation is secondary to capital. Indonesia needs both to realise its Making Indonesia 4.0 transformation. Indonesia’s innovation ecosystem, ranked 85 out of 131 countries in the Global Innovation Index Ranking 2020, is underdeveloped. Indonesia spends a mere 0.2 per cent of its GDP on research and development (R&D) compared to 2 per cent in China, the United States and Singapore. Singapore spends 45 per cent more than Indonesia on R&D and received 21 per cent more patent applications in 2018.

Indonesia is particularly weak in the business innovation space. Business enterprises finance only 8 per cent of R&D expenditure. This is far below the 60 per cent that enterprises contributed in the top five R&D spenders worldwide. It is perhaps expected then, that Business Sophistication is Indonesia’s weakest pillar in the Global Innovation Index 2020.

The Omnibus Law has begun to address this business innovation deficit. It revises the burdensome local production requirement in Law 13/2016 on Patents and assigns R&D requirements to state-owned enterprises in a bid to boost business R&D expenditure. But the government seems to contradict itself with the ministerial merge as it seemingly reinforces the old paradigm of ‘research is only for academia’. Also, delegating R&D functions down to an agency limits policymaking authority in this space. One can only hope that this is not a case of the government forgetting its own insight that innovation should be integrated into investment policies.

The critical role of business in innovation is evident in the development of COVID-19 vaccines. The Oxford-AstraZeneca vaccine developed in the United Kingdom is the result of a university-business collaboration. The three vaccines approved for distribution in the United States were developed by corporations. Universities and research institutes that form the Indonesian Red and White Vaccine Consortium — led by the now defunct Ministry of Research and Technology — have to partner with local pharmaceutical companies for clinical trials and production upscaling.

Indonesia has recognised the importance of encouraging private sector innovation and taken positive early steps on the long road to investment reform. For businesses in a competitive market, R&D is an investment — costly, but necessary to generate higher returns and ensure survival. Fair competition will encourage businesses to keep investing in innovation. Indonesia must continue down the path of economic openness, inviting more investment inflows and levelling the playing field to motivate businesses to generate new ideas and ensure their sustainability.

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Indonesia – Indonesia refinery fires demand an independent investigation (Maxensius Tri Sambodo, East Asia Forum)

An aerial picture shows smoke rising during a fire at Pertamina's oil refinery in Balongan, Indramayu regency, West Java province, Indonesia, 31 March 2021 (Photo: Antara Foto/Dedhez Anggara/via Reuters).

Indonesia refinery fires demand an independent investigation (eastasiaforum.org)

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Indonesia – Consolidating Indonesia’s deteriorating democracy (Fadhilah Fitri Primandari, East Asia Forum)

University students protest against the government's labor reforms bill, Jakarta, Indonesia, October 28, 2020. (Photo: REUTERS/Ajeng Dinar Ulfiana)

Consolidating Indonesia’s deteriorating democracy | East Asia Forum

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