August 2, 2011
GEOPOLITICAL JOURNEY: INDONESIA'S GLOBAL SIGNIFICANCE
By George Friedman
I am writing this from Indonesia. Actually, that is not altogether a fair statement.
I am at the moment in Bali and just came from Jakarta. The two together do not come
close to being Indonesia. Jakarta, the capital, is a vast city that is striking to
me for its traffic. It takes an enormous amount of time to get anywhere in Jakarta.
Like most cities, it was not built to accommodate cars, and the mix of cars with
motor scooters results in perpetual gridlock. It is also a city of extraordinary
dynamism. There is something happening on almost every street. And in the traffic
jams, you have time to contemplate those streets in detail.
Bali is an island of great beauty, complete with mountains, white beaches, blue
waters and throngs of tourists. Since I am one of those tourists, I will not trouble
you with the usual tourist nonsense of wanting to be in a place where there are no
tourists. The hypocrisy of tourists decrying commercialization is tedious. I am here
for the beaches, and they are expensive. The locals with whom tourists claim to want
to mingle can't come into the resort, and tourists leaving the resort will have
trouble finding locals who are not making a living off the tourists. As always, the
chance of meeting "locals" as tourists usually define them -- people making little
money in picturesque ways -- is not easy.
What is clear in both Jakarta and Bali is that the locals are tired of picturesque
poverty, however much that disappoints the tourists. They want to live better and,
in particular, they want their children to live better. We were driven by a tour
guide to places where we bought what my wife assures me is art (my own taste in art
runs to things in museums and tigers made of velvet). We spent the requisite money
on art at places our guide delivered us to, I assume for suitable compensation.
The guide was interesting. His father was a rice farmer who owned some land, and now
he is a tour guide, which in Bali, I gather, is not a bad job by any means if you
have deals with the hotel (which he undoubtedly has). But it was his children who
fascinated me. He had three sons, two of whom were in universities. The movement
from rice farmer to university student in three generations is not trivial. That it
happened with the leaders Indonesia had during that time is particularly striking,
since by all reasonable measures these leaders have been, until recently, either
rigidly ideological (Sukarno) or breathtakingly self-serving (Sukarno's daughter,
When I looked at some of Indonesia's economic statistics, the underlying reason for
this emerged. Since 1998, when Indonesia had its meltdown, the country's gross
domestic product (GDP) has grown at roughly 5 percent per year, an amount
substantial, consistent and above all sustainable, unlike the 8 and 9 percent growth
rates before the collapse. Indonesia is now the 18th largest economy in the world,
ranking just behind Turkey.
All of that is nice, but for this: Indonesia ranks 109th in per capita GDP.
Indonesia's population is about 237 million. Its fertility rate is only 2.15 births
per woman, just above a stable population -- though being just above stable still
means substantial growth. Indonesia is a poor country, albeit not as poor as it was,
and its GDP continues to rise. Given its stable government and serious efforts to
control corruption, which systemically diverts wealth away from the general
population, this growth can continue. But whether the stability and anti-corruption
efforts of the past six years can continue is an open question, as is the prosperity
in Jakarta, the tourism in Bali (recall the jihadist attacks there in 2002 and 2005)
and whether our guide's third son will receive a college education.
I saw three Indonesias (and I can assure you there are hundreds more). One was the
Indonesia of Jakarta's elite, Westernized and part of the global elite found in most
capitals that is critical for managing any country's rise to some degree of
prosperity. Jakarta's elite will do well from that prosperity, make no mistake, but
they are also indispensable to it. Another Indonesia was the changing one that our
upwardly mobile tour guide saw through his children's eyes. The third was the one in
which a little girl, perhaps four, begged in traffic on the road from the airport in
Bali. I have seen these things in many countries and it is difficult to know what to
make of them yet. For me, going to Indonesia is not the same as going to Eastern
Europe. I know what is lurking under the current there. Indonesia is new for me, and
I will be back. For now, let me describe to you not so much the country of Indonesia
but how I try to learn about a place I know only from books (and even then
Nietzsche once said that modern man eats knowledge without hunger. What he meant by
that is that modern man learns without passion and without necessity. I didn't go to
Indonesia without either. What interests me most about Indonesia is not its economy
or its people -- although that might change as I learn more. What interests me now
is Indonesia's strategic position in the world at this point in time.
To determine that position, we must first look at China. China is building an
aircraft carrier. Now, one aircraft carrier without cruisers, destroyers,
submarines, anti-missile systems, satellite-targeting capabilities, mid-ocean
refueling capabilities and a thousand other things is simply a ship waiting to be
sunk. Nevertheless, it could be the nucleus of something more substantial in the
coming decades (not years).
When I look at a map of China's coast I am constantly struck by how contained China
is. In the north, where the Yellow and East China seas provide access to Shanghai
and Qingdao (the home of China's northern naval fleet), access to the Pacific is
blocked by the line of Japan-Okinawa-Taiwan and the islands between Okinawa and
Japan. Bases there are not the important point. The important point is that the
Chinese naval -- or merchant -- fleet must pass through choke points that can be
controlled by the United States, hundreds of miles to the east. The situation is
even worse for China in the South China Sea, which is completely boxed in by the
line of Taiwan-Philippines-Indonesia-Singapore, and worse still when you consider
the emerging naval cooperation between the United States and Vietnam, which has no
love for the Chinese.
The Chinese are trying to solve this problem by building ports in Pakistan and
Myanmar. They say these are for commercial use, and I believe them. Isolated ports
at such a distance, with tenuous infrastructure connecting them to China and with
sea-lane control not assured, are not very useful. They work in peacetime but not
during war, and it is war, however far-fetched, that navies are built for.
China's biggest problem is not that it lacks aircraft carriers; it is that it lacks
an amphibious capability. Even if it could, for example, fight its way across the
Formosa Strait to Taiwan (a dubious proposition), it is in no position to supply
the multi-divisional force needed to conquer Taiwan. The Chinese could break the
blockade by seizing Japan, Okinawa or Taiwan, but that isn't going to happen.
What could happen is China working to gain an economic toehold in the Philippines or
Indonesia, and using that economic leverage to support political change in those
countries. A change in the political atmosphere would not by itself permit the
Chinese navy to break into the Pacific or eliminate the American ability to blockade
Chinese merchant ships. The United States doesn't need land bases to control the
passages through either of these countries from a distance.
Rather, what would change the game is if China, having reached an economic entente
with either country, was granted basing privileges there. That would permit the
Chinese to put aircraft and missiles on the islands, engage the U.S. Navy outside
the barrier formed by the archipelagos and force the U.S. Navy back, allowing free
Now, this becomes much more complicated when we consider U.S. countermeasures. China
already has massive anti-ship missiles on its east coast. The weakness of these
missiles is intelligence and reconnaissance. In order to use those missiles the
Chinese have to have a general idea of where their targets are, and ships move
around a lot. That reconnaissance must come from survivable aircraft (planes that
won't be destroyed when they approach the U.S. fleet) and space-based assets --
along with the sophisticated information architecture needed to combine the sensor
with the shooter.
The United States tends to exaggerate the strength of its enemies. This can be a
positive trait because it means extra exertion. In the Cold War, U.S. estimates of
Soviet capabilities outstripped Soviet realities. There are many nightmare scenarios
about China's capabilities circulating, but we suspect that most are overstated.
China's ambitions outstrip its capabilities. Still, you prepare for the worst and
hope for the best.
In this case, the primary battlefield is not yet the passages through the
archipelago. It is the future of our Indonesian driver's third child. If he gets to
go to college, the likelihood of Indonesia succumbing to Chinese deals is limited.
The history of Chinese-Indonesian relations is not particularly good, and little
short of desperation would force an alliance. American Pacific strategy should be
based on making certain that neither Indonesia nor the Philippines is desperate.
A Focus of History
Indonesia has another dimension, of course. It is the largest Muslim country in the
world, and one that has harbored and defeated a significant jihadist terrorist
group. As al Qaeda crumbles, the jihadist movement may endure. The United States has
an ongoing interest in this war and therefore has an interest in Indonesian
stability and its ability to suppress radical Islam inside its borders and, above
all, prevent the emergence of an Indonesian-based al Qaeda with an intercontinental
Thus, Indonesia becomes a geopolitical focus of three forces -- China, Islamists and
the United States. This isn't the first time Indonesia has been a focus of history.
In 1941, Japan launched the attack on Pearl Harbor to paralyze the American fleet
there and facilitate seizing what was then called the Netherlands East Indies for
its supplies of oil and other raw materials. In the first real resource war -- World
War II -- Indonesia was a pivot. Similarly, during the Cold War, the possibility of
a Communist Indonesia was frightening enough to the United States that it ultimately
supported the removal of Sukarno as president. Indonesia has mattered in the past,
and it matters now.
The issue is how to assure a stable Indonesia. If the threat -- however small --
rests in China, so does the solution. Chinese wage rates are surging and Chinese
products are becoming less competitive in the global marketplace. The Chinese have
wanted to move up the economic scale from being an exporter of low-cost industrial
products to being a producer of advanced technologies. As the recent crash of
China's high-speed train shows, China is a long way from achieving that goal.
There is no question that China is losing its export edge in low-grade industrial
products. One of the reasons Western investors liked China was that a single country
and a single set of relationships allowed them to develop production facilities that
could supply them with products. All the other options aside from India, which has
its own problems, can handle only a small fraction of China's output. Indonesia,
with nearly a quarter-billion people still in a low-wage state, can handle more.
The political risk has substantially declined in the last few years. If it continues
to drop, Indonesia will become an attractive alternative to China at a time when
Western companies are looking for alternatives. That would energize Indonesia's
economy and further stabilize the regime. A more stable Indonesian regime would
remove any attraction for an alignment with China and any opportunities for Chinese
or Islamist subversion -- even if, in the latter case, prosperity is not enough to
When we look at a map, we see the importance of Indonesia. When we look at basic
economic statistics, we see the strength and weakness of Indonesia. When we consider
the role of China in the world economy and its current problems, we see Indonesia's
opportunities. But it comes down to this: If my guide's third son can go to college,
and little girls no longer have to dart into traffic and beg, Indonesia has a strong
future, and that future depends on it becoming the low-cost factory to the world.
Life is more complex than that, of course, but it is the beginning of understanding
the possibilities. In the end, few rational people looking at China in 1975 would
have anticipated China in 2011. That unexpected leap is what Indonesia needs and
what will determine its geopolitical role. But these are my first thoughts on
Indonesia. I will need to come back here many times for any conclusions.
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Copyright 2011 STRATFOR.