Indonesia adopted a maritime development strategy that calls for infrastructure buildup and exploitation of sea-based resources, including offshore oil and gas drilling. Logical as this strategy could be for an archipelagic state with huge development needs, it may easily put the politically cautious Jakarta on a collision course with Beijing.
In a nutshell
- Indonesia sees its future as ‘a strong maritime nation’ contributing to peace and stability in the region
- The country’s new maritime strategy has a security component, but accelerating economic growth is the primary objective
- Jakarta will move slowly implementing its vision to try to avoid upsetting its delicate relations with China
Indonesia, an archipelagic state with some 17,000 islands and a population of more than 261 million people, is the only country in Southeast Asia to have adopted a regional and global maritime strategy. It seeks to assert itself as a natural gatekeeper in the passage between the Indian Ocean and the Pacific Ocean. But there is also China to be reckoned with.
In 2014, Jakarta announced the Global Maritime Fulcrum (GMF) doctrine. The project was perceived as potentially competing with or complementary to China’s Maritime Silk Road (MSR), which is a part of Beijing’s grand Belt and Road Initiative (BRI).
The GMF originally listed five goals: to rebuild maritime culture, manage marine resources, develop maritime infrastructure and connectivity, advance maritime diplomacy and augment maritime defense forces.
As an evolutionary security concept, the GMF attempted to broaden Indonesia’s traditionally inward-looking security system with a new maritime perspective. It redefined the country’s strategic environment, priorities and future challenges. But the strategy itself was not a blueprint for action, it demanded an implementation strategy. The doctrine could be interpreted in various ways.
On March 1, 2017, Indonesian President Joko Widodo released a new document on Indonesian Ocean Policy (IOP) that builds on the GMF. The update envisions Indonesia as “a strong maritime nation” contributing to peace and stability in the region and the world. It also recognizes that the country is located in an area where the United States, the dominant superpower, and China, a rising superpower, are competing for influence.
The country has increased its spending to modernize the naval forces.
The IOP project is further elaborated in annexes that include both a long-term framework and a short-term “Action Plan” for 2016-2019. These, in turn, linked up with several other strategic plans drawn up by the government. These include the Blue Economy concept of 2012, which promotes sustainable development in the maritime region. The Sea Toll Road plan aims to improve inter-island connectivity and strengthen the ports infrastructure. And the Master Plan on ASEAN Connectivity (MPAC) of 2010 has the goal of upgrading maritime infrastructure and facilities in the entire region (as part of a wider effort by the Association of Southeast Asian Nations to bolster its economic strength).
With the introduction of Indonesia’s ocean policy, two new pillars have been added to the original five set forth in the GMF.
Facts & figures
The 7 pillars of Indonesia’s Global Maritime Fulcrum
- Marine and human resource development
- Naval defense: maritime security, safety at sea
- Ocean governance, institutionalization
- Maritime economy, infrastructure, and welfare
- Environmental protection and ocean space management
- Nautical culture
- Maritime diplomacy
These seven pillars have been elaborated into 76 programs and 425 activities to achieve 330 targets. In general, the GMF has two major dimensions: strategic and economic. The strategic dimension frames Indonesia as a regional maritime power. As a result, the country has increased its defense spending to modernize its naval forces.
The economic dimension focuses on how an interconnected Indonesia can capitalize on its geographic location. Better integration of the country’s islands with global maritime trade routes requires investment in ports, fisheries and the shipping industry, as well as accelerating the economic development of smaller islands. This aspect of the GMF, which also emphasizes the state’s role in economic development, is considered more important than the security dimension.
While the IOP mentions Indonesia’s “abundant potential of marine resources,” the focus seems to be on fishing rather than exploration for hydrocarbons or other mineral deposits. Which is quite understandable, as Indonesia is the world’s second-largest fish producer. It has a problem with this industry, though.
Globally, the illegal, unreported, and unregulated fishing (IUU) has been causing losses estimated at $20 billion to $25 billion per year, with about one third of illegal fishing taking place in Indonesian waters. Upon his election in 2014, President Jokowi responded to IUU with the radical “sink-a-trawler” policy: Indonesia’s navy has scuttled more than 300 vessels, including 128 in the first 11 months of 2017.
Indonesia plays an established role in the region’s energy economy, split between net exporters such as Australia to the south and big energy consumers in the north, including China, Japan, South Korea and Taiwan. Jakarta’s ocean policy also recognizes the “great potential of natural resources” in the country’s exclusive economic zone (EEZ) of 5.8 million square kilometers, which may go a long way toward satisfying its future energy and minerals needs.
Facts & figures
Indonesia's natural gas balance scenario
In January 2017, Indonesia’s government decided to strengthen its control over energy joint ventures between state-owned and private companies. It imposed new rules for such ventures (Gross Split Production Sharing Contracts, or PSCs) that eradicated the cost recovery regime and complicated investment conditions for foreign oil and gas companies. Following protests, the controversial PSCs were revised last summer, yet the perception that Indonesia is moving toward resource nationalism has threatened the government’s plan to develop the gas and liquefied natural gas (LNG) sectors.
Jakarta’s policies are particularly self-defeating as ASEAN’s biggest economy experiences a decline in net revenue from energy exports caused by weak prices and rising fuel imports. Other energy-producing countries have gone in exactly the opposite direction. By relaxing regulations and allowing more competition into the energy sector, they have made themselves more attractive to investors.
The GMF provides a good framework for strengthening the existing regional cooperation.
As a result, Indonesia’s prospects in an increasingly competitive economic environment have deteriorated. A net importer of oil since 2003, the country stands to become a net importer of natural gas sometime between 2019 and 2023. Many obstacles stand in the way of expanding domestic output: confusing and often contradictory government policies, delays in adopting an oil law and fiscal and regulatory uncertainty. Add to that the industry’s long exploration and development cycles (typically, 10 to 15 years), and one can see why Indonesia’s oil and gas fields have been of scant interest to foreign investors.
Facts & figures
Indonesia's LNG terminals and plants
This assumes that Indonesia finds ways to advance its strategic agenda in the shadow of China’s own maritime strategy, and in particular of Beijing’s aggressive posture in the South China Sea.
Indonesia is too weak to compete with Beijing’s Maritime Silk Road initiative, but its GMF doctrine stands a good chance of winning support from its neighbors in ASEAN, and also from Australia, India and Japan. The GMF provides a good framework for strengthening the existing regional cooperation and, under favorable conditions, might have a restraining influence on Beijing’s behavior.
Like other countries in the region, Indonesia is deeply concerned about Beijing’s “nine-dash line,” a demarcation of China’s territorial claims in the South China Sea. These claims overlap with Indonesia’s continental shelf and its EEZ, which to the north extends to the Natuna Islands. Beijing allowed its fishing vessels to violate this exclusion zone, which led to two naval confrontations in June 2016.
Faced with this challenge, Jakarta has sought to reinforce its naval presence in the islands and explored the possibility of building a naval base there. The modernization of the navy has quickened and security ties with India and Australia have been tightened, with the possibility of future joint Indonesian-Australian sea patrols. In July 2017, Indonesia renamed the northern part of its EEZ as the North Natuna Sea, provoking angry Chinese comments.
By design, the GMF lets Indonesia present itself as part of the world’s largest energy corridor and supply chain between the Middle East and Asia. The country’s status as an OPEC member state may also help Jakarta build maritime partnerships with countries in Southeast Asia and along the Indian Ocean all the way to the Gulf region.
Indonesia’s naval buildup has been accompanied by a drive to expand deepwater oil and gas drilling. The field in the Natuna Sea off the Western Kalimantan coast, with an estimated 6.3 trillion cubic meters (tcm) of natural gas, is Asia’s largest untapped gas reservoir. Other exploration projects are off the coast of Eastern Kalimantan and Sumatra, where considerable coalbed methane (CBM) deposits have been discovered alongside gas. Discussions are also underway with East Timor to develop new offshore gas fields (e.g., the Greater Sunrise Joint Venture), with reserves estimated at 142 billion cubic meters (bcm).
For Indonesia’s GMF doctrine to bear fruit in the positive scenario, Jakarta would have to secure strong support from ASEAN and other Asian powers while at the same time building a domestic consensus for a more assertive national strategy. This would be a delicate task, especially given the country’s complex relationship with China.
Under a more likely scenario, therefore, Indonesia’s new maritime policies will continue to be hedged by its traditional avoidance of becoming entangled in the South China Sea territorial disputes.
Facts & figures
The GMF’s weaknesses
- Indonesia still lacks a coordinated action plan and strong institutions to effectively monitor the GMF’s implementation. Planning, budgeting and execution of its numerous programs have been dispersed among several ministries. This may change, however, with the recent creation of the Coordinating Ministry for Maritime Affairs
- Indonesia has 13 agencies that are stakeholders in its maritime security. These institutions need to be merged to clarify responsibilities and improve coordination
- In contrast to China’s MSR strategy, the GMF and Indonesia Ocean Policy reflect an inherently inward-looking policy approach. While the role of maritime diplomacy has increased, the GMF remains a work in progress
- The Foreign Ministry in Jakarta has devised 23 action plans as part of the GMF and the Indonesia Ocean Policy, including settlement of territorial disputes and mitigating growing tensions in the South China Sea. These action plans, however, only refer to “optimizing diplomacy,” “active participation” in international bodies and “safeguarding Indonesia’s interests and enforcing Indonesia’s sovereignty in the South China Sea” – without referring to specific actions
The differences between Indonesia’s GMF and IOP doctrines and China’s BRI and MSR strategies are consistent and significant. In contrast to China, Indonesia lacks the financial resources to address its huge infrastructure needs. It depends to a large degree on foreign investors – and consequently, on economic cooperation with China.
Indonesia’s project also appears to underplay the importance of the energy-security nexus. In the field of maritime resources, Jakarta continues to focus on illegal fishing, resource management, foreign intrusions into its EEZ and other nontraditional security challenges, such as human trafficking, climate change and maritime pollution.
The country’s energy needs and diplomatic issues arising from offshore oil and gas projects are addressed only in very general terms. However, most experts believe that these questions should be recognized as central to Indonesia’s infrastructure projects and framed in a wider regional context.
These shortcomings may reflect an unwillingness on the part of Indonesia’s political elite to open a more critical debate on China and its challenge to the existing regional order. Such caution is understandable. China poses risks, but also offers badly needed economic opportunities to Indonesia.
Given the lack of consensus in ASEAN itself on how to deal with China and its maritime claims, Jakarta has opted to play it safe. It is avoiding taking sides and prefers to present itself as the region’s “honest broker.”
Unless and until China issues a direct challenge to Indonesia’s maritime sovereignty, Jakarta will continue to tread carefully and pretend to ignore the security challenges posed by Asia’s emerging hegemon. This will slow the implementation of outward-looking national strategies, including the GMF, IOP and Blue Economy concepts.