Revisiting economic diplomacy Darmansjah Djumala  ;  Director general of the Policy Analysis and Development Agency at the Foreign Ministry

JAKARTA POST,  02 Januari 2015

                                                                                                                       

President Joko “Jokowi” Widodo has appealed to all diplomats to act like salespeople. During his election campaign he also outlined his vision, focusing on people’s economic welfare, in particular in rural development, agriculture, fisheries, marine resource development and infrastructure. This will certainly mold the conduct of Indonesian diplomacy. It is along the lines of this plea that Foreign Minister Retno LP Marsudi prioritizes the economy in Indonesia’s diplomacy. For diplomats the appeal might mean intensifying their promotion of Indonesian business potential abroad, particularly in trade, investment and tourism. Economic diplomacy is commonly understood as promotional activities, projecting the economic profile of a country abroad. But more can be done to invigorate economic diplomacy. Indeed, given significant change in international politics, economic diplomacy needs to be revisited. Amid globalization, economic diplomacy is crucial in enabling international cooperation, whether at the bilateral, regional or multilateral level. The critical question will be how to reorient economic diplomacy in such a way that it brings real benefit to the people. Firstly, economic diplomacy must be rejuvenated by taking into account regional economic dynamics. Many view that the world economic center of gravity has shifted to Asia, marked by huge investment, massive domestic consumption and socio-cultural advancement, as Fareed Zakaria wrote in 2008. The shift in economic power was confirmed by the World Bank’s report this year, the International Comparison Program. The report said that among the world’s 10 biggest economies, those in Asia include China (ranked second), India (ranked third), Japan (ranked fourth) and Indonesia (ranked 10th). Meanwhile, there are only four countries from America and Europe, namely the United States (ranked first), Germany (fifth), France (eighth) and the UK (ninth); Russia was ranked sixth. Assuming that the size of the gross domestic product (GDP) is equal to the size of investment and consumption, the economic gravity shift toward Asia indicates a huge market opportunity for Indonesian export products. It is therefore imperative that resources in economic diplomacy, including finances and personnel, should no longer be excessively allocated for promoting export to the established markets, such as North America and Europe. Without a spectacular promotional program, Indonesian products are already known in those regions. Thus Indonesian products should instead be boosted to Central, South and East Asia and to African and Middle Eastern markets. Secondly, targeted sectors should also be designated if economic diplomacy is to bring real benefit to the people. Compared with the agricultural, industrial and mining sectors, the maritime sector has been marginalized in the national development agenda, as the President has stated, although around 75 percent of Indonesian territory is water. This has led to negligence of the potential of maritime resources, which are estimated to be worth around US$1.2 trillion per year. Economic diplomacy should thus focus on promoting foreign investment and financial cooperation for maritime infrastructure, navigation, shipyard building and fisheries. The more connected every point of Nusantara is, the faster the delivery and movement of people and goods to every island of Indonesia. In turn, it will help the region to develop because goods and services become available at more reasonable prices. From an ASEAN regional economic integration perspective, the development of Indonesia’s maritime infrastructure will enlarge connectivity between Indonesia and the ASEAN market. As connectivity has already been the main agenda of ASEAN in accelerating economic integration between its member states, Indonesia should insist that the connectivity issue focus more on the sea than on land and also on telecommunications connectivity. Expanding connectivity between ports in Indonesia and major cities in ASEAN is far more strategic than developing inter-island bridges, which is significantly more expensive. In addition, most ASEAN countries are located on Asia’s mainland, unlike Indonesia, thus the flow of goods and people takes place largely on land rather than on the ocean. Goods and services in the countries connected over land will be more easily exchanged and thus would enable countries to take more advantage from the interaction. Data show that intra-trade on the ASEAN mainland of Thailand, Malaysia, Vietnam, Cambodia, Laos and Myanmar constitutes 42 percent of the whole regional trade. Meanwhile, intra-trade among ASEAN archipelagos — Indonesia, the Philippines and Brunei — is only 8 percent of ASEAN trade. Being separated from the mainland, Indonesia would reap less benefit from ASEAN economic integration if maritime connectivity among ASEAN countries is not significantly improved. It is due to this rationale that President Jokowi launched his Maritime Doctrine. Our economic diplomacy should therefore focus on speeding up ASEAN deliberations over maritime connectivity in such a way that the ports of Indonesian major cities are well connected to main ASEAN cities. The increasing capacity of national ports will not only facilitate the flow of goods and people around Indonesia, but also strengthen the intensity of Indonesia’s economic connection to ASEAN and Asia. Now that the new government prioritizes maritime development and puts people at the center of national development, economic diplomacy has to be revisited, among other ways through reorienting its priority. Economic diplomacy should explore new markets and business opportunities for Indonesian products and investment in line with the shift of the world’s economic center of gravity. Economic diplomacy should focus on expanding Indonesia’s maritime connectivity to major ASEAN cities. Such reorientation in economic diplomacy will in turn help promote the people’s economy. ●