Jokowi between Brics and a hard place

Accepting Brics membership could be an opportunity for Indonesian President Jokowi to express a desire for ongoing good relations with China.

This year, China holds the presidency of Brics, the cooperation forum of Brazil, Russia, India, China and South Africa. China hosts the group’s annual summit Sept. 3-5 in Xiamen. One item on the agenda of the meeting is “Brics-plus,” an expansion of the group.

In March Chinese representatives mentioned 11 countries as possible new members. They also talked up the prospect of Bricsplus during the June meeting of foreign ministers of Brics countries, and again when Brics leaders met on the sidelines of the Hamburg G20 meeting in July.

In August, Chinese news agency Xinhua hinted three times that Indonesia could be invited to join Brics following the Xiamen summit. It is good to be wanted, but Indonesian President Joko “Jokowi” Widodo may be pausing for thought.

Brics needs new initiatives to live up to China’s view of the group’s purpose. But the group still has limited cohesion. Only China and India are achieving good economic growth, while growth in Russia, Brazil and South Africa is at best anemic.

Trade and investment relations between the countries remain minimal, if it wasn’t for their imports from China and their hosting of Chinese foreign direct investment (FDI). Mutual economic cooperation in Brics remains limited.

Russia is lackluster about Brics, but supports it because it needs China’s cooperation in the Shanghai Cooperation Organisation (SCO) to retain influence in Central Asia. India is increasingly hostile to China since India’s Prime Minister Narendra Modi snubbed China’s President Xi Jinping by not attending Xi’s Belt and Road (B&R) Forum in Beijing in May. Both countries may have pulled back from the flare-up of disagreement over Doklam and Ladakh in the Himalayas, but the issue remains unresolved.

Expansion of Brics has been discussed since at least 2010. Nothing happened. But Brics cannot claim to lead the developing world without at least one predominantly Muslim member state. Among the 11 potential new members mentioned in March were Bangladesh, Indonesia, Iran, Pakistan and Turkey.

Pakistan is not an option because it would be vetoed by India, as happened when India prevented Pakistan from joining the SCO in July 2015. The autocratic nature of the governments of Iran and Turkey is not formally a hindrance for Brics membership, but some current Brics members may object to inviting them. Of the two remaining countries, Indonesia is likely to be favoured, particularly by China.

Firstly, Indonesia is a G20 member. China could do with another ally in this forum to withstand pressures for China to float its currency and open up further to foreign trade and investment. Secondly, China may also see Indonesia as a possible ally in the China-Asean free trade agreement renegotiations and in the Regional Comprehensive Economic Partnership discussions. In both fora, China has to placate forum partners peeved by its claims in the East and South China seas.

But will Indonesia accept an invitation? It will gain little in economic terms as Brics is not a trade bloc. But if Brics asks Indonesia directly, probably yes, because a refusal would embarrass all.

In addition, Jokowi needs China. Since his 2014 election, he styled himself as Indonesia’s infrastructure president. His government revised and expanded Masterplan for Acceleration and Expansion of Indonesia’s Economic Development (MP3EI) infrastructure plan in 2014 and delivered the plan’s next 5-year installment in early 2015. Jokowi has since frequently donned a hardhat and wellies for yet another sod-turning photo op. Rightly so, because the Indonesian economy badly needs the stimulant of infrastructure improvement.

MP3EI was originally conceived as a series of public-private partnership-based projects, but reluctant private investor interest slowed the plan’s execution. Since 2015, interest in financing and constructing infrastructure projects in Indonesia has taken the form of a stampede of Chinese state-owned construction firms and their state-owned suppliers, in conjunction with finance from Chinese state-owned banks.

Around the same time President Xi’s B&R initiative started to take shape. With references to B&R, Chinese firms have taken a greater share of infrastructure projects in Indonesia, joining B&R and MP3EI at the hip in the process. As Indonesia’s domestic private sector remained reluctant to act as the contracting parties, the government persuaded more state-owned firms to be local partners of Chinese firms in turnkey projects.

Chinese companies achieved a record US$4.8 billion turnover on their projects in Indonesia in 2015. And there is more to come. The Heritage Foundation so far recorded the signing of $11.5 billion worth of large Chinese construction projects in Indonesia during 2015-2017. Indonesia’s total foreign debt to China increased to $15.5 billion in June 2017. Projects based on concessional Chinese lending may not yet be included, as they tend to have a long grace period before repayments are due.

Jokowi’s penchant for Chinese construction activity may have peaked in 2015 with the awarding of the Jakarta-Bandung fast rail project, and promises of more loans and FDI from China. Since then, the high-profile fast rail project he endorsed became mired in delays. Many Chinese nationals were found to be at work illegally at Chinese construction sites and companies in Indonesia. And Chinese companies proved reluctant to commit to the FDI projects that Indonesia’s investment board had approved.

An indication of mixed feelings towards China is Indonesia’s snub in July with the naming of part of the South China Sea as the North Natuna Sea. Accepting Brics membership could therefore be an opportunity for Jokowi to express a desire for ongoing good relations with China.

On the other hand, Jokowi will be working towards re-election in 2019. For Jokowi, the immediate advantage of accepting the invitation is that few people in Indonesia know much about Brics. The government also has no explicit policy stance on Brics. It is possible that the implications of a decision to accept membership of Brics with China as a dominant player will take time to sink in, possibly until after the 2019 elections.

But if the implications sink in sooner in Indonesia, membership of Brics could add fuel to the smoldering coals of popular discontent about China’s growing role in the country. It adds to the issues of illegal Chinese workers and the growing bilateral trade deficit with China. This would be something Jokowi does not need in the lead-up to the 2019 elections. Elections in recent years have shown that opponents are not likely to leave any of Jokowi’s political stones unturned.

An invitation for Indonesia to join Brics could put Jokowi between a brick and a hard place.

Pierre van der Eng is associate professor at the Australian National University, Canberra, Australia. This article first appeared in The Jakarta Post on 4 Sept 2017.