Indonesia

Rachel Brown, Sungtae “Jacky” Park, Ariella Rotenberg, Ayumi Teraoka, and Gabriel Walker look at five stories from Asia this week. 1. China puts missiles on disputed island. The Pentagon has claimed that China has deployed surface-to-air missiles on Woody Island, one of the Paracel Islands disputed in the South China Sea. Based on satellite imagery, China has deployed two batteries of eight HQ-9 missile launchers on the island, which Taiwan and Vietnam also claim. In response, U.S. Secretary of State John Kerry has accused China of “an increase in militarization” of the South China Sea. Despite the uproar that the deployment has caused, the Woody Island has a military garrison and has been militarized for quite some time, and the deployment of the missiles would not seriously alter the military equation in the region. What concerns the United States, and its allies and partners, is that the deployment represents a step toward China’s further militarizing and building infrastructure throughout the rest of the South China Sea, particularly in light of China’s recent artificial island–building in the region. 2. Taliban in Afghanistan reported to be increasing use of child soldiers. According to a Human Rights Watch report released this week, the Taliban in Afghanistan have been recruiting an increasing number of child soldiers. Specifically, child soldiers as young as ten were used by the Taliban in their latest battle to overrun the city of Kunduz last year. Most of these children are educated at Taliban-run schools, where they begin indoctrination as early as age six. By the time these boys reach thirteen, many of them are trained in the production and deployment of IEDs as well as how to use various firearms. While the Taliban has been recruiting and using children as fighters since the 1990s, recruitment of boy soldiers is believed to have increased significantly since 2015 due to the expanded Taliban operations against Afghan government forces. Taliban spokesman Zabihullah Mujahid has denied that the Taliban enlists boys to their ranks. 3. United Nations report states that Kim Jong-un should be told he could face trial. In a thirteen-page United Nations (UN) report released on Monday, Marzuki Darusman, a UN human rights investigator, stated that the UN should officially notify Kim Jong-un that he and his close staff could face trial for heinous crimes. This report will be presented next month to the Human Rights Council in Geneva. Darusman’s comment echoes the conclusion of the UN report he coauthored in 2014 that stated that North Korean security chiefs, and possibly Kim Jong-un, should face the International Criminal Court (ICC) for ordering systematic torture, starvation, and killings. Last December, UN High Commissioner for Human Rights Zeid Ra’ad Al Hussein also testified before the Security Council to call for such an action. Whether the international community can successfully garner support for the Security Council to refer North Korea to the ICC, however, faces the typical challenges for any punitive measures against North Korea: China’s reluctance and its veto power as a member of the UN Security Council. Given increasingly imminent risks of North Korea’s missile and nuclear weapons program, combined with the unimproved human rights situation in the country, the international community should keep seeking for ways to overcome this conundrum. 4. United States to ban seafood imports caught with forced labor. Last week, Congress passed a bill to ban imports of all goods made using “convict, forced or indentured labor.” The bill, which included a number of other trade provisions, passed 75–20 in the Senate. President Obama is expected to sign the bill into law next week. The passage of the bill coincided with a measure from the National Oceanic and Atmospheric Administration requiring American firms to better report the sources of their seafood imports. Previously, under the U.S. Tariff Act of 1930, a loophole permitted the import of products made using slave labor if there was no alternative way to fulfill consumer demand. While such a ban could cover over 350 products, much attention has focused on the effect on seafood imports produced with slave labor in Southeast Asia. Last year, a flurry of reporting exposed rampant abuses in the Thai fishing industry including the trafficking of Rohingya migrants and indentured servitude of Cambodians working on Thai ships, as well as the supply to major American grocery chains of seafood produced by enslaved workers. Such seafood is often used in pet food and approximately 90 percent of American seafood is imported from abroad. The annual value of Thailand’s seafood industry is more than $7 billion, and significant economic consequences could arise if adjustments to current labor practices are not enacted. 5. Seoul urges citizens to avoid North Korean restaurants. This week, as part of a move to increase economic pressure on North Korea after its nuclear and missile tests earlier this month, South Korea’s foreign ministry urged the country’s citizens to stop eating at North Korean restaurants. Around 100 of the 130 total establishments, which employ North Korean waitresses and often attract South Koreans traveling abroad, operate in China. On Friday, the South Korean embassy in China reiterated concerns about the safety of the restaurants for South Korean expats and travelers there. The restaurants reportedly bring in around $100 million annually for the North Korean government, a small part of the $1–2 billion it collects in foreign currency from a broad range of business activities abroad. Last week, South Korea severed its last economic ties with the North by shuttering the jointly operated Kaesong Industrial Complex, an act that Pyongyang equated to “a declaration of war.” Bonus: Indonesian government asks apps to remove LGBT emoji. Over the past week, the Indonesian Communications Ministry expressed concern over LGBT-themed emoji offered by a variety of social media platforms. The ministry wrote in a statement that the images were “causing unrest in society, especially among parents,” because the colorful images could be particularly appealing to children. The ministry also demanded that several apps remove the emoji or be banned in the country. Though one company has already complied, popular services like WhatsApp and Facebook have not yet responded. Indonesia has 73 million internet users and 72 million active social media accounts, so the outcome could set an important precedent for internet companies operating in countries with a large user base.

Over the past three weeks, several events have dramatically highlighted the growing appeal of the Islamic State based in Southeast Asia. First, on January 14, a group of militants reportedly run by an Indonesian man who had traveled to Syria carried out an attack in a busy neighborhood in Jakarta, leading to at least seven deaths. Several weeks before the attack, the Indonesian police had made a string of arrests of other Indonesian cells linked to the Islamic State. Then, last week, Singaporean authorities made a major announcement. The city-state announced that it was using its Internal Security Act, which allows for detention without charge, to hold 27 Bangladeshis who it claimed had become radicalized, and were considering launching terrorist attacks. It was the Singaporean authorities’ broadest use of the Internal Security Act in three decades. According to several news reports, the Singapore police claimed that some of the Bangladeshis were planning to return to Bangladesh to carry out terrorist attacks. Most of the Bangladeshi laborers were quickly deported from Singapore. Do these events add up to a serious threat from the Islamic State to Southeast Asia , either by Islamic State recruiting and funding of Southeast Asian militant cells or simply by Islamic State inspiration for Southeast Asians? As I mentioned in a previous post, IS created a brigade in Syria for visiting Southeast Asians, including Indonesian fighters. IS also may be providing a small amount of seed money to some militant groups in Southeast Asia, and the Islamic State clearly hopes to spread its ideology more widely. Its propaganda arm has produced videos, shared online, in Indonesian/Malay and targeted at Indonesian and Malay youths. Indonesian, Malaysian, Philippine, and Thai authorities believe between 600 and 1,200 Southeast Asians have traveled to Syria and Iraq in recent years to fight with the Islamic State and then have returned to Southeast Asia. In addition, several existing militant groups in Southeast Asia have taken public oaths of loyalty to the Islamic State in the past two years, probably both because they share beliefs with the Islamic State and because the loyalty oaths bring them greater media attention. What’s more, as Zachary Abuza of the National War College has noted, the growing influence of Islamic State in Southeast Asia may be leading to a kind of competition among Southeast Asian militant groups to see who can carry out the most brutal attacks, following in Islamic State’s use of extremely brutal, well-publicized tactics. Such brutal tactics, Abuza notes, are easily spread through social media. But overall, the level of threat to Southeast Asian nations varies widely. It is true that Indonesians have traveled to Syria to fight, and even taken part in their own brigade, but Indonesia also is one of the most open societies in the region, with a government and a religious establishment that has a record of effectiveness at combating militancy. Indonesia’s biggest religious organizations have launched campaigns to combat the influence of IS and other groups. Indonesia’s decentralized, free politics filter Islamists through the political process. In the Philippines, the Aquino government is close to completing a landmark peace agreement that could end much of the fighting that has plagued Mindanao for decades. Although there are holdouts unwilling to accept the deal, the completion of the peace process, combined with a flow of investment and aid to Mindanao, could dramatically undercut any public support for militants in the southern Philippines. In contrast, Thailand, Malaysia, and Myanmar have political environments that could be conducive to growing militancy. All three are either outright authoritarian regimes or are currently somewhere between democracy and autocracy; the lack of political freedom means there are few legitimate avenues for Islamists to engage in politics. In Thailand, harsh army rule in the three southern provinces has added to southerners’ anger, made it harder to gain cooperation with army units hunting for militant cells, and potentially has fostered radicalization of young men and women. In Myanmar, there has been little violent reaction so far from Muslim populations that have been terrorized for four years now, particularly in Arakan State; many Muslims are so battered that they are focusing all their energy on survival. Still, it is not hard to imagine that years of attacks on Myanmar Muslims might eventually lead to the emergence of militant Myanmar Muslim groups, perhaps with inspiration or even training from Islamic State. And in Malaysia, the environment is perhaps even more favorable for militants inspired by the Islamic State. Since the 2013 Malaysian general election, the Malaysian government has “been competing...to show the Malay heartland” its Islamic credentials, according to Murray Hunter, a business consultant with thirty years of experience in Southeast Asia. Hunter notes that the ruling coalition also has been publicly burnishing its Islamic credentials in an attempt to tar the opposition as dominated by ethnic Chinese. Such strategies are fostering religious and ethnic divisions in Malaysia. “This is a perfect environment for Islamic State dogma…to breed,” Hunter notes.

In the wake of the attacks last week in Jakarta, which killed seven people, fears are growing that the archipelago, the largest Muslim-majority nation in the world, is going to be hit by a wave of Islamic State-linked bombings and shootings. The potential for mayhem seems obvious. Indonesia’s open society and high social media penetration make it easy for young Indonesians to access Islamist and Facebook pages, and Islamic State has released several videos in Indonesian in an apparent recruiting effort. Indonesia is a country of thousands of islands with porous borders, and many soft targets: The militants launched bombs and opened fire in broad daylight in one of the busiest shopping and office neighborhoods in downtown Jakarta. And Indonesians have fought in Syria and Iraq and returned. The Soufan Group, a consulting security consulting group, believes that at least six hundred Southeast Asians have traveled to Syria to fight with the Islamic State and then come back to their home countries. Indeed, the alleged ringleader of last week’s Jakarta attacks, a militant named Bahru Naim, is currently living in Raqqa, the Islamic State’s hub. But in reality, Indonesia has enjoyed far more success than most nations against Islamist militants, including those linked to the Islamic State. The country has witnessed numerous militant attacks over the past fifteen years, but unlike in some of its neighbors, the Islamic State and other militants have not gained broad public support, and the Indonesian government has not resorted to draconian measures in an attempt to crush militant cells. In many ways, Indonesia’s political leaders, security forces, and religious leaders offer lessons for combating the appeal of the Islamic State. For more on Indonesia’s successes, read my new Bloomberg piece.

Jake Thomases is a public policy analyst at the Risk Analysis Research Center. Investors in Indonesia let out a small sigh of relief when Heri Sudarmanto, the director of foreign workers, announced on October 19 that foreign workers would not be required to pass Indonesian language tests after all. Just three days earlier, an official with the manpower ministry told reporters that such a test would be implemented. The language requirement, which has been proposed and rescinded more than once, is just the latest attempt to shield sectors of the Indonesian economy from outside competition. Such measures are puzzling and counterproductive given President Joko “Jokowi” Widodo’s pleas for infrastructure investment dollars during every state visit he makes. Against the backdrop of economic protectionism, such pleas come across as: “Bring us the money and we’ll tell you how to spend it.” Already foreign oil and gas workers face age limits and foreign lawyers are severely restricted in their activities. Companies were briefly required to employ a ten-to-one ratio of Indonesians to expats before the regulation was hastily dropped in late 2015. Some professions are entirely closed to foreigners, while certain industries, like onshore drilling, have been shut off from foreign investment. Control over the large Mahakam gas field is being transferred from France’s Total and Japan’s Inpex to overworked state-owned enterprise Pertamina when its lease expires in 2017. It is not only foreign companies that should be concerned. The fact is that even if fifty thousand foreign investors lined up tomorrow to offer capital injections with no preconditions – if the administration could direct the money into whatever sectors it chose and hire only domestic employees – the necessary roads and power plants still wouldn’t get built. Domestic companies would end up sitting on a pile of unspent money, unable to fulfill their contracts, because they wouldn’t be able to hire enough people to get the work done. Indonesia may be growing into a middle-income economy, but its workforce is stuck in poor country status. The skills gap between what employers need and what employees have is turning into a major bottleneck. The more barriers the government throws up to foreign expertise, the narrower the bottleneck becomes. A 2008 World Bank survey showed that nearly seven in ten Indonesian manufacturing firms found it hard or very hard to fill professional positions. A 2013 report by Boston Consulting Group anticipated that companies will struggle to fill 40 to 60 percent of their middle manager positions and half of all entry-level positions by 2020. As the service sector grows, the number of administrative and managerial jobs is expected to rise from 36 percent to 55 percent by 2020. Indonesian schools simply are not cranking out enough qualified graduates to fill them. Engineers are in particularly short supply. The economy is adding fifty thousand new engineering jobs every year, but universities are producing only thirty thousand engineers. This 40 percent gap between supply and demand is expected to grow to 70 percent by 2025. Processing firms in the large palm oil industry have taken to training their own engineers, which can take a year or more. There is widespread poaching of trained employees by competitors, driving up wages to unsustainable levels. As the largest economy in Southeast Asia, Indonesia has a chance to exercise much influence over the new ASEAN Economic Community, a collaboration of ten regional nations into a single market and production base. Its young and urbanized labor force portends continued growth after other developed economies have begun slowing down. But estimates of 2015 growth were below 5 percent. Until the country makes structural reforms – improving infrastructure, cracking down on corruption, producing a more skilled workforce – it will fail to fulfill expectations. Producing more next-generation workers isn’t simply a matter of changing curricula or offering more university programs. Indonesia’s education system is riddled with problems from primary school on up. Teacher absenteeism is high, especially in more remote schools, and many teachers are not qualified despite a recent glut of teaching school graduates. Memorization is the preferred method of student instruction rather than encouraging the creative thinking needed for high-skill work. Federal education spending, required by a 2002 law to be 20 percent of the budget, did not actually reach that threshold until 2009. Student enrollment, much improved for younger children, lags well behind the regional average for those over fifteen years old. The latest Program for International Student Assessment (PISA) test in 2012, measuring reading ability, science, and math, rated Indonesian fifteen-year-olds next-to-last among sixty five countries. That dismal showing is unlikely to change much once the 2015 PISA results are released. In 2012, the education ministry announced that it was pulling science and English language from the primary school curriculum in favor of additional civics and religious instruction. Universitas 21, a university network, ranked Indonesia’s higher education system forty-eighth out of fifty countries studied. The Times Higher Education World University Rankings placed no Indonesian schools in the global top six hundred.  Very few Indonesians study abroad either, largely because of a lack of English language ability. The cost of higher education, even at public schools, can be prohibitively expensive for low-income students, which is partially to blame for the fact that three-quarters of all university students are from families in the top 40 percent of the income scale. Education inputs are improving at least. Jokowi has guaranteed twelve years of free education to the poorest students by offering stipends to cover school fees. A new law requires every district to have its own community college, and for credits from those colleges to be transferable to four-year programs, which was not previously the case. The government’s actions on education have been mostly positive, but the system started from a position of such disarray that it will take time for the reforms and additional spending to make a difference. For now, it is important that those crafting economic policy be aware of the problems of the education system. They should advise universities on what skills companies are looking for and help design curricula accordingly. Most of all, they should not exclude foreign companies and foreign workers, who may be the only ones capable of running particular industries. Keeping jobs open for Indonesians does little good if there are no Indonesians to fill them.

It’s that time again---time for resolutions that last a couple weeks into the new year and bold predictions that (surely) will turn out right this year. Right? 1. Najib tun Razak will be Malaysia’s Prime Minister at the End of 2016 For most of 2015, many Malaysian politicians, observers, and activists wrote Najib off, sure that the in-fighting within the governing coalition, the scandals around the 1MDB state fund, and the torrent of criticism of Najib by former prime minister Mahathir would ultimately force Najib out of office. They were wrong. In fact, after surviving UMNO’s December general meeting unscathed, Najib passed legislation that will entrench his power. Just before the end of parliament’s sessions for the year, Najib presided over the passage of new legislation that will potentially give the government unprecedented powers to detain critics on national security-related charges. Expect Najib to still be in control in Malaysia as this year ends as well. 2. Thailand’s Elections will be Pushed Back Farther The Thai junta, which took power in a coup in May 2014, has pushed back the date for elections and a handover of power several times, after a draft new charter collapsed. Prime Minister and junta chief Prayuth Chan-ocha has now promised elections in 2017, but Prayuth also shows signs that he is consolidating his rule. This past year, the military has been busy purging members of its ranks not aligned with Prayuth’s army faction, and launching an even more intensive crackdown on dissent than it did in the months after May 2014. With the Thai king still alive but apparently quite ill, expect Prayuth and the other generals to push elections off even farther, possibly into 2018 or beyond. 3. Jokowi Will Have a Better Year 2015 was a difficult year for Indonesian President Joko Widodo. Struggling to make the transition in his first full year on the job from city mayor to leader of one of the most powerful nations in the world, at times he seemed to zigzag on foreign and economic policies from day to day. His personalized style of decision-making, in which he relied on few close advisors and often made decisions by his gut, proved unworkable in governing such a large and diverse country. Saddled with ministers and other officials who had proven themselves at PDI-P loyalists but did not embody Jokowi’s brand of clean politics, the president also found his reputation as a different type of politician tarnished. It got worse. In the fall, haze enveloped parts of Indonesia and spread throughout the region; Jokowi went home after one day of a planned multi-day trip to the United States to help lead the fight against the haze. By leaving so soon, he may have alienated some of the major corporate leaders he had planned to meet and woo later in the trip on the U.S. West Coast. Given his troubled 2015, 2016 could hardly go worse for Jokowi. And, in all likelihood, the Indonesian president will have a better year. He already has shed himself of several ministers and advisors who had damaged his reputation for fighting graft, and his public image also has benefited from the recent scandal surrounding the speaker of the lower house of parliament, who allegedly tried to extort money from Freeport McMoran. The fact that Jokowi’s energy minister actually reported the allegations against the speaker to the parliamentary ethics committee is, to many Indonesians, a sign that Jokowi’s administration is taking graft seriously. In addition, Jokowi has slowly and steadily begun to push back against economic nationalists within his administration and in parliament. Although the president is unlikely to deliver the massive regulatory reforms he promised in late 2015, the president has set an ambitious economic reform agenda. If he can even push through half of the reforms he has promised for 2016, both local and foreign investors will cheer, and the Indonesian economy will benefit. 4. Laos will not be an Effective Asean Chair In 2015, the Association of Southeast Asian nations was chaired by Malaysia, a country with a wealth of skilled and English-speaking diplomats and officials, and the capacity to capably hold hundreds of meetings annually. Although the Malaysian government was distracted by the 1MDB scandal and in-fighting within UMNO, it still managed an effective chairmanship. Laos will have serious trouble doing the same. Of all the members of Asean, Laos is by far the least prepared to chair the organization; its diplomatic and bureaucratic corps is small, and it has no leaders who could take charge at an Asean meeting and help bridge gaps on divisive issues. Laos is the most authoritarian nation in Southeast Asia, and Laotian leaders already have shown that they are uncomfortable with the nongovernmental aspects of Southeast Asian integration, declining to let Asean civil society groups hold a meeting next year in Laos. 5. China Will Show Southeast Asia both the Stick and the Carrot As I noted in CFR.org’s roundup on Chinese policy in 2016, Beijing this year probably will continue its dual approach to Southeast Asia. Expect China to continue upgrading atolls in the South China Sea and preparing them for use as military bases, while also using ever-tougher tactics to threaten Vietnamese and Philippine ships traveling in disputed waters---tactics like openly displaying guns pointed at Vietnamese and Philippine vessels. But in dealing with mainland Southeast Asian nations like Thailand, Myanmar, and Laos, which chairs Asean in 2016, China will turn on the charm. In particular, Chinese officials and leaders will be eager to win over the new Myanmar government led by the National League for Democracy. Read Part 2 here. 

Indonesian President Joko “Jokowi” Widodo made his first visit to Washington last month as leader of the country with the fourth-largest population in the world and the sixteenth-biggest economy on earth. Indonesia has made a dramatic transition, in just twenty years, from the decades of dictatorship to one of the most vibrant democracies in the world. Jokowi himself signifies that political change. Raised in a middle-class household, he had no ties to Indonesia’s traditional elites but worked his way up from mayor of a medium-sized city to mayor of Jakarta to, in 2014, president of the sprawling archipelago. And during his visit to Washington, Jokowi and Indonesia were hailed by President Barack Obama, who praised Indonesia’s “tradition of tolerance and moderation” and welcomed “the next level” of partnership between the two nations. Yet in reality, most in Washington, and the rest of America, paid little attention to Jokowi’s visit—far less attention than might have been paid to the arrival of leaders from the Philippines, Myanmar, Vietnam, or other nations with smaller populations and tinier economies. Jokowi held no sessions before Congress, like Japanese Prime Minister Shinzo Abe or Israeli Prime Minister Benjamin Netanyahu. He was not welcomed by a phalanx of New Economy titans, the way former Chinese president Hu Jintao was received during a visit to Seattle in 2006. Jokowi’s trip received a smattering of coverage in the American media, but nowhere near as much as the reporting of the arrival of Myanmar politician Aung San Suu Kyi in 2012. Despite Indonesia’s impressive numbers, the lack of broader interest in Jokowi’s visit was not surprising. The Global Country Brand Index is a study compiled by FutureBrand, a consulting group, of countries’ comparative perception, using a range of factors. In the most recent study, Indonesia’s “country brand” ranked 66th in the world. Indonesia is not unique: A number of large and theoretically powerful countries like Indonesia, such as Bangladesh, Kenya, and Mexico, suffer from “unknownness” on the globe stage, a lack of recognition from people around the world. Bangladesh ranked 72nd on the Country Brand Index, while Kenya ranked 65th and Mexico ranked 55th, behind minnows like Costa Rica and Panama. (In contrast, tiny Singapore ranked fourteenth on the FutureBrand study.) Why a country labors in relative obscurity varies from place to place, but many unknowns face similar struggles—a lack of a large diaspora, few global ambassadors, shortages of big consumer brands. And being relatively off the radar can have ramifications that go far beyond national pride. Unknownness can dramatically undercut these nations’ strategic power, hinder diplomacy, hamper their companies, and make it difficult to attract global interest when they face serious crises. For more on why Indonesia’s country brand has remained weak, see my new Boston Globe Ideas piece.

CFR’s Civil Society, Markets, and Democracy (CSMD) Program highlights noteworthy events and articles each Friday in “This Week in Markets and Democracy.”  Indonesia Pledges to Join the TPP Just four weeks after the signing of the Trans-Pacific Partnership (TPP) accord in Atlanta, other countries are already asking to join. During his visit to the White House this week, Indonesian President Joko Widodo announced his interest, hoping it will help fulfill his campaign promise to attract foreign direct investment. Others who have shown interest include Colombia, the only large Pacific-facing nation in the Americas not included in the first round, and South Korea, whose interest has grown with time due to concerns that the deal will give Japan an advantage in cars and electronics. They would join the trade deal’s twelve founding members—which together comprise nearly 40 percent of global GDP—in lowering tariffs, establishing labor and environmental standards, and eliminating barriers to trade in services. New entrants will likely have to wait until the deal is ratified. This process looks especially difficult in the United States, due to opposition from members of both political parties and numerous aspiring presidential candidates. Some are already talking about pushing the vote to the “lame-duck” session, meaning November or December of 2016. Indonesia, and the others, will have to wait. U.S. Investigates Corruption in Venezuela Last March the Obama administration issued an executive order against seven high-ranking Venezuelan officials for human rights abuses and undemocratic practices, banning them from the United States and freezing U.S.-based property. Now the Treasury Department, through its Financial Crimes Enforcement Network (FinCEN) division, is investigating several government officials for corruption and laundering money through Venezuela’s state-owned energy company, Petróleos de Venezuela (PdVSA). Though no charges have been filed, FinCEN alleges that Venezuelan government officials and PdVSA executives received kickbacks, created fake contracts, used shell companies, laundered drug money, and manipulated the official and black market currency gap for personal gain. These funds were funneled through Banca Privada d’Andorra (BPA), which FinCEN accuses of illegally processing over $4 billion from Venezuela (half of which came from PdVSA). Andorran authorities have since ordered a takeover of the bank. At the center of the scandal is Rafael Ramírez, formerly Venezuela’s minister of energy and foreign affairs as well as president of PdVSA. Ramírez is currently Venezuela’s ambassador to the United Nations, which affords him diplomatic immunity. Massive corruption just adds to Venezuela’s woes, which include deepening recession, triple digit inflation, an ever-growing gap between the official and black market currencies, widespread goods shortages, and escalating crime rates.

Indonesian President Joko “Jokowi” Widodo’s visit to the United States was cut short this week. Jokowi decided to return to Indonesia less than halfway through his trip to America in order to deal with the haze crisis in Indonesia. Parts of Sumatra and Kalimintan have been devastated by the haze, which is closing businesses and causing hundreds of thousands of respiratory ailments. Jokowi will “possibly fly directly to the haze-devastated provinces of South Sumatra or Central Kalimantan…He made the decision [to cut the trip short] after he received news that conditions in these provinces had deteriorated over the last two days,” the Straits Times reported. However, during his shortened visit Jokowi did make several important announcements. In Washington, he met President Barack Obama and delivered several important messages as part of Jokowi’s attempts to woo the U.S. business community and convince investors in general that Indonesia is becoming a more attractive climate for business. At the White House, the two leaders affirmed their commitment to combating climate change, and discussed closer maritime security cooperation. Jokowi attended a dinner for him hosted by the U.S. Chamber of Commerce. More notably, the Indonesian president announced that Indonesia intends to join the Trans-Pacific Partnership---a supposed sign that, under Jokowi, Indonesia will be open for business. “Indonesia is an open economy and with a population of 250 million, we are the largest economy in Southeast Asia,” Jokowi said at a meeting in the Oval Office. Joining the TPP would force significant economic reforms in Indonesia, and if Jokowi could follow through on his pledge, it might also consolidate the president’s power and quiet the doubters who believe he does not have the political skills to run Indonesia. Joining the TPP also could prod other Southeast Asian nations that have been considering joining the TPP, such as Thailand, to follow Indonesia’s lead. But while Jokowi promised Indonesia would join, it remains unclear whether he can deliver on that vow. Both Indonesian and foreign businesspeople might dispute the contention that Indonesia is an open economy. Red tape, corruption, and economic nationalism remain significant challenges to business in Indonesia; the country ranked 114 out of 189 countries on the World Bank’s most recent Ease of Doing Business Report. (Indonesia came in even lower in the World Bank’s subcategories for Starting a Business and Enforcing Contracts---among the lowest rankings in the world.) It also ranked a lowly 107th in the world in the latest installment of Transparency International’s Corruption Perceptions Index. Since August, when Jokowi shook up his Cabinet and seemed to put some distance between himself and some of his party’s leaders, he has promised a raft of economic reforms, to be delivered at a rapid rate, the way he used to push through fast changes as mayor of Jakarta. But as I noted earlier this month, it could take years to implement Jokowi’s reforms, as Indonesia’s processes for approving investment need to be totally overhauled. Although Jokowi also has suggested he take other steps to loosen the rules for allowing foreign investment, and (before he shortened his trip) had planned to meet CEOs on a jaunt to the U.S. West Coast, most of the largest foreign investors in Indonesia are not convinced---they are waiting to see whether the first round of Jokowi’s proposed reforms actually occurs. What’s more, if Indonesia was serious about joining the TPP, Jokowi might face significant opposition from the Indonesian public and from many political and business leaders, including leaders of PDI-P. Economic nationalism and suspicion of trade deals have always been potent forces in Indonesia, dating back to Sukarno, founder of the nation. Jokowi himself has, at times, proven a champion of protectionism and of Indonesia’s mostly underperforming state enterprises, which might be forced to liberalize if Indonesia joined the TPP. Jokowi’s administration, for instance, has overseen increases in tariffs on some 1,000 types of imported products. Joining the TPP would require Indonesia to drastically upgrade intellectual property protection and enforcement, change many local content regulations, reduce tariffs, and possibly dismantle some state enterprises, all steps that could alienate some of the most powerful politicians and tycoons in the archipelago.

I have an op-ed in the international New York Times with Brent Harris and Jen Harris arguing that President Obama has a special opportunity to help Indonesia cut carbon emissions from deforestation. I encourage you to read the whole thing at this link. But I wanted to highlight one element here because I think it applies more broadly. Discussions of international climate politics typically frame the dynamic as one where countries pressure each other to cut emissions. This leads naturally to questions about what sort of leverage countries have, how to make international agreements binding, and so forth. But that isn’t the only way in which international interactions can drive down emissions. In the present case, Indonesia is facing a public health nightmare stemming from illegal forest burning. That burning happens to also release an enormous amount of carbon dioxide. (Sane estimates peg current emissions from Indonesian fires as higher than total emissions from the U.S. economy.) The ongoing fires have created domestic pressure on the Indonesian federal government to crack down on forest burning. This is not a place where U.S. pressure has a big role to play in getting Indonesia to cut emissions. There isn’t much one could imagine the United States doing that would create more pressure than what’s already been generated domestically in Indonesia. What the United States can do, though, is help Indonesians who want to cut fires and emissions actually follow through. That support is both technical and political – we go into it in some detail in the op-ed. This sort of international interaction, in which countries help each other deliver transformations that they both want but that are technically or politically difficult to accomplish, is fundamentally different from what many people usually think about when they think about climate change. Leverage becomes less important than capability; whether an international agreement is “binding” or not becomes less consequential. This model won’t replace the traditional one of leverage and pressure, but in many cases, it will be more effective. The more strategists think this way, the more that climate diplomacy will accomplish.

Since August, when Indonesian President Joko “Jokowi” Widodo reshuffled his cabinet, and then promised a wave of new deregulatory reforms, it has appeared that the president finally was going to embark upon serious policy changes. Jokowi had been criticized by Indonesian commentators, during most of his first term as president, for offering mixed and sometimes directionless policy messages. But his new team of ministers includes a new chief of staff renowned as a corruption-fighter, as well as a respected former central banker as his new head economic minister. Among the many reforms that Jokowi has outlined since August, he has vowed tax holidays for certain new investments in Indonesia, government support for cutting red tape in building infrastructure, and streamlined regulations for large new investors in the country and for many big domestic start-ups. These announced reforms were welcomed by much of the Indonesian business community, especially given the country’s weak growth in the first half of the year, the continued weakness of the rupiah, and the many structural impediments to investment in the archipelago. As Societe Generale economist Kunal Kumar Kundu notes, Jokowi’s proposals are unlikely to boost Indonesia’s flagging growth in 2015---the measures are more likely to have an impact over five or ten years. For now, the country’s commodities companies, critical to the Indonesian economy, will remain vulnerable to a slowdown in China, while high domestic inflation will continue to hinder the Indonesian economy as a whole. The rupiah will probably remain at its weakest level in nearly two decades. Still, Jokowi’s proposed reforms send an important signal---if he follows through on them. Over the next year, successful implementation of these economic reforms, and a further set of economic and political changes, could show that the president, who came into office as a political outsider, is truly going to change Indonesia’s political and business climates. But actually following through will be tricky. For one, Jokowi will need to completely remake Indonesia’s licensing and permitting process to achieve the goal of making approval processes for new investments competitive with the speed of approvals in neighboring states like Malaysia, Thailand, or Singapore. Remaking licensing and permitting could include forcing agencies to computerize all functions, create real performance incentives for workforces, and potentially fire staff who slow down permitting---all challenging tasks in Indonesia today. In addition, to make the tax holiday proposal effective, Jokowi will have to overcome continued strong opposition to tax breaks for foreign firms among many leading politicians from Jokowi’s own party, PDI-P. Second, Jokowi will have to pass tougher measures to stem illegal capital flight, as well as creating more positive incentives for Indonesian and foreign investors to keep their money in the country’s stock exchange, which is heavily dominated by foreign equity investors. Capital outflows, both legal and illegal, remains a severe problem---in September, Standard and Poor’s estimated that Indonesia is currently even more vulnerable to capital outflows than Malaysia, which has been rocked by an alleged scandal in its state funds, has seen its stock market plunge, and is in the midst of a no-confidence debate about Prime Minister Najib tun Razak. Finally, Jokowi’s reforms need to include significant steps to modernize state enterprises, make them profitable, and utilize them as engines of development, in the manner of some Chinese and Singaporean state companies. Most Indonesian state enterprises remain bloated and often loss-making and uncompetitive with regional peers. So far, Jokowi has shown only moderate interest in making state enterprises more efficient and competitive. Although his state enterprises minister has sacked the boards of two prominent SOEs and promised to hold state enterprises up to benchmarks of efficiency in the private sector, the Jokowi administration also has placed state enterprises at the center of his plan to rebuild Indonesia’s physical infrastructure. Jokowi has given state firms large new tenders for megaprojects without requiring any real change in how SOEs in construction, electricity, and minerals operate.

On October 26, Indonesian President Joko Widodo will arrive in Washington for his first U.S. visit as leader of the largest country in Southeast Asia. In advance of and during the visit, Obama administration officials probably will stress the increasingly close ties between Indonesia and the United States, building on the comprehensive partnership signed by the two nations. But in reality, the U.S.-Indonesia relationship has been more of a disappointment than a triumph over the past seven years. In a CFR working paper I released earlier this year, I examine the failures of the pivot in Southeast Asia, and particularly the struggles to build ties with Indonesia. I also offer recommendations for revitalizing U.S. ties with Indonesia and the rest of peninsular Southeast Asia. You can see the entire paper here: The Pivot in Southeast Asia: Balancing Interests and Values.

Rachel Brown, Lincoln Davidson, Sungtae “Jacky” Park, Ayumi Teraoka, and Gabriel Walker look at the top stories in Asia this week. 1. Raging flames in Indonesia. Intense forest fires have been burning for the past few months on the islands of Sumatra and Borneo, blanketing vast areas of Indonesia, Malaysia, Singapore, and southern Thailand with smoke. Annual but illegal slash-and-burn agricultural practices that spiraled out of control caused the blazes, now amounting to more than 1,000 fire clusters on the islands. Until this Wednesday, Indonesian President Joko Widodo refused international assistance with battling the flames, but this week six countries offered aid in the form of firefighting aircraft. The fires will result in immense financial, climate, and health costs throughout the region: In 1997, another severe blaze cost the Indonesian government more than $20 billion; carbon emissions from the fires may surpass those from the entire United Kingdom this year; and 110,000 per year may die from respiratory and other illnesses caused by the fires. 2. Pacific trade deal reached. The Trans-Pacific Partnership (TPP), a wide-ranging trade agreement between twelve nations that comprise nearly 40 percent of the global economy, was completed this week. The deal will eliminate 18,000 tariffs for American export firms and provide similar benefits to other nations. The most notable achievements of the deal include provisions to address agricultural trade barriers, to require all parties to adhere to basic standards of the International Labour Organization, and to address the illegal wildlife trade. The final negotiations also involved an intense debate over legal protections for manufacturers of biologic drugs. Whether the deal will be passed by Congress remains in question, and recently presidential candidate Hillary Clinton came out against the agreement. The deal will also face political opposition in a number of other nations including Canada and Japan, where agricultural provisions may cause controversy, and Malaysia, where the required reforms to the state-owned enterprise sector may provoke resistance. 3. Chaos in the KMT. Taiwan’s ruling party, the Kuomintang (KMT), announced Thursday that it would be holding an impromptu party congress to remove Hung Hsiu-chu as the party’s presidential candidate and nominate party chairman Eric Chu instead. Discontent with Hung has grown as her numbers in the polls have slipped; things came to a head this week after Hung said that the constitution of the Republic of China—the de facto government of Taiwan—calls for unification with mainland China (which the majority of Taiwan’s citizens oppose). In response, KMT members expressed concerns that Hung’s presence on the ballot would hurt their chances in legislative elections, which will be held at the same time as the presidential election in January 2016. Hung has said that she will continue to seek the presidency even if it causes her “death on the battlefield,” and some of her supporters have rallied to her call, protesting outside KMT headquarters. The internecine fight does not bode well for the KMT, which is up against second-time Democratic Progressive Party candidate Tsai Ing-wen. 4. Abe reshuffles cabinet and adds demography minister. Japanese Prime Minister Shinzo Abe has reshuffled his cabinet for the third time since reassuming office in December 2012. This time, Abe retained nine and added ten new ministers, including Katsunobu Kato, who was previously the deputy chief cabinet secretary. Kato was appointed to a newly created ministerial post in charge of demography that Abe hopes will create “a society in which all one hundred million people can play an active role.” By creating this ministerial position, Abe seeks to prevent Japan’s current population of one hundred and twenty-seven million from sliding below one hundred million over the next half-century.  Recent polls showed that the new cabinet maintains a forty to forty-five percent approval rating, slightly higher than the forty percent approval that the second cabinet reshuffle last September garnered. 5. Tu Youyou wins Nobel. This Monday, eighty-four-year-old Tu Youyou became the first Chinese citizen to win a Nobel Prize in the sciences for her discovery of artemisinin, a major antimalarial drug that has saved millions of lives. Besides her distinction as the first winner in the sciences, an honor that China has sought for years, Tu is unusual in other ways. Her prize-winning research, for example, took place under a secret military project established by Mao Zedong in 1967, and drew upon an ancient Chinese medical text written over 1,500 years ago. Tu also lacks the three characteristics—a doctorate, foreign experience, and a position in the Chinese Academy of Sciences—with which many accomplished Chinese scientists distinguish themselves, so is in many ways an outlier of China’s scientific and technological system. Tu stated that she was “a little bit surprised, but not very surprised” at receiving the prize. Bonus: Indigenous South Americans consider adopting Korean alphabet. The Aymara people of Bolivia, Peru, and Chile, are considering the use of the Korean alphabet, Hangeul (or Hangul), as their primary writing system. Korean researchers have already created a system for transcribing the Aymaran language into Hangeul, and the Aymaran and Korean languages reportedly share similarities in terms of word order and grammar. If the Aymaras adopt Hangeul, they would be the second to use the writing system after a town in Indonesia adopted the script in 2009 to preserve its spoken language, Cia-Cia. Hangeul was created in 1443 CE by the Korean royal court under the instruction and supervision of King Sejong, who wanted to create a simple script to spread literacy among ordinary Koreans who, unlike the upper classes, did not have the time or resources to learn complex Chinese characters.

Why has Brazil slashed deforestation over the last decade while Indonesian deforestation has accelerated? The two countries lead the world in deforestation, which, after energy use, is the top source of greenhouse gas emissions. In the last week, each country has released an emissions-cutting plan in anticipation of the Paris climate summit that relies heavily on avoiding deforestation. Figuring out why Brazil has succeeded while Indonesia has lagged can provide insight into how both countries can do more. Earlier this year I gathered a multidisciplinary group to explore the Brazilian experience and extract lessons for climate policy. Some of the highlights are summarized in a short report that we’ve just released. We looked at a wide range of issues, many of which are discussed in the report, but I was particularly intrigued by our discussion of why Brazil and Indonesia turned out so differently from each other. The most obvious reason is that Brazil had an earlier start. Its government has been focused on reducing deforestation for over a decade; the Indonesian government hasn’t started looking at the issue seriously until more recently. This is actually good news, since it’s something that time should overcome. Governance and rule of law also stood out as big factors. Both countries have fairly decentralized governance – a feature that should make controlling deforestation difficult since decisions from the center don’t always translate into action. But Indonesian governance is considerably less centralized, which puts Indonesia at a disadvantage. Similarly, since avoiding deforestation requires effectively enforcing laws, corruption is a big barrier to success. Brazil obviously has its fair share of corruption problems, but Indonesia is arguably worse. Both of these factors make avoiding deforestation more difficult in Indonesia. But there’s a bright side: neither needs to be permanent. Governance structures change over time; countries also reduce corruption and improve the rule of law. None of this is easy, of course, and it’s unlikely to happen just to facilitate avoided deforestation, but it at least offers some promise. The last factor that came out in our discussion, though, augurs much more poorly for Indonesian prospects. Amazonian timber has typically been cleared to create cropland or pastureland, or, more simply, to establish ownership of a given tract of land. The wood itself is typically mostly worthless. In contrast, in Indonesia, the trees that are cut down are usually highly valuable. That means that the economic incentive for deforestation is much stronger in Indonesia – which, in turn, means that policy needs to lean much harder against deforestation in order to succeed. This factor suggests that replicating the Brazilian experience in Indonesia will be more difficult than many would hope. The full report on the workshop dives into a bunch of other issues – including the prospects for private sector led efforts to reduce deforestation, new avenues that public policy might pursue to keep trees standing, and the possibility that the decline in Brazilian deforestation might reverse. Download it here.

Ashlyn Anderson, Rachel Brown, Lincoln Davidson,  Lauren Dickey, Ariella Rotenberg, and Gabriel Walker look at the top stories in Asia today. 1. China’s central bank allows currency to devalue. The renminbi (RMB) declined by more than 4 percent this week as the People’s Bank of China (PBOC) set the currency’s daily benchmark lower for several days in a row. The drop may help strengthen the domestic economy, which has faltered in recent months; the PBOC’s willingness to allow the currency’s market rate to drop may suggest that the Chinese economy is doing even worse than some indicators suggest, which could spell trouble for countries that rely on China’s commodity imports. Declines in the currencies of neighboring economies and rising wages in China have damaged the competitiveness of the country’s labor-intensive manufacturing sector, a central pillar of the economy. While foreign critics have charged in the past that China manages its currency to strengthen its export industry, earlier this year the IMF dropped its claim that the PBOC deliberately undervalues the RMB. This week’s drop instead may be a sign that the Chinese government is willing to be true to their claims that they intend to give the market a deciding role in the currency’s value. However, it’s unclear whether the PBOC will stick with moving the currency in the direction of the market, or have a change of heart when the market value of the RMB inevitably moves back up again; regulators’ mixed response to last month’s stock market drop suggest the latter. 2. Worst flood in decades hits Myanmar. While Myanmar is used to flooding during monsoon season, recent floods were made worse by cyclone Komen, causing mudslides that wiped away homes and infrastructure. At least 103 people have been killed and more than one million critically affected by the flooding, making it the most devastating natural disaster since cyclone Nargis in 2008. President Thein Sein visited the areas hit hardest by flooding, declaring four areas as disaster zones amid rampant criticism from the media for his failure to mobilize sufficient relief efforts. Opposition leader Aung San Suu Kyi took a different approach, using a wooden boat to travel the flood areas outside of Yangon as she handed out donations of rice and potable water. The Red Cross and United Nations have also scaled up their aid efforts to provide emergency food assistance. 3. Deadly explosion at a container port in Tianjin, China. Early Thursday morning in the port city of Tianjin, several explosions rocked the city killing at least fifty people and hospitalizing more than five hundred with dozens of firefighters still missing. Official reports say that the explosion occurred in a warehouse for toxic chemicals. According to one firefighter who was among the first responders to what was initially a small fire, they had not been told it was a chemical fire; it has now been uncovered that some of the stored chemicals produce flammable gas when wet. The quoted firefighter is currently hospitalized, and twelve of his colleagues were killed by the blasts that occurred after they had rushed to respond to the initial emergency call. Rescue operations have been temporarily suspended until chemical teams are able to understand the extent to which any remaining toxic chemicals may cause more damage as well as the potential impact of airborne toxins. The Chinese government seems to be closely controlling media coverage of the accident by deleting social media posts that criticize the government and showing Korean soap operas on the city’s main news channel. 4. Indonesia’s president reshuffles cabinet. Indonesian President Joko Widodo changed six positions in his cabinet on Wednesday in an effort to improve Indonesia’s economy by introducing new leadership. Widodo’s political party, the Indonesian Democratic Party of Struggle, has been encouraging Widodo to reshuffle his cabinet and remove poorly performing ministers since May. Four ministers were removed from the cabinet entirely and two were placed in lower positions. The new appointees include Darmin Nasution, a former governor of Bank Indonesia who will serve as the economy minister, and Thomas Lembong, a former private-equity executive who will serve as the trade minister. Following his inauguration in October, President Widodo was hailed as a reformer who could address corruption and reinvigorate his nation’s economy, the largest in Southeast Asia. However, this year Indonesia’s GDP growth has fallen to a six-year low and the changes to the cabinet occurred on the same day that the Indonesian currency, the rupiah, fell to its lowest level against the dollar since the 1997 Asian financial crisis. 5. Japan ends de facto freeze on nuclear power. On Tuesday morning, less than a week after the seventieth anniversary of the bombings at Hiroshima and Nagasaki, a reactor at the Sendai Nuclear Power Plant became the first to restart operations after more than four years of inactivity following the Fukushima Daiichi nuclear disaster. Although Japanese public opinion on abandoning nuclear power completely has been mixed, and demonstrators gathered around the Sendai plant earlier this week, the pro-nuclear Abe administration supports restarting reactors that meet updated safety standards as part of a broader push to improve the country’s lagging economy. Since the temporary shutdown of nuclear power plants began in 2011, Japan has become the world’s largest importer of liquefied natural gas and the second-largest importer of coal behind China, and power generation costs have risen trillions of yen. Although reactivating Japan’s forty eight nuclear power plants would dramatically cut these costs, only five have been declared safe under new safety standards and some are too old to consider retrofitting. Bonus: China steals The Bean. China just unveiled a knock-off of the famous bean-like sculpture that reflects the Chicago skyline to the dismay of sculptor Anish Kapoor. Chinese officials dispute the copycat accusations, pointing to the main difference between Chicago’s “Cloud Gate” and China’s “Big Oil Bubble”: the Bean reflects the sky, while “Big Oil Bubble” reflects the ground. The Chinese sculpture also features LED lights underneath the structure. Kapoor intends to sue the responsible parties in China, although the Chinese artist is currently a secret.