Indonesia and the G20

By Sudjadnan Parnohadiningrat, WASHINGTON D.C.

During the November 2008 Summit in Washington, D.C., the leaders of advanced economies stood on an equal footing with their emerging nations’ counterparts addressing the global economic and financial issues candidly.

The deliberations yielded clear instructions to their relevant ministers and enabled officials to put flesh on the action plan to be immediately implemented to restore global confidence and generate further reforms in the world’s financial systems.

This was an unprecedented joint endeavor involving countries which represent 85 percent of the US$60 trillion global economy, 80 percent of global trade and 67 percent of the world’s population. Brazil, China, India, Indonesia, Mexico and Russia alone have a combined population of almost 3.2 billion people and a collective GDP of $8.4 trillion, or about 15 percent of the world’s GDP.

The United States has been instrumental in leading and pulling together those countries and members of the G20, yet going forward, another key factor in the equation would be President Barack Obama and his priority on the G20 process. In his campaign promises outlined in March 2008 and on several occasions lately, Obama called for an overhaul of the financial system and to establish a 21st-century regulatory system. Obama’s administration seemed to be less aligned with its European counterparts in suggesting larger European stimulus packages and on the issue of regulations and supervision for all major financial players. Obama’s participation at the April 2 Summit in London and the commitment made by Secretary of State Hillary Clinton however, have been a testimony of the present administration’s commitment to the G20 process, particularly on the need to address the present global financial crisis collectively.

For Indonesia, the main policy option will be how best to capitalize on the G20 membership in order to advance its interests, especially as it provides an avenue to engage itself with countries of the G8 as a “global steering group” on high profile and priority issues.

Many policy options preferred by developing countries have found a new channel to be advanced in the summit. Although developing countries like Indonesia have recently been more assertive in their attempt to contribute to the global policy agenda, their impact has been fairly modest. According to a study by Leonardo Martinez-Diaz of the Brookings Institution, in the eight years of G20 Finance Ministers ‘and Central Bank Governors’ meetings, the forum has mainly served as a vehicle for mobilizing support for G7 policies.

Today Indonesia stands in a unique position. It is one among the few and happens to be the only Association of Southeast Asian Nations (ASEAN) country in the G20 summit process.

Indonesia is among those that are major and middle economic and financial powers, major energy exporters and importers, major players in the global as well as regional security arena, and the major polluters of the world. Indonesia is being positioned in such a way to enable it to connect the region with, and advance its interests in, the G20 process.

Some may construe Indonesia’s membership of this new grouping as a reflection of its growing influence on the world stage. Indonesia has capitalized on a number of short-term but critically important gains for charting a strategic framework of engagement in the G20 summit. It co-chairs the G20 working group on the reform of the World Bank and other multilateral development banks.

Its activism contributes to any future decisions pertaining to larger financial access for developing economies. At the same time, it pushes for a greater voice and representation for developing economies in the functioning of the existing multilateral development banks.

Indonesia had recently shown an economic and financial trajectory which helped cushion the tremendous pressure from the global financial and economic challenges. Strenuous structural reforms to improve the investment climate, strengthen economic fundamentals and the financial sector, as well as strengthen regulatory frameworks and legal systems that have been conducted, bear its present results.

Various other measures that have been taken, such as strengthening the food-based industry, and expanding and improving the quality of health services and education, attune Indonesia to the current circumstances. An expanding middle class is developing. The steps taken, as well as the prevailing circumstances today, have ensured Indonesia fits into the dynamic of the G20 Summit.

What needs to be critically maintained is Indonesia’s participation based on its pragmatic approach; one with its meticulously set priorities of national economic and security interests.

In a grouping such as the G20, alliances will be dynamic, established and re-established constantly on issues of common interests. When, on certain issues, Indonesia needs to align or re-align with countries both within and beyond the grouping, then and only then, Indonesia will be the one who decides whether it can afford to shift alignment in order to pursue the foremost priority of its interests.

The writer is a member of the Indonesian Foreign Service. The views expressed in this article are solely the author’s personal opinions and do not necessarily represent the views of the Government of Indonesia

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