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Jakarta Post

Does the G20 matter for Indonesia?

  • Muhtar Lutfi

    The Jakarta Post

Yogyakarta   /   Tue, November 18, 2014   /  10:09 am

The Group of Twenty (G20) major economies is believed by many to be an organization capable of finding
solutions to the global financial crisis for developed and developing countries alike.

The G20'€™s latest summit just ended in Brisbane, Australia, and unlike previous groupings (i.e. the G7 and the G8) the G20 is considered a breakthrough in multilateral cooperation.

Together, the G20 commands well over 85 percent of the global economy. Therefore, the success of the forum will have a significant impact on all nations, including those who are not members of
the G20.

The G20 leaders agreed on a '€œcomprehensive and coherent'€ economic plan called the Brisbane Action Plan. The plan will boost major economies by 2.1 percent and deliver '€œspill-overs'€ to smaller, non-G20 countries at 0.5 percent by 2018.

Other issues discussed at the summit included overcoming intensifying tax competition over the next decade so as to ensure strong and fair competition for business and investment, the issue of climate change and the Ebola outbreak.

But the G20 summit left many political issues unresolved, particularly those concerning Russia and the dispute in the South China Sea. For western countries, these two '€œmajor'€ political issues are seen as the main impediments to developing the global economy.

Russia and China are indeed two big players in the world economy. On the other hand, they tend to '€œantagonize'€ Western dominion.

Both also have strong militaries and are members of the United Nations (UN) Security Council. Hence, both countries have to be included in discussions about world affairs.             

Indonesia was honored to be inaugurated as a member of the G20 in 2008. Indonesia is the only country in ASEAN to be included.

Former president Susilo Bambang Yudhoyono was convinced that the forum was not only an economic powerhouse, but also a civilizational powerhouse.

The G20 is  '€œcivilizational'€ because it consists of several Muslim-majority countries like Turkey, Saudi Arabia and Indonesia. Yudhoyono believed that the G20 was a representative of diverse global community.

Indonesia'€™s free-and-active foreign policy would be tested to build bridges in this forum.

Some believe G20 membership is crucial for Indonesia, as it allows the country to advance its national interests. Perhaps one of the most significant roles played by Indonesia at the G20 was helping create the General Expenditure Support Fund (GESF) in 2008.

The GESF was founded to help developing countries by giving them liquidity of funding from the IMF and the World Bank.

The main purpose of the GESF is to help develop infrastructure, create jobs and achieve the targets set by the Millennium Development Goals (MDGs) by 2015.

Regarding the GESF program itself, Indonesia still faces difficulties. The revised 2014 state budget allocates only about 8 percent of total spending '€” or Rp 150 trillion (US$12.5 billion) '€” for infrastructure development, compared to 18 percent for fuel subsidies and Rp 107.1 trillion for electricity subsidies.

According to an IMF working paper in 2013, Indonesia'€™s ease-of-doing-business rating was still the second-lowest in the region, and the quality of infrastructure was the worst.

Fuel subsidies have become one of the most politically sensitive issues for the new government. President Joko '€œJokowi'€ Widodo and his administration face many dilemmas regarding the subsidies.

If the government reduces the energy subsidy, the price of goods and services will rise. However, the subsidy has been huge and wasteful spending, enjoyed mostly by the middle- and high-income people.

As a bridge toward building harmony among civilizations represented at the G20, Indonesia has to be more courageous promoting compatibility between democracy and Islamic values.

The recent legislative and presidential elections must be seen as an example to other G20 countries and to the world at large that Indonesia can be a role model and that Islam and democracy can walk hand-in-hand.

To conclude, in this era of globalization, the G20 forum is important for Indonesia. Indonesia should not only be proud of its membership, but also become more assertive in using it to secure national interests.

The challenge is how to maximize domestic capacity for improving the quality and the pace of Indonesia'€™s economy. Indonesia'€™s free-and-active foreign policy must also be implemented more vigorously into the greater agenda.


The writer is a postgraduate student of international relations at Gadjah Mada University,

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