The government has underlined the importance of maintaining multilateral relations amid potential risks stemming from the global economic uncertainty that has arisen due to trade disputes between the world’s economic behemoths — the United States and China.

Speaking at the first Centre for Strategic and International Studies (CSIS) Global Dialogue in conjunction with the 25th Pacific Economic Cooperation Council (PECC) General Meeting in Jakarta on Monday, Finance Minister Sri Mulyani Indrawati said the risks coming from the US’ protectionism and its trade war rhetoric with China had gained wider recognition from almost all nations globally.

“Since last year, many political leaders have become more inward looking and focused on what we call local politics,” she said, referring to the largely domestic-oriented economic tendencies shown by China and the US lately. “This lack of cooperation was the most worrying [aspect] from the most recent discussions on the global economy.”

Such individualism, especially considering the fact that it came from big economies, might threaten the idea of high and sustainable economic growth, she added, as the idea needs contribution and support through sound policies, especially those by the bigger economic powers.

“This is one of the biggest risks from the projection of the global economy,” said Sri Mulyani.

Therefore, in order for the world to be able to address the issue, Indonesia and other countries should defend the existing multilateral system as well as have a shared interpretation of the global economic uncertainty.

Furthermore, she said she also believed that given the size of Indonesia’s economy and its population, it would not fall victim to the volatility so long as it was prepared for the risks.

“The only risk I see is that our ability to cope and respond may not be as fast as is necessary,”
she added.

CSIS senior fellow and co-founder Jusuf Wanandi said global economic volatility had actually given Indonesia, as a fast-growing economy, a chance to show its leadership among ASEAN countries and even beyond in the future.

“Indonesia has a very great role to play, especially among emerging economies,” he said on the sidelines of the event. “However, we have to come up with ideas and support [so we can take the lead].”

Jusuf said the global economy was becoming increasingly political day by day, and would therefore present new challenges and have more significant repercussions for Indonesia.

“We and other countries have to unite and work together so that we can continue any positive policies regardless of what [the US and China] might do [...] We can prepare ourselves through regional cooperation,” he said.

Nevertheless, he hinted that Indonesia should always maintain discretion toward big economic powers, especially China, which in 2017 was Indonesia’s third-largest source of foreign investment according to the Indonesia Coordinating Investment Board, so as not to cause any more friction.

University of Melbourne economist Ross Garnaut pointed out Indonesia was not fully aware of its economic magnitude within the Southeast Asia region and had been a reluctant leader of the ASEAN countries.

“With that fact, this disruption can give Indonesia a scope to lead ASEAN and further, influence much of the Indo-Pacific [region],” said Garnaut.

Former trade minister and senior CSIS fellow Mari Elka Pangestu said there were several free trade agreements that the government could prioritize.

She mentioned several agreements Indonesia was currently negotiating or had already ratified, such as ASEAN’s Regional Comprehensive Economic Partnership (RCEP), the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) and the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA).

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