What you need to know
A strategic partnership with Indonesia offers a platform for India to push its economic and defense engagement with ASEAN.
Indian Prime Minister Narendra Modi sealed a critical new strategic partnership aimed at providing a counterbalance to China during his recently concluded visit to Indonesia.
Modi stopped by in Jakarta May 29 on the first leg of a three-nation tour that also includes Malaysia and Singapore and aims to bolster India's relationship with the Association of Southeast Asian Nations (ASEAN).
In his first visit to Indonesia, Modi met with Indonesian President Joko Widodo to discuss bilateral relations and signed some 15 memoranda of understanding in various fields, including defense, space technology, scientific and technological cooperation and railways.
Joko had visited India in 2016, and the two leaders evidently felt the intervening two years was too long without a chance to review ties, as they also agreed to hold annual summit meetings going forward.
But it is the signing of a new Strategic Comprehensive Partnership aimed at shoring up the two countries’ economic and security cooperation that constitutes the greatest prize, offering the potential to act as a cornerstone of Modi’s Act East policy of greater engagement with Southeast Asia and as a counterbalance to China's growing influence in the region.
Defense and security
The strategic partnership builds on the First Security Dialogue between the two sides held in New Delhi on Jan. 9, 2018, which focused on enhancing cooperation in countering terrorism, terrorist financing, money laundering, arms smuggling, trafficking in persons and cybercrime.
For India, Indonesia’s strategic location is vital, as it controls the entry points to Strait of Malacca, the main sea route between the Indian Ocean and the Pacific Ocean, linking major Asia economies including India, China and Japan.
Cooperation with Indonesia thus has the potential to counter China’s assertive behavior in the SCS and its focus on improving its naval prowess, while providing a platform to ensure freedom of navigation and maritime communication, and effectively tackle piracy and terrorism.
For President Joko Widodo, cooperating with India offers a chance to enhance his “global maritime axis,” a maritime development policy announced in 2014, and to counter continual Chinese violations of Indonesia’s Exclusive Economic Zone in the waters off the Natuna Islands in the SCS.
The pact consequently recognizes the importance of freedom of navigation and over flight on the high seas, unimpeded lawful commerce, as well as resolving maritime disputes by peaceful means.
This emphasis on peaceful resolution of disputes and respect for international law offers a counterpoint to China’s own unilateral actions, notably the 2016 rejection of a ruling by an international arbitration tribunal in The Hague in favor of the Philippines over its territorial claims in the SCS.
Modi’s visit also comprised the signing of a Defense Cooperation Agreement (DCA) between the two countries, targeting defense industry cooperation for the joint production and sourcing of equipment, as well as technology transfer, technical assistance and capacity.
India and Indonesia share concerns with regard to terrorism and have in the past called upon all countries to implement UN Security Council Resolution 1267 and other relevant resolutions that designate and apply sanctions to terrorist entities, which in turn will help India to put pressure on Pakistan to rein in terrorist organizations operating on its soil.
Trade and economy
The DCA will boost the Modi government’s Make in India – a scheme launched in September 2015 that aims to transform India into a global design and manufacturing hub – and Skill India – a massive nationwide workforce training program – as well as other similar initiatives, positively impacting the Indian economy.
Economic and trade ties have significantly increased ever since India and Indonesia signed a free-trade agreement in 2010, spurring Indonesia to become India's largest trading partner in ASEAN, notching bilateral trade worth US$18 billion in 2017, according to Indonesia’s Central Statistics Agency. Indonesian exports to India constituted the bulk of that trade at US$14 billion.
As part of the new Comprehensive Strategic Partnership, the two sides vowed to triple the bilateral trade print to US$50 billion by 2025, notionally by eliminating red tape and incentivizing service trade. India also confirmed it will establish a Confederation of Indian Industry office in Jakarta.
The two sides also reiterated their desire for an early implementation of the India-ASEAN Free Trade Agreement in Services and Investment, which was signed in 2010 but has yet to be ratified by Cambodia and Indonesia, in the latter’s case out of a fear of Indian workers flooding its jobs market.
Modi now turns his attention to Singapore after a brief stop in Malaysia. He will use his visit to the Lion City to deliver the keynote address at the International Institute for Strategic Studies 17th Shangri-La Dialogue over the weekend, which is expected to focus on security on the Korean peninsula and will be attended by host of officials from countries with interests in the Pacific, including top military brass from the U.S., China and South Korea.
Modi will leverage the platform to to place before the world his country's views on promoting peace and security in the Indo-Pacific, which is the overriding focus of the Shangri-La meeting.
As far as Singapore is concerned, Modi’s visit to the city state in 2015 provided an overarching framework for bilateral defense cooperation, including for policy dialogues, working group and staff talks, exercises, training activities, exhibitions and conferences.
During his forthcoming visit, Modi will likely discuss Singaporean Prime Minister Lee Hsien Loong’s reservations about joining the Quadrilateral Security Dialogue (QUAD), between India, Japan, Australia, and the United States, as India strongly believes that the role of Singapore is vital in the initiative’s success in offering a counterbalance to China.
India and Singapore's economic bilateral engagement revolves around the "5S Plank", a 2014 agreement to boost cooperation on trade and investment, connectivity, smart cities, skills development and interaction between Singapore and individual Indian states.
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Editor: David Green