Trade and Investment

Why Indonesians fight like Avengers for globalization

Shoppers at a mall in Jakarta, Indonesia.

The world's largest archipelago has had a long and complex relationship with global trade. Image: Reuters/Beawiharta

Peter Vanham
Previously, Deputy Head of Media at World Economic Forum. Executive Editor, Fortune
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It was a remarkable moment: during his speech at the World Economic Forum on ASEAN this September, Indonesia’s President Joko Widodo said he was an Avenger, fighting for free trade. “I and my fellow Avengers stand ready to [keep] Thanos from wiping out half of the population,” he said. “We must prevent trade wars from becoming the infinity war.” (He didn’t say who Thanos was.)

It’s unusual, of course, for any public figure to compare him- or herself to an action hero. But perhaps more remarkable is that a president of a large emerging market like Indonesia would speak so favourably of globalization. What explains the enthusiasm of Indonesia for trade? And why are its people and president such a defender of a concept that has become so disputed elsewhere?

What’s certain is that Indonesians join their president’s embrace of globalization in a way few other people do. In a widely cited 2016 YouGov poll, a large majority of 72% of Indonesians said they considered globalization a “force for good” in the world. In the same poll, their peers in the United Kingdom (46%), the United States (40%) and France (37%) showed themselves much less enthusiastic.

Why is that? There are of course the benefits globalization has brought in recent times. We’ll get into those below. But it’s worthwhile also to step back and look at Indonesia’s role in the world.

President Joko Widodo likened himself to an Avenger fighting for free trade
President Joko Widodo likened himself to an Avenger fighting for free trade

Indonesia is a trade universe on its own. The world’s largest archipelago, it consists of 13,000 islands and has 260 million inhabitants. It is the 4th most populated country in the world, stretching over 5,000 kilometres from the Indian Ocean to the South Pacific. The population explosion, as elsewhere, is recent. But its geography is not. It helps explain the deeply ingrained habit of Indonesians to ship and trade.

As far back as antiquity, Indonesian spices like nutmeg, mace and cloves made their way from their home in the Maluku islands to other parts of Indonesia such as Java and Sumatra, but also to faraway places including India, Greece and Rome. Trading for the Indonesians, then as now, is a fact of life. You need it to get the good stuff; you gain from buying and selling. It is embedded in Indonesia's culture.

Komodo National Park, Indonesia
Indonesia is the world’s largest archipelago Image: REUTERS/Henning Gloystein - RC198845B670

Indonesians also know that trade and exchange aren’t just about goods. Muslim traders, most notably, made their way to Indonesia in medieval times, and their presence has lasted until today. They came to trade but left their religion. As of 2018, Indonesia is the largest Muslim-majority country in the world. Religious exchange happened alongside goods exchange, and it has worked well for Indonesia.

Indonesia, finally, was also the epicentre of the first wave of true globalization. Marco Polo, the merchant from Venice, stayed on Sumatra and wrote about its clove trade. A few centuries later, Portuguese traders had the spice islands of Indonesia in mind when they tried to circumnavigate the globe. One of them succeeded, and a new era was born.

For a while, that globalization wave was largely mutually beneficial, if unequal. The British and Dutch East India Companies, notably, came to Indonesia to trade spices at first. But things took a dramatically darker turn and when the era of colonization reached its peak, the Dutch occupied the whole country and subdued the population, only giving up their colonial claims for good after the Second World War.

A Go-Jek driver pays using Go Pay at a Jakarta food festival in October.
A Go-Jek driver pays using Go Pay at a Jakarta food festival in October. Image: Reuters/Beawiharta

With such a deep – though mixed – history of trade, is it surprising that Indonesians today embrace globalization so profoundly?

In a way, you could say it is. Aware of the pros and cons of opening up, Indonesia has had a much more cautious approach to trade in modern times. As recently as 2016, the latest year for which data are available, Indonesia ranked 108th (out of 140 countries) on the DHL Global Connectedness Index, which measures flows of trade, capital, information and people.

But despite the low score, Indonesia did come a fair way on trade since independence. After focusing on self-sufficiency, oil production and agriculture for the first few decades after 1950, the nation in the 80s and 90s implemented measures to industrialize and open to trade once more. It lowered its export tariffs, attracted foreign investment and manufacturing started to grow.

It led, slowly but surely, to a transformation of the country. A small but increasing share of the population started to work in export-focused factories of apparel, chemicals and electronics. In a condensed period, it led to the classic effects of industrialization and globalization: higher productivity, slightly higher wages, struggle over labour standards and pay, and then, again, higher wages.

Hard hit by the Asian financial crisis in 1997-98 – itself a product of globalization – much of the economic gains many people made over the previous decade were wiped out. It took years to recover. It was another reminder, if Indonesians needed any after centuries of global trade and financial links, that globalization doesn’t only bring wealth but also risks.

Still, the overall picture since has been positive. Since 2000, Indonesia has seen almost consistent GDP growth rates between 4 and 6%, allowing record numbers of people to join the middle class. As a percentage of GDP, trade rose from 30% in the 1980s to 60% in the 2000s. Over the same period, GDP itself rose six-fold. The per capita GDP at purchasing-power parity rates at $13,000, and poverty rates are falling – though still substantial. The growth made Indonesia a “newly industrialized” nation, and a member of the G20.

Shoppers at a Jakarta market ahead of the Muslim festival of Eid al-Fitr.
Shoppers at a Jakarta market ahead of the Muslim festival of Eid al-Fitr. Image: Reuters/Agoes Rudianto

Indonesia also successfully entered the Fourth Industrial Revolution – the age of technology and AI. It boasts one World Economic Forum “Technology Pioneer”, OnlinePajak (an online tax app), and four so-called “unicorns”, innovative start-ups with a valuation of $1 billion or more: Go-Jek (ride-hailing), Traveloka (travel), and Tokopedia and Bukalapak (e-commerce). These companies are contributing to globalization, too: most are partially funded by foreign investment funds, or operate in several other countries outside Indonesia, including Viet Nam, Thailand, the Philippines and Malaysia.

The lessons of the past, however, were never forgotten. Today, Indonesia is an interesting example of how to balance globalization with national development. According to Kyunghoon Kim, a researcher at King’s College in London, even Joko Widodo, the globalization “Avenger” president of Indonesia, puts his own country first in three ways.

First, he writes, “Jokowi” is emphasizing self-sufficiency, much as his predecessors did. Foreign beef and smartphones are good, domestic ones better. Second, Indonesia’s policies have many characteristics of state capitalism, with strong state-owner enterprises in charge of national priorities. And third, Indonesia keeps a tight grip on its economic resources, particularly its sea lanes and fishing water.

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Indonesia also learned to “hedge” its openness to trade and globalization. To counterbalance a potential over-reliance for trade on its bigger Asian brothers, China and Japan, it embraced ASEAN, a regional trade group of 10 South-East Asian nations. It also managed to turn Europe and the US into important export markets, data from MIT shows.

That, in the end, may solve the mystery of Indonesians and their love of globalization. Indonesians support globalization, as they know the benefits of trade and exchange, having experienced them both in medieval and modern times. But they equally know globalization’s dangers and drawbacks, which they have also learned about over the course of the past four centuries, ending with the Asian crisis.

The country’s attitudes have led some observers even to the conclusion that Indonesia preaches globalization, but practises economic populism. That seems a stretch. But, while they support globalization in massive numbers, the same YouGov poll also showed Indonesians’ duality or conditionality concerning trade. Immediately after being asked about globalization as force for good, the poll asked if Indonesia should be able to meet all of its own needs without relying on imports from others. Remarkably, 78% agreed.

Indonesians are like Avengers fighting for globalization, you could say. But when that battle is won, they do believe the Indonesian Avengers’ planet should be able to rely on itself and survive on its own. As the world is figuring out what Globalization 4.0 should look like – and how to deal with the populist backlash to a previous wave of globalization - that may turn out to be an intriguing third way.

Madeleine Hillyer contributed to this article.

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