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Belt and Road Initiative: Challenging South and Southeast Asia

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The euphoria about the Belt and Road Initiative (BRI) in Indonesia and elsewhere in South and Southeast Asia (SEA) has been felt since 2017, particularly following the country’s participation in the BRI Summit in Beijing that year, where Indonesia (along with other SAARC and ASEAN member states) was expected to receive massive investments from China to support several infrastructure projects.

This year, the debates concerning the BRI are again becoming prevalent after Indonesia’s Coordinating Minister for Maritime Affairs Luhut Binsar Panjaitan as Indonesia’s representative signed 28 BRI projects last April. Among the various debated subjects is the growing concern about the real nature of the BRI. Is that a Chinese developmental initiative or a geopolitical instrument that uses debt-trap as a tool to bring targeted countries into the desired terms.

The BRI as Chinese debt trap

In the realisation of the BRI, China is targeted to spend US $ 4.4 trillion (Rp 62.7 thousand trillion) which is divided into various infrastructure projects in 65 countries. The funds from China will be disbursed from three main institutions, namely the Export-Import Bank of China, the Asia Infrastructure Investment Bank and the Silk Road Fund. However, the implementation of the BRI caused various kinds of controversy, one of which was related to the fear of a debt trap.

Sri Lanka is one of the BRI participating countries that must give up on China’s debt. The Mattala Rajapaksa International Airport (MRIA) project in Sri Lanka which costed US $ 190 million (Rp 2.7 trillion) with an interest of 6.3 percent did not benefit from the airport’s operations.

As a result, the Sri Lankan government is losing money. This made the country unable to pay debts to China. The inability to pay credit or interest, at the end of June 2016, led Sri Lanka to make an agreement with China in the form of equity (surrendering land for lease) for 99 years to the country.

According to a well-known SAARC strategic analyst based in India, Brahma Chellaney, what China does with its BRI is a debt-trap diplomacy effort, where this type of diplomacy is a bilateral relationship that is interwoven on the basis of debt. In its operations, this type of diplomacy involves a creditor country that deliberately extends excessive credit to the debtor country. If the debtor country cannot fulfill its debt obligations, often the creditor country will make it possible to interfere with economic and political conditions in the debtor country.

Acknowledging this, Malaysian Prime Minister Mahathir Mohamad in August 2018 said his country would stop funding-backed projects from China, including a railway line worth US $ 20 billion as there is a possibility that the country would be trapped in huge debts.

“We should avoid binary categorisations… However, a bilateral approach in developmental strategies historically does not bring back satisfactory results. Besides the Bretton Woods instruments – often enveloped in controversies, do not forget developmental champions. All of them are multilateral institutions of fair conditionalities, of balanced and transparent instruments: UNIDO, ADB, but also Islamic Development Bank, OFID or UNCTAD. If not a loan, ask them at least for advice”, prof. Anis H. Bajrektarevic reminded us recently in Kuala Lumpur at the Economic Forum.

Indonesia and lessons from Malaysia 

The same concern is also prevalent in Indonesia, given that the country, in the midst of many of its own problems, the government seemed to be incessantly ambitious to continue to take part in the BRI. It is important to remember that currently Indonesia’s external debt has reached US$387.6 billion at the first quarter of 2019.  It consists of government and central bank external debts of US$190.5 billion that have slightly rose by 3.1 percent (year-on-year) and private external debts of US$197.1 bilion that have rocketed by 12.8 percent (year-on-year).

Although the ratio of Indonesia’s external debt to Gross Domestic Product (GDP) is relatively safe at the level 36.9 percent and S&P Global Rating has just raised the long-term sovereign credit ratio for Indonesia from “BBB-“ to “BBB”, the Indonesia’s economic foundation is very fragile.

In 2018, for instance, the massive capital outflow made significant depreciation of the Rupiah against the US dollar due to the hike of Fed Fund Rates and the contagion of Turkish lira crisis. The currency hit about 15,000 rupiah against the greenbacks, the lowest level since the 1998 financial crisis, and made it one of the worst performing currencies in the region.

The extreme volatility of the Rupiah causes payments of interests and foreign debts more expensive. The 1998 financial crisis provided a precious experience that many companies faced default and the country’s economy experience chaos with economic growth of -13.1%. With such conditions, how come Indonesia dear to magnify its debts by signing massive BRI projects?

There is also a concern that the BRI projects is, instead of profiting Indonesia, putting the country at a disadvantage. One example comes from the Palembang LRT project, which has the same potential as the airport in Sri Lanka, is empty with little visitors. In fact, this project must suffer losses with an operating burden of Rp. 8.9 billion (US$618, 545) per month.

By looking at the fact that infrastructure projects have not been able to improve economic growth and to the gap in inequality – especially in the East – as well as various other disputes, the government’s decision to sign many BRI projects is certainly questionable. Also ironic is that the implementation of infrastructure development in Indonesia remains suffering from overt corruption practices. Instead of aiming at the welfare of society, infrastructure projects often become fields of concern for interested parties. Overall, there is a possibility that Indonesia will face Chinese debt trap is it is not careful, which would have negative impacts on the Indonesian economy.

The government needs to be able to make sure that participating in the BRI would not led to its loss. As what Malaysia has done, Jakarta may need to renegotiate with China on the terms and conditions of those projects. Indonesia must realise that China needs them more than they need China as the planned maritime route under the BRI would not be realised without Indonesia. Malaysian case demonstrates that negotiation is possible with China. Failure to do the above, it would not be surprising if what happened to Sri Lanka would also happen to Indonesia.

*Dendy Indramawan is a research assistant at Jakarta-based Institute for Development of Economics and Finance.

From our partner International Affairs

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Southeast Asia

China’s Stranglehold on South East Asia: Shaping the Future of the Region

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A global order characterized by multiplexity entails a diverse array of state and non-state actors actively influencing the norms of governance according to their distinct cultural perspectives. In stark contrast, a hegemonic world order is marked by the dominance of a single power that propagates a uniform narrative. China’s ambitious pursuit of hegemony in the Indo-Pacific region, particularly Southeast Asia, faces a formidable hurdle due to its unsophisticated and unsubtle approach to international relations.

Beijing’s diplomatic, economic, and military initiatives over the past ten years and beyond have undeniably increased China’s influence throughout Asia. Since the founding of the People’s Republic of China in 1949, China’s relations with Russia, as well as those with developing nations of Central Asia, India, Southeast Asia, South Korea, and Japan, have reached an all-time high. This expansion of Beijing’s influence and Asia’s response to Chinese initiatives are inescapable in the long run. Undoubtedly, China is the dominant nation in continental Asia, and it has a thriving economy that, while competing with those of other Asian nations, also drives overall economic growth.

However, to ostensibly stop China from becoming a regional hegemon, the United States and its Asian allies seek to maintain a delicate balance of power in the Indo-Pacific. They worry that Beijing will gradually persuade its neighbors to turn away from the United States, accept Chinese preeminence, and abide by Beijing’s preferences in key foreign policy decisions. Thus, a dominant power wielding its power in this way makes itself less vulnerable to blockades and other forms of coercion while also gaining the respect of weaker states within its sphere of influence, even in the absence of direct rule. The lack of local threats makes it easier for the regional hegemon, should the need or desire arise, to project power into other global domains. Furthermore, despite being a key component of hegemonic ordering, China’s increased economic and financial power in South Asia has not yet resulted in the creation of a regional structure that is in line with its own security, economic and ideological interests.

In particular, India has surpassed China in both size and proportion of young people due to its rapidly growing economy and population. Significant increases in defense spending show that many of China’s neighboring countries are actively engaged in vigorous balance efforts. In addition to the United States, other nations, such as Australia, India, and Japan, are working together. These countries will probably respond with even more resolute measures as their worries about Chinese hegemony grow.

Despite that, South Asia has historically rarely been a focus of American efforts to establish global hegemony. However, under Xi’s leadership, China has increasingly manipulated its role as a regional benefactor, showing a tendency to use force and take sides, particularly in relation to India’s territorial disputes with its neighboring states. The goal of China’s engagement policy is to maintain its strategic advantage over maritime communication routes. This strategy has forced the region into a precarious balance in which economic cooperation and strategic implications must be carefully navigated. The region has shown assertiveness on a few issues and has chosen to co-opt each other’s interests despite China’s materially inferior capabilities.

Due to its lack of cultural legitimacy as a superpower and its preference for extensive economic activism, China’s pretended win-win scenario for Asia as a whole has been called into question. As they interact with the prevailing norms at various levels of state and society, as well as state and non-state actors, the sectors that support China’s aspirations for hegemonic dominance are constantly contested, opposed, renegotiated, and reproduced. Furthermore, China’s rise has unquestionably been imperative to maintain global economic growth, with its market playing an important role.

In a world where our omnipotence in all fields is no longer absolute, Americans will face difficult adaptation challenges. We can adapt to change, though, because we have a flexible and resilient nature. Both the United States and China will continue to pursue their respective national interests as they see fit. In summary, since multiple countries, not just the US or China will participate in power sharing, the future world will likely be more complex than the past and will be characterized by increased “democratization.” There will be numerous opportunities for nations with reliable ties to both Beijing and Washington to control their level of involvement in international affairs. There shall be no dominant force and there shall be no such thing as a “G-2”.

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Southeast Asia

Indonesian Media Perception of China After Brokering Saudi-Iran Peaceful Restoration

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In some degree, we have agreement that regional instability in the Middle East occurred as a result of the reckless US strategic acts thus far. Libya and Iraq invasions have created a chaotic environment for the region everywhere, causing the Middle East not decent to live in. All the more, the long-drawn quarrel between Saudi and Iran which respectively represents the school of thought in Islam, namely Sunni and Shia, not only does harm to the two, but also stir a proxy war across the region. Such two conditions exacerbated the plight for people in Arab Peninsula. Therefore, the more US intervention declining in the Middle East, as well as the rapprochement between two sworn enemies of Saudi-Iran, the more it will open the chance to actualize peace in the region.

Perhaps, it is too early to discuss the impact of the Saudi-Iran restoration on Indonesian Muslims perception toward China at the current time. Meanwhile, it does not mean the event is improbable to have any effect at all since global political phenomena often spark a strong leverage on Indonesia’s domestic politics, especially for Muslim issues. The hottest one was the Indonesian public rejection of Israel’s football team arrival which eventually led to Indonesia being disqualified by FIFA as the host of the world cup under-20. The occurrence is the outcome of the long series of global political phenomena, in particular in the Middle East where Israel up to now still expanding its territorial settlement, seized some Palestinian regions that augment Indonesian public anger. Moreover, according to Anthony L. Smith (2003) findings, Indonesian Muslim society also will never forget how the anti-terrorism campaign launched by the US in the post of World Trade Center bombing on September 11, 2001, discrediting and containing anti-Islam stereotypes, renders ultimately anti-American backlash. Indonesian Muslim fury against the US, the study found, is often triggered by the US double standard in managing the conflict in many places where they deem the US has a bias in its foreign policy.

The facts provided above describe how magnificent the impact of Muslim-related issues on Indonesia is, not exceptional for Saudi-Iran relations. The Saudi-Iran relations recovery at least gives the consequence for Muslim adherents in Indonesia in some ways. Apart from shedding a lesson about how to deal with many cases of intra-domestic Muslim intolerance, the event also opens a new horizon upon the importance of China’s role in shaping a world to be more harmonious. China’s fruitful action as a peace mediator between Saudi and Iran has drawn the feeling of respect and impressed of Indonesian society. However, it is unprecedented imaginary the report regarding the reconciliation of the two sworn enemies in the Middle East surprised the whole public in the world. That is spectacular due to the sudden occasion that happened thanks to China’s benevolence. China is neither actor in the region nor a Muslim country nor a member of the Organization of Islamic Cooperation. Consequently, due to its significance, it inevitably, too gets a spot in Indonesian media coverage. As reported by Indonesia’s distinguished newspaper, Kompas, in its editorial titled “China’s Charm and Iran-Saudi Relations” (03/13/2023), in spite of China’s strategic interest in the Middle East, the pacification between the two camps due to China’s line of duty deserved to get applauded. Kompas is not partisan media and it becomes an important reference for the Indonesian public reading.

Kompas opened its news lead with the sentence “Global power could reconcile (hostile parties), not exploit” referring indirectly to US’ failed role in the Middle East so far. Conversely, China’s tacit approach without fanfare and non-invasive has actually been effective. In other parts of its news, Kompas praised China and mentioned that China is worthy to get appreciation by saying “Saudi Arabia and Iran agreed to reopen diplomatic relations that had been broken since 2016. This was made possible because of China’s commendable kindness”. Unmitigatedly, Kompas also claims that the US has failed in the Middle East, “Liberal hegemony has failed.  China offers itself a simple, no-frills peace. China’s economic strength and Arab oil play a role, but peace is a core. Common prosperity could be achieved if there is a stable and peaceful situation. Salute to China”.

Kompas’ news coverage at one blow, albeit indirectly way, describes Muslim happiness inside the country. Indonesian Muslim congregations are enthusiastic to look forward a harmony in the Middle East. Engulfed the conflict in the Middle East often has an impact on Indonesia’s domestic political stability as abovementioned earlier. Thus, the apparent communion between Sunni and Shia, either Saudi or Iran, will also give a trickle-down outcome in intra-religious life, especially Islam in Indonesia. While well-known as benign and plural Muslim, undoubtedly in some cases Sunni-Shia hostility has oft occurred in Indonesia. Achieved current rapprochement between Saudi and Iran, least would open much maneuvering room for dialogue and learning for wrangled fringe in Indonesia to take advantage and similar steps.

Once again, thanks to China. Now, we are still waiting for another surprise upon China’s role in making the breakthrough to realize the comprehensive win-win solution between Israel and Palestine in the Middle East. This expectation also has ever conveyed by Haedar Nashir, Chair of Muhammadiyah – one of the most distinguished moderate Muslim organizations in Indonesia besides Nahdlatul Ulama – it was addressed long-far before the Saudi-Iran rapprochement. He hoped China is actively engaged in freeing Palestine “We hope that China as a big country can defend the rights of the Palestinian people like other nations” (Republika, 2/2022).

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Southeast Asia

The Effectiveness of the Declaration of the Convention on the Rights of the Child in Combating Child Labor in Indonesia

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Initiated by the United Nations regarding the importance of Human Rights in dealing with the protection of children’s rights, then giving birth Declaration of the Convention on the Rights of the Child on November 20, 1958. The formation of the convention on the rights of the child certainly formulates universal values ​​and legal norms as an umbrella for countries to protect children, therefore, this convention contains international agreements on human rights by inserting civil rights, economic rights , and cultural rights therein. There have been many who have signed the ratification of the Convention on the Rights of the Child in the world, except Somalia. In the Convention on the Rights of the Child there are 54 regulatory articles. As a body that strives for child protection, are member states that ratify children’s rights consistent in seeking child protection and is this convention on the rights of the child effective for use (Human Rights, 1989)

Indonesia has ratified the Convention on the Rights of the Child by Presidential Decree Number 36 of 1990. With the signing of the Convention on the Rights of the Child by Indonesia, legally Indonesia performs its obligations to fulfill and protect the basic rights of children. This ratification was strengthened by the Indonesian government by passing Law No. 23 of 2003 concerning child protection based on the rule of law to protect children. The convention on the rights of the child was ratified by Indonesia because the level of child welfare in Indonesia is very low. Like many child labor activities (Lestari, 2017).

Child Labor in Indonesia

The phenomenon of child labor also occurs in Indonesia. It is recorded that 9 out of 100 children aged 10-17 work in the informal sector and 88.77% of children who work are unpaid. Children who should get rights such as going to school and playing are forced to do work that should be done for adults. The problem of child labor is of particular concern to the world community. This is because the existence of child labor can have an impact on the health and welfare of these children (ILO, 2015).

Many child workers in Indonesia work in the agricultural sector. According to International Labor Organization (ILO) there are around 1.5 children working in oil palm, rubber, and tobacco plantations. The ILO also noted that East Java and Central Java are regions with the highest rates of child labor in Indonesia with an age range of 10-14 years. This has an impact on the health of these children, because working children have to inhale pesticides from prohibited fertilizers. In addition, there are many cases of children being injured as a result of being exposed to oil palm thorns (Kemenpppa, 2021).

Is the Convention Declaration on the Rights of the Child Effective in Addressing Child Labor in Indonesia?

There are still many problems regarding child labor in Indonesia, a big question is whether the convention on the rights of the child that has been ratified by Indonesia is applied to handling child labor. If you look at article 32 in the convention on the right of the child it states that:

1. The state must recognize and protect the rights of children from attempts at economic exploitation, such as work activities that endanger or interfere with the child’s education, endanger physical health, mental, spiritual, moral or social development,

2. The ratifying State shall take legislative, social and educational measures to ensure the application of this article with purpose having regard to the relevant provisions of other international instruments, States Parties will in particular:

a) Determine the minimum age or minimum age to be accepted for work;

(b) Provide suitable hours and conditions of work;

(c) Establish appropriate penalties or other sanctions to ensure the effective implementation of this article (Human Rights, 1989)

In fact, Indonesia cannot apply several regulations from the 54 articles in ratification. Indonesia seems to have forgotten the regulations contained in the article that has been explained. Indonesia has also legalized the law regarding child labor contained in Law No. 13 of 2003 article 68 concerning the prohibition to employ children. However, the law that is made well is from regulations declaration of the Convention on the Rights of the Child as well as domestic laws. Until now child labor inIndonesia is still at 1.05 million working children. The regulation was made without any reports on whether the regulations and efforts made by the Indonesian government based on legal conventions on children’s rights were effective (Lestari, 2017).

Conclusion

There is a declaration Convention on the Rights of the Child actually very helpful to work on the rights of children around the world. The established legal laws are also very good. However, it turns out that the application of existing laws is not enough to be used optimally in Indonesia in dealing with child labor, even though Indonesia has also made statutory regulations that regulate child labor. There are suggestions that can be conveyed for the implementation of child protection, namely that the government should comply with the rules contained in the ratification article regarding children’s rights. Then there is synchronization of programs to fulfill the protection of children’s rights. Strengthen the law by conducting regular monitoring and evaluation of child protection programs. The Indonesian government must be firm in making improvements or changing programs in order to achieve child welfare. Declaration of the Convention on the Rights of the Child must also strengthen regulations so that countries that commit violations are at least given strict sanctions.

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