the US and China are both investing heavily into Indonesia trying to secure it as an ally why because Indonesia will tip the balance of power in Asia Indonesia straddles the Indian and Pacific Oceans which means it holds considerable sway over some of the world's most important Maritime trade routes as tensions between the US and China escalate this archipelago with over 177,000 Islands finds itself at the center of a high stakes competition both superpowers recognize that Indonesia's Allegiance could determine the future of Asia Pacific relations but what makes Indonesia so compelling its economic potential vast natural
resources and growing military capabilities are just the start of the story if I ask you to list the best economic growth stories of this Century you'd probably start by naming China after that maybe Vietnam India or Ethiopia while Indonesia also belongs on that list since emerging from the Asian financial crisis of 1997 the nation has undergone a remarkable transformation today it's an emerging Powerhouse reshaping the economic landscape of Southeast Asia consider this Indonesia's economy has grown tfold in just over two decades it's projected to reach a GDP of 1.5 trillion by the end of 2024
rising to the 16th largest economy globally has meant substantial strides in poverty reduction Indonesia's poverty rate has been cut in half since 1999 that's incredible when you remember that this is a population of over 275 million people but what's driving this explosive economic expansion the answer lies in Indonesia's strategic pivot from raw material exports to value added Industries in the early 2000s Indonesia's grow grth was primarily fueled by commodity exports as China's economy grew it became a voracious importer of Indonesian copper oil gas and coal however the nation's leadership recognized the limitations to this model
and implemented bold policies to diversify and strengthen the economy most recently Indonesian president Joko woto decided to ban raw nickel exports in a calculated strategy to build a domestic processing industry the results have been transformative estimates suggest that the country's nickel smelting capacity increased from just 16 million tons per year in 2018 to over 100 million tons per year by 20123 today the country produces more nickel than all other nations combin positioning it at the heart of the booming electric vehicle industry between nickel Mining and processing woto has positioned Indonesia as a lynchpin of the
global supply chain and this value added manufacturing creates jobs makes the Indonesian economy more resilient and entices investors to look for more Avenues to invest in the country but Indonesia's economic Renaissance isn't limited to Natural Resources the nation has simultaneously cultivated a thriving digital economy Indonesia now boasts the largest e-commerce industry in Southeast Asia dwarfing that of its neighbors to put that perspective Indonesia's e-commerce sector is six times larger than that of the Philippines this digital boom has given rise to a vibrant startup ecosystem Indonesia's home to 15 startups valued at over $1 billion each
a number that surpasses every other Southeast Asian country except for Singapore and these unicorns aren't just creating wealth they're driving Innovation attracting Global Talent and positioning Indonesia as a tech Hub to rival established centers across Asia this has been supported by Indonesian economic policies that are deliberately designed to attract foreign investment if an investor wants to come to Indonesia go ahead come to Indonesia as of 2023 Indonesia boasts the fastest growing economy in southeast Asia and one of the fastest growing globally and this is paired with Indonesia's young Dynamic Workforce which stands in stark contrast
to the Aging stagnating economies of a established Asian players Indonesia's economy is the foundation of its geopolitical power but its strategic location unlocks another substantial opportunity as tensions between the United States and China escalate Indonesia finds itself in a unique position to shape the future of Asia but how does a country with limited Military might wield such influence the answer lies in Indonesia's long-standing policy of non-alignment this approach rooted in the 1955 bandang conference has allowed Indonesia to maintain its independence while avoiding permanent strategic alignments with major powers during the Cold War Indonesia masterfully played
both the United States and Soviet Union securing military and economic aid without fully committing to either side in today's multi-polar world Indonesia is continuing this delicate Balancing Act the nation engages with both the US and China extracting benefits from each while maintaining its autonomy simultaneously Indonesia has expanded its annual guda Shield joint military exercises to include soldiers from 12 additional countries including Australia and Japan this move demonstrates Indonesia's commitment to Broad military cooperation without aligning exclusively with a single power but this non-alignment policy doesn't mean that it's passive on matters of regional Affairs when it
comes com to territorial disputes Indonesia has shown a willingness to hold its ground the nation has refused China's offer to negotiate Maritime boundaries and conducted military exercises near the Nuna Islands signaling resistance to Chinese territorial claims yet China remains a significant economic partner becoming Indonesia's second largest source of foreign direct investment and a major participant in infrastructure projects since 2013 China has intensified its focus on oan countries including Indonesia through massive Investments as part of the belt and Road Initiative for Indonesia this is meant funding for the Jakarta bandang high-speed Railway Mora wall industrial park
and the expansion of several Indonesian ports while the financing comes with strings attached Indonesia has been able to largely outgrow its debt obligations a feat that few Belton Road loan recipients have been able to achieve today Indonesia does over $130 billion worth of trade annually with China nearly double the amount when President woto came to office but Indonesia can still extract concessions from its partner due to the essentiality of nickel to China's EV industry and Indonesia's strategic value geographically since Indonesia is the country that connects the Pacific and Indian oceans aox approximately 60% of all
Maritime trade passes through Indonesian Waters this makes it the key pivot country in the battle for influence in the Eastern hemisphere the United States strategy of a free and open indopacific involves Partnerships with Japan India and Australia and would become undeniable with the addition of the world's fourth most populous nation now we've already outlined some of China's belt and Road Investments but the US has also been a beneficial partner Indonesia benefits from the US generalized system of preferences allowing duty-free entry for over 3,500 Indonesian products into the US market Indonesia's also part of the US
International military Education and Training Program which has helped modernize its military as tensions simmer in the South China Sea and great power competition intensifies Indonesia is quietly modernizing its armed forces in the background is it preparing for war hopefully not but this military transformation is a calculated move to make it a credible threat to deter foreign powers meddling in Indonesia's neighborhood in 2023 the country approved a 20% increase in its military budget as part of a larger long-term strategy known as Indonesia's minimum essential Force plan one of the pillars of the Indonesian strategy is s
forcing Advanced weaponry and equipment from a diverse array of sources Indonesia's military modernization efforts include the acquisition of 33 fighter aircraft and 103 Leopard 2 battle tanks from Germany while sourcing scorpion tanks from Britain this diverse sourcing of arms serves a dual purpose it enhances Indonesia's military capabilities while also maintaining strategic flexibility reflecting its non-alignment policy by acquiring c130s and attack helicopters from the US but missiles and missile systems from China Indonesia ensures that no single nation can veto its modernization plans or put a cap on its power this strategy does result in higher costs
for maintenance and operation but Indonesian leadership has judged that that loss and efficiency is worth the Strategic Independence over the past few years the US has conducted more than 100 military exercises with Indonesia and trained thousands of its officers it's also exported more than a billion dollars worth of arms and equipment to the country to further strengthen its ties with approximately 400,000 Personnel Indonesia boasts one of the largest armed forces in Southeast Asia and a sizable modernized military is essential for the Region's most pressing security challenge territorial disputes in the South China Sea while Indonesia
is not a claimant on the most contentious areas of the South China Sea it has faced pressure from China over Maritime boundaries near the Nuna Islands in a show of resolve Indonesia conducted military exercises near these islands in June of 2020 shortly after refusing China's offer to negotiate Maritime boundaries the South China Sea issue exemplifies the delicate Balancing Act Indonesia must strike in its foreign policy while maintaining economic ties with China Indonesia has shown willingness to stand firm on issues of its sovereignty this stance was further reinforced when Indonesia doubled down on its plans to
turn the Nuna Islands into a special economic zone despite Chinese demands to stop drilling for oil and natural gas in the area this exemplifies how Indonesia's hard power goes hand inand with its Economic Development a credible military means it can do what's best for its people there are a lot of people in Indonesia with a population of 277 million it's the fourth most populous country in the world and the country's demographic profile is particularly favorable for economic growth unlike many developed Nations grappling with aging populations Indonesia boasts a relatively young Workforce this demographic dividend is
expected to fuel Indonesia's economy for at least the next half century giving it a significant Edge over countries like Japan and South Korea which are facing labor shortages and increased social costs due to their aging populations meanwhile Indonesia has the workers to support increasing industrial demands this should ultimately grow its middle class into a legitimate economic driver fueling domestic consumption and creating a viable internal Market as more Indonesians join the ranks of the middle class the demand for goods and services is surging creating a self-sustaining cycle of economic growth Indonesia's GDP per capita is already
twice that of India's and there is considerable upside yet to be realized in order to fully leverage its demographic dividend the country is working to reform its education system which lags behind many Regional competitors only about 10% of Indonesians speak English which Remains the de facto language of international business this language barrier could potentially limit Indonesia's ability to fully integrate into the global economy and attract foreign investment progress has been slower than desired and Indonesia still Trails behind Regional Rivals like India in terms of an English-speaking Workforce but the age of the internet and artificial
intelligence May render that less of a disadvantage as the decade goes by ultimately there is very little standing between Indonesia becoming one of one of the world's 10 largest economies now there are a few hurdles that Indonesia must overcome the first is its geography the country's population is spread across more than 177,000 Islands making Nationwide development a complex and costly Endeavor it also makes inequality between rural and urban centers particularly severe Java the most densely populated island produces about 56 % of all of Indonesia's rice and contains more than half of the country's population despite
comprising less than 7% of Indonesia's total land area this concentration of population and economic activity presents both opportunities and challenges for balanced National development Additionally the capital city Jakarta is sinking into the ocean and faces severe flooding risks some predictions suggest that Jakarta will be submerged by 2050 due to rising sea levels the government's proposed solution a giant seaw wall is projected to cost around $40 billion and has faced controversy over land seizures environmental concerns and security risks leaders have also explored moving the capital to another Island that would also cost tens of billions of
dollars and create a Honeypot for exploitation and bribes corruption continues to plague Indonesia's political and economic landscape after making significant progress in the fight against graft entering the top half of transparency International's corruption perception index in 2019 Indonesia has since regressed and this could all be compounded by internal political turmoil current president Joko wodo is at his term limit but does not seem interested in gracefully yielding power he's campaigning hard for his defense minist prooo sabano in the 2024 election in addition to a track record of Human Rights abuses paoo has selected W Doo's 36-year-old
son as his Vice Presidential nominee this political maneuvering increases the tension on Indonesia's relatively young and fragile democracy woto previously pledged to refrain from building a family Dynasty that seems to have been just an empty campaign promise the potential for Democratic backside looms large and we've already seen it in other Southeast Asian Nations like Thailand and the Philippines Indonesia's democracy remains vulnerable to authoritarian Tendencies and populist appeal the country's ability to navigate these political challenges while maintaining its economic growth will Define how successful it is in the decade ahead I think that economic growth is
already baked into the Indonesian story and they also have the benefit of being removed from the likeliest flash points for conflict in East Asia should Regional tensions escalate in such a scenario Indonesia would have the advantage of getting to make a calculated reaction to events rather than rushing to respond and in matters of negotiation the ability to be patient usually yields greater concessions it would be wise to keep an eye on Indonesia's continued growth and how it aligns itself in the years ahead I know I'll be watching closely if you enjoyed this video thank you
for watching check out our other video on a country with an enormous Muslim population Pakistan
