"The Modern Silk Road" and Its Challenges for Indonesia

You can’t manage change. You can only ahead of it.(1)

Peter F. Drucker

For more than 2000 years ago, the silk route (2) has known as a global network of trade routes that become the central for cultural interaction (3) through regions of the Asian continent connecting the East and West from China to Mediterranean Sea. Trade on the Silk Road played a significant role in the development of the civilizations of China, the Subcontinent, Persia, Europe, the Horn of Africa and Arabia, opening long-distance political and economic relations between the civilizations. (4) In October 2012, Wang Jisi – a professor at Beijing University – urged China to re-open its ancient commercial trade routes with the West. And in 2013, China’s President, Xi Jinping proposed to its neighbors the “One Road, One Belt” initiative, jointly building the Silk Road Economic Belt and the 21st-Century Maritime Silk Road. (5)

Essentially, the 'belt' includes countries situated on the original Silk Road through Central Asia, West Asia, the Middle East, and Europe. The initiative calls for the integration of the region into a cohesive economic area through building infrastructure, increasing cultural exchanges, and broadening trade. Apart from this zone, which is largely analogous to the historical Silk Road, another area that is said to be included in the extension of this 'belt' is South Asia and Southeast Asia. The coverage area of the initiative is primarily Asia and Europe, encompassing around 60 countries including Indonesia. (6)

In supporting this initiative, the government of China proposed two financial institutions. First, Asian Infrastructure Investment Bank (AIIB), an investment bank with $100 billion capital resources in which China controls 26 percent of the votes, formally operated on 25 December 2015 with 50 member-states which are all-funding member and aims to support the infrastructure development in Asia Pacific region. (7) And the second is the Silk Road Fund, a state owned investment fund of the Chinese government, which is established on 29 December 2014 to foster increased investment for business in countries along the One Belt, One Road. (8) Another financial institution that has been established which will support this initiative is New Development Bank, a BRICS (Brazil, Russia, India, China, and South Africa) multilateral bank established on 15 July 2014, as alternatives to the World Bank, International Monetary Fund and Asian Development Bank. (9) The Chinese government also established an academic institution, University Alliance of the Silk Road at Xi’an Jiaotong University, to support the One Belt, One Road initiative with research and engineering, and to foster understanding and academic exchange. (10)

The 'One Belt One Road' policy contrasted with the two US-centric trading arrangements, the Trans-Pacific Partnership (TPP) (11) and the Transatlantic Trade and Investment Partnership (TTIP), (12) as multilateral trade agreements that binding treaties for all its members. The 'One Belt One Road' is a Chinese foreign policy which has no official member list among the 60 countries which will be encompassed by its routes.

Figure 1: The Silk Road routes in ancient and modern era (13)

The One Belt One Road: A New Model of International Cooperation?

On 28 March 2015, the National Development and Reform Commission, Ministry of Foreign Affairs, and Ministry of Commerce of the People’s Republic of China issued the ‘Action Plan on the China-proposed Belt and Road Initiative’. In the background is mentioned explicitly that the initiative is an effort to find a new model of cooperation and global governance in order to inject new positive energy into world peace and development and to promote orderly and free flow of economic factors, highly efficient allocation of resources and deep integration of markets; encouraging the countries along the Belt and Road to achieve economic policy coordination and carry out broader and more in-depth regional cooperation of higher standards; and jointly creating an open, inclusive and balanced regional economic cooperation architecture that benefits all. (14)

At the heart of One Belt, One Road lies the creation of an economic land belt that includes countries on the original Silk Road through Central Asia, West Asia, the Middle East and Europe, as well as a maritime road that links China’s port facilities with the African coast, pushing up through the Suez Canal into the Mediterranean. The project aims to redirect the country’s domestic overcapacity and capital for regional infrastructure development to improve trade and relations with ASEAN, Central Asian and European countries. (15)

Figure 2: List of Countries along One Belt One Road Initiative (16)

To achieve this initiative, the Chinese government used bilateral cooperation mechanism with countries a long One Belt One Road, on consideration that countries along the Belt and Road have their own resource advantages and their economies are mutually complementary. Therefore, there is a great potential and space for cooperation. They should promote policy coordination, facilities connectivity, unimpeded trade, financial integration and people-to-people bonds as their five major goals. (17) Besides, this initiative also enhance its relation with the role of multilateral cooperation mechanisms, make full use of existing mechanisms to strengthen communication with relevant countries, and attract more countries and regions to participate in the Belt and Road Initiative. (18)

The United Nations Industrial Development Organization (UNIDO) responds this initiative positively by organized the “One-Belt-One-Road Inclusive and Sustainable City Exhibition and Dialogue”  in support of the 2030 Agenda for Sustainable Development on 17 - 21 October 2016 UNIDO Headquarters, Vienna International Centre, Vienna, Austria. The event aims to share development experiences and forge new partnerships for the achievement of inclusive and sustainable industrial development and urbanization along the “One Belt, One Road”, and also to mobilize the participation of as many cities and enterprises located along the “One Belt, One Road” as possible, as well as of other UN partner agencies. The platform created by the participating cities was intended to enhance international understanding of individual development successes and challenges and attract outside investment, thereby speeding up the process of inclusive and sustainable industrialization. In addition, UNIDO hopes that this event has inspired the creation of a China-ASEAN Expo as a supplement to exiting inter-regional, city-level and intra-urban dialogues concerning the “One Belt, One Road” initiative. (19)

The Transformation of Chinese Foreign Policy and It’s Challenges to Indonesia

During the last four decades, China has moved from being an isolated country separated from the international community to having become one of the world’s major powers. Under President Xi Jinping. China’s actions in the South and East China Seas and its pursuit of the One Belt, One Road maritime and continental trade route strategy have all led to a more intense scrutiny of Chinese intentions. Another area that is said to be included in the extension of this 'belt' is South Asia and Southeast Asia.  

The Association of South-east Asian Nations (ASEAN) economies have been at the forefront of the emerging markets success story of the past two decades and ASEAN will be the world’s third fastest growing large economy in 2016. As a part of South-east Asian nations, Indonesia’s economic performance is stabilizing with reductions in energy subsidies and increased spending on infrastructure having a positive effect for the economic growth. (20) As the Chinese economy slows and restructures, Indonesia and ASEAN economies in general will become the next leap forward for Chinese One Belt One Road Initiative. For Indonesia, the One Belt One Road Initiative is an opportunity to strength Indonesia’s Maritime Highway National Program. Joki Widodo presidential reitearted his call to transform Indonesia into a maritime nation and involed the slogan of ‘Jalesveva Jayamahe’, In the Ocean We Triumph. (21) This program initially issued by the government to build a more interconnected maritime transportation between islands in Indonesia territories through infrastructure development of 21 ports along Indonesia islands. Indonesian government has launched 43 infrastructure projects in 2015 with a total investment of up to USD $52 billion to support this program. (22)

As the present global economic situation offers limited room to rely on external conditions, it means that Indonesia will depend mainly on the domestic economy. The Chinese One Belt One Road Initiative and Indonesia’s Maritime Highway will be challenge in years to come to boost economic development for both countries. This challenge has to be prepared by Indonesian Government  in order to develop national capacity to answer the challenge. What will be needed to deal with this challenge, this paper will propose several thought.

First, the government should prepare with what is the best local and national policies to deal with this inter connectivity, especially on migrant workers policy considering there is a wide protest against migrant workers from China.

Second, preparing Indonesia’s cities to deal with global world inter connectivity, including industry and infrastructure.  

Third, Indonesia has to set a sustainable economic development scenario which is depend on Indonesia industrialization and modernization considering that some parts of Indonesia regions is still under develop.

Conclusion

To conclude this paper, I would like to cite Parag Khanna’s (23) argument, which say that  

“Another way this competitive connectivity takes places is through infrastructure alliances: connecting physically across borders and oceans through tight supply chain partnerships. Geopolitics in a connected world plays out less on the risk board of territorial conquest and more in the matrix of physical and digital infrastructure. (24)

Reference

1. Peter F. Drucker, On Leading Change, 2002.
2. In the mid-nineteenth century, the German geologist, Baron Ferdinand von Richthofen, named the trade and communication network Die Seidenstrasse (the Silk Road) in 1877, and the term, also used in the plural, continues to stir imaginations with its evocative mystery. In June 2014 UNESCO designated the Chang'an-Tianshan corridor of the Silk Road as a World Heritage Site. Accessed on 4 February 2017. See, http://en.unesco.org/silkroad/about-silk-road
3. The greatest value of the Silk Road was the exchange of culture. Art, religion, philosophy, technology, language, science, architecture, and every other element of civilization was exchanged through the Silk Road along with the commercial goods the merchants carried from country to country. Along the network of routes disease traveled also, as evidenced in the spread of the bubonic plague of 542 CE which is thought to have arrived in Constantinople by way of the Silk Road and which decimated the Byzantine Empire. See, Joshua J. Mark, Silk Road, Accessed on 4 February 2017. See,http://www.ancient.eu/Silk_Road/
4. As cited from Jerry Bentley, Old World Encounters: Cross-Cultural Contacts and Exchanges in Pre-Modern Times (New York: Oxford University Press, 1993), 32. Accessed on 4 February 2017. See,https://en.wikipedia.org/wiki/Silk_Road
5. Financial Times, What can the Silk Road do for global trade? World Economic Forum, September 22, 2015. Accessed on 8 February 2017. See https://www.weforum.org/agenda/2015/09/what-can-the-new-silk-road-do-for-global-trade/ 
6. Wikipedia, Silk Road. Accessed on 5 February 2017, see,https://en.wikipedia.org/wiki/Silk_Road
7. Wikipedia, Asian Infrastructure Investment Bank. Accessed on 5 February 2017, see https://en.wikipedia.org/wiki/Asian_Infrastructure_Investment_Bank 
8. Wikipedia, Silk Road Fund. Accessed on 5 February 2017, see https://en.wikipedia.org/wiki/Silk_Road_Fund 
9. David Tweet and Laurence Arnold, QuickTake Q&A: How China’s New Silk Road Leads Back to Beijing, Bloomberg Market Website, accessed on 8 February 2017, see https://www.bloomberg.com/news/articles/2016-08-01/quicktake-q-a-how-china-s-new-silk-road-leads-back-to-beijing 
10. Wikipedia, University Alliance of the Silk Road. Accessed on 5 February 2017, see https://en.wikipedia.org/wiki/University_Alliance_of_the_Silk_Road 
11. The Trans-Pacific Partnership (TPP), or the Trans Pacific Partnership Agreement (TPPA), is a trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States (until January 23, 2017) and Vietnam. The finalized proposal was signed on 4 February 2016 in Auckland, New Zealand, concluding even years of negotiations. It currently cannot be ratified due to U.S. withdrawal from the agreement on 23 January 2017. The former Obama administration claimed that the agreement aimed to "promote economic growth; support the creation and retention of jobs; enhance innovation, productivity and competitiveness; raise living standards; reduce poverty in the signatories' countries; and promote transparency, good governance, and enhanced labor and environmental protections. Accessed on 5 February 2017, See https://en.wikipedia.org/wiki/Trans-Pacific_Partnership  
12. The Transatlantic Trade and Investment Partnership (TTIP) is a proposed trade agreement between the Europen Union and the United States, with the aim of promoting trade and multilateral economic growth. The American government considers the TTIP a companion agreement to the Trans-Pacific Partnership (TPP). Accessed on 5 February 2017, See https://en.wikipedia.org/wiki/Transatlantic_Trade_and_Investment_Partnership  
13. The Economist, Our Bulldozers Our Rules, Accessed on 5 February 2017, see http://www.economist.com/news/china/21701505-chinas-foreign-policy-could-reshape-good-part-world-economy-our-bulldozers-our-rules  
14. The State Council of the People’s Republic of China, Full text: Action plan on the Belt and Road Initiative, accessed on 8 February 2017, see http://english.gov.cn/archive/publications/2015/03/30/content_281475080249035.htm 
15. A Brilliant Plan One Belt, One Road, accessed on 8 February 2017. See https://www.clsa.com/special/onebeltoneroad/ 
16. United Nation, One Belt One Road, accessed on 8 February 2017, see http://www.un.org/esa/ffd/wp-content/uploads/sites/2/2015/10/PPP-Overseas-Fiscal_vSend-for-UN-Portion.pdf 
17. The State Council of the People’s Republic of China, Full text: Action plan on the Belt and Road Initiative, accessed on 8 February 2017, see http://english.gov.cn/archive/publications/2015/03/30/content_281475080249035.htm
18. Multilateral cooperation such as the Shanghai Cooperation Organization (SCO), ASEAN Plus China (10+1), Asia-Pacific Economic Cooperation (APEC), Asia-Europe Meeting (ASEM), Asia Cooperation Dialogue (ACD), Conference on Interaction and Confidence-Building Measures in Asia (CICA), China-Arab States Cooperation Forum (CASCF), China-Gulf Cooperation Council Strategic Dialogue, Greater Mekong Subregion (GMS) Economic Cooperation, and Central Asia Regional Economic Cooperation (CAREC). 
19. UNIDO, One Belt One Road Inclusive and Sustainable City, accessed on 8 February 2017, see https://www.unido.org/news-centre/events/past-events/one-belt-one-road-inclusive-and-sustainable-city.html  
20. Hartanto T. Budiman, Opportunities and Risks in Indonesia’s Economic Outlook, accessed on 10 February 2017. See http://forbesindonesia.com/berita-994-opportunities-and-risks-in-indonesia%C3%A2%E2%82%AC%E2%84%A2s-economic-outlook.html 
21. Joseph Chinyong, Indonesia as a Maritime Ppower: Jokowi’s Vision, Strategies, and Obstacles Ahead. Accessed on 10 February 2017, see: https://www.brookings.edu/articles/indonesia-as-a-maritime-power-jokowis-vision-strategies-and-obstacles-ahead/ 
22. 2016 Indonesia Infrastructure & “One Belt One Road” Investment Conference, accessed on 10 February 2017, see http://www.indonesia-investments.com/news/trade-expos-exhibitions/2016-indonesia-infrastructure-one-belt-one-road-investment-conference/item7108? 
23. Parag Khanna is an international relations expert and best-selling author. He is a CNN Global Contributor and Senior Research Fellow in the Centre on Asia and Globalisation at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He is also the Managing Partner of Hybrid Reality, a geostrategic advisory firm, and Co-Founder & CEO of Factotum, a boutique content strategy agency.
24. Parag Khanna, Connectopraphy: Mapping the Future of Global Civilization, New York: Random House, 2016, pp. xvii.