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India and Indonesia trade deals realign interests in Asia

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In Brief

Indonesian President Susilo Bambang Yudhoyono’s attendance as chief guest at India’s 62nd Republic Day on 26 January harkened back to an earlier time.

At the same occasion in 1950 when India first commemorated the adoption of its new constitution, Prime Minister Jawaharlal Nehru invited his close ally in the Non-Aligned Movement, Indonesian President Sukarno, to attend the festivities.


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The scene here has changed little over the years, with dignitaries presiding over a grand military and cultural parade that remains one of the world’s great national spectacles. This year’s parade took place on a sunny, cool morning with only a light winter haze blurring the view along the early parade route from the presidential palace on Raisina Hill to the India Gate three kilometers away.

While India and Indonesia were very close in the years following independence, they grew apart as the Non-Aligned Movement lost relevance. Each year India has invited a new chief guest to Republic Day, selected based on India’s strategic economic and political interests at the time. The return of an Indonesian president 61 years after Sukarno’s first visit marks a realignment of the two countries’ interests. India and Indonesia, along with the US, are the world’s largest democracies. Both countries are acutely conscious of their growing role on the world stage and anxious to increase their influence.

From an Indian perspective, there were two objectives underlying President Yudhoyono’s selection as chief guest for this year’s Republic Day celebrations. First, closer alignment with Indonesia is expected to strengthen India’s hand in the East Asian Summit, an ASEAN-led grouping of 17 countries that also includes Russia, China, Japan, Australia, and the US trade is an important component of the summit process, along with strategic issues ranging from energy security to climate change. India has been a part of the summit since its first meeting in Kuala Lumpur in 2005. Among other advantages, strengthening India’s relationship with Indonesia, which currently chairs ASEAN, is seen as a way of counterbalancing Chinese influence in the summit.

Second, the trip was about business, pure and simple. Like British Prime Minister David Cameron last July, U.S. President Barack Obama in November, and Chinese Premier Wen Jiabao in December, President Yudhoyono arrived in New Delhi accompanied by a planeload of business leaders. Economic engagement between India and Indonesia is growing fast, bolstered by the signing of the India-ASEAN Free Trade Agreement last year under which India committed to reduce import tariffs on goods from ASEAN countries. Bilateral trade between India and Indonesia topped $12 billion in 2010. Among other goods, India sells military hardware to Indonesia under a defense cooperation agreement signed in 2001.

President Yudhoyono and his delegation met with around 500 business leaders at a forum hosted by national business associations where they signed billions of dollars worth of cooperative agreements for ventures ranging from infrastructure to mining and manufacturing. The Steel Authority of India (SAIL) signed an agreement to set up a $3.3 billion steal plant in Indonesia’s Central Kalimantan. Hyderabad-based GVK Power and Infrastructure Ltd. signed memoranda to build airports in North Bali and Yogyakarta. In addition to trade agreements, the two countries signed an extradition treaty and a ‘mutual legal assistance’ treaty.

President Yudhoyono’s visit has been viewed within Delhi’s policy and business communities as having been very successful. The visit highlighted the importance that India attaches to its ‘Look East’ policy of increased engagement and economic integration with Southeast Asia. It also showcased India and Indonesia’s growing profile on the world stage as part of a strong and resurgent Asia.

Nick Langton is The Asia Foundation’s country representative in India. This article was first published here by the Asia Foundation.

3 responses to “India and Indonesia trade deals realign interests in Asia”

  1. Nick’s analysis is correct and well written. However, what it perhaps did not underline is the security aspect. India and Indonesia have been cooperating for some time on naval security issues, such as anti-piracy action on and near the straits of Malacca. The visit was a useful building block for future cooperation in the vital seaways of Asia.

  2. The Non-Aligned Movement was set up in 1961, so Sukarno could not have been a close ally of Nehru’s in the NAM in 1950. In any case, Sukarno held little power in Indonesia in 1950 despite being president, and would not have been much of an ally for Nehru. Eleven years later, in April 1961, when Sukarno had imposed Guided Democracy, Presidents Tito and Nasser announced they would hold a non-aligned summit. Sukarno agreed to co-sponsor. Nehru was lukewarm, and India did not become a co-sponsor.When the conference took place in Belgrade in September 1961, Sukarno took a much stronger anti-colonial position than Nehru. India’s Prime Minister appealed much more to the Indonesian Socialist Party (PSI), which was banned by then, than to Sukarno.

  3. Nehru and other Indian leaders had supported Indonesian independence and had even before Indian independence started global lobbying (1946) in favour of that nation’s independence. In fact, records indicate, India made it clear to Great Britain that it would not take kindly to Dutch authorities using force to suppress the Indonesian movement. However, Ken is right in stating the relation between Nehru’s India and Sukarno’s Indoensia were not always smooth. In fact it was pretty rocky by the 1960s and there was perhaps some naval collaboration with pakistan in 1965. But the weight of history and common security interests are much more potent binding blocks than friendship between personalisities. And that is what seems to be at work in the Indo-Indonesian relationship.

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