Assessing the Direction of Indonesia's Economic Security

Today, foreign trade and investment are no longer neutral regarding security. Indonesia requires a foreign policy that is integrated with economic policy, and vice versa.

The President has inaugurated the new Minister of Foreign Affairs, Arrmanatha Nasir, at a time when the boundaries between economic affairs and security are increasingly blurred. Indonesia’s challenge is no longer merely how to expand access for palm oil products or attract more foreign capital for mineral resource downstreaming. The difficult question is how to ensure economic openness without creating new vulnerabilities.

This issue brings Indonesia to a relatively rarely discussed topic in Jakarta: economic security. The background and track record of the new Foreign Minister appear relevant to this intersection.

Trade and Security

For a long as time, Jakarta has been more focused on figures: how much foreign capital has entered, the development of exports compared to imports, or how many jobs have been created.

These parameters are certainly important. However, over the last decade, there have been relatively limited cases where trade and foreign investment have instead become sources of strategic vulnerability for the state.

Indonesia’s participation as a third party in several WTO disputes regarding national security exceptions could serve as an illustration of Jakarta’s stance so far. Indonesia was not recorded as a third party in two important cases. First, Russia—Traffic in Transit. In this dispute, the WTO Panel had to interpret, for the first time, the extent to which a country can use security exceptions to legitimise economic policies that fundamentally conflict with international trade obligations.

Indonesia was also not recorded in US—Origin Marking. This occurred when the panel faced the question of how far national security claims regarding trade matters are self-judging, and how far such claims can still be tested at the WTO.

Of course, participation as a third party is not the only measure of a country’s attention to an issue. However, Indonesia’s pattern of participation is interesting for comparison. Singapore, and several of our partners in BRICS such as India and Brazil, frequently act as third parties in related cases.

A third party does not merely watch the disputes of other nations; they have substantial interests in the dispute. Furthermore, this position offers an opportunity to participate directly in the dispute process, including presenting the nation’s position to the panel. This involvement is also one way for a country to closely follow how the interpretation of WTO regulations evolves and is subsequently translated into future economic policies.

Reviewing Foreign Investment

The same pattern is visible in the context of foreign investment. Indonesia indeed needs Foreign Direct Investment (FDI) and remains interested in maintaining economic openness. However, openness does not mean every transaction must be treated as having the same risk profile. The problem lies in the fact that Indonesia does not yet have an institutionalised mechanism for reviewing foreign investment.

For some, the absence of such a mechanism is sometimes interpreted as a form of