In the G7 Summit at Munich Security Conference, President Biden called for cooperation to counter the influence of China’s non-market oriented policy. The sign of China as an imminent threat to the US reaffirmed by the Secretary of State Anthony Blinken, calling the US relationship with China is the geopolitical test of the 21st century.
The success from the miracle of rapid economic growth and now in mitigating the widespread of the pandemic and actively engaging in vaccine diplomacy are the signs of China could overcome the decades of US’s dominance since World-War II. One of China’s undeniably influential grand-plan that the US is still failing to match: The Belt and Road Initiative. The $50-100 billion per year Chinese-backed loan mega-project is indeed an unparalleled geo-economic and geopolitical strategy. Many countries who are aspired to accelerate economic development will respond positively to it.
The revival of the Export-Import Bank of the United States (Exim) and the formation of US International Development Finance Corporations (USIDFC) by the US Congress seen as the response to China’s BRI. Reauthorized in 2019, the US’ Exim is the government’s export credit agency that provides loans with competitive rates, terms, and conditions to back US exports, focusing on ten preference areas, such as AI, robotics, and wireless communication.
Under the reauthorization, a monumental transformation was made into Exim by increasing its lending power to US$135 billion. Lending requirements also relaxed, allowing deals with US content exported products at 51 percent from previously 85 percent. Meanwhile, the newly-branded USIDFC with US$60 billion of financial power covers a multi-dimensional approach, extending the presence of US businesses from making equity investments to provide technical assistant overseas.
Both Exim and USIDFC slowly have made progress by increasing US influence by American-backed projects in numbers of countries since its resurrection. Exim has created important deals, such as the LNG project in Mozambique and infrastructure facilities in Sudan. On the other hand, USIDFC has made vital investments, ranging from infrastructure and technical support in India, Egypt, and Indonesia to its newly created Sovereign Wealth Fund (SWF).
The utilization of US Exim and USIDFC goes along with President Biden’s calls to toughen on China, from the span of creating the US’ China-free supply chain and countering the non-market oriented policy. Domestically, President Biden has started its move domestically by pledging $2.3 trillion of infrastructure budget with one of the goals to improve US’ capacity in the semiconductor manufacturing, putting less reliance on China.
Although it is impossible to reduce China’s presence to non-existent, US Exim and USIDFC could increase the US’ significance in the global economy. Still, President Biden has to be aggressively wise and need a grandiose plan, and he can start from the Indo-Pacific.
The Indo-Pacific has gained tractions with cooperation concepts popularized by an alliance or a country individually, from ASEAN Outlook on the Indo-Pacific (AOIP) by ASEAN, Free and Open Indo-Pacific (FOIP) by Japan, and Global Britain by the UK to regain political and economic security from the dominance of China. With the increased prominence of the Quad, the Indo-Pacific is a hot-water for geopolitical and geo-economic contests. Nonetheless, the increased tension is a blessing in disguise for the US. Besides it brings closer cooperation between the US and its allies, it mapped out a grand geopolitical strategy. Geopolitically, from the span of India to Australia consists of US comparable counterparts, which numbers of the country have promoted its respective Indo-Pacific concepts.
President Biden needs to see the moment as a golden opportunity. Many countries in the region have one important similar goal: to level China’s influence geopolitically and geo-economically. Therefore, the US needs to embrace and bind these countries with shared objectives. By proposing US Exim and USIDFC, the US can promote its newly-waged power as an alternative and incorporate it in one of the proposed Indo-Pacific concepts that embrace the spirit of economic cooperation and security that can offset China in the Indo-Pacific. Additionally, President Biden has to ensure the incorporation only succeeds if the US can offer a bargain deal that compensates or exceeds what the Chinese do.
US’ primary goal with US Exim and USIDFC, in the end, is to keep its global dominance relevant, in this case by increasing US exports and American businesses competitiveness abroad. However, the US’s increased role in the global economy also acts as a catalyst of growth for developing countries, including Indonesia.
Currently, the Indonesian government has received US$ 2 billion of investment funds from USIDFC to Indonesia’s newly created SWF, the Indonesia Investment Authority. The funneled fund is part of Indonesia’s ambitious infrastructure projects pursued for years, including relocating the capital city from Jakarta to Kalimantan. The US investment and financial assistance also increase the options of investment opportunity and financial assistance, diversifies Indonesia’s investor and financial lender portfolio, and reduces its reliance and risk of national security, particularly from China. The cooperation between USIDFC and possibly US Exim also opens the opportunity to transfer technology, human development, and initiate more climate-aligned investment in Indonesia.
In its geopolitical interest, Indonesia holds a vital role in response to the US economic engagement in the Indo-Pacific without worsened tension to level China’s influence. ASEAN’s AOIP on paper has an edge, for instance, compared to FOIP as it upholds ASEAN Centrality that embraces neutrality, stability, shared interests, and economic cooperation through ASEAN-led mechanisms. As the de facto leader of ASEAN and the main sponsor of AOIP, Indonesia can act as a medium to ensure AOIP can accommodate the US’ economic interest with its US Exim and USIDFC without intensifying tension with China.
President Biden’s maneuver will determine the relevance of the US in the global economy with its allies. The focus on the Indo-Pacific will be a strategic and vital call, and the incorporation of the US Exim and USIDFC in the region is a move that China needs to keep an eye out to stay pertinent. While the government is partaking in the US’ initiative, Indonesia can gain prominence by acting as a bridge and a key player in orchestrating geopolitical equilibrium in the Indo-Pacific.
Kevin Angdreas is a Research Assistant at Center of Industry, Trade, and Investment, Indef. He can be found on Twitter with the username @kev_kag