Indonesia and Malaysia’s post-decolonization relations have been consistently afflicted by political disputes and tension, despite their close proximity and similar historical and linguistic features. As the political and economic dynamics of Asia evolve, contemporary challenges shared by both nations renew chances for effective bilateral and multilateral cooperation.
According to the World Economic Forum’s Global Competitiveness Report 2014-2015, both Indonesia and Malaysia have made progress in terms of economic competitiveness – both nations moved up four spots in the rankings and their respective economies continue to lead ASEAN.
The ASEAN Economic Community (AEC) was formally signed into agreement this past week and both Malaysia and Indonesia have recently signed onto the Trans-Pacific Partnership (TPP), evidence of their commitment to improving competitiveness and integration in the global economy.
However, even with these positive indicators, there remains in Malaysia and Indonesia shared structural and external impediments to sustaining long-term growth and stability. These shared challenges and the collaborative solutions they require are the fundamental elements that will bring the two nations together.
Balancing Act: Regional Dynamics of Asia
As Indonesia and Malaysia become key regional economic players, the economic clout and geopolitical influence of China remains a constant focal point. The OECD anticipates China to be a critical factor affecting Southeast Asia’s growth – “the slowdown in China’s economy will continue to affect the growth prospects as export demand drops and investment flows decline.”
Moreover, territorial tensions, land claims and reclamation in the South China Sea has indisputably become a high-priority issue in regional diplomacy, with ASEAN concerned by China’s power play and Malaysia and Indonesia worrying about potential encroachment on their maritime sovereignty. The AEC and TPP signifies greater regional multilateralism and integration, but moreover acts as a strategic counterbalance to Chinese actions and influence in the region.
At the recent APEC summit in the Philippines, Malaysian Prime Minister Najib Razak announced his expectation that the AEC will become the fourth-largest economy by 2030, deriving strength from unity. Indonesian President Joko Widodo has oft been criticized as indulging in ultra-nationalist and protectionist policies; however, the calculated potential of such treaties have lured Jokowi back into regional alliances with ASEAN and bilateral relations with Malaysia.
Indonesia and Malaysia’s Politics of Pollution
Increased regional collaboration has eased coordination on bilateral issues and policies. Both nations are facing mounting pressure and increased scrutiny in their handling of environmental issues – specifically, the issue of haze and regulation of industries, such as the palm oil industry. The palm oil industry has faced a litany of problems in recent years – from environmental (palm oil plantation land clearing has been a major cause of haze pollution) to corruption and falling prices.
As two of the world’s top producers of palm oil, Indonesia and Malaysia this past week announced their joint leadership in the creation of a council for palm oil producers. Indonesia’s Resources Minister Rizal Ramli indicated that the council will be a “game-changer for an industry under pressure”; by regulating the production and stock of the commodity in the global market.
The council will help to ensure price stability and competitiveness in addition to ensuring and regulating sustainable practices in the industry. Malaysia and Indonesia suffer from severe haze pollution; the significant environmental, health and productivity costs affect not only the contributing parties, but other neighboring nations that bear the burden of its spillover effects.
Recognizing this, Indonesia and Malaysia ratified the ASEAN Agreement on Transboundary Haze Pollution,in 2014; a legally-binding agreement obligating its members to actively prevent and mitigate haze pollution. Mr Razak has also recently called for a MOU to be signed with Indonesia, indicating the need for further bilateral action to better tackle the haze crisis.
2016: Continued Opportunities for Collaboration
Recent developments in relations signal a commitment to bilateral and multilateral cooperation in solving their shared challenges. However in 2016, observers will be looking for more than statements and agreements of collaboration, but for effective coordination and tangible results.
In terms of economic competitiveness, Indonesia and Malaysia still face challenges in competitiveness and integration due to inadequate infrastructure, slow growth in services, and consistent corruption and environmental scandals.
2016 will also see a heightened focus on security, counter-terrorism, and Asia’s black market. Highlighted by the recent tragedy in Paris, the international community will increasingly look to Indonesia and Malaysia as regional leaders in confronting extremism within their borders.
Similarly, in April 2016, the UN General Assembly will host a special session on drugs; Southeast Asian nations will find themselves in the spotlight as the drug wars shift east and as counter-narcotics efforts hone in on the Mekong Delta region.
These upcoming events should serve as the catalyst for sustained cooperation between both nations.
