Indonesia in the Geopolitics of Asia: Four Scenarios and Strategic Options

This scenario imagines a future in which Indonesia operates in a broadly favourable geo-economic environment despite persistent geopolitical tensions. Over the next five to ten years, strategic rivalry between the US and China continues, particularly in trade, technology, and political influence. However, this competition does not escalate into open conflict in the region. Instead, both powers remain economically engaged in South-East Asia, allowing Indonesia to pursue a hedging strategy that balances relationships with Washington and Beijing while safeguarding its strategic autonomy.

China remains a key engine of regional growth, supporting economic momentum across South-East Asia, including Indonesia. At the same time, Indonesia continues to strengthen its engagement with ASEAN-led mechanisms and regional groupings such as ASEAN Plus Three, reinforcing regional economic capacity and stability. ASEAN economic cooperation plays a critical buffering role, enabling Indonesia to sustain growth and mitigate external shocks arising from US–China tensions. Indonesia also increasingly positions itself as a regional leader, promoting rule-based order through frameworks such as the UN Convention on the Law of the Sea (UNCLOS) and advocating for multilateral solutions to geopolitical disputes.

Under this scenario, Indonesia benefits from strong economic potential driven by its natural resource base, growing clean energy and green industry sectors, and a large labour force. Human capital remains a central source of long-term strength, particularly as Indonesia seeks to move up global value chains and capitalize on digitalization and clean energy transitions. However, growth is characterized as strong yet fragile. Structural vulnerabilities persist, including overreliance on critical mineral extraction, sensitivity to global demand fluctuations, and uneven regional capacity.

Domestically, governance challenges constrain Indonesia’s ability to fully realize these opportunities. While democratic processes such as general elections continue, a lack of institutional capacity undermines effective policy implementation, along with corruption, collusion, and nepotism. Limited bureaucratic capacity and suboptimal resource allocation slow progress on economic transformation and social development. As a result, although Indonesia does not face immediate instability from external threats, gaps in internal capacity risk becoming a source of long-term fragility.

Overall, the scenario Reviving Garuda depicts an Indonesia that is economically promising and geopolitically stable yet held back by institutional and societal constraints. Whether this revival is sustained or stalls depend largely on domestic reforms and leadership choices made today.

Strategic options for Indonesia:

1. Major domestic reform

Indonesia must prioritize comprehensive domestic reforms to strengthen institutional capacity and policy execution. Clear leadership and accountability mechanisms are needed to overcome fragmentation across ministries and levels of government. Reforms should focus on implementation and monitoring, ensuring continuity of long-term strategic projects beyond electoral cycles, and reducing regulatory overlap. Investment in education, skills development, and human capital are critical, alongside efforts to strengthen transparency and accountability to address corruption and inefficiencies in public resource allocation.

2. Strengthening societal and community economic resilience

To ensure inclusive and sustainable growth, Indonesia should reinforce economic resilience at the societal and community levels. This includes supporting small and medium-sized enterprises, cooperatives, family-owned businesses, and local economic ecosystems. Strengthening community-based economic participation can help reduce inequality and build social cohesion. Initiatives that promote civic values, trust, and a sense of belonging—alongside mechanisms such as pooled philanthropic or private funding—can enhance grassroots capacity and complement national development strategies.

3. Foreign policy priorities

Amid intensified US-China competition, Indonesia’s foreign policy should be more pragmatic; focusing on national interests, economic resilience, and risk management will be essential to preserve strategic autonomy. Continued hedging, economic diplomacy, and engagement through ASEAN-led platforms can help mitigate geopolitical risks while sustaining regional stability.

Indonesia should also increase its participation and assume a greater leadership role within the Global South. Strengthening South–South cooperation can diversify partnerships, reduce dependence on major powers, and amplify Indonesia’s voice in global governance. In parallel, Indonesia should leverage its soft power through instruments such as Indonesian AID, the government agency for international development. Expanded development assistance and capacity-building initiatives can enhance Indonesia’s international standing, foster long-term partnerships, and reinforce its role as a credible regional and global actor.

This scenario imagines an optimistic future for Indonesia over the next five to ten years, characterized by favourable geopolitical and geo-economic conditions. At the geopolitical level, major power competition between the US and China remains managed and non-violent. While strategic rivalry persists, tensions do not escalate into open conflict, preserving regional stability. Within this environment, Indonesia can maintain constructive and balanced relations with both powers, avoiding alignment while safeguarding its strategic autonomy.

On the geo-economic front, Indonesia benefits from relatively strong and stable economic growth. This growth is underpinned by the country’s substantial natural resources, large domestic market, and sizeable labour force. Compared to regional competitors such as Vietnam, Indonesia possesses a distinctive competitive advantage due to its population size and internal market depth. If effectively governed, these structural advantages enable Indonesia to enhance its position within regional and global value chains while strengthening domestic economic resilience.

Within this favourable context, the group frames the scenario across three interrelated dimensions: economic policy, regionalism, and human development. Central to this scenario is the role of a capable and interventionist state that exercises strong regulatory control over resource management, labour protections, and technological development. Effective governance ensures that economic growth translates into improved welfare outcomes rather than exacerbating inequality. In particular, investments in education and human capital development are seen as essential for ensuring that technological advances—especially in artificial intelligence—complement rather than displace human labour.

At the regional and international levels, Indonesia plays a more confident leadership role. Within ASEAN, the principles of non-interference and consensus remain formally intact, but Indonesia adopts a more proactive stance in mediating regional conflicts and shaping institutional evolution. ASEAN is increasingly viewed by external partners such as the European Union, Japan, and Australia as a significant market and strategic interlocutor, with Indonesia acting as a diplomatic and economic anchor. Beyond ASEAN, Indonesia deepens South–South cooperation and participates more actively in flexible middle-power groupings such as MIKTA (Mexico, Indonesia, Korea, Turkey, Australia), expanding the country’s diplomatic reach while maintaining strategic balance.

Strategic options for Indonesia:

1. Domestic policy

Indonesia’s foremost domestic challenge is strengthening trust between the government and society. A resilient and inclusive future requires a renewed social contract in which citizens perceive the state as responsive, fair, and capable, while the government benefits from greater public legitimacy and cooperation. Trust-building must be mutual, and reinforced through transparent governance, inclusive policymaking, and consistent service delivery.

To support this objective, electoral and political party reforms are critical. Improving the integrity of the democratic process will help ensure that competent and accountable individuals are placed in positions of authority. Reforms should aim to enhance transparency, reduce patronage, and strengthen internal party democracy so that leadership selection reflects merit and public interest rather than narrow elite capture. By improving institutional quality and governance standards, Indonesia can lay a durable foundation for effective policymaking across all sectors.

2. Economic policy

Indonesia’s economic strategy should prioritize inclusive and regionally balanced development. Persistent infrastructure gaps between Java and outer islands such as Sumatra, Kalimantan, and Sulawesi continue to limit economic integration and access to opportunities. Targeted investment in eco-friendly infrastructure (including roads, highways, railways, and inter-city connectivity) can strengthen national cohesion, reduce regional disparities, and support long-term productivity growth across the archipelago.

At the same time, stronger social protection is needed to safeguard the middle class from downward mobility. Rising living costs and economic volatility place increasing pressure on households that are vulnerable to falling into lower-income status. Expanding the available safety nets such as subsidized health insurance and affordable public transportation can reduce poverty risks while sustaining domestic consumption. In parallel, clearer regulatory frameworks for labour protection, resource management, and the use of artificial intelligence should ensure that technological progress enhances productivity without undermining employment or social equity.

3. Foreign policy

Indonesia should practice proactive diplomacy. Maintaining constructive relations with both the US and China is essential to preserving regional stability and safeguarding Indonesia’s strategic autonomy amid great-power competition. Rather than alignment, Indonesia should continue hedging through economic diplomacy, multilateral engagement, and principled neutrality, allowing it to maximize cooperation while mitigating geopolitical risks.

Within ASEAN, Indonesia should assume a stronger leadership role by actively mediating regional conflicts and reinforcing ASEAN’s relevance, while respecting core principles such as consensus and non-interference. Beyond the region, Indonesia should diversify partnerships through South–South cooperation and flexible middle-power groupings such as MIKTA (Mexico, Indonesia, Republic of Korea, Turkey, Australia). Expanding twin-town partnerships and adopting a more proactive diplomatic stance on long-term global issues such as climate change and development assistance can further enhance Indonesia’s international credibility and influence.

This scenario imagines an environment where political and geopolitical competition is largely managed, but economic outcomes are mixed and uneven. The group identified high economic interdependence among countries as a key stabilizing factor, reducing incentives for open conflict despite ongoing competition. Differentiated national interests and mutual economic dependence contribute to this managed competition, producing a form of pseudo-stability in the international system. At the same time, global economic reorganization is under way, marked by industrial relocation, near-shoring, and shifting production patterns.

For Indonesia, this environment presents both optimistic and pessimistic dynamics. On the more optimistic side, industrial relocation and awakening generate new economic opportunities and profits that could potentially benefit the broader public. On the pessimistic side, these gains risk being captured by oligarchic actors, with governments following rather than leading market forces. Indonesia’s continued reliance on extractive economic models creates vulnerability to exploitation through mechanisms such as pricing pressures, dumping, and external market manipulation, even as Indonesia itself may seek to exploit favourable market conditions for its natural resources.

Inequality and scarcity emerge as central challenges in this scenario. Indonesia’s domestic resources and capabilities remain insufficient to fully generate wealth independently, sustaining a dependence on external capital and foreign capitalist actors. As a result, the outcomes of capitalism in this scenario are fragmented: stability coexists with uneven prosperity, opportunity with exploitation, and growth with persistent structural constraints. The scenario highlights how managed competition and economic interdependence do not automatically translate into inclusive development, instead producing multiple and often contradictory faces of capitalism for Indonesia.

Strategic options for Indonesia:

1. Improving civic capacity and education

Within a five- to ten-year horizon equivalent to one or two electoral cycles, the most realistic strategic priority is improving civic capacity. Education forms the core of this approach and is understood as a basic and indispensable requirement regardless of Indonesia’s future economic direction. Whether the economy continues to emphasise resource downstreaming or shifts toward broader industrialization, education enables the workforce to participate in future phases of industrial change and economic restructuring.

Civic capacity also includes the strengthening of public dialogue. Sustaining networks of civil society and enabling continued discussion on major national issues are viewed as achievable short-term objectives. In a context where civil society has become fragmented and weakened in recent years, renewed spaces for dialogue can support more informed public engagement and lay the groundwork for longer-term institutional improvement.

2. Remodelling of foreign policy

A second strategic priority is remodelling foreign policy to reduce its dependence on individual leaders and political personalities. Frequent changes in leadership have led to shifts in foreign policy direction, reflecting limited institutionalization. Greater continuity requires embedding foreign policy within more durable institutional frameworks rather than relying primarily on executive authority.

This remodelling also involves expanding public participation in diplomacy through multi-track approaches. By involving civil society, experts, and non-state actors alongside official channels, foreign policy can become more resilient, consistent, and representative. Over time, this approach can help stabilize Indonesia’s external engagement in an environment of managed but persistent geopolitical competition.

3. Public pressure for improved state and bureaucratic capacity

Meaningful improvements in state and bureaucratic capacity are widely recognised as necessary but unlikely to be fully realised within a five- to ten-year timeframe. In the short term, the focus is therefore on generating public pressure to demand better institutional performance in addressing basic governance challenges.

Public campaigns aimed at increasing accountability and expectations can serve as a catalyst for gradual improvement. Rather than immediate structural reform, this approach seeks to create the political and social conditions necessary for enhancing state capacity over time, allowing Indonesia to better navigate adverse geo-economic conditions without relying on unrealistic assumptions about rapid institutional transformation.

This scenario envisages a catastrophic global environment marked by the irreversible escalation of geopolitical competition into open conflict, leading to complete economic decoupling and a global hegemonic war. Strategic rivalry between major powers intensifies into violent confrontations, resulting in the deliberate fragmentation of global trade and financial systems. Crucially, key maritime chokepoints and essential logistics routes, including the Malacca Strait and the Panama Canal, are disrupted, blockaded, or militarized. Global supply chains are not merely fractured; they are severed, forcing a complete halt to international trade and compelling nations to prioritize self-sufficiency and securitization over economic interdependence. The world enters a prolonged period of violent stagnation.

For Indonesia, these developments create an acute and existential supply-demand crisis. As a commodity exporter, the nation is unable to ship its key products, leading to a massive oversupply domestically and the total collapse of export revenues that fund the state budget. Simultaneously, the blockades of key supply chain routes prevent the import of critical goods, including essential energy supplies and fuel, creating immediate scarcity and driving uncontrollable hyperinflation. The economy grinds to a halt. Furthermore, Indonesia’s vast natural wealth, particularly its deposits of critical minerals, turns into a resource curse. Instead of leveraging these resources for growth, Indonesia becomes a target, with competing foreign powers seeing the archipelago as a strategic asset to be seized or controlled. The nation is thrust into the centre of war as major powers struggle to secure these critical assets, rendering the traditional bebas dan aktif (free and active) foreign policy doctrine obsolete and providing no shield against external aggression.

The economic hardship fuels extreme social discontent, leading to severe polarization, civil unrest, and the potential for civil war as the conflict becomes multi-faceted: pitting civilian against civilian, and the elite against the general population. Governance capacity evaporates as the state, desperate to maintain order, shifts into authoritarianism and militarization, leading to a shrinking of civic space and the worsening protection of vulnerable groups, particularly an increase in violence against women. By the end of this period, democratic institutions are severely degraded. The Indonesian state is operating solely in survival mode; internally fragmented, economically paralyzed, and unable to effectively defend its territory against foreign encroachment.

Strategic options for Indonesia:

1. Strengthening security and defence through professional military reform 

In a context of escalating hegemonic war and militarized chokepoints, Indonesia’s most immediate strategic imperative is the physical defence of its sovereignty and territory. This must involve a fundamental national strategic soul-searching to clearly define the nation’s defence doctrine and posture in a hostile world. The strategy demands creating a professional military force that is modernized and technologically capable of safeguarding strategic sea lanes and repelling foreign intervention, without simultaneously becoming a threat to domestic civilian democracy. This capability includes investments in advanced surveillance, early-warning systems, and defensive assets. 

Crucially, defence policy must pivot to a non-aligned approach to procurement, ensuring diversification of defence partners to avoid becoming dependent on any single, potentially warring great power. A parallel diplomatic effort must be mounted to create a Safe Neutral Zone with other like-minded nations, seeking a collective mechanism to manage spillover conflict risks and protect regional logistics without being pulled into the rivalry between the great powers.

2. Political party transformation

The internal vulnerability posed by deep political fragmentation and the erosion of trust is as dangerous as external military threats. The strategy must therefore target the source of the governance crisis: the political parties. The view is that the current political parties function merely as entertainment or vehicles for elite interests, rather than genuine instruments for national policy and accountability. The quality of leadership in both the executive and legislative branches depends entirely on the quality of individuals produced by these parties, making them the supply chain for the nation's governance. 

Therefore, systemic reform is necessary, focusing on improving party transparency, strengthening internal accountability mechanisms, and reforming political financing laws. By restoring the foundational integrity of political institutions, Indonesia can foster democratic resilience, limit elite capture, and enable more coherent, effective decision-making during periods of prolonged and overlapping security, economic, and social crises.

3. Building economic resilience through cooperatives and civil society

To mitigate the severity of the economic strangulation caused by blocked global trade, Indonesia must urgently cultivate resilience from the ground up, recognizing that the reliance on the capitalist market is a critical vulnerability. The primary strategic option for economic survival is the promotion and institutionalization of cooperatives. 

These community-based economic structures function as an economic shield for the middle-to-lower classes and the informal sector. Unlike market-dependent capitalist enterprises that collapse when supply chains are severed, cooperatives can leverage local knowledge and shared resources to ensure the production and distribution of essential goods locally, safeguarding the population from mass scarcity and starvation. Furthermore, strengthening civil society organizations (CSOs), media, and academia is paramount. These entities must be empowered to act as watchdogs, to combat the disinformation that fuels social polarization, and to serve as key resources for local knowledge about crisis management, ensuring that local communities have the capacity to sustain themselves when the central state enters survival mode.