Indonesia’s Economic Diplomacy of Creative Economy Under Susilo Bambang Yudhoyono Administration Toward Indonesia’s National Income (Study Case: Craft Export Indonesia to United States 2011-2014)
By GALUH ATIKASURI ID No. 016201400066
A Thesis presented to President University The Faculty of Humanities in partial fulfillment of the requirements for Bachelor Degree in International Relations Concentration of Diplomacy Studies
2019
THESIS ADVISER RECOMMENDATION LETTER
This thesis entitled “Indonesia’s Economic Diplomacy of Creative Economy Under Susilo Bambang Yudhoyono Toward Indonesia’s National Income (Study Case: Craft Export Indonesia to United States 2011-2014)” prepared and submitted by Galuh Atikasuri in partial fulfillment of the requirements for the degree of Bachelor of Arts in International Relations from the Faculty of Humanities has been reviewed and found to have satisfied the requirements for a thesis fit to be examined. I therefore recommend this thesis for Oral Defense.
Cikarang, Indonesia, January 29th 2019
Recommended and Acknowledged by,
Riski M Baskoro, S.Sos.,M.A
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ABSTRACT
Galuh Atikasuri, 016201400066, International Relations 2014, President University
Thesis Title: Indonesia’s Economic Diplomacy of Creative Economy Under Susilo Bambang Yudhoyono Toward Indonesia’s National Income (Study Case: Craft Export Indonesia to United States 2011-2014)
Creative Economy is one of the programs from the government of Indonesia that relies on ideas, creativity and innovation derived from human resources and it is the main production factor. During the Presidency of Susilo Bambang Yudhoyono (SBY), Indonesia adopted the slogan “a thousand friends, zero enemy” on Indonesia’s foreign policy, where the slogan means that Indonesia focused on increasing partnerships with other countries in the stand up for its national interests. In an effort to develop the country’s economy, Indonesia maximize the function of the Creative Economy program through export activities. In marketing its products, Indonesia cooperates with several major countries, including the United States. Using economic diplomacy instruments and based on good relations between Indonesia and the United States that have been established for a long time and cooperation in various fields, Indonesia and the United States agreed to increase cooperation through comprehensive agreements, where the agreement bring the benefit to Indonesia to do export activities to the United States. In 2011, the United States became the main destination for Indonesia in exporting craft, which craft was one of the subsectors that highly contributed to the Indonesia’s economy. The craft subsector is also one of the subsectors with the most employment. Therefore, this study will focus on Indonesia’s economic diplomacy under the leadership of Susilo Bambang Yudhoyono with the United States as a destination country, through the Craft export cooperation (creative economy sub-sector) from 2011 to 2014. Indonesia's economic diplomacy through Craft export cooperation to the United States then contributed to increasing export value from year to year, as well as increasing employment, especially in the Craft sub- sector itself.
This research was conducted in the period of November 2018, until January 2019, using a qualitative descriptive analysis method, to provide analysis of the sources obtained, in the form of news articles, books, and scientific journals.
Keywords: Creative Economy, Susilo Bambang Yudhoyono, Economic Diplomacy, Indonesia, United States of America, Exports, Craft
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ABSTRAK
Galuh Atikasuri, 016201400066, International Relations 2014, President University
Judul Penelitian: Indonesia’s Economic Diplomacy of Creative Economy Under Susilo Bambang Yudhoyono Toward Indonesia’s National Income (Study Case: Craft Export Indonesia to United States 2011-2014)
Ekonomi kreatif merupakan salah satu program pemerintah Indonesia yang mengandalkan ide, kreatifitas dan inovasi yang berasal dari sumber daya manusia dan merupakan factor produksi yang utama. Pada masa pemerintahan president Susilo Bambang Yudhoyono (SBY), Indonesia menerapkan slogan “a thousand friends, zero enemy’ pada kebijakan luar negeri Indonesia, dimana slogan tersebut memiliki arti yaitu Indonesia berfokus pada peningkatan kemitraan dengan Negara-negara lain dalam rangka memperjuangkan kepentingan nasional. Dalam upaya pengembangan perekonomian Negara, Indonesia memaksimalkan berjalannya program Ekonomi Kreatif tersebut melalui kegiatan ekspor. Dalam memasarkan produknya, Indonesia menjalin kerjasama dengan beberapa Negara besar, diantaranya adalah Amerika Serikat. Menggunakan instrument diplomasi ekonomi dan di dasari oleh hubungan yang baik antara Indonesia dan Amerika Serikat yang telah terjalin sejak lama serta kerjasama di berbagai bidang, Indonesia dan Amerika Serikat sepakat untuk meningkatkan kerjasama melalui perjanjian comprehensive, dimana dengan adanya perjanjian tersebut memberi kemudahan bagi Indonesia dalam melakukan kegiatan ekspor ke Amerika Serikat. Pada tahun 2011, Amerika Serikat menjadi destinasi utama bagi Indonesia dalam melakukan ekspor Kriya, dimana Kriya adalah salah satu subsector yang memberikan kontribusi besar terhadap perekonomian Indonesia. Subsektor Kriya juga menjadi salah satu subsector dengan penyerapan tenaga kerja terbanyak. Sehingga pada penelitian ini akan berfokus pada diplomasi ekonomi Indonesia dibawah kepemimpinan Susilo Bambang Yudhoyono dengan Amerika Serikat sebagai negara tujuan, melalui kerjasama ekspor Kriya (sub sektor ekonomi kreatif) dari tahun 2011 sampai dengan 2014. Diplomasi ekonomi Indonesia melalui kerjasama ekspor Kriya ke Amerika Serikat kemudian memberikan kontribusi berupa peningkatan nilai ekspor dari tahun ke tahun, serta peningkatan penyerapan tenaga kerja khususnya di sub sektor Kriya itu sendiri.
Penelitian ini di lakukan dalam jangka waktu November 2018, hingga Januari 2019, dengan menggunakan metode analisis deskriptif kualitatif, untuk memberikan analisa dari sumber- sumber yang didapatkan, berupa artikel berita, buku, dan jurnal ilmiah.
Kata Kunci: Ekonomi Kreatif, Susilo Bambang Yudhoyono, Diplomasi Ekonomi, Indonesia, Amerika Serikat, Ekspor, Kriya
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ACKNOWLEDGEMENT
I would like to express my absolute gratitude to Allah SWT, for the good health, wellbeing that were necessary to complete this thesis and for everything his plan made for me possible finish my study in university, including for me to finish this thesis. I would like to give my biggest grateful to my family for their endless support, prayers and love for me. My parents, my father. Ir. Doddy Muslim and my mother Sri Melia, S.Sos, M.Si for their unlimited support, unconditional trust, and endless patience who teaches me all the good things, give me advice regarding any problems I have had. Their love gave me strength to do all my study in President University. I could not give anything to them now, but this is the beginning that in the future I hope I could give more than they give to me. Both are where my mind goes to every time when I am lucky, as it must be from their prayers. My grateful for my grandmother Hayati who never forget give support and her prayer for me even in her sickness, get well really soon grandma. Also, I would like to give another thank you to my big sister Nadira Laksita, who always care and asked what I need, how I am doing in university and during my process finishing thesis and my little sister Della Safira, who still in the process of completing school I believe you will one day be anything you dream on!. My aunty Nelyati and my uncle Mirza, my cousin Gita Angelia, and Citra Gautama and the other that I cannot mention all.I can’t thank you enough for never-ending believe and everything that my family done for me. I would also deliver my special gratitude for both of my advisers: Mr. Riski Baskoro, S.Sos., M.A and Mrs. Ilmi Dwiastuti, S.H.Int., MStratSt in busy schedules always being able to make the time to have consultations, patient in guiding me and for always being able to give constructive criticism to my thesis. Apologies for all the mistakes that I have made during the thesis making process. I believe that I am one of the luckiest students to have both of you as my thesis advisor. Without your patient guidance, my thesis would not be as it is now.
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Thank you to all my friends in International Relations President University especially batch 2014. To my closest IR friends: Ayu Santika Ardipramesa, Destri Ayu Angela Bangkan, Hafiza Raisya, K. Audina Permana who have coloring my university life. Especially for my roommate Nurul Sriwulandari Nur, Meidina Putri, and Natalia Lovelace, who have helped me so much during my thesis writing process, stayed with me from the very beginning, and thought and sharing almost about anything. I would like to say thank you to the colleagues that have been with me during my time in the university, which I cannot mention one by one. Also, I would like to thank you my high school friends: Ivo Putri Rahmadhani, Amelia, Meiga Ervianti, Maya Nofiurly, Clara Kusumawati Johan, Rezi Rezki Amelia, Kellin Wedness Sitanggang (GYMMKIMKAR) for always spare time for me in Pekanbaru. We scatter there out of town to continue our education and achieve our goals. Always stay together even though we are far apart and continue to be one of the important people in my life Finally, I would like to thank everybody who has become an important part of my life journey. I always pray for your success, health, and happiness. Do not forget to keep in touch!
Cikarang, January 29th 2019
Galuh Atikasuri
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TABLE OF CONTENTS
THESIS ADVISER RECOMMENDATION LETTER ...... i DECLARATION OF ORIGINALITY ...... Error! Bookmark not defined. PANEL OF EXAMINER APPROVAL SHEET ...... Error! Bookmark not defined. ABSTRACT ...... iv ABSTRAK ...... v ACKNOWLEDGEMENT ...... vi TABLE OF CONTENTS ...... viii LIST OF DIAGRAMS ...... x LIST OF TABLES ...... xi LIST OF FIGURES ...... xii CHAPTER I INTRODUCTION ...... 1 I.1. Background of Study ...... 1 I.2.Problem Identification ...... 9 I.3. Statement of Problem ...... 10 I.4. Research Objectives ...... 11 I.5. Significance of the Study ...... 11 I.6. Theoretical Framework ...... 11 I.6.1. Economic Diplomacy ...... 11 I.7. Scope and Limitation of the Study ...... 15 I.8. Outline of Chapters ...... 15 CHAPTER II LITERATURE REVIEW ...... 17 II.1. Journal Review ...... 17 II.2. Books Review ...... 20 CHAPTER III METHODOLOGY ...... 23 III.1. Research Methodology ...... 23 III.2. Research Framework ...... 24 III.2. Research Time and Place ...... 25 III.3. Research Instrument...... 25 CHAPTER IV INDONESIA-UNITED STATES ECONOMIC DIPLOMACY IN CREATIVE ECONOMY UNDER SUSILO BAMBANG YUDHOYONO ADMINISTRATION ...... 27 IV.1. The Overview of Indonesia-United States Relations...... 27 IV.2. Indonesia’s Economic Diplomacy ...... 29 IV.3. Indonesia-United States Bilateral Relations Under Susilo Bambang Yudhoyono ..... 34
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IV.3.1. Comprehensive Partnership and Cooperation on Economy Indonesia-United States ...... 35 IV.3.2. The Importance of the United States of America for Indonesia ...... 38 IV.4. The Origin of Creative Economy ...... 41 IV.4.1. History of Creative Economy in Indonesia: Under Susilo Bambang Yudhoyono Administration ...... 42 IV.4.2. The Importance of Creative Economy ...... 44 CHAPTER V AN ANALYSIS OF ECONOMIC DIPLOMACY ON CREATIVE ECONOMY AND ITS CONTRIBUTION TO INDONESIA’S ECONOMY AND EMPLOYMENT...... 46 V.1. Creative Economy and Its Contribution to Indonesia’s Economy and Employment: Sub- sectors on Creative Economy and the Contribution ...... 46 V.2. Indonesia-United States Craft Export & the Contribution to the National Income ..... 47 V.3. The Contribution of Indonesia’s Economy Diplomacy Under Susilo Bambang Yudhoyono Administrations Toward Its Economic Development ...... 50 CHAPTER VI CONCLUSION ...... 54 BIBLIOGRAPHY ...... 56 APPENDICES ...... 65
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LIST OF DIAGRAMS
Diagram III.1. The scheme of research framework ...... 24
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LIST OF TABLES
Table IV.1. Typology of Economic Diplomacy ...... 31 Table IV.2. Indonesian Economic Diplomacy Practice ...... 33 Table V.1. FOB Value of Exports of Craft Subsectors by Countries Destination 2011-2014 48
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LIST OF FIGURES
Figure V.1. 3 Sub-sectors with the Biggest Export ...... 46 Figure V.2. The Main Destination of Indonesia's Creative Economy Exports 2011-2015 ..... 47 Figure V.3. Labour Absorption According to Sub Sector (Culinary, Craft, Fashion) ...... 49 Figure V.4. Example of Craft ...... 52
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CHAPTER I INTRODUCTION
I.1. Background of Study
Indonesia under the leadership of Susilo Bambang Yudhoyono (SBY) has a slogan for its foreign policy, namely "a thousand friends, zero enemy". The slogan has meaning and purpose, namely to make as many friendships as possible, to establish partnerships with various parties to realize the national development agenda.1 SBY also views that foreign policy was a result of the process of thinking, and prioritizes rational rather than emotional aspects, and prioritizes soft power over hard power.2 Therefore, Indonesia in carrying out its foreign policy must apply attitudes and mindsets that are not based on suspicion, but rather an attitude of confidence and enthusiasm in establishing partnerships with other countries in the context of fighting for national interests.3 In an effort to improve the country's economy, Indonesia then expanded, increased and improved friendships with other countries, one of them was with the United States. Indonesia used Economic Diplomacy instruments to achieve its national interests. By using economic diplomacy instruments, Indonesia succeeded in cooperating with the United States as its partner in carrying out various cooperation activities in the economic field, one of which was through the creative economy on craft sector and craft export cooperation. Definition of Economic Diplomacy is a form of diplomacy that uses economic instruments to achieve certain goals and interests of the state (or other institutions such as corporations).4 Economic diplomacy usually refers to interests for trade problems (export or
1 Irfa Puspitasari, "Indonesia's New Foreign Policy: Thousand Friends, Zero Enemy," Idsa Issue Brief, August 2010, accessed November 20, 2018, https://idsa.in/system/files/IB_IndonesiaForeignPolicy.pdf. 2 Ibid. 3 Hassan Wirajuda, "Desain Baru Politik Luar Negeri Indonesia," Analisis CSIS 34, no. 3 (2005): 343. 4Harianto Solichin and Taat Subekti, "Diplomasi Ekonomi Indonesia," (n.d.), 2. 1 import), investment, loans, implementation of development projects or other matters relating to economic activities.5 Creative Economy is one of the tools for Indonesia to achieve its national interest through the trade cooperation. Creative Economy is defined as “the development of economic activities based on creativity, skills and individual talents to create the creative creations of individuals of economic value and influence the welfare of the Indonesian citizen”. 6 Of all the islands that contributed to the implementation of the Creative Economy, the island of West Java, especially the city of Bandung, is the island with the largest contribution to exports in the cultural field. Fikri Fahmi, Phillip Mc Can and Sierdjan Koster argue that this inequality is due to regulation and enthusiasm in different regions, as well as the influence of infrastructure in an area that certainly affects the course of the program.7 In this case, this is one of the challenges for the government, both central and regional, to be able to take advantage of and take the opportunity to run the Creative Economy program which is very potential in Indonesia's economic development.8 Where in this research not just focusing on West Java but the writer wants to analyze in creative economy nationally about craft in Indonesia. The phases of the economy keep changes and develop along with the development of times. An economy that was originally an agricultural era, has developed into the era of industrialization and form of the information age that followed and has been marked by rapid development in the field of information technology and invention.9 These changes have an impact on the rise of competitiveness and greater market
5 Kishan S. Rana, "Economic Diplomacy: The Experience of Developing Countries," in The New Economic Diplomacy: Decision Making and Negotiation in International Economic Relations, ed. Nicholas Bayne and Stephen Woolcock (London: Ashgate, 2007). 6 President Republik Indonesia, Instruksi Presiden Republik Indonesia Nomor 6 Tahun 2009 tentang Pengembangan Ekonomi Kreatif, (Jakarta, 2009), http://kemenpar.go.id/userfiles/file/7193_2610- Inpres6Tahun2009.pdf. 7 Fikri Z. Fahmi and Sierdjan Koster, "Creative Industries and Regional Productivity Growth in the Developing Economy: Evidence from Indonesia," Growth and Change 48, no. 4 (2017): 805-830, doi:10.1111/grow.12212. 8 Ibid. 9 Ari M. Ginting, Edmira Rivani, and Juli P. Saragih, "Pengaruh Ekonomi Kreatif Terhadap Perekonomian Nasional," in Strategi Pengembangan Ekonomi Kreatif Di Indonesia (Indonesia: Yayasan Pustaka Obor Indonesia, 2017), 9. 2 competition. Intense competition forced the community to think creatively in order to develop the potential of the economy of the country. Creativity becomes a capital base that has been used to create an innovation.10 The time when the people used economy was promoting and gives priority to the creativity and information in the process also known by the term Creative Economy. Nowadays, as a new economic concept that relies on the idea of creativity, culture, human resources and technology, neither developed nor developing countries believed that are able to become potential in improving the national economy. Indonesia as a country that have sufficient human resources, make Indonesia government implement creative economy in an effort to improve the condition economy of the country. The development of creative economy in Indonesia started from the idea of President Susilo Bambang Yudhoyono (SBY) about the importance of creativity and innovation in development, especially in developing the craft and creativity industry to achieve a competitive economy. Starting from this idea, in 2007, the Ministry of Trade which was then led by Mari Elka Pangestu then formed Indonesia Design Power with the aim of strengthening the strength of design and creation of brands.11 In the same year, through the Trade Expo which is routinely held every year, the Ministry of Trade began to provide special zones in exhibitions that held to the actors and creative industries. The government also held a special exhibition, namely the Indonesian Creative Products Week (PPKI) to show Indonesia's strong competitiveness through the creative economy.12 In that year also, the development of creative economy be more structured. The Ministry of Trade is mapping potential and making plans to develop Indonesia's creative economy. Until 2009, the Ministry of Commerce drafted a plan to develop
10 Stefan Krätke, "Synthesis: The Creative Capital of Cities," in The Creative Capital of Cities: Interactive Knowledge of Creation and the Urbanization Economics of Innovation (NJ: John Wiley & Sons, 2011), 195, DOI:10.1002/9781444342277. 11 Badan Ekonomi Kreatif, "Pemahaman Tentang Ekonomi Kreatif," in Tenaga Kerja Ekonomi Kreatif 2011 - 2016, ed. Sub Direktorat Statistik Ketenagakerjaan (Badan Pusat Statistik, n.d. ), 7. 12 Ibid. 3
Indonesia's creative economy until 2025 and 14 creative sub-sectors for the period 2009-2015.13 Economy and creative industries in Indonesia began to be known since the launch Presidential Instruction in 2009 (Inpres No.6 / 2009) which also includes plans for development in 14 economy and creative industry sub-sectors.14 Fourteen creative industries sub-sectors are; 1.) Advertising, 2.) Architecture, 3.) Art market, 4.) Crafts, 5.) Design,6.) Fashion, 7.) Video, Film and Photography, 8.) Interactive Games, 9.) Music, 10.) Performing Arts, 11.) Publishing and Printing, 12.) Computer and Software Service, 13.) Television and Radio, 14.) Research and Development.15 Those sectors are expected could help boost country’s economy. Mobilizing and promoting the creative economy require the synergy of all parties, both the government and non-government. In this research, the writer takes one sub of creative economy which is craft sector as a focus for the studies. Craft is a part of applied art which is a meeting point between art and design, which comes from the heritage of tradition or contemporary ideas and produces the final product in the form of artwork, functional products, decorative objects, or decorative.16 The craft includes all that made from wood, metal, leather, glass, ceramics and textiles. The progress of the craft subsector is inseparable from the availability of raw materials and creativity from the industry players itself.17 The products of craft from Indonesian are famous for their 'handmade' therefore they have high prices in the market. Some craft industries have
13 Badan Ekonomi Kreatif, "Pemahaman Tentang Ekonomi Kreatif," in Tenaga Kerja Ekonomi Kreatif 2011 - 2016, ed. Sub Direktorat Statistik Ketenagakerjaan (Badan Pusat Statistik, n.d. ), 7. 14BINUS University and Faisal Afiff, "Pilar-Pilar Ekonomi Kreatif," Rangkaian Kolom Kluster I, 2012, 2012, http://sbm.binus.ac.id/files/2013/04/Pilar-Pilar-Ekonomi-Kreatif.pdf. 15 President Republik Indonesia, Instruksi Presiden Republik Indonesia Nomor 6 Tahun 2009 tentang Pengembangan Ekonomi Kreatif, (Jakarta, 2009), http://kemenpar.go.id/userfiles/file/7193_2610-Inpres6Tahun2009.pdf. 16Badan Ekonomi Kreatif (BEKRAF), "Apa Itu Ekonomi Kreatif?," in Opus: Ekonomi Kreatif Outlook 2017, ed. Celsius Creative Lab and Wignyo Parasian (Indonesia: Badan Ekonomi Kreatif (BEKRAF), n.d.), 44, http://www.bekraf.go.id/downloadable/pdf_file/180719-opus-bekraf- outlook-2017.pdf. 17 Global Business Guide Indonesia, "Indonesia's Creative Economy & Heritage Product: A Wealth of Opportunities," Global Business Guide Indonesia, accessed November 22, 2018, http://www.gbgindonesia.com/en/manufacturing/article/2014/indonesia_s_creative_economy_and amp_heritage_products_a_wealth_of_opportunities.php. 4 successfully marketed their products to foreign countries. 18 There are also promoting their products through exhibitions activities. 19 Collaboration with designers, small medium enterprises (SMEs) and manufacturing can also support the advancement of the craft subsector. The craft subsector is the 3rd subsector after culinary and fashion, which is major contribution to the Indonesian economy. It has been noted that at least 6% growth per year. If viewed in terms of value, each year the craft sector increases, until 2014 amounting to US $ 6363.3.20 It has been recorded that from 2011 to 2014, the United States was the main destination for Indonesia in doing export activities, specifically in the craft subsector.21 When viewed from the percentage of creative economy labor growth, the craft subsector is one sector that absorbs many workers, after the culinary and fashion sub-sector. From 2011 to 2014, the craft subsector was able to absorb as many as 3.39 million people. 22 During SBY's administration, the government focused on efforts to strengthen bilateral relations between Indonesia and the United States of America (US), given that the US was a superpower that had important influence. In this context, US is considered an important partner for Indonesia therefore it is very necessary to maintain good communication in order to keep the partnership between the two countries.23 Indonesia has established cooperation with several countries in supporting creative economy. One of the countries that made cooperative partnership with
18 Global Business Guide Indonesia, "Indonesia's Creative Economy & Heritage Product: A Wealth of Opportunities," Global Business Guide Indonesia, accessed November 22, 2018, http://www.gbgindonesia.com/en/manufacturing/article/2014/indonesia_s_creative_economy_and amp_heritage_products_a_wealth_of_opportunities.php. 19 Badan Ekonomi Kreatif (BEKRAF), "Apa Itu Ekonomi Kreatif?," in Opus: Ekonomi Kreatif Outlook 2017, ed. Celsius Creative Lab and Wignyo Parasian (Indonesia: Badan Ekonomi Kreatif (BEKRAF), n.d.), 44, http://www.bekraf.go.id/downloadable/pdf_file/180719-opus-bekraf- outlook-2017.pdf. 20 Badan Ekonomi Kreatif Indonesia, "Subsektor Kriya," in Ekspor Ekonomi Kreatif 2010-2016, ed. Subdirektorat Statistik Ekspor (Badan Pusat Statistik, n.d. ), 26. 21 Badan Ekonomi Kreatif Indonesia, "Subsektor Kriya," in Ekspor Ekonomi Kreatif 2010-2016, ed. Subdirektorat Statistik Ekspor (Badan Pusat Statistik, n.d.), 26. 22 Ibid. 23 Joshua Kurlantzick, Keeping the U.S.-Indonesia Relationship Moving Forward (Council on Foreign Relations Press, 2018), https://cfrd8files.cfr.org/sites/default/files/report_pdf/CSR81_Kurlntzick_Indonesia_With%20Cov er.pdf. 5
Indonesia is the United States of America. The relationship between Indonesia and US has been established for a long time. It began in 1949 when H. Merle Cochran as US Ambassador bring a message of congratulation for Indonesia independence over the Kingdom of the Netherlands sent from President Harry S. Truman to President Soekarno.24 Over time, the two countries continue to work to improve relations and cooperation between Indonesia and US. In recent years, some efforts to improve relations between the two countries has been going on since been driven by the situation in seeking for greater market for recovery from the economic crisis. Starting in 2008, where there was an idea from President SBY at the USINDO about partnership program in a long term, as well as parties that involved not only the government, but also private sector and people were also include in it.25 The process of the idea took two years to become a Comprehensive Partnership (CPA) which was officially launched in 2010 during the president Barrack Obama visit to Jakarta.26 Before signing the Comprehensive Partnership, the Indonesian and US governments had previously carried out several economic cooperation, in order to improve bilateral relations between the two countries, especially in the fields of economy and trade. Several forums were formed to facilitate dialogue and economic cooperation between Indonesia and the US, including the US-Indonesia Trade and Investment Dialogue, Commercial Dialogue, and the Overseas Private Investment Corporation (OPIC). In addition, Indonesia has become one of the US export focus countries listed in the National Export Initiatives (NEI), and the US has held a Global Entrepreneurship Program (GEP) to encourage entrepreneurs in the United States and the United States Trade and Development Agency (USTDA)
24 U.S. Embassy and Consulates in Indonesia, History of the U.S. and Indonesia | U.S. Embassy & Consulates in Indonesia, (Indonesia, n.d), https://id.usembassy.gov/our-relationship/policy- history/io/. 25 USINDO, "INDONESIA AND AMERICA: A 21ST CENTURY PARTNERSHIP", (2008), http://usindo.org/wp-content/uploads/2010/07/SBY-Speech-at-USINDO-Nov-20081.pdf. 26 The White House Office of the Press Secretary, Fact Sheet United States-Indonesia Comprehensive Partnership, (2011), https://obamawhitehouse.archives.gov/the-press- office/2011/11/18/fact-sheet-united-states-indonesia-comprehensive-partnership. 6 to encourage energy cooperation 27 Then after that both countries made Comprehensive Partnership. Joint Declaration on Comprehensive Partnership between the Republic of Indonesia and the United States of America is a long-term commitment between Indonesia and US in order to strengthen bilateral relations. 28 Commitment by former President of Indonesia Susilo Bambang Yudhoyono (SBY) and former President of United States of America Barrack Obama in Comprehensive Partnership has made plan of action which consist of three pillars: political and security; economic and development; and socio-cultural, education. Science and technology cooperation.29 Comprehensive partnership is a collaboration created by the two countries to establish more in several sectors such as economic sector, education and others. It gives Indonesia some benefit in trade liberalization, facilitating the continuation of the creative economy and facilitating trade to the US in order to increase the economy of the country. Improving cooperative relations by the two countries in the economic sector, facilitate trade flows including on realizing and give opportunity to small business and entrepreneurship are one of the points that stated in Joint Declaration on Comprehensive Partnership between Indonesia and US. 30 Those points have been used as the foundations that support creative economy Indonesia. Comprehensive partnership Indonesia-US leverage the use Trade and Investment Framework Agreement (TIFA) in removing existing barriers for trade and investment where both government working together under Trade and
27The Embassy of the Republic of Indonesia, Brief History of Indonesia-US Bilateral Relations, (Washington, DC, 2017), https://www.embassyofindonesia.org/index.php/bilateral-relations/. 28 Kementrian Luar Negeri Republik Indonesia, Joint Declaration on Comprehensive Partnership Between the Republic of Indonesia and the United States of America, (Jakarta, 2010), https://www.kemlu.go.id/id/lembar-informasi/Pages/Joint-Declaration-on-Comprehensive- Partnership-between-the-Republic-of-Indonesia-and-the-United-Stat.aspx. 29 The White House, Fact Sheet United States-Indonesia Comprehensive Partnership, (2011), https://obamawhitehouse.archives.gov/the-press-office/2011/11/18/fact-sheet-united-states- indonesia-comprehensive-partnership. 30 Kementrian Luar Negeri Republik Indonesia, Joint Declaration on Comprehensive Partnership Between the Republic of Indonesia and the United States of America, (Jakarta, 2010), https://www.kemlu.go.id/id/lembar-informasi/Pages/Joint-Declaration-on-Comprehensive- Partnership-between-the-Republic-of-Indonesia-and-the-United-Stat.aspx. 7
Investment Working Group.31 That collaboration was been used by Indonesia to increase the value of exports. Beside the cooperation in the fields of economy and trade, US also contributed to the growth of the Indonesian economy through assistance including strengthening the economy and job creation, as well as providing foreign loans where the US ranked second after Japan, as a lending country to Indonesia.32 The rate of exports from the creative economy continuous to increase every year where on average during period 2010-2016, export of economy creative as a whole experienced an increase of 6,93% per year. 33 Based on research in the Creative Economy Policy Journal in Developing Countries: The Case of Indonesia, the contribution of traditional culture industry to the economy tends to be greater at around 7% compared to the real creative economic sector which only accounts for 1%. Traditional culture tends to be more advanced and developing, especially in demand in Western country, because of the large interest of the international community in anti-exotic and exotic goods, although the craft itself is a legacy that has long existed and is not a new innovation.34 The creative economy is also able to expand employment and increase employment. If seen in its entirety, from 2011 to 2014, the creative economy in 2011 recorded an absorption of as many as 13.45 million workers, until 2014 it reached 15.17 million people. 35 The number of creative economy workers tends to increase with an average growth of 4.69% per year.36
31 U.S. Department of State, United States-Indonesia Comprehensive Partnership, (Bureau of Public Affairs, 2013), https://2009-2017.state.gov/r/pa/prs/ps/2013/10/215196.htm. 32Thomas Lum and Foreign Affairs, Defense, and Trade Division, U.S. Foreign Aid to East and South Asia: Selected Recipients, (2008), https://fas.org/sgp/crs/row/RL31362.pdf. 33 Purwaningsih, Eka Andriani, and Fifi Nofrida, "Bab 3. Pembahasan," in Ekspor Ekonomi Kreatif 2010-2016 (Badan Pusat Statistik, n.d. ), PDF e-book, 33. 34 Fahmi, Fikri Z., and Sierdjan Koster. "Creative Industries and Regional Productivity Growth in the Developing Country: Evidence from Indonesia." Growth and Change 48, no. 4 (December 2017), 805-830. 35Badan Ekonomi Kreatif, "Perkembangan Tenaga Kerja Ekonomi Kreatif 2011-2016," in Tenaga Kerja Ekonomi Kreatif 2011-2016, ed. Sub Direktorat Statistik Ketenagakerjaan (Badan Pusat Statistik, n.d. ). 36 Ibid. 8
From these developments, it can be seen that the cultural potential in the Creative Economy program is very real. Traditional Culture can not only have an impact on economic growth, but also can form a good image for Indonesian culture.
I.2.Problem Identification
Creative economy is a Indonesia’su government program established since 2006.37 However, in that year, the performance of creative economy has not been maximized. Also, in that year no special body that supervise and manages the Creative Economy program. The creative economy program was promoted in the era of President Susilo Bambang Yudhoyono (SBY).38 It was established because considered to have the potential to improve Indonesia economy, develop the Small Medium Enterprises, strengthen the connection of diplomatic relations between countries to open jobs and reduce unemployment.39
As the author has explained in the background, Creative Economy not only has the potential to improve the country’s economy and increasing employment, but also can maintain the relations between countries through export cooperation. It also can be an opportunity for Indonesia to introduce and promote the culture, and build positive images through export. As the author explained in Introduction, the author took one example of sub-sector of Creative Economy which is export in the field of craft sector, with a collaboration partner is United States. Before the implementation of the Creative Economy program, Indonesia’s Gross Domestic Product (GDP) and Export were classified as low.40 Therefore, through this creative economy Indonesia has opportunity to develop and maximize economic development through export activities which at the same time can develop Indonesia’s Small Medium Enterprises (SMEs). As we know, good
37 BINUS University and Faisal Afiff, "Pilar-Pilar Ekonomi Kreatif," Rangkaian Kolom Kluster I, 2012, 2012, http://sbm.binus.ac.id/files/2013/04/Pilar-Pilar-Ekonomi-Kreatif.pdf. 38 The Jakarta Post and Fikri Z. Fahmi, "Promoting the Creative Economy," The Jakarta Post, last modified July 8, 2014, http://www.thejakartapost.com/news/2014/07/08/promoting-creative- economy.html. 39 BINUS University and Faisal Afiff, "Pilar-Pilar Ekonomi Kreatif," Rangkaian Kolom Kluster I, 2012, 2012, http://sbm.binus.ac.id/files/2013/04/Pilar-Pilar-Ekonomi-Kreatif.pdf. 40 Purwaningsih, Eka Andriani, and Fifi Nofrida, "Bab 3. Pembahasan," in Ekspor Ekonomi Kreatif 2010-2016 (Badan Pusat Statistik, n.d. ), PDF e-book, 33. 9 relations have been made for a long time between Indonesia and the United States, marked by cooperation both country in various fields, which is: education, military, economy and trade. Indonesia is also one of the big markets for United States. In 2010, the two countries agreed to strengthen relations and cooperation between countries through a Comprehensive Partnership agreement that cover various fields of cooperation, including trade sector.41 It is based on the Comprehensive Partnership that ultimately became the basis for trade cooperation between Indonesia and the United States, which finally provided a way for Indonesia to export to the United States. In 2011, the United States became the main destination for Indonesia in the collaboration of export in craft sector.42 Through its Craft export activities which began with Comprehensive Partnership cooperation, then it can be examined what is the influence of Indonesia’s economic diplomacy through the creative economy cooperation in Craft sector Indonesia-United States on Indonesia’s employment and economy.
I.3. Statement of Problem
The issues and reasons describe above will then lead into a research that this Thesis would be, which is:
Research Question:
How did Indonesia’s economic diplomacy under Susilo Bambang Yudhoyono administration in creative economy for craft sector on Indonesia- United States, contribute to Indonesia’s economy (craft export and employment) in 2011 until 2014?
41 Kementrian Luar Negeri Republik Indonesia, Joint Declaration on Comprehensive Partnership Between the Republic of Indonesia and the United States of America, (Jakarta, 2010), https://www.kemlu.go.id/id/lembar-informasi/Pages/Joint-Declaration-on-Comprehensive- Partnership-between-the-Republic-of-Indonesia-and-the-United-Stat.aspx. 42 Ibid. 10
I.4. Research Objectives
The objectives of this research are:
a. To know the implementation of economic diplomacy Indonesia in improving its economy and employment through creative economy specialized in Craft sector, in the United States b. To show the changes in Indonesia’s economy after the establishment of cooperation with United States for creative economy c. To show how Creative Economy, especially Craft sector contributed to the employment of Indonesia’s craft sector
I.5. Significance of the Study This research is aimed to give valuable knowledge on how creative economy in craft sub-sector under Susilo Bambang Yudhoyono administration contribute to increasing Indonesia’s economy through economy diplomacy. In purpose to get a clear and better understanding on knowing creative economy and craft sub-sector itself, also how Indonesia use its economy diplomacy in doing trade especially craft export activities to United States that served in this thesis. The author hopes that the result of this study would find it useful to contribute for International Relations studies while everything is interrelated to one another.
I.6. Theoretical Framework
In structuring this thesis, a series of significant theories and concepts would be applied to gain better perspective in understanding the issue as well as gaining the comprehensive answer to the problems.
I.6.1. Economic Diplomacy
In general, diplomacy can be understood as the way a country reaches its national interests through negotiations and cooperation. Not only that, diplomacy can also be used as a way to find solutions to problems that appear in interstate relations by not involving acts of violence that can harm both parties.
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In international politics, interaction between State actors and economic actors can be achieved through diplomacy. This diplomacy known as Economic Diplomacy. The main task of economic diplomacy is to encourage the economic relations of the country represented by the destination country, which is focused on maintaining market relations, protection, and supervision, as stated by Pavol Baranay: “…Economic diplomacy is a process in which the State relates to the outside world in an effort to maximize its objectives in all forms of activities, such as trade, investment, and other forms of economic interaction.”43
Economic diplomacy is a component of foreign policy, where the policy plays a major role in making or determining a goal and target of economic diplomacy of a country which ultimately must reflect all activities, forms, objectives and methods used to realize foreign policy. Baranay argues that economic diplomacy is the main key to the economy in an effort to achieve foreign policy goals.44
The main character of economic diplomacy is that economic diplomacy is very sensitive and reactive to changes and market developments.45 In addition, the involvement and large role of the private sector in the negotiation process and policy formulation is also one of the differences between economic diplomacy and other diplomacy.46 The role and development of economic diplomacy in the economic international modern system is driven by several factors which also have an impact on the building of a positive image of the State, where has an effect on the attractiveness of foreign investment, including:47
43 Pavól Baranay, Modern Economic Diplomacy, March 2009, http://www.dec.lv/mi/Baranay_Pavol_engl.pdf. 44 Ibid. 45 Kishan S. Rana, "Economic Diplomacy: The Experience of Developing Countries," in The New Economic Diplomacy: Decision Making and Negotiation in International Economic Relations, ed. Nicholas Bayne and Stephen Woolcock (London: Ashgate, 2007). 46 Ibid. 47 Pavól Baranay, Modern Economic Diplomacy, March 2009, http://www.dec.lv/mi/Baranay_Pavol_engl.pdf. 12
a. The process of internationalization and strengthening the dependencies of the world economic system leads to two things, namely global and regional integrity; b. Market economies that experience expansion, national economic liberalization, increased state interaction through international trade and investment, and increased global economic factors such as multinational companies, banks, and investment groups; c. Economic globalization; the combination of internationalization processes and increasing the role of multinational companies has an impact on increasing the role of economic diplomacy. In this case, economic diplomacy plays a role in encouraging the development of internationalization in the country, but on the other hand it also holds back the strength of the state or other actors trying to monopolize the benefits of globalization; d. Adaptation to progressive management methods, energy efficiency, and new technologies, so that foreign investment can ensure the development of cooperation between countries and international organizations; e. The development of the country's economic innovation towards the openness of the external economy.
Some important factors that make economic diplomacy work are as follows:48
a) Foreign economic relations involve not only the foreign ministry, trade and industry of the country concerned, but also involve all business units in the country, such as trade and industry associations, the financial sector, schools and business research institutions, the tourism industry, and domestic actors who are stakeholders as well as prime movers;
b) Foreign ministry structures and external economic regulatory bodies must be harmonized and aligned. This policy has been taken by Scandinavian countries
48 Kishan S. Rana, "Economic Diplomacy: The Experience of Developing Countries," in The New Economic Diplomacy: Decision Making and Negotiation in International Economic Relations, ed. Nicholas Bayne and Stephen Woolcock (London: Ashgate, 2007).
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such as Denmark, Finland, Norway, Sweden, Iceland and other countries such as Australia, Brunei, Canada, South Korea, New Zealand and several countries in the Caribbean. The Scandinavian countries above have fully integrated trade and investment promotion, as well as trade and foreign aid policies into the foreign ministry;
c) Making priority "twins", economic diplomacy, namely between the promotion of exports and mobilization into foreign investment. Export promotion includes assistance to domestic companies seeking foreign markets; market studies, business delegation visits, participation in international trade meetings, as well as buyer-seller meetings;
d) The framework of the trade regulations that are legally determined by the government is shared thoughts with business people as well as think-tanks and scholars that aim to establish conditions that increase state trade and investment;
e) Must distinguish between economic diplomacy operating in the capital city and in the field through networks in embassies and consular offices;
f) There are differences in the effectiveness of economic diplomacy in each country. Diplomatic missions run by trained people and professional staff provide the power benefits and influence of the country they represent.
Seeing from the definition above, economic diplomacy is an important element for the state in managing its economic relations with the outside world because international economic relations do not occur if only relying on market forces as assumed by neoclassical economists. In this understanding, economic diplomacy then becomes an important weapon for the State to be able to cooperate or conflict in the international system. According to Van Bergeijk & Moons, economic diplomacy contains three elements, which is:49
49 Van Bergeijk, P.A.G., dan S. Moons, 2007. “Economic Diplomacy and Eco-nomic Security”, New Frontiers for Economic Diplomacy.Lisbon: Portugal. 14 a) Use of influence and political relations to promote and or influence trade and investment, b) Utilization of economic assets to increase the costs of conflict and strengthen mutually beneficial relationships, c) Efforts to consolidate the international political and environmental climate to achieve these objectives.
Attracting foreign investment which then impacts on the economic growth of a country is one of the main objectives in economic diplomacy. Thus, the activities carried out by the government of Indonesia through the Creative Economy program are one form of business to develop and advance the Indonesian economy, which is one of its Foreign Policies, through Creative Economy export cooperation in the craft sector. Through collaboration with the United States as a trading partner, Indonesia sees the potential of such export cooperation on economic growth in the country. Not only that, economic diplomacy also has an influence on the image of a country, which in turn will also affect the interest of foreign investment to cooperate.
I.7. Scope and Limitation of the Study
In order realize a structured and targeted research, the author restricted this research in 2011 until 2014. Started in 2011 as the changes of economy that occurred in Indonesia when United States became the largest export partner and until 2014 chosen to focus on Susilo Bambang Yudhoyono’s administration. The ranged behind the period is somewhat discussed as long as there is still relevance to the topic of the study.
I.8. Outline of Chapters
Chapter I - Introduction In the first chapter, the reader will be introduced to a problem consisting of fundamental aspects and important information on the topic. This chapter will provide background study, problem identification, statement of problem, research
15 objectives, significance of the study, theoretical framework, scope and limitations of the study, and outline of Chapter. This chapter aims to enhance the reader to look further into the thesis. Chapter II – Literature Review In this chapter the author will discuss the review of previous research, both in the form of books and journals, where the research relates to the issues raised in this thesis. Therefore, that both books and journals then become references and secondary sources / data in working on this thesis. Chapter III – Research Methodology In this chapter the author explains what methods are used in writing this thesis. Chapter IV – Indonesia-United States Economic Diplomacy in Economy Creative under Susilo Bambang Yudhoyono Administration This chapter will provide the reader with an overview of the development of bilateral relations between Indonesia and the United States, especially in the field of Economics. In addition, also information about the history and forms of Indonesian economic diplomacy, as well as the implementation of the creative economy in Indonesia. Chapter V – An Analysis of Economy Diplomacy on Creative Economy and Its Contribution to Indonesia’s Economy and Employment Analysis of the creative economy Indonesia and Craft subsector contribution to the development of the Indonesian economy and the contribution of the Craft sub sector to employment absorption Chapter VI – Conclusion This chapter will conclude this research which relates to the topic of the contribution to creative economy in Indonesia's economy and employment rate which can be used for reference or further research on the same problem.
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CHAPTER II LITERATURE REVIEW
In this chapter, the author trying to explain several previous studies which focus in the field of economic diplomacy and economic cooperation. Various studies which have similar to the theme of this research has been carried out before.
II.1. Journal Review
First, the research that has been done by P.M Erza Killian, with the title is Paradigma dan Problematika Diplomasi Ekonomi Indonesia.50 In his journal, Erza Killian argued that the implementation of economic diplomacy before 2011 was still weak and traditional, due to several internal factors, such as the lack of the role from the Indonesian Ministry of Foreign Affairs, the Ministry of Economy, and the Ministry of Tourism in raising issues of low politics such as economic issues. In that year, the role of non-state actor was very small, as well as the role of the Ministry of Foreign Affairs, which at that time was more focused on High Politic issues, like issues of security, sovereignty, defense and transnational crime. That is why it is necessary to strengthen the functions and authority of the Ministry of Foreign Affairs as the spearhead of Indonesian diplomacy. Indonesia’s diplomacy needs to be directed towards innovative, comprehensive and inclusive so that national goals can be achieved. The relationship of the journal to this study is a flashback and correction of Indonesian diplomacy which at that time was still traditional and experienced some errors due to the influence of internal problems as described above. He explained in 2011 (in the Congressional Report Service) issued by the United States Congress, Indonesia was declared a key player in Southeast Asia, due to its location, population and political leadership. Therefore, 2011 was the year in which Indonesia had the opportunity to collaborate with US.
50 P.M Erza Killian, "Paradigma dan Problematika Diplomasi Ekonomi Indonesia,"Global & Stategies 6, no. 2 (July 2012): 170-183, http://journal.unair.ac.id/download-fullpapers- jgsd095c88cd12full.pdf. 17
Second, research conducted by Fikri Zul Fahmi, Phillip Mc Can & Sierdjan Koster, the title is Creative Economy Policy in Developing Countries: The Case of Indonesia.51 The author of this journal tries to explain the difference between the implementation of creative economy in Western countries and Asian countries. There are several differences in implementing the creative economy between Western country and Asian Country. Both countries have different focus. If in Western country the focus is more on creating and developing new innovations, in the Asian countries more focus is on the development and introduction of what they already have, like culture. Some obstacles are also found in Asian countries in implementing the creative economy, such as limited infrastructure and protection of intellectual property rights. However, the author argues and conducts research, that this does not mean that the State of Indonesia does not have the opportunity to succeed in a creative economic program.52 Indonesia itself has followed the concept of British Economic Creative rules as a reference, and also continues to adopt the original concept of marketing the culture through a creative economy. It is evident that the creative economy can create new jobs, reduce unemployment and increase the country's GDP. Due to the creative economic implementation rules on each island / city are different, so the effectiveness / results are also different. At present in Indonesia, Bandung is the most advanced city in developing a creative economy. The relationship of the journal to this study is to see the perspective of creative economy in Western and Asian countries. The obstacle faced by the Asian country in implementing the creative economy, which in this reach more focused in Indonesia and the contribution to the country’s economy. Third, research conducted by Gillian Doyle, with the title Creative Economy and Policy.53 In this journal, Doyle explained the implications of technological and internet advances on the creative industries of the cultural industry and the media. Although many countries argue that culture is not part of the real creative economy,
51 Fikri Z. Fahmi, Philip McCann, and Sierdjan Koster, "Creative economy policy in developing countries: The case of Indonesia," Urban Studies 54, no. 6 (2015): 1367-1384, doi:10.1177/0042098015620529. 52 Ibid. 53 Gillian Doyle, "Creative economy and policy," European Journal of Communication 31, no. 1 (2015): 33-45, doi:10.1177/0267323115614469. 18 the cultural sector also includes art, literature, drama, theater, dance, visual arts and others. Doyle argued that the developments and advancements in technology and the internet are currently affecting not only income, but also in protecting intellectual property right in media industry. The easier to access the internet which ultimately has an effect on income, because through the internet, this creativity, for example films, can be accessed easily and without cost. Therefore, the copyrights in the media and culture industry are still highly debated at the moment. The relationship of this journal to this study is the implication of technological advances effects on creative economy. In this research will show on how the government maintain the creative economy under the changes the globalizations using cooperation and the policy of the country. Fourth, research conducted by Fikri Zul Fahmi & Sierdjan Koster, the title is Creative Industries and Regional Productivity Growth in the Developing Country: Evidence from Indonesia.54 In this journal, as a whole discusses about research where creative economics can stimulate the development of a region in developing countries, especially Indonesia. In the journal, it was explained that creative economic differences in Indonesia and in developed countries were where culture was included in Creative Economy and did not separate into Traditional Culture Industry. Also, Fahmi and Koster conducted research on the contribution of each sector in creative economy which are the real creative economy sector and traditional culture sector. In this study, it was found that the contribution of traditional culture industry to the economy tended to be larger at around 7% compared to the real creative economic sector which only contributed 1%.55 Fahmi and Koster argue that traditional culture tends to be more advanced and developing, especially more demand in Western country, because of the large of interest in international community for antiques and exotic items, although the craft itself is a legacy that has long existed and is not a new innovation.56 It also explained that the need for a review of regulations concerning creative economy in each region,
54 Fikri Z. Fahmi and Sierdjan Koster, "Creative Industries and Regional Productivity Growth in the Developing Economy: Evidence from Indonesia," Growth and Change 48, no. 4 (2017): 805-830, doi:10.1111/grow.12212. 55 Ibid. 56 Ibid. 19 because currently the biggest contribution comes only from Java specifically West Java, Bandung. Therefore, the government must conduct a review, and the government from each region should maximize the opportunities of the creative economy. The relationship of the journal to this study is the contribution of creative economy can stimulate the development of a region, as well as the review of the polices of each region. While in this research use the data to see on how creative economy could improve national economy especially with the activities of craft export to the United States.
II.2. Books Review Fifth, research conducted by Dr. Mari Elka Pangestu, the title of the book is Pengembangan Ekonomi Kreatif Indonesia 2025.57 In this book, as a whole, it discusses the establishment of the creative economy in Indonesia, history until the goals of the Creative Economy program itself. Mari Elka explained that the economy has entered the 4th phase, after going through a long journey from the agricultural era, the era of industrialization, the information era, and now has entered an era of creativity-based. Therefore, the Indonesian government sees it potential, moreover Indonesia has human resources that can be mobilized to succeed the creative economic program. It also explained the differences between creative economy and creative industry, where creative economy is the basis and root of the establishment of creative industries. Mari Elka also explained that each country builds creative economic competencies in its own way, adapted to the ability of the country itself. There are several directions in the development of the creative industry, which focus more on industries based on the creative culture- based business field, creative business field, and intellectual property rights such as copyright. Judging from its contribution, the role of the creative economy in the Indonesian economy is quite significant at an average of 6.3% in 2002-2006.58 If viewed from the export side, the role of the creative economy towards total exports
57 Mari Elka Pangestu and Departemen Perdagangan RI, Pengembangan ekonomi kreatif Indonesia, 2025: rencana pengembangan ekonomi kreatif Indonesia, 2009-2015 (Jakarta: Departemen Perdagangan RI, 2008). 58 Ibid. 20 on average for 2002-2006 was 10.6%.59 The relationship of the book to this study is the changing era which entered era creativity and seeing the potential for Indonesia in developing creative economy. Therefore, as one of the sub sectors in this research focused on craft. The process of made from raw material improving the creativity and help with reducing the unemployment. Sixth, research conducted by Kishan S. Rana, the title of the book is Economic Diplomacy: The Experience of Developing Countries.60 In this book, Rana explains that economic diplomacy is the process where countries establish relations with the outside world in order to achieve their national interests in all activities such as trade, investment, and forms of economic exchange that can benefit the State, where a country can enjoy a comparative advantages which has bilateral dimension, regional and multilateral dimensions of each are essential. Rana explained that there are several key ingredients so that the economic diplomacy of a country can run smoothly. One of them is the involvement of the foreign, trade and industry ministries, as key stakeholders and prime movers. However according to Rana, State Institution need to take initiative to create. But according to Rana, State Institutions need to take the initiative to create viable and innovative public-private partnerships, the structure of foreign affairs and external economic management needs to be integrated and harmonized and what actions are taken and implemented by the State in carrying out its economic diplomacy. In her research, Rana also made an Economic Diplomacy Typology consisting of several groups / categories of economic diplomacy and their characteristics, which then can be used by a person / country in determining the class / form of economic diplomacy in a country. The relationship of the book to this study is the definition and role of economic diplomacy, and the actors involved which Rana use it to analyses on India as one of developing countries. The typology from Rana help the author use it to
59 Mari Elka Pangestu and Departemen Perdagangan RI, Pengembangan ekonomi kreatif Indonesia, 2025: rencana pengembangan ekonomi kreatif Indonesia, 2009-2015 (Jakarta: Departemen Perdagangan RI, 2008). 60 Kishan S. Rana, "Economic Diplomacy: The Experience of Developing Countries," in The New Economic Diplomacy: Decision Making and Negotiation in International Economic Relations, ed. Nicholas Bayne and Stephen Woolcock (London: Ashgate, 2007). 21 analyze how economic diplomacy in Indonesia to know on what or who the actors that take part for economic diplomacy on creative economy in Indonesia. Seventh, research conducted by Badan Ekonomi Kreatif Indonesia, in book with the title Ekspor Ekonomi Kreatif 2010-2016.61 In this research, it tells about the development of creative economy exports in 2010 until 2016. It is illustrated that the creative economy has 16 subsectors, of which 3 are subsectors which have a major contribution to the Indonesian economy, including culinary, fashion and craft. Bekraf explained the comparison between the value of exports of the creative economy and national non-oil exports, where the value of exports of the creative economy tended to be higher and experience growth from year to year, which was 6.39% per year.62 The export value is also not only seen from each subsector, but also based on the destination country. During the period 2010-2016, the export destination countries of Indonesia were the United States, where on average each year the role of the creative economy of the subsector of commodity exports to the US reached 36.24% of the overall exports of Indonesia's creative economy.63 It was also explained that the island with the largest export contribution in Indonesia was West Java and East Java. The relationship of the book to this study is the subsector which has the largest contribution in the value of exports, as well as the destination countries of Indonesia in conducting export activities. Therefore, in this thesis take craft export as one of the sub sectors in creative economy that have largest contribution to the economy and United States as one of the countries for doing export.
61 Badan Ekonomi Kreatif Indonesia,Ekspor Ekonomi Kreatif 2010-2016, ed. Subdirektorat Statistik Ekspor (Badan Pusat Statistik, n.d.). 62 Ibid. 63 Ibid. 22
CHAPTER III METHODOLOGY
III.1. Research Methodology
In this research, the author used descriptive qualitative research method. Djama’an Satori stated that qualitative research is carried out because researchers want to explore phenomena that cannot be quantified, which are tend to descriptive, such as the process of a work step and understanding of a diverse concept.64 In addition, Sugiyono also set out qualitative research as a research method based on the philosophy of post positivism, used to examine natural conditions, where researchers are key instruments, data collection techniques with triangulation, data analysis is inductive or qualitative, and qualitative research results are more meaning rather than generalization.65 According to Nana Syaodih, qualitative descriptive research is aimed at describing and illustrate existing phenomena, both natural and human-made, which pay more attention to the characteristics, qualities, interrelationships between activities. 66 In addition, descriptive research does not provide treatment, manipulation or alteration on the variables studied, but describes the conditions as they are. Data collection techniques in this study using the Library Research method, which is collecting data through libraries such as books, journals, magazines, newspapers, and official sites. Therefore, using a descriptive qualitative method, the analysis carried out in this study is expected to be more effective and focused. Formation in answering the problem formulation in this study was arranged in stages in a deduction to describe in detail the problem raised.
64 Satori, Prof. Dr. Djam'an, and Prof. Dr. Aan Komariah. Metode Penelitian Kualitatif, 4th ed. Bandung: Alfabeta, 2014. 65 Sugiyono. Metode Penelitian Kuantitatif Kualitatif dan R&D, 3rd ed. Bandung: Alfabeta, 2007. 66 Sukmadinata, Nana Syaodih. Metode Penelitian Pendidikan, 73. Bandung: PT Remaja Rosdakarya, 2011. 23
III.2. Research Framework
State Analysis Indonesia
ECONOMIC DIPLOMACY
Comprehensive Partnership Agreement Creative with United States of Economy America
Craft Export Cooperation to the United States of America
Diagram III.1. The scheme of research framework
Economic diplomacy is a diplomacy that uses economic instruments to achieve the interests of the country itself. Economic diplomacy usually leads to interests in terms of trade involving exports and imports, investments, and all forms of project implementation / development related to economic activities. Indonesia uses Economic Diplomacy as a tool to achieve its national interests. As explained earlier, the application of economic diplomacy has long been carried out in Indonesia, which is since 1945 where Indonesia has just become independent. Economic diplomacy turned out to play a big role and was able to become an extension of Indonesia's hands to meet their needs at that time.
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Through Indonesian economic diplomacy to the United States of America, it was made a comprehensive cooperation agreement as the outcome which covering several fields of cooperation, one of them was in the fields of economy and trade. Through a Comprehensive Partnership Agreement signed by the two countries, the agreement later became the basis of further collaborations that took place between Indonesia and US. The position of the Creative Economy here is a government program that aims to develop the potential of the Indonesian economy through the use of human resources, and creativity as the main subject. In the creative economy it has 14 subsectors, where one of them include Craft subsector. The craft subsector is one sector that has great potential in advancing the Indonesian economy. Craft Subsector is also one of the Indonesian specialties, where the products are famous for handmade. Therefore, it is very important to support the development of the craft sector, through export activities, where the United States is the main destination for Indonesia. Cooperation in the economic field that carried out by Indonesia-US is then included into or becomes part of Economic Diplomacy, where in practice, according to the definition of Economic Diplomacy itself, it covers a variety of diplomatic activities (negotiation, promotion, export activities) that are engaged in the development of the Indonesian economy.
III.2. Research Time and Place
This research began on October 1st, 2018 to November 2018. While the research places are Adam Kurniawan Library, President University, Cikarang, Jababeka, and Library of Ministry of Education and Culture, Jakarta, Indonesia.
III.3. Research Instrument
Data collection techniques in this study used the Library Research method to obtain the data needed for this study. These data can be obtained through books, journals, articles, documents, and various other related media such as official sites and newspapers.
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The author uses qualitative data analysis techniques in the form of descriptive data and other supporting data that shows the form of Indonesia's economic diplomacy towards the United States through trade cooperation. The writing method used is deductive method, that is describing in general the problem under study, then drawing conclusions specifically in analyzing the data.
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CHAPTER IV INDONESIA-UNITED STATES ECONOMIC DIPLOMACY IN CREATIVE ECONOMY UNDER SUSILO BAMBANG YUDHOYONO ADMINISTRATION
IV.1. The Overview of Indonesia-United States Relations
Indonesia-US diplomatic relations have been established long before Indonesia stood as an independent State. Indonesia-US diplomatic relations were inaugurated with the establishment of embassies in each country.67 From its history, Indonesia-US diplomatic relations have experienced ups and downs, along with the changing leadership in both countries. In the early days of Indonesian independence, under the leadership of President Soekarno, Indonesia launched a principle of free and active foreign policy, which meant that Indonesia did not have a position or take a side in the Western Blocs (the United States) or Eastern Blocs (Uni Soviet), but made a neutral movement called Non-Aligned Movement.68 During President Soeharto’s regime, Indonesia sought to eliminate communism in Indonesia, whose issues had spread during the period of President Soekarno, where Indonesia at that time had close relations with China and was considered to have begun to interfere on communism. The communism eradication movement received response and support from the United States, and was able to normalize relations between Indonesia and the United States which at that time had quite down.69 But during the Soeharto era, a multidimensional crisis occurred in Asia which caused massive inflation on the exchange rate of the rupiah against the dollar.
67 The Embassy of the Republic of Indonesia, Brief History of Indonesia-US Bilateral Relations, (Washington, DC, 2017), https://www.embassyofindonesia.org/index.php/bilateral-relations/. 68 Abraham Denmark, Rizal Sukma, and Christine Parthemore, "III. A BRIEF HISTORY of U.S.- INDONESIAN RELATIONS," in Crafting a Strategic Vision: A New Era of U.S.-Indonesia Relations (Washington, DC: Center for a New American Security, 2010), 14-17, https://www.files.ethz.ch/isn/117303/CNAS_Crafting%20a%20Strategic%20Vision_Denmark.pdf 69 Ibid. 27
At that time, Indonesia could not adapt to this situation, which later led to the monetary crisis in 1998 and was marked by the end of time of office President Suharto.70 As one of the biggest voting rights holders at the International Monetary Fund (IMF), through the IMF, the United States helped Indonesia to rise from its downswing through providing loan funds.71 During the era following presidents, the bilateral relations between Indonesia and the United States were in the stage of improvement and adjustment. At the beginning of the reformation, the B.J Habibie government had not been able to establish a stable relationship, it was also followed with the cases of violations of Human Right in East Timor which at that time grab the attention of the international community, and also the United States.72 Then, under the government of President Abdurrahman Wahid and President Megawati Soekarno Putri, the bilateral relations between the two countries continued to be strengthen and maintained. In 2001 after a historic event in the United States on September 11, 2001, under the leadership of President George W. Bush, the United States explicitly declared a "war on terror" policy aimed at fighting terrorism. The United States also cooperates with Indonesia, as a country with the largest number of Muslim populations, to participate in supporting the policy.73 The special attention of the United States towards Indonesia is enough to take public attention and lead the public in opinion. Although Indonesia supports US policies in combating terrorism,
70 Steven Radelet, Indonesia: Long Road to Recovery, March 1999, 1, https://sites.hks.harvard.edu/cid/archive/hiid/papers/indonesia.pdf. 71Yaro Sadek Tahirou, "The Role of the International Monetary Funds (IMF) in the East Asian Debt Crisis of 1997," Journal of Undergraduate Research at Minnesota State University, Mankato 13 (2013): 2, http://public.wartburg.edu/mpsurc/images/Tahirou.pdf. . 72Richard Tanter, Mark Selden, and Stephen R. Shalom, "East Timor and the Crisis of the Indonesian Intelligence State," Bitter Tears, Sweet Tears: East Timor, Indonesia and the World Community (n.d.), 258, http://www.nautilus.org/wp-content/uploads/2011/12/ET-intelligence- state-and-ET-BTST.pdf. 73 Seniwati and Andi Alimuddin, "The United States - Indonesian Military Relationship In Countering Terrorism In Indonesia," International Journal of Management and Applied Science 2, no. 8 (August 2016), http://www.iraj.in/journal/journal_file/journal_pdf/14-287-147488197089- 94.pdf. 28
Indonesia still disagrees and not supports unilateral attacks by the United States on Afghanistan and Iraq.74
IV.2. Indonesia’s Economic Diplomacy
Historically, Indonesia's economic diplomacy was first carried out after Indonesia officially stood as an independent State. For a newly independent country, at that time Indonesia was in an unstable economic position. Finally, diplomacy was carried out to meet national needs. The first Indonesian economic diplomacy was: a. Rice diplomacy to India. Indonesia sells 500,000 tons of rice with cheap prices, while India sends medicines and clothing materials b. Hold foreign direct trade relations with private companies in the United States (Isbrantsen Inc.), Singapore and Malaysia.75
During President Soeharto's administration, Indonesia's economic diplomacy on the basis of historical, political and cultural relations with the Netherlands resulted in the Intergovernmental Group on Indonesia (IGGI), it is an international group founded in 1967, initiated by the United States to coordinate multilateral aid funds to Indonesia.76 In March 1992, Indonesian government announced that IGGI aid funds would be rejected if the organization was still chaired by the Netherlands. IGGI was later replaced by Consultative Group on Indonesia (CGI).77 In economic diplomacy that emphasizes the negotiation process and not on influencing structures or policy issues, the capacity and institutional competencies of a country become an important element. In this capacity, developing countries
74 Seniwati and Andi Alimuddin, "The United States - Indonesian Military Relationship In Countering Terrorism In Indonesia," International Journal of Management and Applied Science 2, no. 8 (August 2016), http://www.iraj.in/journal/journal_file/journal_pdf/14-287-147488197089- 94.pdf. 75Muhnizar Siagian, "Peranan Sutan Sjahrir Untuk Diplomasi Indonesia (1945-1947) - Repository Universitas Andalas," Repository Universitas Andalas, last modified January 21, 2015, http://repository.unand.ac.id/21392/.. 76 G. A. Posthumus, "The Inter-Governmental Group on Indonesia," Bulletin of Indonesian Economic Studies 8, no. 2 (1972): 55-56, doi:10.1080/00074917212331332048. 77 Perpustakaan Bappenas, "Presiden Bubarkan CGI," Bappenas, last modified 2007, http://perpustakaan.bappenas.go.id/lontar/file?file=digital/blob/F18127/Presiden%20bubarkan%20 CGI-BI.htm. 29
have various variants and typologies that are based on various factors such as coordination, policy management, trade promotion and also investment.78 Kishan S. Rana divides economic diplomacy typology into 4 types, which are traditional, niche-focused, evolving and innovative. The differences from these types can be seen in the table below. Although there is no strict dichotomy between each type, this typology can be used as an initial description to identify and classify the types of economic diplomacy carried out by a State.79
Traditional Niche- Focused Evolving Innovative Handled by the Some coordination External trade & economic Promotion between trade and Joined-up and other Economic ministries; little concentrates on the foreign ministries; cooperative Management involvement of identified niche contestation also arrangements MFA likely Inter-ministry or Limited role for cabinet level Institutionalised Policy Good internal MFA, frequent coordination; management, strong Management coordination turf battles tending towards teamwork improvement
Role of Non- Episodic, depends New procedures, Harmonisation with Variable State Actors on personality strong networking all stakeholders
Handled by Networking economic ‘Graduated’ out of aid Economic Aid: Limited between the aid agencies, seldom receipt, or close to Recipient coordination management agency coordinated with that stage and MFA MFA Expanding Modest program, programme, run by Economic Aid: Unlikely to be an Unlikely to be an usually covering MFA in harmony with Donor aid donor aid donor technical trade promotion cooperation agencies Cooperative Often handled by Limited focus on arrangements, often Well- coordinated Trade a commercial commercial integration of activities, role model Promotion cadre, outside promotion, outside political and in range of activities MFA control the niche area economic work
78 P.M Erza Killian, "Paradigma dan Problematika Diplomasi Ekonomi Indonesia,"Global & Stategies 6, no. 2 (July 2012): 170-183, http://journal.unair.ac.id/download-fullpapers- jgsd095c88cd12full.pdf. 79Kishan S. Rana, "Economic Diplomacy: The Experience of Developing Countries," in The New Economic Diplomacy: Decision Making and Negotiation in International Economic Relations, ed. Nicholas Bayne and Stephen Woolcock (London: Ashgate, 2007). 30
MFAs and Handled by embassies work Strong team effort, Investment domestic agencies, Active use of actively with home based in institutional Promotion limited role of the embassy network agencies, often at arrangements diplomatic system individual initiative
Innovative, Regional Focused on Usually reactive Active exploitation of Diplomacy Role preferred niche area potential
Table IV.1. Typology of Economic Diplomacy80 The typology that has been described by Rana is used as an initial description to clarify and identify the types of economic diplomacy carried out by the State, although there is no strict dichotomy between each type. If seen from the two activities raised by Rana, namely policy management and external economic management, the role of the Indonesian Ministry of Foreign Affairs is still very limited. This can be seen from the inclusion of the Ministry of Foreign Affairs as one of the related partners of the Coordinating Ministry for Economic Affairs. This shows that there is less or no role of the Ministry of Foreign Affairs in the formulation and implementation of Indonesia's economic policies, both internally and externally.81 The role of the Ministry of Foreign Affairs is very limited in managing Indonesia's economic policies, where several major economic external activities are carried out by other Ministries, namely the Ministry of Trade, thus shifting the role of the Ministry of Foreign Affairs (MoFA) as one of Indonesia's central economic diplomacy actors, which differs from developed countries MoFA and agencies that regulate external economic activities.82 Apart from being seen in terms of economic policy coordination, according to Rana, the involvement of non-state actors in economic diplomacy activities is also very important. 83 In this case, the participation of non-state actors is still
80 Kishan S. Rana, "Economic Diplomacy: The Experience of Developing Countries," in The New Economic Diplomacy: Decision Making and Negotiation in International Economic Relations, ed. Nicholas Bayne and Stephen Woolcock (London: Ashgate, 2007). 81 P.M Erza Killian, "Paradigma dan Problematika Diplomasi Ekonomi Indonesia,"Global & Stategies 6, no. 2 (July 2012): 170-183, http://journal.unair.ac.id/download-fullpapers- jgsd095c88cd12full.pdf. 82 Ibid. 83 Kishan S. Rana, "Economic Diplomacy: The Experience of Developing Countries," in The New Economic Diplomacy: Decision Making and Negotiation in International Economic Relations, ed. Nicholas Bayne and Stephen Woolcock (London: Ashgate, 2007). 31 limited and coordination between economic diplomacy actors in Indonesia is still relatively weak. The role of the Ministry of Foreign Affairs in managing foreign aid is also still relatively limited.84 Various government agencies, especially the Ministry of Trade, have been active in trade and investment promotion activities. It was only in 2011 that the Ministry of Foreign Affairs came down to play despite its limited role. In 2011 was an important year for Indonesian diplomacy where there was a shift from traditional diplomacy focused on the issue of high politics, shifting towards economic diplomacy, which was maintained based on the instruction of the Minister of Foreign Affairs who argued that economic diplomacy would become the backbone of Indonesian diplomacy future.85 The Ministry of Foreign Affairs also instructs to encourage investment that is beneficial to Indonesia through several efforts related to economic diplomacy, such as, the exhibition of Indonesian products, bringing in businessmen from friendly countries and promoting the formation of business forums between businessmen of friendly countries.86 The final element of economic diplomacy is about the role of a State in regional diplomacy. In this case, the role of Indonesia can be said to be quite large and active, both in Southeast Asia and East Asia. This is evidenced by the position of Indonesia as chairman of ASEAN in 2011, at which time it produced several important ASEAN programs including the Blueprint ASEAN Connectivity which became an important element of ASEAN integration. Indonesia is also the only ASEAN country incorporated in the G20 group which is considered a regulator of the global economy.87
84 P.M Erza Killian, "Paradigma dan Problematika Diplomasi Ekonomi Indonesia,"Global & Stategies 6, no. 2 (July 2012): 170-183, http://journal.unair.ac.id/download-fullpapers- jgsd095c88cd12full.pdf. 85 Kementrian Luar Negeri Republik Indonesia. Pernyataan Pers Tahunan Menteri Luar Negeri 2012: Refleksi 2011, Proyeksi 2012. Jakarta: Kementrian Luar Negeri RI, 2012. 86 Ibid. 87 P.M Erza Killian, "Paradigma dan Problematika Diplomasi Ekonomi Indonesia,"Global & Stategies 6, no. 2 (July 2012): 170-183, http://journal.unair.ac.id/download-fullpapers- jgsd095c88cd12full.pdf. 32
Activities / Elements of Implementation in Indonesia Typology of Economic Diplomacy Economic Diplomacy
External Economic Limited role for the ministry; Run Traditional Management by other ministries independently There is no / little role for the Traditional Policy Management Ministry of Foreign Affairs; coordination is only carried out by 20 ministries (minus the Ministry of Foreign Affairs) Traditional Role of Non-State Actors There is no / minimal coordination between the government and the private sector Traditional Economic Aid: Recipient Managed by Bappenas and the role of the Ministry of Foreign Affairs is very limited; still receiving foreign aid in large numbers Traditional Economic Aid: Donor Managed by Bappenas and the role of the Ministry of Foreign Affairs is very limited; only provide small assistance, for example in the form of humanitarian assistance
Trade Promotion The Ministry of Foreign Affairs Niche-Focused also plays a role, but is limited to 3-5 priority fields according to the target of economic cooperation The Ministry of Foreign Affairs Investment Promotion also plays a role by activating a Niche-Focused network of representative offices abroad
Regional Diplomacy Actively and have a strategic role Evolving Role in the area Table IV.2. Indonesian Economic Diplomacy Practice88
88 P.M Erza Killian, "Paradigma dan Problematika Diplomasi Ekonomi Indonesia,"Global & Stategies 6, no. 2 (July 2012): 170-183, http://journal.unair.ac.id/download-fullpapers- jgsd095c88cd12full.pdf. 33
The implementation of eight elements from Rana version of economic diplomacy carried out by Indonesia, is described in Table 4.2 above. It can be seen, from 8 elements, 5 are still classified as traditional, 2 niche-focused and 1 evolving. Although there are still variations in the categorization of Indonesian economic diplomacy, some elements of Indonesia's economic diplomacy are still categorized as traditional types, or the simplest form of the Kishan Rana version. Therefore, from the explanation of the version of the Rana typology on the running of economic diplomacy in Indonesia, it can be concluded that the form of Indonesian economic diplomacy is classified as traditional, where the actors involved in the trade and investment promotion process in Indonesia, especially in the Creative Economy program are the Ministry of Trade and also the Ministry of Tourism and Creative Economy where the ministry officially operated in 2011 and specifically regulates and runs the Creative Economy program, where the role of the Ministry of Foreign Affairs here is quite limited.
IV.3. Indonesia-United States Bilateral Relations Under Susilo Bambang Yudhoyono
During the administration of President Susilo Bambang Yudhoyono (SBY), the government focused on efforts to improve bilateral relations between Indonesia and the United States. The aim is to improve bilateral relations with regard to Indonesia's foreign policy interests, as well as efforts to increase Indonesia's contribution in the international political constellation and in facing global problems.89 As a superpower country, the United States certainly has an influence on Indonesia, due to of that reason the relations between the two countries need to be kept stable and strengthened. On the government of SBY make planned on Indonesian diplomacy with the motto “A thousand friends, zero enemy”.90 The motto is intended to show
89 Joshua Kurlantzick, Keeping the U.S.-Indonesia Relationship Moving Forward (Council on Foreign Relations Press, 2018), https://cfrd8files.cfr.org/sites/default/files/report_pdf/CSR81_Kurlntzick_Indonesia_With%20Cov er.pdf. 90 Ziyad Falahi, "Memikirkan Kembali Arti Million Friends Zero Enemy dalam Era Paradox of Plenty," Indonesia for Global Justice 7, no. 2 (2013): 228-230, http://journal.unair.ac.id/download- 34
Indonesia as a country that is able to establish all-direction foreign policy in a unstable world as stated by President SBY through the metaphor of "navigating a turbulent ocean" that can be extracted that the government believes in the present era encouraging the need for cooperation without showing partiality.91 In that context, the United States is considered as important partner for Indonesia. Therefore, it is very important to maintain communication between Indonesia and the United States in order to create sustainable relations and maintain partnerships between the two countries. As a continuation of Indonesia's foreign policy principles under the SBY government, cooperation with the United States was continuously reviewed, fixed and improved.92 In realizing the improvement and development of Indonesia-US relations, the two countries then agreed to sign a cooperation agreement, which later became a new phase in Indonesia-US bilateral relations. The cooperation agreement became the basis of Indonesia-US future cooperation, which was later called the Comprehensive Cooperation Agreement.
IV.3.1. Comprehensive Partnership and Cooperation on Economy Indonesia- United States
Comprehensive partnership consists of 6 components, where the economic cooperation between Indonesia-US is included in the last point, namely the Trade and Investment Working Group.93 The United States and Indonesia work together under the Trade and Investment Working Group to remove existing barriers to trade and investment, based on the bilateral Trade and Investment Agreement (TIFA) 1996.94 The process of Indonesia-United States bilateral cooperation arrived at the phase called equal partnership which was marked by the agreement of the
fullpapers-10%20Ziyad%20Falahi%20- %20Memikirkan%20Kembali%20Arti%20Million%20Friends%20Zero%20Enemy%20dalam%20 Era%20Paradox%20of%20Plenty%20(1).pdf. 91 Ibid. 92 Irfa Puspitasari, "Indonesia’s New Foreign Policy- ‘Thousand friends-zero enemy," Idsa Issue Brief, last modified August 23, 2010, https://idsa.in/system/files/IB_IndonesiaForeignPolicy.pdf. 93 U.S. Department of State, Fact Sheet United States-Indonesia Comprehensive Partnership, (Bureau of Public Affairs, 2013), https://2009-2017.state.gov/r/pa/prs/ps/2013/10/215196.htm. 94 Ibid. 35
Indonesia-US Comprehensive Partnership Agreement (CPA) on President Barack Obama's state visit on November 9-10, 2010.95 This comprehensive partnership agreement is the starting point of the new phase of bilateral relations between Indonesia and the United States. Before the establishment of CPA, Indonesia-US bilateral relations were implemented based on the Indonesia-US Joint Commission Meeting chaired by the Minister of Foreign Affairs of each country. This comprehensive partnership is based on a number of very important shared values such as freedom, pluralism, tolerance, democracy, and respect for human rights.96 President SBY also emphasize that CPA was built with the aim of forming democratic partnership and committed together to promote peace, freedom, prosperity, law enforcement, and religious tolerance in various regions of the world. 97 The partnership formed in this comprehensive partnership includes extensive cooperation in various sectors, such as in the education sector, environmental sector, security sector, science and technology sector, trade and investment sector, democracy sector and human rights, energy sector, and food sector.98 The sectors included in the comprehensive partnership are divided into working groups and it chaired by each ministry that is appointed directly by the President of each country.99 The Ministry here has the role and responsibility in overseeing programs that have been formed based on the working group that is their responsibility. This partnership is a reflection of increasing relations between the two countries based on equal partnerships on the principle of mutual respect and mutual benefit. In an effort to improve the bilateral relations of the two largest
95The White House and Office of the Press Secretary, Joint Declaration on the Comprehensive Partnership between the United States of America and the Republic of Indonesia, (Office of the Press Secretary, 2010), https://obamawhitehouse.archives.gov/the-press-office/2010/11/09/joint- declaration-comprehensive-partnership-between-united-states-americ. 96 Ibid. 97 Ziyad Falahi, "Memikirkan Kembali Arti Million Friends Zero Enemy dalam Era Paradox of Plenty," Indonesia for Global Justice 7, no. 2 (2013): 228-230, http://journal.unair.ac.id/download- fullpapers-10%20Ziyad%20Falahi%20- %20Memikirkan%20Kembali%20Arti%20Million%20Friends%20Zero%20Enemy%20dalam%20 Era%20Paradox%20of%20Plenty%20(1).pdf. 98 U.S. Department of State, Fact Sheet United States-Indonesia Comprehensive Partnership, (Bureau of Public Affairs, 2013), https://2009-2017.state.gov/r/pa/prs/ps/2013/10/215196.htm. 99 Ibid. 36 democratic countries in the world, the working group formed under the agreement of the Indonesia-US Comprehensive Partnership includes six main components, that are; The Democracy and Civil Society Working Group, Education Working Group, Security Working Group, Environment and Climate Working Group, Energy Working Group, dan Investment Working Group.100 Other than signing the CPA, the efforts of the Indonesian and US Governments in improving economic relations between the two countries were marked by the formation of several forums to facilitate dialogue and economic cooperation between the two countries. These forums and initiatives consist of: US- Indonesia Trade and Investment Dialogue, Commercial Dialogue, and Overseas Private Investment Corporation (OPIC).101 Moreover, Indonesia has become one of the US export focus countries listed in the National Export Initiatives (NEI), and the US has held a Global Entrepreneurship Program (GEP) to encourage entrepreneurs in Indonesia and the United States Trade and Development Agency (USTDA) Geothermal Development to encourage energy cooperation.102 In trade relations, US is the third largest trading partner for Indonesia, after China and Japan. Indonesia's trade balance to the United States shows a positive value. From 2010, overall of Indonesia's non-oil and gas export value increased.103 The value of US investment in Indonesia in the same year also increased. The US also provides various forms of assistance for Indonesia which is channeled through the United States Agency for International Development (USAID). Related to the economic sector, there are several aspects that are the focus of US assistance, including: strengthening economic growth and creating job employment, developing the business and corporate climate, stability and fairness of the financial sector, improving the quality of basic services, environmental services, health services, and the food and nutrition sector. In addition, the US also provides foreign
100 U.S. Department of State, Fact Sheet United States-Indonesia Comprehensive Partnership, (Bureau of Public Affairs, 2013), https://2009-2017.state.gov/r/pa/prs/ps/2013/10/215196.htm. 101The Embassy of the Republic of Indonesia, Brief History of Indonesia-US Bilateral Relations, (Washington, DC, 2017), https://www.embassyofindonesia.org/index.php/bilateral-relations/. 102 Ibid. 103 Thomas Lum and Foreign Affairs, Defense, and Trade Division, U.S. Foreign Aid to East and South Asia: Selected Recipients, (2008), https://fas.org/sgp/crs/row/RL31362.pdf.
37 loans. Bilateral loans originating from the US ranked in second after bilateral loans originating from Japan.104
IV.3.2. The Importance of the United States of America for Indonesia
There are two main points why the United States is very important for Indonesia. First, by maintaining and strengthening bilateral relations between Indonesia and the US, Indonesia can improve its human resource capabilities. This can be achieved by increasing the mobility of the Indonesian people to the US with the aim of sharing experience and knowledge that can be used to build the nation.105 Second, it is undeniable if the United States has an important role in the global economy. If Indonesia-United States bilateral relations maintain stability, it will also have an impact on increasing Indonesia's economic development. Not only that, Indonesia can also make the support of the United States as an opportunity to enhance its central role both regionally and internationally.106 Increasing bilateral relations between countries can also have an impact on increasing economic, political, defense and security development, not only for Indonesia but also for the United States both at regional and international levels. This is because Indonesia plays an important role in Asian geopolitics. Indonesia is the entrance to the United States in passing interests in the region. In addition, Indonesia is also a strategic partner for the US in combating terrorism.107 As partners in economic relations, the US has the power that make it look attractive to other countries, including Indonesia. The power possessed by the US includes:108
104 Thomas Lum and Foreign Affairs, Defense, and Trade Division, U.S. Foreign Aid to East and South Asia: Selected Recipients, (2008), https://fas.org/sgp/crs/row/RL31362.pdf. 105 Kementrian Keuangan Republik Indonesia, Kajian Kerja Sama Bilateral Indonesia-Amerika Serikat Di Bidang Ekonomi dan Keuangan, (Jakarta: Kementrian Keuangan Republik Indonesia, 2012), https://kemenkeu.go.id/sites/default/files/kajian_kerja_sama_bilateral_ri-as.pdf. 106 Ibid. 107 Rizal Sukma and The Jakarta Post, "Insight: Strategic significance of Indonesia-US relations," The Jakarta Post, November 10, 2010, xx, https://www.thejakartapost.com/news/2010/11/10/insight-strategic-significance-indonesiaus- relations.html. 108 Kementrian Keuangan Republik Indonesia, Kajian Kerja Sama Bilateral Indonesia-Amerika Serikat Di Bidang Ekonomi dan Keuangan, (Jakarta: Kementrian Keuangan Republik Indonesia, 2012), https://kemenkeu.go.id/sites/default/files/kajian_kerja_sama_bilateral_ri-as.pdf.. 38
a. The ease of doing business so that the International Finance Corporation (IFC) acclaim the United States as one of the best destinations to build / do business, thus potentially becoming a destination for Foreign Direct Investment (FDI). Overall, in 2010 the United States was in position 4, where the ranking was relatively better compared to the OECD high income countries (Canada, Germany, etc). Specifically, the US occupies position 4 for ease of starting a business, position 17 in terms of construction / development permits, position 16 for property registration, position 4 for obtaining credit, position 7 in contract enforcement, and rank 17 in obtaining electricity.109 b. The United States has a strong position in international organizations. The US is also a pioneer of the modern international trade system and founder of various international trade and financial institutions. The US also has a large influence and an important role in various international organizations, one of them is the World Trade Organization (WTO), where the organization is an organization engaged in economics and trade. Thus, the influence and leverage of the US is very large in determining the rules of the game related to international economic relations. c. The United States is a superpower that has the latest technology and innovation, as well as excellent infrastructure that will support various economic activities so that efficiency can be achieved at work, which in turn attracts foreign investment to work together d. Having high competitiveness related to the quality of US human resources.
While in the other hand, it is important for the US to maintain good relations with Indonesia, because Indonesia also has an important role for the US. The cooperation between Indonesia and the US is inseparable from the national interests of each country. Although Indonesia is not the most important economic partner of
109The World Bank, Doing Business 2010: Reforming through Difficult Times (Washington, DC, DC: The World Bank, IFC and Palgrave MacMillan, 2009), PDF e-book. 39 the United States, the strategic location of Indonesia in Southeast Asia is a bridge for the United States in realizing its national interests.110 There are several reasons why Indonesia is very important for US. Seeing from a US perspective, Indonesia as a country that upholds equality, harmony and human rights. Indonesia is seen as a country with a high tolerance for religious people. Therefore, Indonesia is needed to promote democracy, world peace, legal supremacy and religious tolerance throughout the world.111 In the economic sector, Indonesia with a population of more than 200 million people is a large market for the United States, remembering that products from China have dominated the Asian market, including Indonesia.112 Therefore, to win the Indonesian market which has great potential, the US need to establish cooperation in the economic and trade sectors that are profitable with Indonesia, with the expectation that the US can replace the position of Chinese products.113 US exports service to Indonesia have increased 70% and have reached US $ 2.5 billion. Indonesia is also the only ASEAN country that joins the G-20, where countries that are members of the G20 control approximately 75% of world trade.114 The United States and Indonesia also establish several cooperation in the economic sectors that are mutually beneficial to the two countries, where US has a potential market for Indonesia's export activities because America is the dominant market in the world which invests a lot, while Indonesia is an oil and gas producer, as well as manufacturing products.115 By strengthening US-Indonesia's economic relations, US influence has become stronger. As stated by President Barack Obama “Building an economy that lasts isn’t just about making things, it’s about opening new markets for people to buy them. After all, 95% of the world’s consumers live outside our borders. And as
110 Tri Setiya and Facts of Indonesia, "10 Reasons Why is Indonesia Important to the US," Facts of Indonesia, n.d, https://factsofindonesia.com/why-is-indonesia-important-to-the-us. 111 Lisbet and Sekretariat Jenderal DPR RI, "Penguatan Kemitraan Komprehensif Indonesia-Amerika Serikat," Info Singkat Hubungan Internasional 7, no. 2 (January 2015), http://berkas.dpr.go.id/puslit/files/info_singkat/Info%20Singkat-VII-2-II-P3DI-Januari-2015-69.pdf. 112 Tri Setiya and Facts of Indonesia, "10 Reasons Why is Indonesia Important to the US," Facts of Indonesia, n.d, https://factsofindonesia.com/why-is-indonesia-important-to-the-us. 113 Ibid. 114 Ibid. 115 Ibid. 40
the fastest-growing region in the world, no market is more important to our economic future than the Asia Pacific, a region where our exports already support five million American jobs.”116
Not only in the economic sector, defense sector, US also needs Indonesia to offset China's influence in the Asian region. With the existence of a comprehensive partnership, this can clarify Indonesia's position in the competition between the two countries in Asia. If viewed from geographically, with a position located between two oceans and two very strategic continents, a comprehensive partnership with Indonesia would greatly support US military interests.117
IV.4. The Origin of Creative Economy
Historically, the creative economy first began in 1995, in London, England.118 The terms and concepts of creative economics were first written in a book by Landry and Bianchini. Landry and Bianchini wrote their creative ideas into a book called The Creative City. In 2000, Landry again put his idea in a book entitled The Creative City: A Toolkit for Urban Innovators. The book succeeded in attracting the attention of regional officials (mayors) and stakeholders of economic- cultural development. The concept offered is "creative city".119 In 2001, John Howkins was inspired by previous studies on creative economics, eventually initiating deeper creative economic ideas into his book entitled Creative Economy, How People Make Money from Ideas. The Howkins idea was also inspired by Robert Lucas who saw that the economic growth of a region was largely determined by the level of productivity and the existence of creative people who had special talents with the ability to apply science to create an
116 Jane Kaminski, "Why Indonesia Matters to the U.S," U.S. Global Leadership Coalition (USGLC), last modified November 22, 2011, https://www.usglc.org/blog/why-indonesia-matters- to-the-u-s/. 117 Lisbet and Sekretariat Jenderal DPR RI, "Penguatan Kemitraan Komprehensif Indonesia-Amerika Serikat," Info Singkat Hubungan Internasional 7, no. 2 (January 2015), http://berkas.dpr.go.id/puslit/files/info_singkat/Info%20Singkat-VII-2-II-P3DI-Januari-2015- 69.pdf. 118 Herie Saksono, "Ekonomi Kreatif: Talenta Baru Pemicu Daya Saing Daerah,"Jurnal Bina Praja 04, no. 02 (2012): 93-104, doi:10.21787/jbp.04.2012.93-104. 119 Ibid. 41 innovation. With his idea of creative economics, John Howkins became known as the Father of Creative Economy.120 In 2012, Richard Florida further developed research on the creative economy and put forward the results of the transformation research of economic products, creative industries, and the rise of creative classes. It was also stated that the world economy had undergone a shift. In the twentieth century, the economy was based on manufactured products. In the 21st century, it experienced a shift to the economy originating from creativity as its main commodity.121
IV.4.1. History of Creative Economy in Indonesia: Under Susilo Bambang Yudhoyono Administration
Referring to President Susilo Bambang Yudhoyono’s (SBY) statement on the creative economy, SBY defines creative economy as "the creative economy is the 4th wave economy, which is the continuation of the 3rd wave economy with an orientation to creativity, culture, and cultural heritage, and environment.”122 SBY stated the importance of developing a sector that originated from the nation's craft and creativity. Then in 2006, Mari Elka Pangestu, as Minister of Trade of Indonesia at that time launched Indonesia Design Power in the ranks of the Indonesian Ministry of Trade, a program that was expected to be able to increase the competitiveness of Indonesian products both at home and abroad. The program focuses on developing the service sector, and can provide space for creative actors and industries. After the establishment of the program, the terms creative economy and creative industries became the talk of the Indonesian people.123 After one year of running the Indonesia Design Power program, an agenda for the Indonesian Culture Products Week was held with the theme “Bunga Rampai
120 Herie Saksono, "Ekonomi Kreatif: Talenta Baru Pemicu Daya Saing Daerah,"Jurnal Bina Praja 04, no. 02 (2012): 93-104, doi:10.21787/jbp.04.2012.93-104. 121 Florida, Richard. The Rise of The Creative Class. New York: Basic Books, 2012 122. Pascasuseno, Agus. Ekonomi Kreatif: Kekuatan Baru Indonesia Menuju 2025. Yogyakarta: Bedah Cetak Biru Ekonomi Kreatif, 2014 123 Mari Elka Pangestu, Pengembangan Ekonomi Kreatif Indonesia 2025 (Jakarta: Departemen Perdagangan Republik Indonesia, 2008). 42
Produk Budaya Indonesia untuk Dunia”.124 The program continued until 2008 when a book was launched on the study of mapping Indonesian creative industries, which became the first book in Indonesia to discuss the potential and mapping of creative industries in Indonesia. 125 In Indonesia, enthusiasm for the creative economy has been felt since 2007, through the Indonesian Culture Products Week which later changed its name to the Week of Indonesian Creative Products in 2009.126 The Indonesian government is aware of the shifting / economic transformation that originally relied on manufacturing, slowly starting to shift to the economy based on creativity whose main instrument is Human Resources (HR).127 Responding to the transformation of the economy, in 2009 the Indonesian government officially published the program of Creative Economy, which was inaugurated in Presidential Instruction No. 6 of 2009 concerning the development of creative economy, where the program must be implemented by several agencies or ministries, and also mandatory for all local governments (provincial and district / city). The President also declared 2009 as the Year of Creative Indonesia.128 In the same year there was also a Creative Virus Exhibition which included the creative industry sector, and the Pangan Nusa Exhibition which introduced the Indonesian food industry, thus becoming evidence that the development of creative industries in Indonesia leads to a positive trend.129 In 2010, a digital platform was created called the Indonesian Creative Economy to facilitate Indonesian people in accessing the development of creative industries in Indonesia. In addition, the same year also began the socialization of information between the central government and regional governments about the
124 Mari Elka Pangestu, Pengembangan Ekonomi Kreatif Indonesia 2025 (Jakarta: Departemen Perdagangan Republik Indonesia, 2008). 125 Ibid. 126 Badan Ekonomi Kreatif (BEKRAF), "Apa Itu Ekonomi Kreatif?," in Opus: Ekonomi Kreatif Outlook 2017, ed. Celsius Creative Lab and Wignyo Parasian (Indonesia: Badan Ekonomi Kreatif (BEKRAF), n.d.), http://www.bekraf.go.id/downloadable/pdf_file/180719-opus-bekraf-outlook- 2017.pdf. 127 Ibid. 128 Ibid. 129 Ibid. 43 production of data on exporters, importers, entrepreneurs, associations and creative industry players as well as formal and non-formal education.130 In 2011, the Indonesian government issued Presidential Regulation No. 92 of 2011 which became the legal basis for the formation of a new ministry responsible for creative economic activities, namely the Ministry of Tourism and Creative Economy, and Mari Elka Pangestu as it ministry. The rapid development of Indonesia's creative industry encouraged Mari Elka Pangestu to explore the creative economic potential in the country. To maximize the program, Indonesia cooperates with Britain as a partner, and also both Britain and Indonesia are two countries in the world that manage creative industries at the ministry level.131
IV.4.2. The Importance of Creative Economy
Creativity and innovation are the cornerstones of Indonesia's economic development. Although relatively new, the creative economy has shown a significant contribution. The role of creative economy can be seen from several aspects, which are:132 1. Creative economy contributes to sustainable economic growth because creativity and ideas are renewable resources 2. Creative economy is able to produce high value products, which are not only functional but also have meaning 3. In addition to contributing to the economy, the creative economy also contributes to strengthening national image and identity, strengthening social tolerance, reducing social and economic inequalities in society, increasing the use of local raw materials and being environmentally
130 Badan Ekonomi Kreatif (BEKRAF), "Apa Itu Ekonomi Kreatif?," in Opus: Ekonomi Kreatif Outlook 2017, ed. Celsius Creative Lab and Wignyo Parasian (Indonesia: Badan Ekonomi Kreatif (BEKRAF), n.d.), http://www.bekraf.go.id/downloadable/pdf_file/180719-opus-bekraf-outlook- 2017.pdf. 131 Arinto T. Wibowo, "Industri Kreatif RI Belajar dari Inggris," Viva, November 1, 2012, https://www.viva.co.id/arsip/363947-industri-kreatif-ri-belajar-dari-inggris. 132 Ronny Correa-Quezada et al., "Role of Creative Industries as a Regional Growth Factor," Sustainability MDPI 10, no. 5 (May 2018), doi:10.3390/su10051649. 44
friendly, enhancing roles in development and encouraging general creativity.
Creative economy is believed to be able to become the newest economic axis of the Republic of Indonesia in the future. The economic model of the creative economy tends not to require subsidies or massive investment from the government, but has a large influence on the Indonesian economy, and is considered to be a driving force for the Indonesian economy, bringing about systematic and systematic changes.133 In this thesis, the author chooses one of the sub-sectors from creative economy to more specific, which is craft sector as the focus of this research. That is because the craft sub-sector is one of the sectors included in the top 3 creative economic sub-sectors having the largest contribution in exports and the economy along with the fashion and culinary sub-sector.134 Therefore, here the author wants to focus and see the contribution of the craft sub sector to economic development and employment absorption in Indonesia in the craft subsector.
133 Badan Ekonomi Kreatif (BEKRAF), "Mengapa Ekraf Penting?," in Opus: Ekonomi Kreatif Outlook 2017, ed. Wignyo Parasian and Celsius Creative Lab (Jakrta,Indonesia: Badan Ekonomi Kreatif (BEKRAF), n.d. ), PDF e-book, 21.. 134 Badan Ekonomi Kreatif Indonesia, "Subsektor Kriya," in Ekspor Ekonomi Kreatif 2010-2016, ed. Subdirektorat Statistik Ekspor (Badan Pusat Statistik, n.d.), 34. 45
CHAPTER V AN ANALYSIS OF ECONOMIC DIPLOMACY ON CREATIVE ECONOMY AND ITS CONTRIBUTION TO INDONESIA’S ECONOMY AND EMPLOYMENT
V.1. Creative Economy and Its Contribution to Indonesia’s Economy and Employment: Sub-sectors on Creative Economy and the Contribution
At present, creative economy consists of 16 sub-sectors, namely: Application and Toy Developers; Architecture; Interior design; Visual communication design; Product design; Fashion; Film, Animation and Video; Photography; Craft; Culinary; Music; Publishing; Advertising; Performing Arts; Art; Television and Radio. 135 The creative economy in Indonesia contributes positively to the national economy, both in terms of added value, employment, and also increased exports.136
Figure V.1. 3 Sub-sectors with the Biggest Export137 From 2010 to 2015, the creative economy showed an increase in contribution to the national economy with an average of 10.4% per year. In 2015,
135 Badan Ekonomi Kreatif Indonesia (BEKRAF), "Subsektor," BEKRAF, accessed November 21, 2018, http://www.bekraf.go.id/subsektor. 136 Badan Ekonomi Kreatif (BEKRAF), "Bagaimana dengan Indonesia?," in Opus: Ekonomi Kreatif Outlook 2017, ed. Wignyo Parasian and Celsius Creative Lab (Jakarta, Indonesia: Badan Ekonomi Kreatif (BEKRAF), n.d.), PDF e-book. 137 Ibid. 46 the creative economy contributed the largest value of 852.24 trillion-rupiah, equivalent to 7.38% of the total national economy.138 In terms of employment, the creative economy is able to absorb 15.9 million workers or 13.90%. This number is relatively large for the period of 2010 to 2015. The creative economy also contributed to the export value of 19.4 billion US dollars, equivalent to 12.88% in 2015, an increase of 6.6% from the previous year.139
V.2. Indonesia-United States Craft Export & the Contribution to the National Income As of 2010, the United States is the main destination for Indonesia to export creative economy. Comprehensive collaboration between Indonesia and the United States in 2010 was the umbrella of all cooperation between Indonesia-US in various fields, including Trade and Economy. 140 This decision is inseparable from the consideration and interests of foreign policy that can be achieved through establishing and maintaining good relations with the US.
Figure V.2. The Main Destination of Indonesia's Creative Economy Exports 2011-2015141 During 2011 to 2014, the United States was the main destination country for Indonesia in doing the creative economy export activity. The wood furniture
138 Badan Ekonomi Kreatif (BEKRAF), "Bagaimana dengan Indonesia?," in Opus: Ekonomi Kreatif Outlook 2017, ed. Wignyo Parasian and Celsius Creative Lab (Jakarta, Indonesia: Badan Ekonomi Kreatif (BEKRAF), n.d.), PDF e-book. 139 Ibid. 140 The U.S. Embassy and Consulates in Indonesia, Fact Sheet: United States-Indonesia Relations, (Washington, DC: US Embassy & Consulates in Indonesia, 2010), https://id.usembassy.gov/our- relationship/policy-history/embassy-fact-sheets/fact-sheet-united-states-indonesia-relations/. 141 Badan Ekonomi Kreatif (BEKRAF), "Sekilas Pandang," in Opus: Ekonomi Kreatif Outlook 2017, ed. Wignyo Parasian and Celsius Creative Lab (Jakrta,Indonesia: Badan Ekonomi Kreatif (BEKRAF), n.d. ), PDF e-book, 24. 47 industry commodities, the non-traditional music instrument industry, and the precious metal jewelry industry are the main commodities exported to the country. 142 Exports of the craft subsector to the United States continued to experience positive growth until 2014.
FOB Value (Million US$) Country of Destination 2011 2012 2013 2014 United States 1,174,1 1,203,0 1,302,6 1,324,4 Switzerland 6,3 8,0 4,8 19,0 Singapore 185,3 182,1 154,0 370,0 Hong Kong 51,1 61,1 64,8 418,8 Japan 571,8 591,8 497,3 472,0 United Arab Emirates 97,9 93,2 88,1 449,9 Taiwan 56,5 45,5 58,8 456,9 Australia 181,7 184,2 167,1 263,1 German 201,4 179,9 153,3 172,8 Malaysia 133,8 114,3 133,3 185,4 Table V.1. FOB Value of Exports of Craft Subsectors by Countries Destination 2011-2014143 As the writer already explained before, and the data from table 5.1 from 2011, the United States was a major destination in exporting the craft subsector. If the development is observed from year to year, craft exports to the United States can be categorized as quite significant, which from year to year has increased, where in 2011 amounted to 1.149.2 million USD but in 2014 increased to 1.324.4 million USD.144
142 Badan Ekonomi Kreatif (BEKRAF), "Sekilas Pandang," in Opus: Ekonomi Kreatif Outlook 2017, ed. Wignyo Parasian and Celsius Creative Lab (Jakrta,Indonesia: Badan Ekonomi Kreatif (BEKRAF), n.d. ), PDF e-book, 24. 143 Badan Ekonomi Kreatif Indonesia, "Subsektor Kriya," in Ekspor Ekonomi Kreatif 2010-2016, ed. Subdirektorat Statistik Ekspor (Badan Pusat Statistik, n.d.), 26. 144 Ibid 48
Figure V.3. Labour Absorption According to Sub Sector (Culinary, Craft, Fashion)145 Based on data taken from the Creative Economy Agency about the Creative Economy Employees 2011-2016146, the number of creative economy workers tends to increase even not significant. The creative economy employment in 2011 was recorded at 13.45 million people, until 2014 it reached 15.17 million.147 When we viewed based on its sub-sector, Craft is included in one of the sub-sectors with the largest contributor of employees, after the culinary and fashion sub-sectors. In figure 4.6, in 2011, the craft subsector was able to absorb worker of 3.37 million people, until 2014 as many as 3.39 million people. Based on the data figure above it can be seen that the total amount of labour absorption from the craft sub-sector has increased even though it is not really significant. However, although it is not too significant, if the government maintained properly, the craft sub-sector is expected could contribute more to the future for the implementation of Indonesia’s labour and economic development.
145 Badan Ekonomi Kreatif, "Perkembangan Tenaga Kerja Ekonomi Kreatif 2011-2016," in Tenaga Kerja Ekonomi Kreatif 2011-2016, ed. Sub Direktorat Statistik Ketenagakerjaan (Badan Pusat Statistik, n.d.), 19. 146 Ibid. 147 Ibid. 49
V.3. The Contribution of Indonesia’s Economy Diplomacy Under Susilo Bambang Yudhoyono Administrations Toward Its Economic Development
Economic diplomacy is a very important part of foreign policy in various countries, where economic diplomacy is closely related to the achievement of a country's economic welfare. One part of economic diplomacy efforts is to conduct foreign trade, where foreign trade is an important variable of economic growth in an economy, so it is not surprising that all countries strive to encourage trade cooperation whose purpose is to encourage the economy of the country itself. This goal can be achieved through increasing export activities.148 The economic well-being of a country can be measured by Gross Domestic Product (GDP). GDP is one indicator of economic prosperity in a country and can be a reference for measuring people's welfare as measured by income level. So, the higher the level of exports of a country, the higher the income. International trade will also affect aspects of consumption, production and income distribution.149 Indonesia under the government of President Susilo Bambang Yudhoyono (SBY) applied slogans to his foreign policy, namely a thousand friends, zero enemy, where the slogan means that Indonesia's focus is on building relationships and increasing friendships as much as possible and using soft power to achieve interests nationally, which are increasing the economy through increasing export activities and attracting foreign investment into Indonesia.150 In order to realize its national development agenda, Indonesia under the SBY government collaborated with several major countries, one of which was the United States. Indonesia and the United States have established a good relationship since time immemorial and experienced ups and downs. In the SBY government,
148 Sulthon Sjahril Sabaruddin, "Dampak Perdagangan Internasional Indonesia terhadap Kesejahteraan Masyarakat: Aplikasi Structural Path Analysis," Buletin Ekonomi Moneter dan Perbankan 17, no. 4 (April 2015): 433-435, doi:10.21098/bemp.v17i4.505. 149 Ibid. 150 Hassan Wirajuda and CSIS indonesia, "Desain Baru Politik Luar Negeri Indonesia," Analisi CSIS Demokrasi Lokal: Pilkada Langsung 34, no. 3 (September 2005): 343, https://archive.org/details/AnalisisCSISTahuXXXICSIS_n4c5. 50
Indonesia focused on improving and improving relations between Indonesia and the United States.151 Indonesian and US governments have carried out several economic cooperation, in order to improve bilateral relations between the two countries, especially in the fields of economy and trade. Several forums were formed to facilitate dialogue and economic cooperation between Indonesia and the US, including the US-Indonesia Trade and Investment Dialogue, Commercial Dialogue, and the Overseas Private Investment Corporation (OPIC). In addition, Indonesia has become one of the US export countries listed in the National Export Initiatives (NEI), and the US has held a Global Entrepreneurship Program (GEP) to promote entrepreneurs in the United States and the United States Trade and Development Agency. (USTDA) to encourage energy cooperation. 152 Then after that both countries agreed to increase the level of cooperation through the Comprehensive Partnership Agreement. With the approval of a comprehensive agreement, which later became the basis of all fields of Indonesia-US cooperation including trade cooperation which eliminated barriers such as tariffs, making it easier for Indonesia to carry out export activities to the United States. On this occasion, Indonesia made the United States a trading partner, especially exports in the craft sector. Craft is one of the subsectors of the Creative Economy program. The Creative Economy Program itself is an Indonesian government program that focuses and aims to improve the economy through the use of ideas, creativity and innovation derived from human resources.153 Judging from the material, the craft includes all crafts made from wood, metal, leather, glass, ceramics and textiles. The
151 Joshua Kurlantzick, Keeping the U.S.-Indonesia Relationship Moving Forward (Council on Foreign Relations Press, 2018), https://cfrd8files.cfr.org/sites/default/files/report_pdf/CSR81_Kurlntzick_Indonesia_With%20Cov er.pdf. 152 The Embassy of the Republic of Indonesia, Brief History of Indonesia-US Bilateral Relations, (Washington, DC, 2017), https://www.embassyofindonesia.org/index.php/bilateral-relations/. 153 John Newbigin and British Council, The Creative Economy: An Introductory Guide, ed. Pablo Rosselló and Shelagh Wright (London: The British Council, 2010), xx, https://creativeconomy.britishcouncil.org/media/uploads/files/English_GuideToolkit_30_withCov er_LR.pdf. 51 availability of abundant raw materials and the creativity of industry players is a major factor in the progress of this subsector.154 Indonesia has creative and skilled crafters in business. Many of these business customers have successfully marketed their products abroad. 155 There were also 27.16% of craft sub-sector actors promoting their products through exhibitions.156 Indonesian craft products are famous for their 'handmade' so they have high prices in the market. To support the advancement of the Craft subsector, BEKRAF provides a variety of relevant facilities, such as collaboration between designers, SMEs and manufacturing so that collaboration between subsector actors is formed.157
Figure V.4. Example of Craft158 As explained in the sub-section of the Subsector of Creative Economy and Contributions, the craft subsector is 1 of the 3 subsectors with large export
154 Global Business Guide Indonesia, "Indonesia's Creative Economy & Heritage Product: A Wealth of Opportunities," Global Business Guide Indonesia, accessed November 22, 2018, http://www.gbgindonesia.com/en/manufacturing/article/2014/indonesia_s_creative_economy_and amp_heritage_products_a_wealth_of_opportunities.php. 155 Ibid. 156 Badan Ekonomi Kreatif Indonesia. "Kriya." In Opus: Ekonomi Kreatif Outlook 2017, 44. Jakarta, Indonesia: BEKRAF, 2017. http://www.bekraf.go.id/downloadable/pdf_file/180719-opus-bekraf- outlook-2017.pdf. 157 Global Business Guide Indonesia, "Indonesia's Creative Economy & Heritage Product: A Wealth of Opportunities," Global Business Guide Indonesia, accessed November 22, 2018, http://www.gbgindonesia.com/en/manufacturing/article/2014/indonesia_s_creative_economy_and amp_heritage_products_a_wealth_of_opportunities.php. 158 Ibid. 52 contributions.159 It was recorded that 49% of the value of craft exports came from East Java Province to total national craft exports and 18% of the value of craft exports came from West Java province to total national craft exports, 11% percent from DKI Jakarta, 5% Banten, 1% from Regions Special Yogyakarta, and the remaining 0.77% comes from 24 other provinces.160 In this case, the practice of Indonesia's economic diplomacy can be seen through the negotiation process and the Comprehensive Partnership Agreement with the United States which was followed by export cooperation in the craft sector in 2011-2014. In 2011, the United States was a major destination in exporting the craft subsector. If the development is observed from year to year, craft exports to the United States can be categorized as quite significant, which from year to year has increased, which in 2011 amounted to 1149.2 million USD but in 2014 increased to 1324.4 million USD.161 Those activities conducted by Indonesia during 2011-2014 are efforts from Indonesia's economic diplomacy towards the United States run by the government through the Creative Economy program, specifically the Craft subsector which is expected to contribute to the Indonesian economy. However, overall from the economic diplomacy activities carried out by Indonesia, if analyzed from the 2011- 2014 period, the contribution of Indonesia's economic diplomacy under the SBY government can be said to have increased even though not significantly, to the total increase in craft exports to the United States. Therefore, SBY and the Indonesian government played an active role in conducting activities that reflected the practice of economic diplomacy to develop the Indonesian economy.
159Badan Ekonomi Kreatif (BEKRAF), "Bagaimana dengan Indonesia?," in Opus: Ekonomi Kreatif Outlook 2017, ed. Wignyo Parasian and Celsius Creative Lab (Jakarta, Indonesia: Badan Ekonomi Kreatif (BEKRAF), n.d.), PDF e-book. 160 Ibid. 161 Badan Ekonomi Kreatif Indonesia, "Subsektor Kriya," in Ekspor Ekonomi Kreatif 2010-2016, ed. Subdirektorat Statistik Ekspor (Badan Pusat Statistik, n.d.), 26. 53
CHAPTER VI CONCLUSION
In the administration of President Susilo Bambang Yudhoyono (SBY), Indonesia's foreign policy focused on enhancing partnerships with other countries, in order to establish inter-state cooperation and attract foreign investment into Indonesia which is expected to contribute to the Indonesian economy. SBY's foreign policy is known as 'a thousand friends, zero enemy'. In realizing its foreign policy, Indonesia uses a government program known as the Creative Economy. Creative economy is a creativity-based economic development program. Thus, in the creative economy there is an important element, namely collaboration between scholars, business and government, which is a basic prerequisite. The Creative Economy itself has 14 sub-sectors. One of the subsectors that make a major contribution to the Indonesian economy is Craft. The economic diplomacy activities carried out by SBY resulted in several activities which later contributed to the development of the Indonesian economy, like economic diplomacy carried out by Indonesia in the SBY government where at that time it also focused on developing and improving the national economy through expanding relations with other countries. In the end, this created a better relationship between Indonesia and the US, which then the two countries cooperated in various fields, including the economy where such cooperation became a way for the development of the Indonesian economy. In developing the potential of creative economy programs, especially in increasing its export subsector activities, the government of Indonesia then uses economic diplomacy instruments in establishing trade cooperation, which is with the United States (US). Based on cooperation and bilateral relations that have long been established between Indonesia and the US, the two parties agreed to improve relations between the two countries in the equal partnership phase which was marked by the agreement of the Comprehensive Partnership, while President Barack Obama's visit to Indonesia. With the existence of a comprehensive
54 partnership agreement in the field of investment and trade that eliminates all barriers such as tariffs, making it easier for Indonesia to carry out export activities to the United States. Indonesia's economic diplomacy activities towards the United States through craft exports from 2011 to 2014 turned out to provide a fairly high contribution but not too significant to the Indonesian economy. First, the craft export activities to United States from 2011 to 2014 giving results that continuous to improve, which can be seen from the increase in export value from year to year, which initially amounted to only US $ 1,174.1 million in 2011, which in 2014 could reach US $ 1,324.4 million. Second, craft exports to various countries, including the United States also have an impact on increasing employment, which indirectly will contribute to the development of the Indonesian economy. The absorption of the workforce subsector which can be said to be quite high, it can be seen from its development from year to year (2011-2014) also has the potential to supply labour and reduce unemployment and is expected to contribute more to the development of the Indonesia’s economy.
55
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APPENDICES
Appendix 1 Official United States-Indonesia Comprehensive Partnership162
162 Official sources of data from Bureau of Public Affairs U.S. State Department. 65
66
Appendix 2 Joint Declaration on Comprehensive Partnership between the Republic of Indonesia and the United States of America163
163 Official sources of data from Ministry of Foreign Affairs of the Republic of Indonesia. 67
68
69
70
71
Appendix 3 Presidential Instruction of the Republic of Indonesia Number 6 of 2009
72
73
74
75
76