Japan Foreign Economic Assistance

JAPAN FOREIGN ECONOMIC ASSISTANCE: THE IMPLEMENTATION OF OFFICIAL DEVELOPMENT ASSISTANCE (ODA) UNDER SHINZO ABE ADMINISTRATION FOR INDONESIA INFRASTRUCTURE DEVELOPMENT (2014-2016)

DAYUANA NILAM KASIH 016201400039

A thesis presented to the Faculty of Humanities President University In partial fulfillment of the requirements for Bachelor Degree in International Relations Major in Diplomacy Studies

March 2018

iii

ABSTRACT

Title: Japan Foreign Economic Assistance : The Implementation of Official Development Assistance (ODA) under Shinzo Abe Administration for Indonesia Infrastructure Development (2014-2016).

Development assistance becomes an important issue in international relations today. Through development assistance, donor countries and related agency can contributes to the development of politic, economic and social in developing countries. This research explains about the role of Japan’s Official Development Assistance (ODA) for Indonesia infrastructure development. The time period of this research is during President Joko ‘Jokowi’ Widodo’s leadership from 2014 to 2016. This research is classified into analytical and descriptive research that using qualitative as the research methodology. The result of this research shows that Japan’s contribution through ODA is in line with the policy of President Jokowi to prioritize infrastructure development in Indonesia. Infrastructure development is very essential to increasing Indonesia’s competitiveness as well as to facilitating better business and industry environment. Other than that, infrastructure development can strengthening regional integration of Southeast Asia. In other word, ODA is very important to bridge diplomatic relations between Japan and Indonesia.

Keywords: Development Assistance, Official Development Assistance (ODA), Infrastructure, Competitiveness, Business and Industry Environment, Regional Integration.

ABSTRAK

Judul: Bantuan Ekonomi Luar Negeri Jepang: Implementasi Bantuan Pembangunan Resmi (Official Development Assistance/ODA) di bawah Pemerintahan Shinzo Abe untuk Pembangunan Infrastruktur Indonesia (2014- 2016).

Bantuan pembangunan merupakan salah satu isu yang penting dalam hubungan internasional saat ini. Melalui bantuan pembangunan, negara-negara pendonor dan lembaga yang berkaitan dapat memberikan kontribusi untuk pembangunan politik, ekonomi dan sosial negara-negara berkembang. Penelitian ini menjelaskan tentang peranan Bantuan Pembangunan Resmi atau disebut juga dengan Official Development Assistance (ODA) Jepang dalam pembangunan infrastruktur di Indonesia. Jangka waktu yang diambil untuk penelitian skripsi ini adalah selama pemerintahan Presiden Joko ‘Jokowi’ Widodo dari tahun 2014 sampai dengan 2016. Penelitian ini adalah penelitian yang bersifat analitis dan deskriptif dengan menggunakan metode penelitian kualitatif. Hasil penelitian ini menunjukkan bahwa kontribusi Jepang melalui ODA sangat mendukung kebijakan Presiden Jokowi dalam memprioritaskan pembangunan infrastruktur di Indonesia. Pembangunan infrastruktur sangat penting untuk meningkatkan daya saing Indonesia serta memfasilitasi lingkungan bisnis dan industri yang lebih baik. Selain itu, pembangunan infrastruktur juga dapat meningkatkan integrasi regional kawasan Asia Tenggara. Dengan kata lain, ODA sangat penting untuk menjembatani hubungan diplomatik antara Jepang dan Indonesia.

Kata Kunci: Bantuan Pembangunan, Official Development Assistance (ODA), Infrastruktur, Daya Saing, Lingkungan Bisnis dan Industri, Integrasi Regional.

ACKNOWLEDGEMENT

All praise and thanks to Allah SWT for all the blessing and grace, the one that answers to all the prayers. I would like to express my highest gratitude to His greatness in giving me the strength and courage to complete this thesis. There are many people whom I have to acknowledge for their support, help and encouragement during the journey of preparing this thesis. Therefore, the writer would like to express gratitude for:

1. The whole of my family, for the overwhelming love and care they give upon me. Especially for my late father, Irwan Hanafi and my mother, Lusia Safitri, who has supported me financially as well as morally. Dwi Mughni Saddam Hanafiah and Hazlaam Trimaha Ilhami as my brothers for their love and support. Besides that, for my aunts, Widya Astuti and Rika Sari as well as my uncle, Bung Suryana for their endless prayer and support toward me. 2. Mr. Hendra Manurung and Mr. Bustanul Arifin as my thesis advisors, for guidance and advice from the very beginning of this thesis until I can finally complete it. 3. All of lecturers in International Relations study program study of President University, for all knowledge and valuable lecture. 4. Ajeng Intan Larasati and Ajeng Listya Danastri as my best friends during university life, for staying besides me to go through freshman year, sophomore year and senior year together. 5. Yofin Elsyafitri and Hillery Melisa as my sisters, for always encourage me during thesis writing process and cheers me up whenever I was down. You two are my amazing support system. 6. Steven Wijaya, a good friend that I know since thesis supervisory. Thank you for your support and help during the process of this thesis writing.

7. All of my good friends in university, Ranada Hamalia, Dian Yustikadinata, Fitria Krisanti, Gabriela Adinda, Yuke Eria and Indah Suciati, for all lessons and memories of friendship. Wishing you all the best for your next choosen path of life.

Finally, I would like to thank everybody who was important to the successful realization of this thesis, as well as expressing my apology that I could not mention personally one by one.

Cikarang, March 2018

Dayuana Nilam Kasih

vii

TABLE OF CONTENTS

THESIS ADVISER RECOMMENDATION LETTER ...... i

DECLARATION OF ORIGINALITY ...... ii

PANEL OF EXAMINER APPROVAL SHEET ...... iii

ABSTRACT ...... iv

ABSTRAK ...... v

ACKNOWLEDGEMENT ...... vi

TABLE OF CONTENT ...... viii

LIST OF TABLES ...... xi

LIST OF FIGURES ...... xii

LIST OF ACRONYMS ...... xiii

CHAPTER I: INTRODUCTION ...... 1

I.1 Background of the Study ...... 1

I.2 Identification of Problem ...... 5

I.3 Statement of the Problem ...... 9

I.4 Research Objective ...... 9

I.5 Significance the Study ...... 9

I.6 Theoretical Framework ...... 10

I.6.1 Liberalism ...... 10

I.6.2 Regional Integration ...... 10

I.6.3 Complex Interdependence ...... 11

I.7 Literature Review ...... 12

I.7.1 Carol Lancaster – Foreign Aid: Diplomacy, Development, Domestic Politics ...... 12

viii

I.7.2 Dennis D. Trinidad – Japan’s ODA at the Crossroads: Disbursement Patterns of Japan’s Development Assistance to Southeast Asia ...... 13

I.7.3 Syamsul Hadi – Japanese Diplomacy to ASEAN and Its Relevance to Indonesia ...... 13

I.8 Scope and Limitations of the Study ...... 14

I.9 Definition of Terms ...... 14

I.9.1 Foreign Policy ...... 14

I.9.2 Foreign Aid ...... 15

I.9.3 Official Development Assistance ...... 15

I.9.4 Global Development...... 15

I.9.5 Infrastructure ...... 16

I.10 Research Methodology ...... 16

I.11 Structure of the Thesis ...... 17

CHAPTER I: INTRODUCTION ...... 17

CHAPTER II: JAPAN-INDONESIA ECONOMIC RELATIONS ...... 17

CHAPTER III: JAPAN’S OFFICIAL DEVELOPMENT ASSISTANCE (ODA) IN INDONESIA (2014-2016) ...... 17

CHAPTER IV: THE CONTRIBUTION OF JAPAN’S OFFICIAL DEVELOPMENT ASSISTANCE (ODA) TO INDONESIA INFRASTRUCTURE DEVELOPMENT (2014-2016) ...... 18

CHAPTER V: CONCLUSION ...... 18

CHAPTER II: JAPAN-INDONESIA ECONOMIC RELATIONS ...... 19

II.1 Overview on Japan’s Economy ...... 19

II.2 Overview on Indonesia’s Economy ...... 22

II.3 Economic Bilateral Relations between Japan and Indonesia ...... 23

II.3.1 Bilateral Trade...... 24

II.3.2 Japanese Investment in Indonesia ...... 28

II.4 Japan’s Economic Relations with other Neighboring Countries ...... 30

CHAPTER III: JAPAN’S OFFICIAL DEVELOPMENT ASSISTANCE (ODA) IN INDONESIA (2014-2016) ...... 33

III.1 Official Development Assistance (ODA) as Japan’s Foreign Economic Policy ...... 33

III.2 The Implementation of Japan’s ODA in Indonesia ...... 39

III.2.1 Japan’s ODA Development in Indonesia ...... 40

III.2.2 Japan’s ODA Contribution in Indonesia...... 42

CHAPTER IV: THE CONTRIBUTION OF JAPAN’S OFFICIAL DEVELOPMENT ASSISTANCE (ODA) TO INDONESIA INFRASTRUCTURE DEVELOPMENT (2014-2016) ...... 50

IV.1 Infrastructure Development as Priority Policy by President Joko Widodo Administration ...... 50

IV.2 Japan’s Contribution toward Indonesia Infrastructure Development ...... 53

IV.3 The Impacts of Infrastructure Development to Indonesia Socioeconomic Development ...... 62

IV.4 Infrastructure Development as the Key of Regional Connectivity ...... 64

CHAPTER V: CONCLUSION ...... 69

BIBLIOGRAPHY ...... 72

APPENDICES ...... 82

APPENDIX 1 ...... 82

APPENDIX 2 ...... 89

APPENDIX 3 ...... 92

APPENDIX 4 ...... 94

APPENDIX 5 ...... 96

APPENDIX 6 ...... 98

LIST OF TABLE

Table 2.1 Japan’s Export to Indonesia from 2012 to 2016 ...... 26

Table 2.2 Japan’s Import from Indonesia from 2012 to 2016 ...... 26

Table 3.1 Top 10 Recipients of Japan’s ODA comparison for 2014-2015 and

2015-2016 average ...... 38

Table 3.2 Japan’s ODA Contribution through JICA Programs in Southeast

Asia ...... 46

Table 4.1 Japan’s Aid Disbursement related to Economic Infrastructure to

Indonesia for fiscal year 2014 to 2016 ...... 57

LIST OF FIGURES

Figure 1.1 Japan’s ODA by Recipient and Sector for 2014-2015 average ...... 4

Figure 1.2 Top Ten Donors of Gross ODA for Indonesia (2014-2015 average)

...... 8

Figure 3.1 Scheme of Japan’s Official Development Assistance (ODA) ...... 36

Figure 3.2 Bilateral ODA by Sector for Indonesia (2014-2015 average) ...... 43

Figure 3.3 Bilateral ODA by Sector for Indonesia (2015-2016 average) ...... 44

xii

LIST OF ACRONYMS

AEC ASEAN Economic Community APBD Anggaran Pendapatan dan Belanja Daerah APBN Anggaran Pendapatan dan Belanja Negara ASEAN The Association of Southeast Asian Nations DAC Development Assistance Committee EPA Economic Partnership Agreement FDI Foreign Direct Investment FTA Free Trade Agreement GDP Gross Domestic Product JICA Japan International Cooperation Agency JIEPA Japan-Indonesia Economic Partnership Agreement LDC Least-Developed Country MDB Multilateral Development Bank MDG Millenium Development Goals MPA Metropolitan Priority Area MPAC Master Plan on ASEAN Connectivity MRT Mass Rapit Transit ODA Official Development Assistance OECD Organization for Economic Co-operation and Development RCEP Regional Comprehensive Economic Partnership RPJMN Rencana Pembangunan Jangka Menengah Nasional SDG Sustainable Development Goals SME Small-Medium Enterprise TPP Trans-Pacific Partnership UN United Nations WTO World Trade Organization

xiii

CHAPTER I INTRODUCTION

I.1 Background of the Study According to Mamoru Shinohara, the former Ambassador of Japan to Costa Rica, foreign policy is formulated by considering several indicators.1 First, national interest is the main reason in formulating foreign policy. Foreign policy usually utilized as tool to achieve national interest of a state. Second, the implementation of such ideology as human rights, rule of law, democracy and others. Third, strengths and weaknesses of the state also influence foreign policy. For instance, a state have ability in military or economically in order to interact and give influence to other states. Fourth, foreign policy formulated have to meet public opinion and expectation. And last one, the consideration of perceived reality as opportunity or risks. Leaders of countries must watch out prospects for its foreign policy, such as what may happen if a policy implemented.

Mamoru Shinohara explained some points about reality of Japan’s foreign policy making. First, Japan considering regional security in East Asia region. Currently, regional security becomes a sensitive issue due to increasing of military spending for countries in the region. Second, the issue of terrorism by extremist group. Terrorism is currently a major issue that need to be concerned by all of the countries in the world. Third, the urgency to respond global issues such as poverty, refugee, global disease, climate change and others. As part of international system, Japan has responsibility to addressing these issues. Fourth, the opportunity for international economy. In this case, Japan rely on free trade in order to fulfill the needs of its country.

Generally, Japan’s foreign policy is consist of four categories. The first category is peace and stability of international community. The 21st century is characterized by globalization wave, global power balance as well as transnational threats. All state must works together in order to achieve peace and security. It is

1 Mamoru Shinohara (2017). The Foreign Policy of Japan. Ideas for Peace, 3-5. 1 impossible to happen when individual state can survive to maintain peace and security without cooperate with others. Japan has various efforts to contribute in achieving international peace and security such as through participate in UN peacekeeping operations.2 Second, strengthening economic diplomacy as the way to promoting the revitalization of the Japanese economy. Under his administration, Prime Minister Shinzo Abe revealed a comprehensive economic policy that is known as Abenomics. The purpose of Abenomics is basically to bring back Japan’s economy due to economic stagnation for two decades long.3 Japan believes on the importance of multilateral organization because it can strengthen economic ties with other countries. Third, Japan formulating its policy regarding global issues and Official Development Assistance (ODA). In this category, Japan plays actively in ODA contribution, environment and climate change action, health and medical care, human security, sustainable development and others. Last one, policy related to public diplomacy. In this case, Japan took several ways to implement its public diplomacy such as through people to people exchange, cultural exchange, cooperation with international organization and cultural grant assistance.

Shinzo Abe encourages Japan to plays more robust role in international arena. Japan demonstrate its foreign economic policy based on three basis; free, fair and rule-based market. Japan demonstrates free trade consistently in order to expand cooperation in international market. In addition, Japan continues to do national branding through the promotion of Small Medium Enterprises (SMEs) and local attractiveness. Attempting to promote free trade, Japan has build economic partnership with the Asia-Pasific and Europe countries. Japan has been signing various cooperation through Economic Partnership Agreements (EPAs) and Free Trade Agreements (FTAs). Besides that, Japan also accelerates the implementation of Trans-Pasific Partnership or TPP Agreement. Moreover, Japan offers win-win solutions principle toward infrastructure development. Japan contributes on expanding global infrastructure needs by utilizing its quality infrastructure policy.

2 Ministry of Foreign Affairs of Japan. Japan's Security / Peace & Stability of the International Community. Retrieved October 8, 2017 from http://www.mofa.go.jp/policy/security/index.html 3 The Government of Japan. About ABENOMICS. Retrieved October 8, 2017 from https://www.japan.go.jp/abenomics/index.html

In addition, Japan encourages private companies to invest and provide budget in infrastructure project financing. This is obviously would escalate Japan’s image in the global affairs.

Over last decades, global attention on the Official Development Assistance (ODA) has increased significantly. The commitment of world leaders to global goals becomes a reason to attract public interest to ODA issue. Global goals consist of 17 indicators to be achieve universally by 2030. The purpose of these goals is to resolve major issues such as poverty, climate change, equality and so forth. ODA considered as one of the solutions to the realization of global goals since it aims to assist development in developing countries. As explained before, Japan is one of the countries who utilizing ODA as one of its foreign policy. Japan officially joined Colombo Plan in 1954 as an effort to promote cooperation in economic and social development in Asia-Pacific region.4 Since then, Japan actively allocating some funds for humanitarian aid and it is marked as a memorable start of Japan's government-to-government economic cooperation with developing countries. Nowadays, the contribution of Japan’s ODA is not limited into humanitarian aid only, yet expand to other sectors such as social and economic infrastructure sector. The fundamental of Japan’s ODA policy is based on ODA Charter that decided by the Cabinet for the first time in 1992 and then revised in 2003. According to OECD, ODA refers to aids in forms of loans, grants and technical assistance that allocated to developing countries. These assistance may involve donor and recipient country only (bilateral assistance) or involve any organizations/agency; such as World Bank (multilateral assistance).

Despite its present economic turmoils, Japan still remains ranked as one of the world's largest economy and the world's leading bilateral aid donor. However, Japan rely heavily on other countries to ensure its nation survival. For instance, due to insufficient land for agriculture, Japan has limitation in producing food materials. As the result, Japan should imports them from other countries. Besides that, Japan

4 Ministry of Foreign Affairs of Japan. Official Development Assistance (ODA). Retrieved October 8, 2017 from http://www.mofa.go.jp/policy/oda/cooperation/anniv50/pamphlet/progress1.html

3 also shortage of raw materials such as oil, iron ore, copper, coal, wood and aluminum.5 Thus, Japan needs to cooperate with country who able to provide these resources. For instance, Indonesia known as an agrarian country with abundant of natural resources. Japan has build cordial diplomatic relations with Indonesia by become a trade partner as well as donor of ODA.

Figure 1.1 Japan’s ODA by Recipient and Sector for 2014-2015 average6

Based on the given data, it identified Japan spending budget on economic infrastructure is larger than another sectors. Infrastructure, nation’s prosperity and the national economy is interconnected between one and another. Indeed, become a prosperous nation-state with massive economic growth is goal for all of countries in all over the world. One crucial thing to support economic growth is efficient infrastructure development. Infrastructure is a prerequisite of state’s prosperity since it enhance productivity and promote better life quality. In addition, adequate infrastructure will contribute to economic development. It boost economic growth, provide job opportunity, and improve productivity as well as efficiency.7

5 Basic points about Japan's economy and trading patterns. Retrieved October 24, 2017 from http://afe.easia.columbia.edu/japan/japanworkbook/economics/factshe.htm 6 OECD Data – Aid Statistics. The global picture of official development assistance (ODA). Retrieved October 25, 2017 from http://www2.compareyourcountry.org/aid-statistics 7 Role of Critical Infrastructure in National Prosperity. Retrieved October 10, 2017 from https://www.publicsafety.gc.ca/cnt/rsrcs/pblctns/2016-rl-crtclnfrstrctr-ntnlprsprty/index-en.aspx

Infrastructure facilitating trade, businesses and connection through broadband networks, telecommunication systems, electricity power plant, transportation, building, water conduits and so forth. In other words, infrastructure is a key driving factor to boost national prosperity and requirement for great long term economic outgrowth.

The prominent role of Japan as the important economic ally for Indonesia is very interesting to discuss. Throwing back to history, Indonesia has been colonialized by Japan during the World War II in 1942 to the end of war in 1945. This research is going to elaborate how Japan successfully changes its image as a colonialist state to the cordial nation for Indonesia. In addition, as mentioned before, Indonesia always included in the top recipient of Japan’s aid. This fact is somehow enhance diplomatic relations between these countries. Overall, Japan’s ODA has been contributing to several sectors in Indonesian national development as in education, health and medical care, natural resources and energy, transportation, peace building, rural development, environmental management, natural environment conservation and others. However, this research is focusing on the aid contribution towards economic infrastructure development.

I.2 Identification of Problem Eventhough foreign aid is not a new term in international relations, pros and cons over the effectiveness of aid is still going on. One important question to be asked when talking about foreign aid is, why is aid given. There are different perspectives to analyze the implementation of foreign aid. Some says that aid is not effective due to assymetris advantages between donor and recipient countries. In this case, aid is tend to used as political tool in order to fulfill national interest of donors. On the other hand, some believes that foreign aid is an instrument of the tendency of states to cooperate in adressing problems of interdependence and globalization. Somehow, aid is also using as an effort to maintain good relations with countries that have strategic and commercial importance. Therefore, it is very important to analyze the role of ODA in bridging diplomatic relation between Japan and Indonesia and how it provides economic benefit for the two countries.

Japan is a country that has been put interest on Southeast Asian countries for a long time. As Takeshi Terada said that, ASEAN begun negotiations in four different regional integration frameworks in Asia since 2010: a free trade agreement (FTA) among China, Japan, and South Korea (hereafter, CJK FTA); the Regional Comprehensive Economic Partnership (RCEP) comprising the 16 countries of ASEAN+6; and a US-led Trans-Pacific Partnership (TPP). These cooperations regarded as big opportunity for Japan in order to expanding its trade and investment in the Southeast Asia region.8 In 2015, ASEAN officially began the implementation of ASEAN Economic Community. Furthermore, ASEAN unveiled the ASEAN Connectivity Master Plan (MPAC) in 2010. The purpose of this workplan is to promote infrastructure development for ASEAN member countries. As one of the strategic partner for ASEAN, Japan also participate in realization of the MPAC by supports 33 priority projects in the List of Flagship Projects that announced in ASEAN-Japan Summit in 2011.9

Japan plays crucial role for development of Southeast Asian countries since it has contributed to regional peace, stability and prosperity through ASEAN-Japan Strategic Partnership. Offering cooperation and support for development has been strengthening the integration among Japan and Southeast Asian countries. Recently, Japan actively contributes to provide financing quality infrastructure in Asia and enhancing regional connectivity through its support on MPAC. As stated by Dato’s Sri Mohd Najib Tun Abdul Razak in the 18th ASEAN-Japan Summit in 2015, Japan is the third largest trading partner as well as second largest source of Foreign Direct Investment (FDI) for ASEAN countries.10

During 1997 to 1998, Indonesia has experienced worst financial crisis. Twenty years after the crisis, Indonesia began to rise and shows to reforms as a

8 Takashi Terada (2015). ASEAN-Japan Strategic Partnership in East Asia and in Global Governance. Navigating Change. p.84 9 Hiroyuki Ishige (2013). Indonesia-Japan Relations: From Complementarity to Leading Regional Economic Integration in Asia. Retrieved November 12, 2017 from https://www.jetro.go.jp/ext_images/jetro/topics/pdf/1303_topics3_annexion2.pdf 10 ASEAN. (2015, November 23). Chairman's Statement of The 18TH ASEAN-Japan Summit - ASEAN | ONE VISION ONE IDENTITY ONE COMMUNITY. Retrieved from http://asean.org/chairmans-statement-of-the-18th-asean-japan-summit/

6 great potential state in the global affairs. Indonesia predicted to becomes six major emerging economies countries that contribute for more than half of total global growth together with Brazil, Russia, India, China and South Korea. Moreover, by the implementation of ASEAN Community in 2015, Indonesia plays notable role as a key driver of regional economic expansion in Southeast Asia. As the result, some countries are considering great potential market of Indonesia by building cordial economic relations through trade activities, investment, signing of joint ventures, franchising, licensing and etc, including Japan.

Through Masterplan for ASEAN Connectivity (MPAC) 2025, a number of infrastructure projects that can not supported by the state budget, it will be assisted through a number of approaches with private investors. Moreover, the proposal in MPAC 2025 has been synergized with ASEAN partner countries such as China, Japan and South Korea, so that development projects can be integrated.11 Darmin Nasution, the minister of Coordinating Ministry for Economic Affairs, said that the government is working on infrastructure development to encourage economic equity throughout all over regions in Indonesia. Currently, there are 245 National Strategic Projects (PSN) that spread throughout the Island in Indonesia as the development of industrial area, special economic area, and national tourism strategic area.12 Juan Jose Daboub as the World Bank Managing Director told that Indonesia secure a position to become a state with significant growth. It has big opportunity to receive more investments for infrastructure sector development.13

11 Badan Koordinasi Penanaman Modal. Retrieved September 20, 2017 from http://www.bkpm.go.id/id/publikasi/detail/berita-investasi/proyek-infrastruktur-indonesia-masuk- dalam-masterplan-asean-2025 12 Miftah Ardhian (2017). Pemerintah Siapkan Dua Strategi Dorong Pemerataan Ekonomi. Retrieved September 21, 2017 from https://katadata.co.id/berita/2017/07/27/pemerintah-siapkan- dua-langkah-dorong-pemerataan-ekonomi 13 World Bank. Infrastructure Development is Key to Rapid Growth in Middle Income Indonesia: World Bank Managing Director. Retrieved October 12, 2017 from http://www.worldbank.org/en/news/press-release/2010/04/12/infrastructure-development-key- rapid-growth-middle-income-indonesia-world-bank-managing-director

Figure 1.2 Top Ten Donors of Gross ODA for Indonesia, 2014-2015 average14

The figure above shows ten countries with largest amount of ODA for Indonesia in the period of 2014-2015 average. Japan ranked as the first donor that assist for USD 524.3 million. Then, followed by Australia, Germany, United States and France. After that, global fund is in the sixth position with USD 49.5 million. In the seventh to tenth position, there was Korea, EU institutions, Norway and United Kingdom.

Most of Japan’s aid in Indonesia is allocating into economic infrastructure. A question arises, what are the motives behind this fact. As the answer, Wendy Dobson (1993) argues that, Japan’s effort to support infrastructure development through ODA has impact to lowering investment costs for Japanese companies that operates in Southeast Asia countries.15 Hence, there is no doubt if Japan willing to spend large budget on infrastructure within its ODA policy. In addition, Japan and Indonesia officially signed a investment and trade agreement called as Japan- Indonesia Economic Partnership Agreement (JIEPA) in 2008. The purpose of JIEPA is to promote the liberalization and facilitation of trade and investment between Indonesia and Japan. Principally, the implementation of JIEPA will beneficial for Indonesia. As a country with great potential to becomes emerging

14 OECD Data – Aid Statistics. The global picture of official development assistance (ODA). Retrieved October 25, 2017 from http://www2.compareyourcountry.org/aid-statistics 15 Syamsul Hadi. Japanese Diplomacy in ASEAN and Its Relevance to Indonesia. p.43

8 market economy, Indonesia needs to provides efficient infrastructure in order to facilitating better investment and business environment.

Japanese ODA is expected to assist Indonesia in realizing the better economic infrastructure development which can lead to significant economic growth. As one of the biggest donor country of ODA for Indonesia, it is important to know what contribution that has done by Japan. Moreover, Japan’s contribution in economic infrastructure is in line with the government policy under President Jokowi administration. Therefore, this research conducted to know about the contribution of Japan’s ODA to Indonesia’s infrastructure development during 2014 to 2016.

I.3 Statement of the Problem

I.3.1 How did Japan’s Official Development Assistance contribute to Indonesia’s infrastructure development since 2014 to 2016?

I.4 Research Objective

I.4.1 To describe the contribution of Japan’s ODA towards infrastructure development in Indonesia.

I.4.2 To explain ODA roles in intensify economic alliance between Japan and Indonesia.

I.4.3 To analyze effects of Japan’s ODA for Indonesia economic growth.

I.5 Significance of the Study

I.5.1 To elaborate contributions of Japan’s ODA contribution towards infrastructure development in Indonesia.

I.5.2 To elaborate impacts of ODA policy towards economic bilateral relations between Japan and Indonesia.

I..5.3 To elaborate the importance of ODA as Japan’s foreign policy in developing countries.

I.6 Theoretical Framework

I.6.1 Liberalism In order to cope with global issues, world leaders must work together since there are lot of obstacles and challenges to face. It is very impossible that an individual country able to survive without cooperate with others. According to liberal perspective, international cooperation is possible to addressing issues in international relations. Liberalism theory believes that the nature of international system is evolving through time and continuosly becomes more peaceful as time goes by. Liberalist argue that peace and cooperation is possible to achieve a better world rather than concerning about conflict and war. Burchill (2001) argues that modern liberalism supports state and non-state actors to coordinating in promote global peace as well as to improve political, economic and social development in all over the world.16

The concept of liberalism theory use to explain the problem discussed in this research. The implementation of ODA as foreign economic policy indicate cooperation between Japan and other countries in which comply with the concept of liberalism theory. Japan’s ODA contribution to Indonesia’s development is actually based on the mutually interdependence between these two countries in terms of trade and investment activities. Moreover, ODA policy is not only aims to secure Japan’s national interest yet it attempt to promotes global development goals as well. Thus, the concept of liberalism can explain the cooperation between Japan and Indonesia in achieve global development goals through trade and investment.

I.6.2 Regional Integration

The theory of economic integration was developed by the liberal economic thinkers and preceded the theory of political integration developed by the political scientists such as Ernst Haas and Leon Lindberg. Integration was conceived in two ways, either as a process or as a goal. There are two different dimensions of integration; formal integration and informal integration. Formal integration marked

16 Scott Burchill. (2005). Theories of International Relations. p.54-69

10 by the role of state to lead the process of integration. Whereas, informal integration refers to integration that involve non-state actors as predominant lead.17

The concept of regional integration explain Japan’s strong interest in ASEAN countries under Shinzo Abe’s administration. Japan has been promote cooperation and support through various programs in order to build close relations with each countries in Southeast Asia including bilateral ODA. Besides that, Indonesia as the emerging economic country with strategic demography attracting Japan. Therefore, that is why the concept of regional integration is use to explain the topic of this research. Specifically, how ODA can strengthening regional integration of Asia through infrastructure development.

I.6.3 Complex Interdependence

Complex interdependence theory was popularized by Robert Keohane and Joseph Nye in response to neorealism. The concept of complex interdependence rely on the interdependency relations among states or society.18 Based on Keohane and Nye’s argument, complex interdependence has three characteristics. First, state and non-state actors become the actors are that has multiple channels of communication, such as through interstate, transgovernmental and transnational. Second, issues that discuss between a state with another state is not arranged based on hierarchy system. For instance, issues related to military and security does not consistently dominate the cooperation agenda. Third, military force that plays a relatively minor role in international relations mainly because it is not used by governments toward other governments within the region, or on the issues, when complex interdependence prevails.19

Complex interdependence theory is used as one of theoretical framework in this research due to interdependence relations between Japan and Indonesia. in terms of ODA policy, Japan plays role as donor country and Indonesia as the

17 Hannu Heinonen (2006). Regional Integration and the State : The Changing Nature of Sovereignty in Southern Africa and Europe. 18 Waheeda Rana. Theory of Complex Interdependence: A Comparative Analysis of Realist and Neoliberal Thoughts, p. 290. 19 Robert Keohane and Joseph Nye (1977). Power and Interdependence. Boston: Little, Brown and Company (Inc.) 11 recipient. Japan becomes one of the top donors for ODA contribution in Indonesia for several sectors. Moreover, Indonesia and Japan has cordial relations in economic. They becomes major partner in trade and investment for each other. Thus, there is no doubt if these countries have various cooperation in order to strengthening and deepening their bilateral relations.

I.7 Literature Review

I.7.1 Carol Lancaster. Foreign Aid: Diplomacy, Development, Domestic Politics. The University of Chicago Press (2007).

In international relations, foreign aid is regarded as an international norm to bridging relations between developed and developing countries. It has been debatable for the recent years due to different notions of aid motives. Some people argues that aid is purely using as medium to exploitation. Some others believes that aid served as diplomacy tool that using to cover up national interest. In several cases the allocation of aid only due to the obligation for rich countries to help poor countries. However, foreign aid is actually can be seen as an effort to facilitate cooperation amoung countries to overcome global issues.

In this book, Carol Lancaster explains that domestic factors becomes an essential reason to influence foreign aid policy. In the first chapter of the book, the author provides explanation about foreign aid as well as its purposes. There are various purposes of aid such as diplomatic purpose, development agenda, humanitarian support, conflicts resolutions and etc. According to her, all of these aid purposes are reflections of the overlapping influences between domestic condition, strategic interests as well as institutions or organizations of the donor countries.

The second chapter provides deeper analysis about aid purpose and brief history of aid-giving in the past, started from 1945 until today. The author take five case studies from different major donor countries in order to provide deeper explanation about foreign aid. The explanation of relations between domestic politics and aid-giving in the US, Japan, France, Germany, and Denmark is provided in chapter three to chapter seven. Each chapter point out history and

12 changes for country’s aid-giving as well as purposes and influence on aid. Related to this thesis topic, the book is very beneficial as guidance and reference for understanding the overview development of Japan’s ODA. The author provides detail history of ODA in Japan, from the establishment to changes from year to year until the current ODA policy.

I.7.2 Dennis D. Trinidad. Japan’s ODA at the Crossroads: Disbursement Patterns of Japan’s Development Assistance to Southeast Asia. Journal Asian Perspective: Vol. 31, No. 2, pp. 95-125 (2007).

This journal discuss about patterns of Japan’s ODA disbursement in Southeast Asia region during period of the end of cold war up to 2006. ODA considered as an important policy since it helps Japan to accomplish many foreign policy objective. For instance, ODA utilize as solution for bilateral problem, medium for export promotion and investment, confidence-building measure and even as tool of buying power and influence in international organization as well as manifestation of economic power and global leadership. The author provides clear explanation about the history of Japan’s ODA in Southeast Asia. The region considered as the paramount interest to Japan due to regional stability. As the result, Japan invests huge amount of ODA to Southeast Asia in order to maintain the stability. Therefore, it is become the reason for the author to choose Southeast Asia as the study focus. There are many published literatures related to the subject, which focuses largely on ODA policy and reforms, effectiveness and post-evaluation of ODA, political- economic aspects, strategic uses, and a number of cross-country comparisons and case studies. This thesis is going to focus on Indonesia as the study object. This journal choosen as the foundation of this thesis since it has similar study focus which is Japan’s ODA disbursement pattern to Southeast Asia countries.

1.7.3 Syamsul Hadi. Japanese Diplomacy to ASEAN and Its Relevance to Indonesia. 2010.

In supporting this thesis, the journal titled Japanese Diplomacy to ASEAN and Its Relevance to Indonesia written by Syamsul Hadi has revealed several points regarding the importance of Indonesia to Japan. As the introduction, the author

13 explains about tighter relations among Japan and ASEAN countries. Due to many dynamic changes happened in East Asia, Japan has a chance to deepen its relations with ASEAN. In this case, there is an effort implemented by Japan called as checkbook diplomacy. ODA is choosen as main instrument of Japan’s foreign policy due to domestic condition and limitation of political and military force. Furthermore, the author provides explanation about Japanese ODA to Southeast Asia. ODA helps Japanese companies to get cheaper investment cost due to its contribution toward infrastructure of each countries. Moreover, ODA utilize as the realization of Japan’s commitment to consolidate more on ASEAN integration and regional stability. Indonesia considered as the most important partner for Japan in ASEAN. there are several points that become Indonesia’s strength such as its geographical position and plenty of natural resources. It is clearly very strategic for Japan as the trade partner for economically and even politically. Hence, Indonesia may get more concrete benefits in its relations with Japan both bilaterally as well as regionally.

I.8 Scope and Limitations of the Study This research focusing on the implementation of Japan’s ODA policy in Indonesia under the new Shinzo Abe administration. As the largest donor of ODA in Indonesia, Japan has been contributed to several sectors on Indonesia development. However, this research focus on ODA contribution towards Indonesia infrastructure development. The period of data collection is taken from 2014 to 2016, which is during the administration of Joko Widodo as the president of Indonesia.

I.9 Definition of Terms I.9.1 Foreign Policy According to the English dictionary, foreign policy refers to package of policy that implemented by a state to communicate and interact with other state. In other words, it defined as as a government’s strategy to deal with other country. There are several indicators that may influence foreign policy making such as domestic considerations, policy or behaviour of other states, or plans to advance

14 specific geopolitical designs.20 Thus, foreign policy defined as a formulation of policy that applied by a state to deal with other state to preserve national interests and/or achieve national objectives.21

I.9.2 Foreign Aid

The standard definition of foreign aid comes from the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD), which defines foreign aid (or the equivalent term, foreign assistance) as financial flows, technical assistance, and commodities that are (1) designed to promote economic development and welfare as their main objective (thus excluding aid for military or other non-development purposes); and (2) are provided as either grants or subsidized loans.22

I.9.3 Official Development Assistance (ODA) ODA is defined as the assistance provide by official agencies including state and executing agency that intends to spurring development in developing countries. Most of ODA is allocated to promote social and economic development. Thus, assistance that aims to military purposes are not included into ODA.23

I.9.4 Global Development Development consists of more than improvements in the well-being of citizens, even broadly defined: it also conveys something about the capacity of economic, political and social systems to provide the circumstances for that well- being on a sustainable, long-term basis.24 Hence, global development or international development refers to the development with international scale with

20 The Editors of Encyclopædia Britannica. Retrieved October 25, 2017 from https://www.britannica.com/topic/foreign-policy 21 The Editors of Encyclopædia Britannica. Retrieved October 25, 2017 from https://www.britannica.com/topic/foreign-policy 22 Foreign Aid. Retrieved October 25, 2017 from http://internationalrelations.org/foreign-aid/ 23 Organization for Economic Cooperation and Development. Retrieved October 25, 2017 from http://www.oecd.org/dac/stats/officialdevelopmentassistancedefinitionandcoverage.htm 24 Owen Barder (2012). What is Development?. Retrieved October 25, 2017 from https://www.cgdev.org/blog/what-development

15 several indicators as human development index, standart of living, poverty rate and etc.

I.9.5 Infrastructure

Infrastructure defined as the basic systems and services, such as transport and power supplies, that a country or organization uses in order to work effectively.25 Infrastructure is the basic requirement of economic development. It does not directly produce goods and services but facilitates production in primary, secondary and tertiary economic activities by creating positive external economies. It is an admitted fact that the level of economic development in any country directly depends on the development of infrastructure.26

I.10 Research Methodology The methodology proposed in this research is qualitative research approach which refers to the method that provides an explanation about interconnected relation between variables in a particular phenomenon. With qualitative data one can preserve chronological flow, see precisely which events led to which consequences, and derive fruitful explanations.27 This research can categorized into descriptive research as well since it is explain about inference or causal relationship among given variables. Hence, the outcome of this research presented in descriptive narrative rather than scientific report. Whereas, the writing technique of this research using literature study and library research. The data collected is consist of primary and secondary data which gather from many sources as books, journals, reports, publications, articles and online platform. In addition, data from official publications from related institutions used as reliable sources in order to support the accuracy of this research.

25 Meaning of “infrastructure” in the English Dictionary. Retrieved October 25, 2017 from http://dictionary.cambridge.org/dictionary/english/infrastructure 26 Importance of Infrastructure for socio-economic development of community. Retrieved October 28, 2017 from http://iasscore.in/economy/importance-of-infrastructure-for-socio-economic- development-of-community 27 Matthew B. Miles and A. Michael Huberman (1994). Qualitative Data Analysis: an Expanded Sourcebook. California: SAGE Publications 16

This research using content-analysis method that refers to analysing the contents of documentary materials such as books, magazines, newspapers and the contents of all other verbal materials which can be either spoken or written. The primary sources of this research obtained through the national and foreign government or related institution publications. Besides that, this research obtain data from secondary sources as well. Secondary data refers to data that already available and have been collected and/or analysed by someone else. Secondary data can be published data or unpublished data. This research mostly using published sources for the secondary data that comes from journals, books, magazines, reports, articles written by particular business entities or scholars, economists, and so forth.

I.11 Structure of the Thesis CHAPTER I: INTRODUCTION The first chapter of this thesis provides the topic overview that going to be elaborate. This chapter consists of several sub-chapter as the background of the study, problem identification, statement of the problems, research objectives, significance of the study, theoretical framework, literature review, scope and limitation of the research, definition of terms that might be found within this thesis and as well as thesis structure.

CHAPTER II: JAPAN-INDONESIA ECONOMIC RELATIONS The second chapter provides explanation about bilateral relations between Japan and Indonesia. Start with the explanation about recent growth for each country as how is Japan’s economic currently, what are Japan’s economic interests and how is Indonesian growth and future potential. Then, continued to the Japan- Indonesia economic relations, in terms of cooperation lately. In addition, there is explanation regarding Japan’s bilateral relations with other neighboring countries such as ASEAN, China, India, Republic of Korea and Australia.

CHAPTER III: JAPAN’S OFFICIAL DEVELOPMENT ASSISTANCE IN INDONESIA (2014-2016)

The third chapter provides explanation about implementation of ODA in Indonesia. In the beginning of this chapter, there is explanation about history of

Japan’s ODA in Indonesia. Then, followed by ODA contribution to Indonesia, particularly for infrastructure sector. Furthermore, this chapter define current government’s concern on infrastructure development in order to support Indonesian economic growth. .

CHAPTER IV: THE CONTRIBUTION OF JAPAN’S OFFICIAL DEVELOPMENT ASSISTANCE (ODA) TO INDONESIA’S INFRASTRUCTURE DEVELOPMENT

The fourth chapter is the main part of this thesis since it provides the result of findings related to the implementation of Japan’s ODA toward infrastructure development in Indonesia as the vital prerequisite of economic growth. This chapter explain about how significant contribution made by Japan in support Indonesia’s infrastrucure development. This chapter provides analysis about the role of aid in shaping Japan and Indonesia bilateral relations. In addition, this chapter explains about the importance of infrastructure to strengthening regional integration in Southeast Asia region.

CHAPTER V: CONCLUSION The last chapter concludes the findings of the research regarding to the topic from the Chapter I to the Chapter IV which aims to answer the research question.

CHAPTER II JAPAN-INDONESIA ECONOMIC RELATIONS II.1 Overview on Japan’s Economy In the 19th century, Japan is not a developed country as it is today. Yet, it is a weak country that depends on agricultural sector. Japan also considered as a backward country due to lag of technology. However, Japan’s struggle to bring development toward its nation has been triumph to make it becomes an onward industrialized state. During 1945 to 1949, Japan experienced high growth economy after the recovery period. The Korean War, which began in June 1950 and ended (in ceasefire) in 1953, gave Japan with a timely and significant impetus for economic revival.28

Known as the third world’s biggest economy country, Japan has experienced ups and downs of economy. Japan began to bring significant transformation of its economy during 1950 to 1970 due do high and sustained economic growth.29 However, the growth was decline in the early 1970s and continue to fell down in the 1990s.30 One of reasons behind this fact is due to bankruptcies of major financial banks and corporates as Yamaichi Securities and Hokkaido Takushoku Bank. This condition were triggering a nationwide banking crisis and credit crunch. In 1998, the Financial Supervisory Agency and the Financial Restructuring Commission (merged into the Financial Services Agency in 2000) established as the response of the government toward the crisis. However, there were times when the Japanese economy appeared to recover. For instance, in the early 2000s, the government took several initiative in order to stabilising the financial system through using public money to recapitalise banks, better government supervision of the sector and speeding-up the process of dealing with bad loans.

28 Michael Schaler (2004). The Korean War: The Economic and Strategic Impact on Japan, 1950- 53. Retrieved November 30, 2017 from https://www.researchgate.net/publication/296202925_The_Korean_War_The_economic_and_strat egic_impact_on_Japan_1950-53 29 Kenichi Ohno (2006). The Economic Development of Japan: the Path Traveled by Japan as a Developing Country. Retrieved December 1, 2017 from http://www.grips.ac.jp/forum/pdf06/EDJ.pdf. p.162 30 Ibid. p.184

Japan started to participates actively in the global economic cooperation in 1951. It was remarkable for Japan since its political independence restored after United States occupation ended. Japan becomes a member of the International Monetary Fund (IMF) and the World Bank Japan in 1952. Followed in 1955, Japan officially joined World Trade Organization (WTO) and took part of General Agreement on Tariffs and Trade (GATT). In 1956, Japan joined the United Nations and continued to signed a convention of Organisation for Economic Co-Operation and Development (OECD) members in 1964.

Japan becomes a notable key player of global economy. Currently, it is ranked as the third biggest economy with US$4.4 trillion that represents almost 6% of the world economy.31 It is one of largest aid donor as well as a source of global capital and credit. Manufacturing industry is the key power of Japan’s economy. Japan is ranked as the forefront in technology industries. By using its excellence in high- technology, Japan largest export products are automobiles and consumer electronics. Besides that, Japan known as the big producer of automobile manufacturing, machinery, and robotics. Since Japan does not have much suitable land for agriculture, Japan must rely heavily on other countries in order to support its growing economy and large population. Therefore, most of Japan's import consist of raw materials for production and resources as oil to fuel their machinery and vehicles. Services plays essential part of Japan's economy that contribute to 71.4 percent of GDP and employs about 68.9 percent of the population.32 Whereas, agriculture sector only compose GDP for about 1.4 percent in every year and employs a mere 3.9 percent of the population.33 Ranked as the third world largest producer of automobile and electronic goods, Japan receive 24 percent of its GDP from these manufacturing industry.34

31 Alex Gray. (2017). The world’s 10 biggest economies in 2017. Retrieved November 30, 2017 from https://www.weforum.org/agenda/2017/03/worlds-biggest-economies-in-2017/ 32 Economywatch.com (2013). Japan’s Economy. Retrieved November 30, 2017 from http://www.economywatch.com/world_economy/japan 33 Ibid. 34 Ibid.

Recently, Japan intends to continuously strengthening diplomacy in order to protect and promote national interests. Diplomatic efforts is needed to build trust and cooperative relationships with other countries. There are three basis of Japan’s diplomacy in recent years.35 First, rulemaking to strengthen a free and open international economic system. Japan believes that free trade may enhance economic growth by maintain and develop the open, stable and rulesbased international economic order. Second, the government is highly supports the expansion of Japanese companies’ to operate in overseas market. For instance, it has implemented public-private partnership efforts to promote Japanese technologies and infrastructure overseas. Third, promoting resource diplomacy and attracting investments and tourists.

In order to promote further economic growth and cooperation with other countries, Japan established Free Trade Agreements (FTAs) and Economic Partnership Agreements (EPAs). These two cooperation help to monitor recent trend in foreign market as well as to strengthen the basis of the Japanese economy. There are several characteristic of FTAs and EPAs such as lowering tariffs for goods, elimination for trade barriers for services and rule-making for trade and investment rule making.36 Currently, Japan has signed 16 EPAs with 20 countries around the Asia Pasific region and Europe. In terms of conceptual, EPA has larger scope rather than FTA which only related to trade in goods and services. The scope of EPA is more than investment and bilateral cooperation, yet consist movement of people, government procurement and competition policy as well.

Recently, Shinzo Abe plans to expand its diplomatic relations through Free and Open Indo-Pacific Strategy. This strategy is important for Japan’s continued economic success and also for its strategic interests. For instance, to prepare Japan dealing with the fast changing global and regional order. Japan thinks that the synergy between continents and open sea is the key to achieve stability and prosperity of international community. In this case, the continents that intended are

35 Ministry of Foreign Affairs of Japan. Diplomatic Bluebook 2017. p.12. Retrieved on November 30, 2017 from http://www.mofa.go.jp/policy/other/bluebook/2017/html/ 36 Ibid. p.5.

Asia and Africa continent. Asia known as remarkable growth region, while Africa recorded as a land with great potentials. These two continents located in the open and free the Pacific and the Indian Oceans.37 Through this policy, Japan willing to expand cooperation through development in infrastructure and human resources that may enhance business environment as well as facilitate further trade and investment activity. It intends to involve all of countries in East Asia, Middle East and Africa. As the result, it becomes an effort to promote peace and prosperity through connected and more integrated region.

II.2 Overview on Indonesia’s Economy Indonesia has experienced a remarkable economic revival since the Asian financial crisis of the late 1990s. Since 2004, Indonesia started to stabilize its condition and through significant progress in terms of the economy as well as democratization. Under the Susilo Bambang Yudhoyono administration that took office in October 2004, progress has been made with respect to new institutional frameworks for improving policies on infrastructure and the investment climate, and policies for receiving aid and promoting democratization.38 Indonesia’s GDP per capita has constantly increase from $857 in 2000 to $3,603 in 2016.39 Recently, Indonesia considered as largest economy in Southeast Asia and ranked as the fourth largest population in the world.

The government continue to encourage Indonesia to participare more in international community. It has strong commitment to promote peace and achieve further international and regional economic governance. Besides that, the government seeking for expanding its cooperation with other countries in order to support national development. There are three main programs that implemented priorities of Indonesian foreign policy under President Jokowi administration.40

37 Ministry of Foreign Affairs of Japan. Diplomatic Bluebook 2017. p.27. Retrieved on November 30, 2017 from http://www.mofa.go.jp/policy/other/bluebook/2017/html/ 38 The Ministry of Foreign Affairs of Japan (2008). Country Assistance Evaluation of Indonesia. Retrieved on January 15, 2018, from http://www.mofa.go.jp/policy/oda/evaluation/FY2007/ 39 The World Bank in Indonesia. Retrieved February 2, 2018 from http://www.worldbank.org/en/country/indonesia/overview 40 Kementerian Luar Negeri Republik Indonesia. Retrieved February 25, 2018 from https://www.kemlu.go.id/en/kebijakan/organisasi-internasional.aspx

First, consolidation of Indonesian foreign policy and optimization of diplomacy. Second, enhancement of international cooperation. Third, affirmation of commitment to world peace program.

Indonesia plays significant roles in ASEAN that has strategic geoeconomic attraction. Compared to other member countries, Indonesia has largest land and population in Southeast Asia region. Located in straits of Malacca which becomes important point of sea lanes. In the recent years, Indonesia enjoyed steady economic growth. According to the World Bank Report in 2017, Indonesia has positive economic forecast since it has strong fundamental domestically. The government has made economic development planning that segmented into 5 year medium-term plans or called as the RPJMN (Rencana Pembangunan Jangka Menengah Nasional). Each of the RPJMN consist of different development priorities, such as infrastructure development and social assistance programs related to education and health-care.41

II.3 Economic Bilateral Relations between Japan and Indonesia The political and economic stability of Indonesia may affect to stability and prosperity of the whole continents of Asia, including Japan.42 Japan and Indonesia began to build their diplomatic relations in 1958 by signing the Treaty of Peace. Indonesia is a strategic partner for Japan, since it shares basic values in terms of democracy, human rights, and market economy, and has long maintained good relations with Japan at the country-wide level.43 They have build strong bilateral relations due to mutually important partners for each other. Masafumi Ishi, the Ambassador of Japan to Indonesia said that currently there are around 1500 Japanese companies that operating in Indonesia during the past 15 years. They

41 The World Bank in Indonesia. Retrieved February 2, 2018 from http://www.worldbank.org/en/country/indonesia/overview 42 Kedutaan Besar Jepang di Indonesia. Country Assistance Policy for the Republic of Indonesia. Retrieved on January 16, 2018, from http://www.id.emb-japan.go.jp/oda/en/policy.pdf 43 Ministy of Foreign Affairs of Japan. Country Assistance Policy for the Republic of Indonesia. Retrieved February 9, 2018 from http://www.mofa.go.jp/policy/oda/page_000008.html#indonesia

23 employ for about 4.7 million workforce and 93.3% are local workers.44 Japan offers assistance for Indonesia’s well-balanced development, enhancement of capacity to address issues of the Asian region and international society, building on further economic growth of Indonesia.45

The growth of Asia region, in particular ASEAN countries, is important for Japan because the region is considered as the key element of Japan growth. Recently, ASEAN member countries initiate to enhance regional connectivity as an effort to reach further regional integration. Indonesia expected to become a prominent player as one of the centers for a network of international production and trade by the realization of the ASEAN Community. Thus, achieving further economic growth by provides better business and investment environment is very important for Indonesia. After the Japan-Indonesia Economic Partnership Agreement (JIEPA) came into effect in July 2008, Japan and Indonesia signed a memorandum of cooperation on the Metropolitan Priority Areas for Investment and Industry (MPA) in December 2010 to agree to cooperate in infrastructure development. In this way, bilateral economic ties are expected to be strengthened.46

II.3.1 Bilateral Trade Trade is very important due to interdependence among countries in the world. Each countries has different capability in producing things. Commonly, there are three factors to determine production output, which are land, labor and capital. The availability of particular these materials gives a country comparative advantage in trade. Several countries gain advantage from their land, thus they have abundant of natural resources. As the result, they do not need to import as many raw materials. On the other hand, those countries who has insufficient land should doing trade with other countries in order to survive. For instance, Japan must import oil from Saudi Arabia as the oil producer since it does not have oil resources.

44 Novy Lumanauw and Imam Suhartadi (2018). 1.500 Perusahaan Jepang Beroperasi di Indonesia. Retrieved on January 20, 2018, from http://id.beritasatu.com/tradeandservices/1500- perusahaan-jepang-beroperasi-di-indonesia/170987 45 Ministy of Foreign Affairs of Japan. Country Assistance Policy for the Republic of Indonesia. Retrieved February 9, 2018 from http://www.mofa.go.jp/policy/oda/page_000008.html#indonesia 46 Ibid. 24

Therefore, trade among countries is very essential in order to compensate for what they do not produce.

Japan became one of the major trading partners for Indonesia since years ago. According to data from the World Integrated Trade Solution (WITS) in 2016, Japan ranked in the third position of biggest exporter following China and United States.47 Raw materials, consumer goods and fuels are the main product group exported by Indonesia to Japan. Besides that, Japan is very important for Indonesia in importing several products as capital goods, machinery and electronic, intermediate goods, metals and others. In addition, Indonesia ranked as the 24th largest export economy in the world. According to Ministry of Trade of Indonesia, these are the ten main commodities exports by Indonesia; textile and product textile, electronic, rubber and article thereof, palm oil, forest products, footwear, automotive, shrimps, cocoa and coffee.48

Japan known as one of the most technologically advanced countries in the world. In global trade, Japan succeed to becomes notable player in various industries such as automobile, manufacturing and robotics product as well as biotechnology, nanotechnology and renewable energy sectors. When it comes to Japan, people talk about the robotic technology, the bullet trains as well as vast and complicated bridges. Japan is the original place of several world-leading automotive companies such as Toyota, Mitsubishi, Honda and Nissan. Toyota was at the top with record global sales of 9.38 million vehicles in 2017, up 1.7 percent from the previous year, followed by Nissan, which improved 4.6 percent to 5.82 million units.49

47 World Integrated Trade Solution (WITS). Indonesia exports, imports and trade balance. By Country 2016. Retrieved February 9, 2018 from https://wits.worldbank.org/CountryProfile/en/Country/IDN/Year/LTST/TradeFlow/EXPIMP/Partn er/by-country 48 Ministry of Trade of Indonesia. Export Destination Country For 10 Main Commodities. Retrieved January 13, 2018 from http://www.kemendag.go.id/en/economic-profile/10-main-and- potential-commodities/10-main-commodities 49 Japan’s top six automakers scored record-high global unit sales in 2017. Retrieved February 9, 2018 from https://www.japantimes.co.jp/news/2018/02/03/business/corporate-business/japans-top- six-automakers-scored-record-high-global-unit-sales-2017/#.WsSRe4hubIU

Table 2.1 Table 2.2 Japan’s Export to Indonesia Japan’s Import from Indonesia during 2012 to 2016. during 2012 to 2016.

The table above shows the amount of Japan’s trade activities to Indonesia during 2012 to 2016. Weakening of international trade is a driven factor of declining Japan’s export and import. The value of international trade grew less than 2 per cent in every year during 2011 to 2014 and declined by 10 per cent in 2015.50 International trade further deteriorated in 2015 after sluggish pace on economic recovery from the Great Recession. There are several factors behind this trend. Generally, the weakening of international trade was caused by three reasons, which are falling price of commodities, nominal factors, principally the fall in the price of commodities, the overall appreciation of the United States dollar and weaker of market demand.

Recently, export of high technology products become the engine of Japan’s economic growth. According to data in 2016, machines has the biggest percentage of Japan’s export to Indonesia. With total amount about US$4.17 billion, it consists

50 United Nations Conference on Trade and Development (UNCTAD). Key Statistics and Trends in International Trade 2016. Retrieved February 9, 2018 from http://unctad.org/en/PublicationsLibrary/ditctab2016d3_en.pdf

26 of engine parts, industrial printers, transmissions, metal molds, air pumps, liquid pumps, ball bearings, and many others.51 Then, transportation includes vehicle parts, cars, buses, tractors, ships and motorcycle are the other main products of Japan’s export. These products contribute for about US$1.71 billion of total export to Indonesia.52 Other than that, export products consist of metals, plastic and rubbers, chemical products and etc.

However, as the country who do not has adequate resources, Japan depends heavily on import of raw materials. Mineral resources becomes the main products that imported from Indonesia. It becomes the main import product that consist for more than US$5 million for each year.53 This includes coal, petroleum gas, oils, lignite, peat and others. Wood, organic chemicals, nickel, plastics and paper are other products that considered as the important raw resources needed by Japan for its production. Fish and crustaceans, mollucs and other aquatic invertebrates products not less than US$4 million imported for each year.54 Coffee, tea and spices are the other products imported eventhough the portion of amount is not too large. Besides that, Japan imports electrical machinery and equipment and parts thereof as the resources that supports electronic production.

Prime Minister Shinzo Abe and President Jokowi are widely expected to reviving trade decline between the two countries. It has triggered all of the economic actors including the government, business players and economists to call for measures bilateral trade revival.55 One of the ways to be considered is through Indonesian-Japan Economic Partnership (IJEPA) that has been exist since 2008.56 It is an agreement for conduct free trade activities between Indonesia and Japan. It

51 The Observatory of Economic Complexity. What does Japan export to Indonesia (2016)?. Retrieved February 9, 2018 from https://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/jpn/idn/show/2016/ 52 Ibid. 53 Trade Map-International Trade Statistics. Bilateral Trade between Japan and Indonesia. Retrieved February 8, 2018 from https://www.trademap.org/tradestat/Bilateral_TS.aspx?nvpm=1|392||360||TOTAL|||2|1|1|1|2|1|1|1|1 54 Ibid. 55 Stefani Ribka. Japan, Indonesia Target Trade Revival. Retrieved February 8, 2018 from http://www.thejakartapost.com/news/2017/01/10/japan-indonesia-target-trade-revival.html 56 Ibid. 27 aims to increase bilateral trade and investment for these two countries. Indonesia plans to ask Japan to lower tariff barriers for its agriculture and fisheries shipments, which currently stand at more than 10 percent. Meanwhile, Japan may discuss settlement of Indonesia’s failure to lower its import tariff on cars from Japan.57 Whereas, regarding infrastructure and investment, Yamazaki Norio as JICA Investment Promotion Policy Advisor in Indonesia told that Japan’s robust investment in Indonesia would lead to recovery in trade between the two countries.58

II.3.2 Japanese Investment in Indonesia

Compared to other Southeast Asian countries, Japan has more investments in Indonesia. It becomes the second largest investor in Indonesia with US$5.4 billion in 2016 and US$ 2.8 billion in the first half of 2017.59 Lately, there are almost 20,000 Japanese people living in Indonesia and around 1800 companies are operating. Japanese companies in Indonesia have created around 5 million jobs, out of which 95 percent are held by Indonesians, and they are contributing almost 20% to the country’s export.60 There are three main sector of Japan’s investment in Indonesia which are infrastructure, manufacturing and service.

In 2018, Japan and Indonesia will celebrated their 60th anniversary of diplomatic relations. Back to the 1958, these two countries began modern diplomatic and economic relations. Since then, bilateral trade ties expand enormously. During these past 60 years, there are many remarkable events as cooperation that consist of various fields such as cooperation in economy field through several trade agreements and ODA contribution. Regard to the diplomatic anniversary, these counties intends to strengthening and deepening their cordial relations.

57 Stefani Ribka. Japan, Indonesia Target Trade Revival. Retrieved February 8, 2018 from http://www.thejakartapost.com/news/2017/01/10/japan-indonesia-target-trade-revival.html 58 Ibid. 59 Now! Jakarta. An Interview with H.E. Ishii Masafumi, Ambassador of Japan to Indonesia. Retrieved February 9, 2018 from http://nowjakarta.co.id/an-interview-with-h-e-ishii-masafumi- ambassador-of-japan-to-indonesia. 60 Ibid.

According to Heru Santoso as the Secretary General of the Indonesia-Japan Friendship Association (PPIJ), Japan has a high contribution for Indonesia’s economic development.61 Japan has been creating added value, providing job opportunities and building qualified human. Moreover, Japan’s investment that involve small-medium enterprises (SMEs) in Indonesia will be helpful in accelerating technology transfer and national economic growth.

Recently, the infrastructure investment projected for about US$460 billion up to 2019.62 Transportation and power sectors become two focus areas for Japanese investment in Indonesia. Japan have significant investment in the industrial sector like automotive products, electronic goods, petrochemicals and many others. Nevertheless, there are several issues that concerned by Japanese business and industries to invest in Indonesia. One of the issues is investment climate that considered has not conducive yet. Hence, Japanese investment in infrastructure development is very important.

Currently, Japan’s investment toward Indonesia in the automotive sector has been declined. This is due to a continued adjustment in the sales volume of automobiles in Indonesia that continuosly decreased. Started from around 1.2 million units to about 1 million units, moving from 1.23 million units in 2013 and 1.21 million units in 2014 to 1.01 million units in 2015 and 1.06 million units in 2016.63 As the result, it affect to declining investment in the supporting industries of iron, non-ferrous metals and metals.

These two countries continued to sign a memorandum of cooperation on the Metropolitan Priority Areas for Investment and Industry (MPA) in 2010 following

61 Nurmayanti. Investasi Jepang di RI Capai US$ 19,7 Miliar dalam 6 Tahun. Retrieved February 28, 2018 from http://bisnis.liputan6.com/read/2878398/investasi-jepang-di-ri-capai-us-197-miliar- dalam-6-tahun 62 International Financial Law Review. The Japanese Overseas Investment Report 2017: Indonesia. Retrieved February 9, 2018 from http://www.iflr.com/Article/3673587/The-Japanese- Overseas-Investment-Report-2017-Indonesia.html 63 Mizuho Research Institute. Trends in Japan Foreign Direct Investment (FDI) toward Asia. Retrieved February 28, 2018 from https://www.mizuho- ri.co.jp/publication/research/pdf/eo/MEA171221.pdf

IJEPA in 2008.64 The signing of MPA aims to promote further economic growth through infrastructure development in the Jabodetabek Area as the economic engine of Indonesia. This cooperation is essential to strengthening strategic partnership between Japan and Indonesia. As reported by the JICA, Japan has provided about 113 billion yen in ODA financial cooperation to MPA Projects. 65 In addition, under the MPA Strategic Plan, these countries would like to build Jabodetabek area becomes more attractive for investment as well as environmentally and people- friendly.

Recently, Prime Minister Abe held a summit meeting with President Joko Widodo (Jokowi) in November 2017 that took place in Manila, the Philippines. President Jokowi hopes that the 60th anniversary of the establishment of Japan- Indonesia diplomatic relations can strengthening these countries bilateral relations such as in further development in the infrastructure projects.66 From his statement, it can concluded that Japan is worth to receive apprectiation due to initiative to participate in social and economic development of Indonesia. For instance, Japan is ready to strengthening development cooperation through several infrastructure projects such as the MRT project, the northern Java railway, and energy field projects.

II.4 Japan’s Economic Relations with other Neighboring Countries

Recently, Japan is the second largest trade partner for ASEAN due to economic interdepence between these countries has been steadily increasing. Moreover, ASEAN countries has become major destination for Foreign Direct Investment (FDI) of Japanese enterprises for years. In 2011, total bilateral trade

64 Japan International Cooperation Agency. Fourth Steering Committee Meeting Held by Cabinet Members of the Governments of Japan and Indonesia on the Metropolitan Priority Area for Investment and Industry (MPA) in Jabodetabek. Retrieved January 4, 2018 from https://www.jica.go.jp/english/news/press/2013/131217_01.html 65 Ibid. 66 Sekretariat Kabinet Republik Indonesia. (2017). President Jokowi ad Prime Minister Abe to Launch 60 Years Anniversary of Indonesia-Japan Relations. Retrieved January 4, 2018 from http://setkab.go.id/en/president-jokowi-and-prime-minister-abe-to-launch-60-years-anniversary-of- indonesia-japan-relations/

30 between Japan and ASEAN estimated as US$ 248 billion.67 Furthermore, ASEAN and Japan has build close relations that basis on peace, stability, development and prosperity in Asia. Japan plays as key player that becomes important trading partner for ASEAN as well as a donor of ODA.

Located in the East China Sea, Japan and China are neighbor that has strong bilateral relations in economic and exchanges on resources and cultural.68 China is the largest trading partner for Japan in ten consecutive years that reach about US$ 270.3 billion in 2016.69 Recently, Prime Minister Shinzo Abe and President Xi Jinping decided to strengthening their bilateral ties by adopting rules-based, free and open principles. Japan and China have agreed to enhance economic, security, tourism, and cultural cooperation.

Through ODA and trade expansion, Japan succeed to strengthen its bilateral relations with ROK. Japanese firms also played crucial role in triggering Korea’s compressed economic development. These alliances countries have worked together in addressing regional and global issues, including nuclear disarmament and non-proliferation, peacebuilding, poverty and issues related to North Korea. Through years, Japan and the ROK continue to maintain their close economic relations. These countries has interdependence relations in terms of trade and investment. In 2016, approximately about 7.74 trillion yen achieved as the total value trade between Japan and the ROK. They are mutually dependent in terms of trade since they becomes a notable largest trading partner for each other.

In the basis of sustainable development, India and Japan has similar vision to achieve peace, stability and prosperity. These two countries underpin their cooperation based on various similarities such as democratic values and

67 Ministry of Foreign Affairs of Japan. 40th Year of ASEAN-Japan Friendship and Cooperation. Retrieved November 22, 2017 from http://www.mofa.go.jp/region/asia- paci/asean/relation/ja40/index.html 68 Ministry of Foreign Affairs Japan. Diplomatic Bluebook 2017. Japanese Diplomacy and International Situation in 2016. p. 31 69 Ibid. p. 26

31 commitment to human rights, pluralism, open society, and the rule of law.70 In 2000, Prime Minister Yoshiro Mori’s visited India in order to strengthen the Japan-India relationship. As the result of this visit, leaders of these countries agreed on the establishment of Global Partnership between Japan and India. This partnership reflects a broad convergence of long term political, economic and strategic interests for both Japan and India.

Japan and Australia enjoy cordial relations under the “Special Strategic Partnership”. These countries sharing fundamental values and strategic interests as well as support a free and open rule-based international order. By signing the new Japan-Australia Acquisition and Cross Servicing Agreement (Japan-Australia ACSA), these two counties has enhance cooperation in terms of security and defense sector. Furthermore, these countries have signed Japan-Australia Economic Partnership Agreement (EPA) and the Trans Pacific Partnership (TPP) Agreement as well as the East Asia Regional Comprehensive Economic Partnership (RCEP) as the promotion of free trade.

70 Ministry of External Affairs, Government of India (2013). India-Japan Relations. Retrieved November 22, 2017 from https://www.mea.gov.in/Portal/ForeignRelation/Japan_Relations_- _Jan_2013.pdf

CHAPTER III JAPAN’S OFFICIAL DEVELOPMENT ASSISTANCE (ODA) IN INDONESIA (2014-2016)

III.1 Official Development Assistance (ODA) as Japan’s Foreign Economic Policy

Nowadays, state and non-state actors in international relations make effort to promote development cooperation that aims to support social and economic development in developing countries. Official Development Assistance (ODA) is one of the economic cooperation that consists of financial and technical assistance. After joined Colombo Plan, Japan began its ODA with technical cooperation as the effort to contribute in development alongside postwar reparations. Japan continued to increasing amounts of ODA in corresponding with Japanese economic growth. Once in 1989, it succeed to took the United States’s position as the number one worldwide ODA provider. The guidelines and main rationales for Japan’s commitment in aid program is based on the ODA Charter which adopted in 1992. The charter declared that Japan provided aid because of its humanitarian concerns for the poor, to strengthen international interdependence, to protect the environment, and to further “self-help” on the part of developed countries.71

The Ministry of Foreign Affairs of Japan divides the ODA development into four stages. The first stage (1954 to 1976) called as system development when the international assistance as reparations of World War II. The second stage (1977 to 1991) more likely as systemic expansion. During this stage, Japan contributed on basic people needs and several basic projects assistance. The goverment began to enhance policy and philosophy of ODA during 1992 to 2002 which refers to the third stage. In this stage, policy makers realized that the importance to provide quality of ODA rather than quantity. It is expected to assist development in the recipient countries, particularly Asia region as the priority recipient of Japan’s

71 Carol Lancaster (2007). Foreign Aid: Diplomacy, Development, Domestic Politics. p. 123

ODA.72 Therefore, the period of 2003 to the present called as final development or the fourth stage in development of ODA.

The first decade of the twenty-first century is notable for Japan’s ODA policy due to reforms of several things in the implementation of ODA. In 2003, Japan revised its ODA Charter and followed by the formulation of the Medium- Term Policy on ODA in 2005. In addition, the Japan Bank for International Cooperation (JBIC) merged to the Japan International Cooperation Agency in 2008.73 JICA has mandate from the government as one of the Japanese ODA executing agency. JICA has responsibility to promote Japan’s development cooperation to support development and stability of social and economic in developing countries.74 In 2015, Japan officially announced latest revision of ODA Charter. The government stated that ODA Charter updated to Development Cooperation Charter due to adjust with recent trend of international system. ODA is an embodiment of the sincere efforts implemented by Japan, as the form of responsibility towards the international community that aims to resolve the current issues through cooperation for non-military purposes.

According to the Development Assistance Committee (DAC), the allocation of ODA has to fulfill three requirements as follows:

1) ODA should be undertaken by governments or government agencies; 2) The main objective is the promotion of economic development and welfare in developing countries, 3) ODA has concessional terms, having a grant element of at least 25%. Furthermore, in terms of ODA distribution, Japan will comprehensively examine each recipient countries’ needs and socio-economic conditions.75

72 Timur Dadabaev (2016). Japan’s ODA assistance scheme and Central Asian engagement: Determinants, trends, expectations. Journal of Eurasian Studies. p.25 73 Izumi Ohno. Japan’s ODA Policy and Reforms since the 1990s and Role in the New Era of Development Cooperation. Retrieved November 22, 2017 from http://www.grips.ac.jp/forum- e/IzumiOhno_E/lectures/2014_Lecture_texts/03_KOICA_Ohno_1125.pdf 74 Japan International Cooperation Agency. Japan ODA and JICA. Retrieved February 3, 2018 from https://www.jica.go.jp/english/about/oda/index.html 75 Ibid.

Furthermore, in accordance to the principle of the United Nations, ODA must meet these several points:

1) Environmental conservation and development should be pursued in tandem. 2) Any use of ODA for military purposes or for aggravation of international conflicts should be avoided. 3) Full attention should be paid to trends in recipient countries’ military expenditures, their development and production of weapons of mass destruction and missiles, their export and import of arms, etc., so as to maintain and strengthen international peace and stability, including the prevention of terrorism and the proliferation of weapons of mass destruction, and from the viewpoint that developing countries should place appropriate priorities in the allocation of their resources on their own economic and social development. 4) Full attention should be paid to efforts for promoting democratization and the introduction of a market-oriented economy, and the situation regarding the protection of basic human rights and freedoms in the recipient country. – Ministry of Foreign Affairs of Japan (2003).76 Japan’s ODA has several consistent convictions.77 First, support for self- help efforts. In this case, he stated that Japan’s assistance for infrastructure development may help developing countries to achieve sustainable growth. Second, Japan commitment to stressing poverty reduction through economic growth. Recently, many of Japanese companies able to do expansion in Asia region by promotes infrastructure development through Japan’s ODA. As the result, it spurring economic growth of partner country, providing local job creation and promoting consumption. Therefore, there is no doubt if Asian countries, particularly ASEAN countries become indispensable markets as well as investment destinations for Japan until today. Third, Japan also highly concern to the realization of human security. Hence, the distribution of ODA is not limited into economic infrastructure only but also aims to provide better quality life through development of social sector, human resources, disaster management and so forth. JICA as the agency who in charge of administering Japan’s ODA, is the world’s largest bilateral aid agency. It operates in over 150 countries and regions of the world. Through various forms of assistance, JICA plays role in channeling Japan’s ODA to developing

76 Ministry of Foreign Affairs Japan. Revision of Japan's Official Development Assistance Charter (August 2003). 77 Sixty Years of Japan’s ODA. (2014). Retrieved on March 2, 2018 from https://www.jica.go.jp/english/publications/j-world/index.html

35 countries in order to participate in their social and economic development. Generally, ODA is categorized into two types which are bilateral aid and multilateral aid. Furthermore, bilateral aid is provided in three ways namely technical cooperation, loan aid and grant aid. While, multilateral aid refers to financing and financial contributions to international organizations. For further details, the figure 3.1 shows the scheme of Japan’s ODA.

Technical Cooperation

Finance and Investment Cooperation

Bilateral Grants ODA Aid JICA

Disaster Relief Multi- lateral Aid Public-Private Partnership

Citizen Participatory Cooperation Figure 3.1 Scheme of Japan’s Official Development Assistance (ODA)78

78 JICA Annual Report 2017. Retrieved March 3, 2018 from https://www.jica.go.jp/english/publications/reports/annual/2017/index.html p.18

Technical cooperation draws on Japan’s high-technology, know-how innovation and experience to nourish the human resources in developing countries.79 It supports the development and improvement of technologies through jointly planning a cooperation plan with partner countries. Moreover, technical cooperation contributing to raising the overall technology levels and setting up new institutional frameworks and organizations. Thus, technical cooperation will promote socioeconomic development in developing countries.

Finance and investment cooperation or also known as ODA loans are extended under generous lending conditions (long repayment periods, low- interest).80 It consist of the capital necessary for development project in developing countries. ODA loans has several characteristics such as it required repayment, promote efficient use of the borrowed funds and appropriate supervision of the project financing. ODA loans provide larger amounts of finance rather than technical cooperation and grant aid. Hence, it usually utilized for source of financing to build large-scale basic infrastructure in developing countries.

Grant aid is the types of ODA in which funds are granted to a developing country in order to support construction works or services such as procuring equipment and materials that are necessary for economic and social development.81 The targets recipient for grant aid is mostly devoloping countries with low income level since there is no obligation for repayment. Grant aid is broadly implemented for building public facilities such as schools, hospitals, bridges, irrigation system, access to safe water and other socioeconomic infrastructure in which aims to support and improve standar of living in recipient countries.

Whereas, multilateral aid is an indirect method of providing assistance to developing countries by provide financing or donating funds to international organizations.82 Mostly, funds are contributed to the various bodies of the United Nations such the United Nations Development Programme (UNDP), United

79 JICA Annual Report 2017. Retrieved March 3, 2018 from https://www.jica.go.jp/english/publications/reports/annual/2017/index.html p.18 80 Ibid 81 Ibid 82 Ibid

Nations Population Fund (UNFPA) and the United Nations Children’s Fund (UNICEF). While financing is provided to multilateral development banks (MDBs) such as the World Bank, the International Monetary Fund (IMF) and the Asian Development Bank (ADB).

2014-2015 average 2015-2016 average (USD million) (USD million) Rank Country Amount Country Amount 1 Viet Nam 1,651 India 1,669 2 India 1,494 Viet Nam 1,501 3 Indonesia 524 Bangladesh 517 4 Philippines 508 Iraq 482 5 Bangladesh 436 Indonesia 439 6 Iraq 355 Myanmar 429 7 Afghanistan 352 Philippines 422 8 Thailand 294 Afghanistan 309 9 Myanmar 283 Thailand 293 10 Sri Lanka 268 Pakistan 210 Table 3.1. Top 10 Recipients of Japan’s ODA comparison for 2014-2015 and 2015-2016 average83

The data above shows the distribution of gross bilateral ODA from Japan during 2014 to 2016 based on OECD report. There are countries who received increasing amount of ODA and some others received decreasing amount. India ranked as the first largest recipient of Japan’s ODA in the period of 2015-2016 average with US$1,669 million from US$1,494 million in the previous year. Compared to other ASEAN countries, Indonesia is the second largest recipient after Vietnam in the first position. In 2014-2015 period, Indonesia received US$524 million and then decreasing into US$439 million in 2015-2016 period. Viet Nam

83 OECD – DAC. Aid at a glance chart. Retrieved November 15, 2017 from http://www.oecd.org/dac/financing-sustainable-development/development-finance-data/aid-at-a- glance.htm 38 also received decreasing amount of ODA from US$1,651 million to US$1,501 million. However, although Vietnam received larger amount of Japan’s ODA rather than Indonesia, it does not means that Indonesia is no longer important for Japan. Yet, there are terms and conditions that needs to considered by Japan in allocating different amount of ODA to these countries. For instance, consideration of recent economic and social urgency in the recipient country.

In accordance with the revision of Japan’s ODA Charter in 2003, Asia becomes a priority region for Japan’s ODA allocation due to close relations among these countries that will leads to stability and prosperity in Asia as the whole.84 Traditionally, many countries in Asia is attractive enough for foreign investors since it has cheaper production cost. Japan has been helping Asia to expand productivity capacity in the last few decades, it has also played a key role in boosting the inflow of technology, know-how and human resource development in the region.85 In the implementation of ODA, Japan providing funds, transferring technologies for social and economic growth, assistance for disaster relief, and so forth. In respective assistance needs, Japan fully take into account the diversity of socioeconomic conditions and changes of the countries. For instance, ASEAN countries has commitment to enhance regional integration by strengthening and deepening economic cooperation within the region. Therefore, as an essential partner, Japan channeling its ODA in order to forge stronger relations as well as to reduce regional gap between one country and another.

III.2 The Implementation of Japan’s ODA in Indonesia Eventhough Japan provides ODA to more than 140 countries, much of its aid allocates to middle-income countries. Japan utilize ODA as a tool to expand its diplomatic presence in international as well as to participate in the world development goals. Indonesia becomes one of top recipient of Japan’s ODA due to

84 Ministry of Foreign Affairs of Japan. ODA Reform. Retrieved November 15, 2017 from http://www.mofa.go.jp/policy/oda/reform/ 85 Aelim Chi. Japan and Asia: developing ties. Retrieved October 2, 2017 from http://oecdobserver.org/news/archivestory.php/aid/56/Japan_and_Asia:_developing_ties.html

39 several reasons. The contribution of Japan’s assistance have been helping Indonesia in socioeconomic development.

III.2.1 Japan’s ODA Development in Indonesia As a stable and reliable donor country today, the origin’s of Japan’s ODA lie in the tumult of the immediate postwar period. In 1951, Japan signed the San Francisco Peace Treaty and continues to launched its international cooperation effort in tandem with the payment of reparations. Japan began to actively channelling its ODA in 1954. In the early history of ODA, Japan began making reparations to four countries in Southeast Asia as Burma (now called as Myanmar), the Philippines, Viet Nam and Indonesia. Furthermore, Japan offering other countries including Laos, Singapore, Malaysia and Cambodia aid in form of grants. In order to have further integration of cooperation into an international framework, it joined the Colombo Plan in 1954. As the result, Japan commenced technical cooperation, hosting trainees and dispatching specialists by targetting countries in Asia.

Since the enunciation of the Fukuda Doctrine, Southeast Asia has been a priority region of Japan’s ODA program.86 In the postwar era, Japan’s foreign policy in Southeast Asia was based on Yoshida Doctrine. But, after Japan’s defeat in World War II, Prime Minister Shigeru Yoshida declared that economic development will be Japan’s priority. However, Japan do not have sufficient land of raw materials which is important to build economy. During that time, access to raw materials is the reason of Japan’s interest on Southeast Asia countries. The practice of Japan’s economic diplomacy caused anti-Japanese movements in several Southeast Asia countries. As the result, in the 10th ASEAN Anniversary, Prime Minister Takeo Fukuda formed a new framework for Japan’s foreign policy. He attempted to expanding political relations with Southeast Asia countries. With the theme of regional integration in Southeast Asia, he assigned Japan-ASEAN Forum for Economic Dialogue and offered aid with total amount 1.5 billion US

86 Trinidad, Dennis D. (2007). Japan's ODA at the Crossroads: Disbursement Patterns of Japan's Development Assistance to Southeast Asia. Asian Perspectives, 31, 2, 114.

Dollars. He declared that Japan has no intention to be the next hegemonic power in the region.

Therefore, the Fukuda Doctrine is symbolize the commitment of Japan to cooperate with Southeast Asia region based on “heart to heart understanding” and cultural approach. Ginandjar Kartasasmita, the chairman of the PPIJ (Indonesia- Japan Friendship Association said that by the declaration of Fukuda Doctrine, cooperation between Indonesia and Japan is not just limited to economic aid or infrastructure development, but extends to the field of education, health-care and other social sectors. Moreover, Fukuda Doctrine also succeed to change the image of Japan to the society. Previously, the perception of Indonesian toward Japan was very bad due to historical reason, so antipathy and full of suspicion. But, started from 1980s, the perception changing because of the Japan’s success to become role model as developed country in Asia.87

Historically, among ASEAN member countries, Indonesia has remained one of the largest recipients of Japanese aid together with Thailand and the Philippines. In 1990s, it became the number-one recipient of Japan’s ODA in Southeast Asia. It was the single largest recipient of Japan’s ODA in 2000-2001 and was behind China in 2002.88 Japan has provided various kinds of support for Indonesia’s development through ODA loans, grant aid, technical assistance. It consists of the areas of industry, transportation, agriculture, communication and health care.89 Japan’s ODA is very beneficial for Indonesia in terms of human capacity development as well as improvement of economic and social infrastructures. Indonesia meet the criteria of Japan’s interests as the consideration of aid allocation. Indonesia has plenty of natural resources needed by Japanese industry. Besides that, it has strategic geographical location, which is in the Malacca

87 Roy Rosa Bachtiar (2017). Ginandjar: Doktrin Fukuda bawa perubahan ekonomi Indonesia- Jepang. Retrieved on January 20, 2018, from https://www.antaranews.com/berita/661260/ginandjar-doktrin-fukuda-bawa-perubahan-ekonomi- indonesia-jepang 88 Dennis. D. Trinidad. (2007). Japan’s ODA at the Crossroads: Disbursement Patterns of Japan’s Development Assistance to Southeast Asia. Asian Perspective: 31 (2). p.115 89 Japan International Cooperation Agency. Activities in Indonesia. Retrieved February 27, 2018 from https://www.jica.go.jp/indonesia/english/activities/index.html 41

Straits that considered as the main trade channel to Southeast Asia. Indeed, Indonesia has strategic position both economically and politically for Japan.90

III.2.2. Japan’s ODA Contribution in Indonesia

According to Carol Lancaster, there are two fundamental factors of foreign aid. First, foreign aid is principally considered as the obligation for rich countries to help development in poor countries. Second, the promotion of development goals (Sustainable Development Goals and Millennium Development Goals) which intended to be a driver for mobilizing international action on development aid.91 Furthermore, behind the policy of foreign aid, there are several core of purpose which are to promote better quality of life in recipient countries through economic stabilization, long-term growth, and poverty reduction.

ODA is one of the foreign funding source that became a driving force of the Indonesian economy and its supporting pillar such as development of infrastructure and human resources. For every year, the OECD publish a report related to ODA contribution based on the donors, recipients and regions. Recently, for 2015-2016 of gross ODA, Germany is in the first rank of donor for Indonesia.92 Japan followed in the second position and then continued by Australia, United States and France. Generally, bilateral ODA for Indonesia be used for five main sectors, which are economic infrastructure, social infrastructure, humanitarian aid, multi-sector and production.

In every year, the OECD provides data regarding development cooperation from DAC member countries to recipient countries in all over the world. Data for 2014-2015 and 2015-2016 average of gross ODA disbursement is provided through Figure 3.2 and Figure 3.3 below. During these periods of time, most of total gross ODA disbursement was allocated to economic infrastructure. Economic

90 Abdul Irsan. (2007). Budaya & Perilaku Politik Jepang di Asia. Jakarta: Grafindo. p.248 91 Carol Lancaster. (2007). Foreign Aid: Diplomacy, Development, Domestic Politics. United States of America: the University of Chicago. 92 OECD. Aid at a Glance Charts. Retrieved February 27, 2018 from http://www.oecd.org/dac/financing-sustainable-development/development-finance-data/aid-at-a- glance.htm

42 infrastructure is defined as basic foundation for economic growth that consist of facilities to provide power supply, transportation and communication. For instance, adequate infrastructure in power supply will accelerate the pace of production activity. Whereas, the availability of various transportation will facilitate the mobility of people, goods and services. While, satisfy of communication infrastructure would facilitate business process such as marketing, communicating, reporting, and many others. Consequently, these elements of infrastructure serve as a support system to production activity in the economy. In other words, infrastructure plays important role as a foundation of economic growth and social development of human beings.

Bilateral ODA by Sector for Indonesia, 2014-2015 average

10% 7% 6%

16% 61%

Economic Infrastructure Social Infrastructure Humanitarian Aid Multi-sector Production

Figure 3.2 Bilateral ODA by Sector for Indonesia (2014-2015 average)93

This figure provides data about percentage of bilateral ODA that received by Indonesia in 2014-2015 average. In Indonesia, most of ODA is allocated into infrastructure either economy or social. However, more than half of the total ODA is consist of economic infrastructure. In other words, it can conclude that economic infrastructure becomes the priority sector of assistance for Indonesia. Infrastructure

93 OECD. Aid at a Glance Charts. Retrieved February 27, 2018 from http://www.oecd.org/dac/financing-sustainable-development/development-finance-data/aid-at-a- glance.htm

43 takes larger portion compared to other sector because it is essential for economic and social impact investment. In accordance to the basic purpose of ODA, as an effort to bring economic and social development, infrastructure empowers recipient countries to lead more productive lives, while bringing effectiveness, innovation and scale to sustainable business.94 Based on the OECD report, Japan was the first donor of ODA for Indonesia in 2014-2015 average. The average of gross ODA disbursement by Japan is about USD 524.3 million. Then, in the second and third rank was Australia with USD 413.7 million and USD 363.5 million for Germany. United States and France was following in the fourth and fifth rank.95

Bilateral ODA by Sector for Indonesia, 2015-2016 average

3% 17%

1% 51%

28%

Economic Infrastructure Social Infrastructure Humanitarian Aid Multi-sector Production

Figure 3.3 Bilateral ODA by Sector for Indonesia (2015-2016 average)96

This figure concludes that for 2015-2016 average, economic infrastructure still remains become the main sector of ODA disbursement for Indonesia since it consists of more than half of the total ODA disbursement. However, compared to

94 OECD. (2016). Development Cooperation Report 2016. The Sustainable Development Goals as Business Opportunities. Retrieved February 27, 2018 from https://www.oecd- ilibrary.org/development/development-co-operation-report-2016_dcr-2016-en 95 Ibid. 96 OECD. Aid at a Glance Charts. Retrieved February 27, 2018 from http://www.oecd.org/dac/financing-sustainable-development/development-finance-data/aid-at-a- glance.htm

44 the previous figure, the percentage of economic infrastructure sector was decrease from 61% to 51%. On the other hand, social infrastructure sector was increase from 16% to 28%. Multi-sector also shows rising of percentage for about 10%. Whereas, humanitarian aid and productions sector has slump significantly with consist of not more than 5% of total disbursement in 2015-2016 average. Thus, from figure 3.2 and figure 3.3, it concludes that infrastructure becomes the main priority of ODA allocation in Indonesia. According to country assistance policy for Indonesia, Japan concerning to Indonesia further economic growth as one of its priority areas. By providing assistance for infrastructure development, Japan convinced that it will lead to accelerate economic growth since it improve the business and investment environment.97

Recently, the Association of Southeast Asian Nations (ASEAN), continues its efforts to deepen regional integration even after the launch of the ASEAN Community in December, 2015. Strengthening connectivity within ASEAN member states is necessary in order to develop and deepen its regional integration. Moreover, as the development of ASEAN into greater intergovernmental organization, connectivity between ASEAN and the world, including Japan is important. Recently, JICA has cooperates with public-private company in order to support the realization of ASEAN connectivity. Japan provides support for development and improvement in terms of economic and social infrastructure, investment climate and business environment, and legal systems development.

As the effort to support sustainable growth in Southeast Asia region, JICA promotes development of quality infrastructure. Based on Japan’s initiative called “Partnership for Quality Infrastructure: Investment for Asia’s Future” to meet the growing need of infrastructure development in ASEAN by building “quality infrastructure,” which is easy to use, durable, environmentally friendly, and disaster resilient, as well as cost-effective in the long run.98 This effort expected to make

97 Embassy of Japan in Indonesia. Country Assistance Policy for the Republic of Indonesia. Retrieved on January 22, 2018 from http://www.id.emb-japan.go.jp/oda/en/policy.pdf 98 Japan International Cooperation Agency. JICA Annual Report 2017. p.27. Retrieved on January 22, 2018 from https://www.jica.go.jp/english/publications/reports/annual/2017/index.html

45 significant improvement towards people’s lives. For instance, through quality infrastructure, Japan contributes to the realization of ASEAN connectivity as an effort to regional integration. Besides that, it will provides job opportunity for local people in recipient countries as well as helps to increase knowlegde and skills as development of human resources.

Country 2014 2015 2016 (Unit: millions of Yen) (Unit: millions of Yen) (Unit: millions of Yen)

Viet Nam 155,615 192,910 185,695 Philippines 67,295 36,485 30,368 Indonesia 54,652 54,194 41,992 Thailand 29,241 30,461 42,162 Myanmar 25,109 41,608 30,871 Cambodia 13,587 15,599 12,219 Laos 7,292 9,571 6,193 Malaysia 6,457 8,903 4,621 Timor-Leste 2,685 4,912 1,953 Singapore 11 11 30 Brunei Darussalam 0* - 2

Total 361,946 394,655 356,076

* The value of JICA programs in Brunei Darussalam in 2014 is ¥384,000 is rounded off to the nearest million yen Table 3.2 Japan’s ODA Contribution through JICA Programs in Southeast Asia99

Based on the JICA Annual Report regarding Japan’s ODA contribution to Southeast Asia, several countries received increasing amount of ODA while some others received decreasing amount. Viet Nam ranked as the country who received largest amount of assistance from Japan’s ODA. The amount of Japan’s ODA to Vietnam is not stable since it has increasing from ¥155,615 millions in 2014 to

99 JICA Annual Report 2015, JICA Annual Report 2016, JICA Annual Report 2017. Retrieved from https://www.jica.go.jp/english/publications/reports/annual/index.html 46

¥192,910 millions in 2015.100 However, in 2016, the amount decreased to ¥185,695 millions. Thailand received increasing amount of ODA from 2014 to 2016 while Philippines received the opposite. Philippines experienced significant declining of ODA disbursement. Whereas, Indonesia ranked as the third recipient country in 2014, the second in 2015 and back to third position in 2016.101 Brunei Darussalam got the last ranking because it received less of assistance from Japan compared to the rest of Southeast Asia countries. Considered as the richest countries among ASEAN member countries, it is no doubt that Singapore and Brunei Darussalam not receive much of development cooperation.

Data from table 3.2 shows that total amount of ODA distribution in Indonesia during 2014 to 2016 has decreased. However, it does not mean that Indonesia was no longer important nor significant for Japan. Indonesia still ranked as the top three recipient countries of Japan’s ODA in Southeast Asia. Indeed, the contribution of Japan through JICA programs102, is very valuable for Indonesia. There are several ongoing projects such as the subway project in Jakarta, which aims to easing traffic congestion in the metropolitan area. Besides that, by using great technological advantages of Japan, JICA is currently supporting the development of geothermal power generation. In addition, Japan enlarge support for coastal protection and maintenance of irrigation facilities and equipment. Indonesia is a vurnerable country to natural disasters. Based on Japan’s experience with similar disaster-prone settings, Japan’s ODA also allocated to disaster reliefs as well as disaster management. Overall, ODA is utilized to strengthening regional connectivity, promoting regional development, reducing regional disparity, and strengthening the social security system.103

100 JICA Annual Report 2015, JICA Annual Report 2016, JICA Annual Report 2017. Retrieved on February 17, 2018 from https://www.jica.go.jp/english/publications/reports/annual/index.html 101 Ibid. 102 JICA programs in each country including Technical Cooperation (Training Participants, Experts, Study Teams, Provision of Equipment, JOCV and Other volunteers, and Other costs), Loan Aid (Disbursements), and Grant Aid (Newly concluded G/A agreements). 103 Japan International Cooperation Agency. JICA Annual Report 2017. p.28. Retrieved on January 22, 2018 from https://www.jica.go.jp/english/publications/reports/annual/2017/ 47

In the allocation of ODA, the government of Japan always concern to infrastructure sector. For instance, through technical cooperation and loans aid, the government supports the construction of basic needs for economic infrastructure such as roads, railways, harbors, airports, power plants and others.104 It helps to improve the investment climate in Indonesia that could attract more foreign direct investment including from Japan. ODA has lowered investment costs for Japanese companies because of its benefits in the providing infrastructure. Therefore, ODA making investment in recipient countries becomes more efficient.

For years, Japan becomes one of the largest donor of ODA for Indonesia. According to data from OECD, Japan ranked as the second largest donor to Indonesia with US$439,3 million for the average of 2015-2016.105 Whereas, during 2014 to 2015, Japan becomes the first donor which spent around US$524.3 million.106 Historically, Indonesia is attract Japan due to rich of natural resources and strategic geopolitically important compared to other Asian countries. Besides that, the consideration Indonesia as emerging market which has a great potential of economic growth becomes another reason to be concerned by Japan. The practice of foreign policy through ODA help Japan to strengthening its bilateral ties with Indonesia, particularly to create opportunity in expanding its market capacity since most of the aid using for economic purposes.

According to basic policy of assistance to Indonesia, Japan has three priority area.107 First, assistance for further economic growth which consist of two development issue; infrastructure development in Jakarta Metropolitan Area and business environment improvement and professional human resources development. Second, assistance to promote equality and establishment of a safe society. This assistance divided into two programs which are correction of

104 Bert Edström (ed). (2011). Japan’s Foreign Policy in Transition. Singapore: Institute for Security and Development Policy. 105 OECD – DAC. Aid at a glance chart. Retrieved January 20, 2018 from http://www.oecd.org/dac/financing-sustainable-development/development-finance-data/aid-at-a- glance.htm 106 Ibid. 107 Embassy of Japan in Indonesia. Country Assistance Policy for the Republic of Indonesia. Retrieved on January 22, 2018 from http://www.id.emb-japan.go.jp/oda/en/policy.pdf 48 imbalance and connectivity enhancement and disaster management and emergency response. Third, assistance for the enhancement of capacity to address issues of Asian region and international society.

During 2014 to 2016, technical cooperation has more projects rather than loan aid and grant aid. The projects are consist of various priority areas of assistance that explained above. Basically, technical cooperation aims to support the development of human resources that will promote economic and social development in developing countries. Utilizing the knowledge, experience and technology of Japan, it also supports the improvement of technical standars as well as the establishment of administrative systems.108 For instance, cooperation project in capacity development to implementation of green economy policy, project for early warning and response system of infectious disease, project to promotes intellectual property rights protection and so forth.

In terms of grants aid, Indonesia only received few projects recently. It is due to grants aid is prioritized for low-income developing countries without the obligation of repayment. It is aims to support the building of facilities necessary for socioeconomic development in recipient countries. In Indonesia, Japan usually provides grants aid in the form of grant assistance for Japanese NGO projects, cultural grassroots project and grassroots human security project.

108 Japan International Cooperation Agency. JICA Annual Report 2017. p.16. Retrieved on January 22, 2018 from https://www.jica.go.jp/english/publications/reports/annual/2017/ 49

CHAPTER IV THE CONTRIBUTION OF JAPAN’S OFFICIAL DEVELOPMENT ASSISTANCE (ODA) TO INDONESIA INFRASTRUCTURE DEVELOPMENT (2014-2016) IV.1. Infrastructure Development as Priority Policy by President Joko Widodo Administration

Connectivity between countries becomes one of the requirement in trade activity. People trying to get commodity and services with best quality and affordable price. As the result, there is a competition among countries to provide attracting market. Adequate infrastructure is the answer for a country to compete with other countries in order to attract foreign investment and trade. For instance, various infrastructure such as toll roads, railways seaports and airports will speed up the movement of goods and services. This condition in turn will cut transport costs and reduce production cost. Thus, consumers able to gain more benefit from the cheaper price of goods and services. In other words, infrastructure help trade and business activities becomes more efficient.

Infrastructure development is very important to drive economic growth of a country. Infrastructure seen as a locomotive of national and regional development. According to Hirschman (1958), infrastructure consists of those basic facilities without which primary, secondary and tertiary activities cannot function.109 These facilities play an important role in creating investment opportunity. In terms of macro economic, the availability of infrastructure services influence marginal productivity of private capital. Whereas, in the context of micro economic, infrastructure affects towards reduction of production cost.110 Besides that, infrastructure also has important implications to improving the quality of life and

109 All Answers Ltd. Economic And Social Infrastructure Economics Essay. Retrieved on March 1, 2018 from https://www.ukessays.com/essays/economics/economic-and-social-infrastructure- economics-essay.php 110 Abdul Haris. Pengaruh Penatagunaan Tanah terhadap Keberhasilan Pembangunan Infrastruktur dan Ekonomi. Retrieved on March 1, 2018 from https://www.bappenas.go.id/files/3013/5228/3483/05abdul__20091014131228__2260__0.pdf

50 human welfare. For instance, by increasing the value of consumption, increasing labor productivity and providing access to job field. Hence, infrastructure becomes a measurement to determine country’s competitiveness.

Adequate infrastructure is very important to measure country’s development. Basically, economic growth and social development in a country must meet three requirements. First, investment in infrastructure. Second, sustainable industrial development. And third, technological progress. It is based on one of the sustainable development goals (SDGs) by United Nations. The SDGs or also known as the Global Goals refers to an inclusive agenda that aims to improve life for future generations in a sustainable way. The SDGs consist of seventeen goals which contain a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity.111 Stated in the 9th point of SDGs, all of the countries encourage to build resilient infrastructure, promote sustainable industrialization and faster innovation.112 Therefore, provide infrastructure as public services to support business activities is valued as an effort to the realization of global goals.

The policy of infrastructure development under President Jokowi’s administration have great visible result during the past three years. People cannot deny that the development of infrastructure in various places become the achievement of Jokowi administration. His leadership is very effective in terms of rapid infrastructure development. This effort aims to improve Indonesia’s competitiveness which started by building connectivity from the periphery, support food and water security and improve the quality of life of people in settlement areas. Currently, Indonesia claimed 36th rank in the global competitiveness level in 2017. It has increased from 2016 which in the 41st rank. Specifically, for infrastructure

111 United Nations Development Programme. Sustainable Development Goals. Retrieved March 1, 2018 from http://www.undp.org/content/undp/en/home/sustainable-development- goals.html 112 United Nations. Infrastructure and Industrialization. Retrieved March 1, 2018 from http://www.un.org/sustainabledevelopment/infrastructure-industrialization/#

51 sector in the same period, Indonesia succeed to increase its ranking from 60th rank to 52nd rank.113

Funds amount to Rp313.5 trillion allocated by the government of Indonesia to build infrastructure equally to all over regions in 2016.114 There are many undergoing projects related to dams, ports, airports and power plants in several regions. President Jokowi strongly determined to increase Indonesia’s competitiveness continuosly. Infrastructure development considered as the key of economic growth in Indonesia. However, he realized that infrastructure development is not only for economic purpose yet also to achieve equality for the people. Java and Bali island as the center of business in Indonesia has great development rather than other island. Therefore, to alleviate regional disparity, President Jokowi committed to end the orientation of Java-centric. Otherwise, the government has been working on improving the productivity, competitiveness and welfare of people outside Java through various development programs, including infrastructure development. For instance, 24 projects in Kalimantan, 27 projects in Sulawesi and 13 projects in Maluku and Papua.115

Sources of development financing can be categorized into two sources, namely conventional sources and non-conventional sources. The source of conventional financing is a source of financing obtained from the government such as APBN (state budget), APBD (regional budget), tax, and levy. Non-conventional sources of financing, refers to a source of financing that derived from a combination of government, private and public funds such as public and private partnerships, foreign debts and self-help. The construction of such a massive infrastructure requires substantial funds, therefore the government cannot rely to the APBN only.

113 Sridewanto Pinuji. (2017). Mengevaluasi Pembangunan Infrastruktur Pemerintahan Jokowi- JK. Retrieved March 1, 2018 from https://www.kompasiana.com/dewantoedi/5a0baf934d66913d4072fae4/mengevaluasi- pembangunan-infrastruktur-pemerintahan-jokowi-jk 114 PresidentRI.go.id. (2016). Mewujudkan Pembangunan Indonesia Sentris. Retrieved March 1, 2018 from http://www.presidenri.go.id/program-prioritas-2/mewujudkan-pembangunan-indonesia- sentris.html

115 Rappler.com. (2017). 3 Tahun Jokowi-JK: 5 pencapaian di sektor infrastruktur. Retrieved January 20, 2018, from https://www.rappler.com/indonesia/berita/185764-3-tahun-jokowi-jk-5- pencapaian-sektor-infrastruktur

Wimboh Santoso, the Chairman of the Commissioner of the Financial Services Authority told that foreign funding is one of the sources financing that can be used for infrastructure development. Through foreign funds, infrastructure funding of Indonesia is relatively more promising and has enormous potential.116 All this time, infrastructure projects as seaports, airports, electricity network and railway built by state-owned enterprises through loans commercial and APBN. Priority infrastructure which has high economic value usually funded through multilateral or bilateral loans from development bank such as World Bank, Asian Development Bank, Japan International Cooperation Agency and KfW.117

IV.2. Japan’s Contribution toward Indonesia Infrastructure Development

The accomplishment of Japan to have a high level of modernization within a short period of time has witnessed by the world. It admits that infrastructure becomes the foundation of its marvelous growth. Furthermore, Japan considers the concept of human security in combining economic development, social inclusion and environmental sustainability. As a key of technology development and modern infrastructure, Japan able to help its neighbors in Asia region to catch up with rapid growth. Back then to the 1970s and 1980s, Japan succeed to utilize development assistance in several Southeast Asia countries such as Indonesia, Malaysia and Thailand to modernize infrastructure and attract foreign investment in global manufacturing.118 Since then, these countries started to addressing its economic growth.

116 Feby Novalius (2018). OJK: Bangun Infrastruktur Butuh Dana Besar. Retrieved January 22, 2018, from https://economy.okezone.com/read/2018/01/19/320/1847243/ojk-bangun- infrastruktur-butuh-dana-besar 117 Riza Azmi. Direct Lending Kepada BUMN Sebagai Alternatif Pembiayaan Infrastruktur. Retrieved March 1, 2018 from https://www.kemenkeu.go.id/sites/default/files/direct%20lending.pdf

118 Jeffrey D. Sachs. (2017). Japan’s Leadership and Inspiration in Sustainable Development. Retrieved on March 1, 2018 from https://www.japan.go.jp/tomodachi/2017/summer2017/professor_jeffrey_D_Sachs.html

Japan’s development cooperation supports economic development of developing countries by creating flows of people and goods through infrastructure development. Besides that, it also facilitating the shipment of goods and materials through the improvement of customs procedures at national borders and developing communities in the vicinity of economic corridors with further acceleration of a flow of cooperation.119 Regarding Japan’s development cooperation, economic infrastructure remains the focus of the government. The reason of this trend is based on Japan’s postwar experience which spurred industrialization by building the necessary economic foundations such as roads and ports.120

Indonesia have to develop its capacity in order to addressing recent issues either in region or international.121 Japan has a commitment to contribute to the stability and prosperity of Asian region, including Indonesia. As a strategic partner to Indonesia, Japan offers assistance for Indonesia’s well-balanced development and enhancement of national capacity. In addition, assistance in terms of ODA is aims to building further economic growth of Indonesia. As explained in the previous chapter, Indonesia becomes a core country of ASEAN. Having abundant resources, Indonesia considered as the center of economic activities in Asia. Hence, there is no wonder if Japan continuosly deepening and expanding its partnership as well as a mutually beneficial relationship with Indonesia.

President Joko “Jokowi” Widodo’s vision to make Indonesia as the world’s maritime fulcrum has prompted advanced developed countries, to strengthen their countries’ bilateral partnership with maritime power.122 On 5 July 2014, Joko Widodo, as presidential candidate has expressed his idea on “Indonesia’s visionary

119 Ministry of Foreign Affairs of Japan. White Paper on Development Cooperation 2016. p.133. Retrieved February 28, 2018 from http://www.mofa.go.jp/policy/oda/page22e_000815.html 120 Christine Dugay. (2014). Infrastructure remains Top Area of Support for JICA. Retrieved on March 2, 2018 from https://www.devex.com/news/infrastructure-remains-top-area-of-support-for- jica-84203 121 Embassy of Japan in Indonesia. Country Assistance Policy for the Republic of Indonesia. Retrieved on March 2, 2018 from http://www.id.emb-japan.go.jp/oda/en/policy.pdf 122 Hendra Manurung. (2014). Impact of Joko 'Jokowi' Widodo Leaderships on Indonesia's World Maritime Axis. Retrieved on March 2, 2018 from https://www.researchgate.net/publication/315363043_Impact_of_Joko_'Jokowi'_Widodo_Leaders hips_on_Indonesia's_World_Maritime_Axis. DOI. 10.2139/ssrn.2510986

54 position on world maritime axis and hub for regional maritime”.123 His statement signaled country’s powerful bargaining position as world largest archipelago with its Sea Lanes of Communications (SLOC) strategic possesses led to many countries compete to dominate the maritime route around Asia Pacific.124 Japan Prime Minister, Shinzo Abe recognizes the strategic location of his country as a regional maritime power in East Asia and Southeast Asia in order to challenge China global maritime ambitions in Asia Pacific.

Therefore, from the writer perspective, during President Jokowi leadership in 2014 to 2016, Shinzo Abe and Japan must develop and improve closer relations through beneficial economy cooperation and providing foreign assistance to Indonesia and other ASEAN member-states in the millennium era. It is due to Japan continuous interests to stabilize Southeast Asia region dynamically with capital, technology, and human resources supports.

President Jokowi said that Indonesia is willing to cooperate in future infrastructure projects with Japan. Under Jokowi’s administration, the government intends to concerning about infrastructure and maritime development as priority policy. Underlined Indonesia as Japan’s strategic partner, Prime Minister Abe hopes for the two countries to maintain cooperation, particularly in terms of infrastructure development in Indonesia. Furthermore, he told that infrastructure development in Indonesia also important for regional prosperity.125 Hence, Japan will participate in Indonesia’s development through quality infrastructure. In order to accelerate Indonesia’s economic growth, Japan believes that improving the business and investment environment is an important effort must take by the government. Therefore, Japan willing to provide assistance for infrastructure development especially in the Jakarta metropolitan area and for the improvement

123 Hendra Manurung. (2014). Impact of Joko 'Jokowi' Widodo Leaderships on Indonesia's World Maritime Axis. Retrieved on March 2, 2018 from https://www.researchgate.net/publication/315363043_Impact_of_Joko_'Jokowi'_Widodo_Leaders hips_on_Indonesia's_World_Maritime_Axis. DOI. 10.2139/ssrn.2510986 124 Ibid. 125 Ina Parlina. (2015). Indonesia, Japan to Work on Infrastructure Projects.Retrieved January 20, 2018 from http://www.thejakartapost.com/news/2015/11/23/indonesia-japan-work-infrastructure- projects.html

55 of various regulations and systems in alignment with enhanced economic partnership within the Asian region. At the same time, assistance is also provided for professional human resource development.126

In the contribution of ODA, Japan implemented three frameworks based on the scale of the project signed. Those three frameworks are through grant aid, loan aid and technical cooperation which has been explained in the previous chapter. In addition, there are several other things that Japan need to considers in order to utilize the limited budget efficiently and achieve a high level of development. First, JICA and the Ministry of Foreign Affairs need to take into account the needs of the recipient country. Second, determines priority areas of cooperation in every recipient country. Third, formulate projects that contribute to these areas while going beyond the boundaries of each framework.127

The government of Japan and Indonesia agreed to implement a Comprehensive Infrastructure Development Plan on establishing the Metropolitan Priority Area (MPA) for Investment and Industry in December 2010.128 The MPA Master Plan formulated an overall plan on infrastructure development to be constructed in the JABODETABEK area by the year of 2020.129 It consist of 45 priority infrastructure projects and facilitated the 18 fast track projects to be undertaken by the end of 2013.130 It is estimated the total project amount required by 2020 at approximately 3.4 trillion yen to be funded from both the private and the

126 Embassy of Japan in Indonesia. Country Assistance Policy for the Republic of Indonesia. Retrieved on March 2, 2018 from http://www.id.emb-japan.go.jp/oda/en/policy.pdf 127 Ministry of Foreign Affairs of Japan. Diplomatic Book 2017. Retrieved on January 20, 2018 from http://www.mofa.go.jp/policy/other/bluebook/2017/html/chapter3/c030201.html 128 Japan International Cooperation Agency. (2012). Master Plan Study for Establishing Metropolitan Priority Area for Investment and Industry (MPA) in JABODETABEK Area Approved by the Steering Committee consisting of the cabinet members of the Japanese and Indonesian governments. Retrieved on February 22, 2018 from https://www.jica.go.jp/english/news/press/2012/121009.html 129 Ibid 130 Ibid

56 public.131 Thus, for about 1 trillion yen of the total funds needed is expected receive from from international monetary cooperation, including Japan’s ODA.132

Amount No. Project Sector Subsector (million yen)

Geothermal Development Electric Power Plants 1. Acceleration Program Power and 657

(Hululais Geothermal Gas Power Plant Project

Java-Sumatra Transmission Electric Interconnection Lines and 2. Power and 62,914 Transmission Line Distribution Gas Project (II) Systems

Construction of Jakarta 75,218 3. Mass Rapid Transit Transportation Railways Project (II)

Engineering Services for Jakarta Mass Rapid 1,919 4. Transit East-West Line Transportation Railways Project (Phase I)

Table 4.1 Japan’s Aid Disbursement related to Economic Infrastructure to Indonesia for fiscal year 2014 to 2016.133

131 Japan International Cooperation Agency. (2012). Master Plan Study for Establishing Metropolitan Priority Area for Investment and Industry (MPA) in JABODETABEK Area Approved by the Steering Committee consisting of the cabinet members of the Japanese and Indonesian governments. Retrieved on February 22, 2018 from https://www.jica.go.jp/english/news/press/2012/121009.html 132 Ibid 133 Ministry of Foreign Affairs of Japan. ODA by Region. Retrieved on February 22, 2018 from http://www.mofa.go.jp/files/000142543.pdf 57

These projects as listed in the table above are the recent loan agreements signed between Indonesia and Japan during 2014 to 2016. In order to to get better understanding, here are background of the projects:

1. Geothermal Development Acceleration Program (Hululais Geothermal Power Plant Project

In 2015, Indonesia’s power source structure was composed of 11.4% oil/diesel, 24.7% natural gas, 53.5% coal, 5.7% hydroelectric (including small hydroelectric generation) and 4.2% geothermal.134 The rising of economic growth will influence the domestic consumption of oil and natural gas. Therefore, there are several important strategies that the government could implement in order to develop new power sources. For instance, by implementation of renewable energy through geothermal and hydroelectric power. Indonesia has one of the greatest geothermal energy potential in the world. Therefore, the government is currently make efforts to develop the utilization of geothermal energy. This project will construct a geothermal power plant that is very efficient as power sources due to its characteristics such as production of reusable, renewable energy as a stable power source.135 The power plant expected to contribute to the stability of the power supply in Indonesia by using the geothermal resources efficiently.

2. Java-Sumatra Interconnection Transmission Line Project (II)

Due to the undergoing considerable growth in power demand, the government planning to make new power development. Currently in Jakarta, the power demand increasing for 9.8 percent per year which exceeds the historical high of 20,000MW.136 Since Java is not yet connected to the power system in Sumatera, the government has to provide transmission lines in order to interconnect both power systems. Southern Sumatera selected as the place for new power development due to abundant coal deposits. The purpose of this project is to provide

134 Japan International Cooperation Agency. Signing of Japanese ODA Loan with the Indonesia: Addressing the rapidly growing power demand. Retrieved January 25, 2018 from https://www.jica.go.jp/english/news/press/2015/151218_01.html 135 Ibid 136 Ibid

58 a flexible power supply system that incorporates the Java-Bali and Sumatra power grids. Hence, it will reduce the pressure on the power supply and perhaps will contribute to economic development on Java and Sumatra.137

3. Construction of Jakarta Mass Rapid Transit Project (II) and Engineering Services for Jakarta Mass Rapid Transit East-West Line Project (Phase I)

The population of Jakarta is continue to increase over the past decades. The number of registered vehicles in this area has rapidly increased as well, by about 3.6 times (from 2.67 million in 2000 to 9.63 million in 2010).138 As the result, it caused severe traffic congestion and air pollution. These two projects aims to alleviate the severe traffic congestion and reduce traffic pollution in Jakarta as metropolitan area in Indonesia. Moreover, Indonesia will has its first subway through the construction of MRT projects. As stated in the National Medium-Term Development Plan (RPJMN, 2015-2019), the expansion of public transportation in urban areas is one of the targets that expected to achieve by the government of Indonesia.

From the table 4.1, it shows that Japan’s ODA is very beneficial for Indonesia’s infrastructure development. These four projects categorized into economic infrastructure that expected will help Indonesia to provide preferable public infrastructure and to support economic activities. Narrowing income and regional gap within country is essential for Indonesia in order to secure either mid- term or long term stability. Having steady economic growth becomes the key for Indonesia to face these challenges. Therefore, facilitating infrastructure development is important to boost economic growth as well as to improve the business and investment environment. For instance, mitigating serious traffic congestions and improving the electricity supply.

137 Japan International Cooperation Agency. Signing of Japanese ODA Loan with the Indonesia: Addressing the rapidly growing power demand. Retrieved January 25, 2018 from https://www.jica.go.jp/english/news/press/2015/151218_01.html 138 Japan International Cooperation Agency. Signing of Japanese ODA Loan with the Indonesia: Mitigating traffic congestion through construction of mass rapid transit. Retrieved January 25, 2018 from https://www.jica.go.jp/english/news/press/2015/151204_02.html

There are various of JICA’s projects facilitated within the MPA framework. Three out of four projects of Japan’s ODA stated in the table above are including into the MPA projects. First, the construction of the Jakarta Mass Rapid Transit (MRT) System which is becomes the first subway in Indonesia. The Jakarta MRT System is consist of two projects which are the construction of the MRT and engineering services of the MRT. In 2015, JICA signed loan agreements with the government of Indonesia to provide Japan’s ODA loans of 77.137 billion yen for these two projects.139 Second, the Java-Sumatra Interconnection Transmission Line. The purpose of this project is to connects the islands of Java and Sumatra by provide large scale of transmission lines. Through the connection, it can supply electricity to the metropolitan area. For this project, JICA provides loans of 62,914 million yen.140 Whereas, the Hululais Geothermal Power Plant Project is not included into the MPA Master Plan since the project will take place in southern Sumatra. For this project, the government received loans of 657 million yen from JICA.141

The presence of Jakarta MRT is not only about the development of transportation in Indonesia, but it also encourages the changing culture of people’s mobility and promotes a better quality of life. Traffic congestion in Jakarta affect the economic growth. It caused the cost of transporting goods and services becomes expensive. According to survey made by representative office of Indonesian Bank (Bank Indonesia or BI) in Jakarta, congestion in the region cause transportation costs to swell for about 2.9%.142 Besides that, it forced companies to increase the cost of raw materials inventory. In the end, it lead to the diminished of profit gained by the entrepreneurs and business actors. By having Jakarta MRT project, Japan has participated in the Indonesia’s infrastructure development. The project is

139 Japan International Cooperation Agency. Signing of Japanese ODA Loan with the Indonesia: Mitigating traffic congestion through construction of mass rapid transit. Retrieved January 25, 2018 from https://www.jica.go.jp/english/news/press/2015/151204_02.html 140 Japan International Cooperation Agency. Signing of Japanese ODA Loan with the Indonesia: Addressing the rapidly growing power demand. Retrieved January 25, 2018 from https://www.jica.go.jp/english/news/press/2015/151218_01.html 141 Ibid. 142 Michael Agustinus. (2016). Ini Dampak Kemacetan Terhadap Perekonomian Jakarta. Retrieved February 22, 2018 from https://finance.detik.com/berita-ekonomi-bisnis/3243447/ini- dampak-kemacetan-terhadap-perekonomian-jakarta

60 expected to increase capacity and comfortable environment in the Jakarta metropolitan area as the center of business operation in Indonesia. In addition, the project will reduce congestion and greenhouse gas emissions as well as air pollution. Shortly, Jakarta MRT projects is intended to improving business and investment environment in Jakarta.

Regarding electricity supply, President Jokowi officially announced the 35,000 Mega Watt (MW) Electricity program for Indonesia in 2015. The policy has at least three strategic goals. First, to distribute power supply evenly in areas that have not access to electricity. Second, increase 30% of the electricity reserves above the peak load in almost all regions. Third, making electricity as a driver of industrial and regional growth. In 2016, Indonesia has installed power plant capacity of 55,528.8 MW. The capacity has increased by 2,496.8 MW since President Jokowi began his administration. If the 35,000 MW Electricity program running based on schedule, Indonesia will have generators of 90,528.8 MW by the end of Jokowi’s Administration in 2019.143 The policy of President Jokowi about 35,000 Mega Watt (MW) Electricity program is actually in line with one of the SDGs points. The 7th goals stated that all of the countries must ensure access to affordable, reliable, sustainable and modern energy for all. Energy is an essential sector that needed by people that used for industries and household. Hence, sustainable energy is very important since it can transforms people’s live, economy and save the planet.

Those two infrastructure projects signed between Japan and Indonesia is aims to addressing the rapidly growing power demand. As the urgency of power demand in the Jakarta metropolitan area, the Java-Sumatra Interconnection Transmission Line Project aims to reducing the pressure on the power supply. In addition, the project also expected to contributing to economic development on Java and Sumatra. Regarding the Hululais geothermal power plant project, there are several purpose that the government want to achieve. Basically, the project intended to improve the stability of power supply on the Sumatra power grid. Then, it is

143 Kantor Staf Presiden. Tiga Sasaran Program Listrik 35.000 Mega Watt. Retrieved on February 22, 2018 from http://www.presidenri.go.id/program-prioritas-2/tiga-sasaran-program-listrik-35- 000-megawatt.html

61 expected to contributing to economic development as well as improving investment environment in Sumatra. Most important one, by promoting renewable energy, the government would like to fight climate change and lower global environmental burden.

The economic relatios between Japan and Indonesia have increasingly become interdependent as a result of close linkage in trade, investment and development cooperation over the years. In other words, these two countries need each other in order to fulfill its interests. In the previous chapter, it has been explains that Japan and Indonesia has great cooperation in terms of trade and investment. With abundant resources and market potential, Indonesia becomes essential for Japan’s destination in business operation and investment. Whereas, Japan has a role as one of the largest donor country of development assistance for Indonesia. As one of the most industrialized country, Japan has many contribution toward social and economic development in Indonesia.

IV.3. The Impacts of Infrastructure Development to Indonesia Socioeconomic Development

President Jokowi’s concern on infrastructure development will spur Indonesia to catch up with other countries. Nowadays, competition is not a choice that need to considered by a state anymore. Yet, competition is an essential driving factor to encourage country’s development either in regional or international level.144 Country who do not wants to left behind must facing competition rather than just watching other countries race to be prosperous. Moreover, the existence of Indonesia has counted by the world as a country with great potential economically. Hence, it is essential to provide qualify infrastructure in order to support social and economic stability.

Japan’s contribution for Indonesia infrastructure development during 2014 to 2016 is consist of four projects. These projects categorized into electric power

144 Kantor Staf Presiden. (2016). Keterbukaan dan Kompetisi: Tantangan Bangsa Indonesia ke Depan. Retrieved March 2, 2018 from http://presidenri.go.id/berita-aktual/keterbukaan-dan- kompetisi-tantangan-bangsa-indonesia-ke-depan.html 62 and transportation sector. Regarding electric power, Japan provides assistance for the geothermal power plant project that took place in Hululais. The other project for electric power sector is the transmission lines and distribution systems for Java- Sumatra interconnection. Whereas, for transportation sector, Japan provide loan aid and technical assistance for two projects of construction of Jakarta Mass Rapid Transit.

Japan is highly enthusiast to assist Indonesia’s development by provides ODA in forms of loans and technical cooperation. It is due to the importance of Indonesia as a strategic partner for Japan. It has been build various cooperation based on basic values in terms of democracy, human rights and market economy.145 Besides that, Indonesia is an important base for Japanese companies, therefore providing assistance for infrastructure aims to facilitating efficient economic activities. Both of these countries gain benefits from those four projects of development assistance. It is certainly help Japan to further deepening its cordial relations with Indonesia. In this case, Japan’s ODA activities in Indonesia have decreased investment costs to Japanese companies that operating in Indonesia since ODA provide access to the infrastructure.146 Japan’s ODA contribution on these four projects give Indonesia a chance to learn advance technology from Japan. Other than that, the advantages for Indonesia can be seen from economic and social development.

There are several advantages of the acceleration of the Jakarta MRT project for economy. The MRT will beneficial for the efficiency of economic activities such as mobility of people as the human resources, mobility of goods and services and lowering logistic cost. Congestion is one of the most important issues that Indonesia face currently. It causes state losses for about Rp 35 trillion for every year.147 The increasing number of vehicles is the reason of massive congestion in

145 Embassy of Japan in Indonesia. Country Assistance Policy for the Republic of Indonesia. Retrieved on March 2, 2018 from http://www.id.emb-japan.go.jp/oda/en/policy.pdf 146 Syamsul Hadi. (2010). Japanese Diplomacy in ASEAN and Its Relevance to Indonesia. 147 Maikel Jefriando. (2016). Jokowi: Macet di DKI dan Bandung, Rp.35 Triliun Hilang per Tahun. Retrieved on March 2, 2018 from https://news.detik.com/berita/d-3175635/jokowi-macet- di-dki-dan-bandung-rp-35-triliun-hilang-per-tahun

Jakarta. The MRT will very beneficial for time and cost efficiency. By using MRT, people do not need to waste much time to go to work due to hours of traffic jam. Thus, the government’s policy to improve public transportation through construction of the Jakarta MRT is a great decision. Besides that, the construction of this project will provide job opportunity. As the result, it can reduce the number of unemployment in Indonesia.

Japan’s development assistance for the construction of transmission lines and power plant in Indonesia is very helpful to the realization of of 35,000 MW electricity for Indonesia. According to the writer’s perspective, this effort is very important to guarantee adequate power supply in Indonesia. Transmission lines for Java-Sumatra interconnection is the alternative solution to solve the problem of increasing power demand in Java and Sumatra. Moreover, it will contributes to the regional economic in Sumatra as well as to achieve equitable development. Other than that, it helps Indonesia to implement one of global goals indicator. Global goals or also called as the 2030 Agenda for Sustainable Development, adopted by world leaders at the United Nations on 25 September 2015, sets out an ambitious plan of action for people, planet and prosperity, with the overarching objective of leaving no one behind.148 One of the indicators is to achieve affordable and clean energy in goal 7. In this case, all of states has commitment to ensure access to affordable, reliable, sustainable and modern energy for everyone.149 Thus, the government’s willing to provide infrastructure for energy including electricity is an effort to the realization for global goals indicator.

IV.4. Infrastructure Development as the Key of Regional Connectivity

The ASEAN-Japan strategic partnership has been contributed to regional peace, stability and prosperity. They have long-standing friendship through several cooperations. In 2015, Japan becomes ASEAN’s third largest trading partner and

148 OECD. (2017). Measuring Distance to the SDG Targets. 149 United Nations. Retrieved on March 2, 2018 from http://www.un.org/sustainabledevelopment/energy/

64 the second largest source of foreign direct investment. The ASEAN leaders appreciated Japan’s continued support for ASEAN’s central role in the evlving regional architecture through ASEAN-lead processes, in particular the ASEAN Plus Three, the East Asia Summit and the ASEAN Regional Forum.150 Moreover, ASEAN countries recognised the important of Japan’s contribution towards the implementation of various projects under ASEAN-Japan cooperation. Furthermore, the ASEAN leaders reiterated commitment to double trade and investment flows by 2022 as well as to deepening further economic integration between Japan and ASEAN through the ASEAN-Japan Comprehensive Economic Partnership (AJCEP).151

At the 17th ASEAN Summit in 2010, ASEAN member countries established the Master Plan on ASEAN connectivity or also known as MPAC 2010.152 Infrastructure development is one of the requirements to achieve effective connectivity either for domestic or regional level. Connectivity in ASEAN refers to the connection between physical, institutional and people-to-people linkages. Basic infrastructure such as transportation, ICT facilities and power generators have to facilitate trade and investment activities as well as to provide facilities for education, culture and tourism. As the result, ASEAN connectivity can contribute towards a more competitive, inclusive, and cohesive ASEAN. It is expected to supports the political-security, economic, and socio-cultural pillars of an integrated ASEAN Community.153 Hence, it can concluded that there are three pillars that needed to create linkages among countries as well as active flows of people and goods across the region as a whole. These three pillars consist of physical connectivity through infrastructure development, institutional connectivity through facilitation of custom procedures and people-to-people connectivity through human resources exchanges.

150 ASEAN. (2015). Chairman’s Statement of The 18TH ASEAN-Japan Summit.Retrieved on

March 2, 2018 from http://asean.org/chairmans-statement-of-the-18th-asean-japan-summit/ 151 Ibid. 152 ASEAN Secretariat. (2016). Master Plan on ASEAN Connectivity 2025. Retrieved on March 2, 2018 from http://asean.org/storage/2016/09/Master-Plan-on-ASEAN-Connectivity-20251.pdf 153 Ibid. 65

In fact, Japan’s assistance in infrastructure development is not only beneficial for Indonesia. But, those assistance also contribute to reinforcing of regional integration. Since the Japan’s ODA budget is not expected to increase in the foreseeable future, its objectives are bound to be more prioritized and focused. Basically, there are two approach that becomes a prominent feature of Japan’s future ODA. First, to cope with international development values and targets. Second, to adressing public concern for its national interests, particularly related to economic integration in Asia and peace building. In 2003, Japan and the ASEAN agreed on a Framework for Comprehensive Economic Partnership. The purpose of this agreement is to eliminates barriers, lowering business costs and increasing inter-regional trade and investment. Besides that, Japan together with China and the Republic of Korea have agreed to promote a trilateral cooperation that aims to cover a wide range of areas including economics and trade as well as information and technology (ICT). As the result, it shifted the focus of Japan’s regional economic policy to economic partnership rather than development assistance only.

Recently, the ASEAN has been making efforts to enhance its economic competitiveness. There are several efforts that has been done such as seek to sustaining economic growth, expanding economic relations with countries outside the region and also strengthening regional integration. However, undeveloped infrastructure and poverty still become unsolved issues in the region. One of the prominent country that becomes ASEAN’s partner is Japan. Japan and ASEAN member countries has been deepening their economic interdependence through trade and investment. The peace, stability and prosperity in the Southeast Asian region are important to Japan.154 Thus, Japan has contribution to various development issues in the region such as poverty reduction by promoting economic development, social development and human security through development cooperation or ODA.

154 Ministry of Foreign Affairs of Japan. Diplomatic Bluebook 2017. Retrieved on March 2, 2018 from http://www.mofa.go.jp/policy/other/bluebook/2017/html/

Taking advantage of Japan’s experience as the first nation in Asia to become a developed country, Japan has utilized its ODA to actively support economic and social infrastructure development, human resource development, and institution building.155 Through ODA, Japan is eager to contribute to the peace, stability and prosperity in the region. In addition, ODA used as a catalyst to support economic integration such as by alleviating disparities within the region. Support for infrastructure building considered as one of the essential keys to strengthen regional connectivity. It is also important as industrial foundation development which can lead to sustainable growth in the region. Quality infrastructure is needed for ASEAN’s sustainable development. It aims for long-term growth which has impact to regional connectivity that becomes a driver for economic and social development in ASEAN. Through quality infrastructure development assistance and human resource development, Japan will continue to contribute to connectivity in the ASEAN region.156 Japan formed a taskforce to work on ASEAN Connectivity immediately after MPAC was adopted. Basically, Japan’s assistance to Southeast Asia regions is in line with MPAC2025. There are four visions statements related to friendship and cooperation of Japan and ASEAN. Those visions are arranged based on objectives that they would like to achieve together, which are partners for peace and stability, partners for prosperity, partners for quality of life and heart-to- heart partners. Related to the implementation of ASEAN Connectivity, Japan committed to further enhance comprehensive economic partnership and cooperation for prosperity in the region.157

Japan’s assistance for supporting ASEAN Connectivity is consists of five categories. First, Japan will increase public and private infrastructure investment for each ASEAN members in order to achieve sustainable infrastructure. Japan also increase the deployment of smart urbanisation models accross ASEAN. Second,

155 Ministry of Foreign Affairs of Japan. (2003). Japan’s Official Development Assistance Charter. Retrieved on March 2, 2018 from http://www.mofa.go.jp/policy/oda/reform/charter.html 156 Japan hosts "Dialogue for Quality Infrastructure -- Building Asia's Future". Retrieved on March 2, 2018 from https://en.antaranews.com/news/110984/japan-hosts-dialogue-for-quality- infrastructure--building-asias-future 157 Mission of Japan to ASEAN. Japan’s assistance to ASEAN Connectivity in line with MPAC2025. Retrieved on March 2, 2018 from http://www.asean.emb- japan.go.jp/documents/20161102.pdf

Japan is supporting digital innovation through enhanced data management in ASEAN member countries. Third, Japan assist to improve speed and reliability of supply chains in each countries in order to achieve seamless logistic. Fourth, in terms of regulatory excellence, Japan suppports the development of legal systems related to economic activity. And the last one, Japan facilitates access to information about ASEAN countries that aims to ease people mobility.158

Through its assistance, Japan has been facilitating development of Southeast Asia, either for individual country or the whole region. Japan’s contribution to infrastrastructure development in Indonesia is in line with its strategic vision for MPAC objective. As explained before, sustainable infrastructure is one of the visions that would like to achieve by ASEAN. In accordance to the target to increase the deployment of smart urbanisation, Japan develops infrastructure and human resources to tackle problems associated with urbanisation such as traffic congestion, traffic safety and housing supply. In Indonesia, the construction of Jakarta Mass Rapid Transit becomes an efforts for improve public transportation. Therefore, Japan’s assistance for the construction of the Jakarta Mass Rapid Transit is not only fruitful for Indonesia’s development only but also to the realization of ASEAN Connectivity as the further integrated of Southeast Asia region.

158 Mission of Japan to ASEAN. Japan’s assistance to ASEAN Connectivity in line with MPAC2025. Retrieved on March 2, 2018 from http://www.asean.emb- japan.go.jp/documents/20161102.pdf

CHAPTER V CONCLUSION

The implementation of Official Development Assistance (ODA) as the main instrument of Japan’s foreign policy called as checkbook diplomacy. ODA is very essential as part of diplomacy tool for Japan in order to define its role in international system. Japan is a member of Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) and for years become one of the largest donor country. Japan started to channelling its ODA in 1954 that intended to war reparations for several countries in Asia. Today, Asia still remains a priority region for receiving Japan’s ODA. Japan International Cooperation Agency (JICA) is the agency that has responsibility to the promotion of international cooperation by supporting social and economic development of developing countries. Generally, ODA divided into bilateral and multilateral aid. Bilateral aid refers to assistance that given directly to recipient countries in the form of technical cooperation, loans and grants. Whereas, multilateral aid is assistance that provided through international organizations.

Based on the discussion in this research, the writer concludes that bilateral relations between Japan and Indonesia is mutually interdependence. These two countries has been strengthening and deepening their bilateral ties through various cooperation, including ODA. Due to insufficient land, Japan heavily dependent to Indonesia in terms of export for raw materials. As the origins of several big industries, Japan have to expand its market to overseas. Thus, with abundant resources, strategic locations and great economy potential, Indonesia becomes the placement for Japanese investment. There are three main sectors of investment which are manufacturing, infrastructure and services. Moreover, Japan provides large amount of ODA for Indonesia in order to support social and economic development.

Recently, economic infrastructure sector received largest portion of total amount of Japan’s ODA in Indonesia. Basically, economic infrastructure is

69 essential to drive economic growth. It is very important to support business and investment environment. For instance, infrastructure such as toll roads, railways seaports and airports will facilitate the movement of goods and services. The availability of adequate infrastructure is somehow will increase country’s competitiveness through production capability and workforce productivity. Under President Jokowi’s administration, the government has been concerning to infrastructure development in various regions. President Jokowi realized that acceleration of infrastructure will boost national economic growth as well as to attract more foreign direct investment. Besides that, Japan’s assistance for infrastructure development is not only beneficial for Indonesia, yet also to enhance regional integration of Southeast Asia region. ASEAN countries has been strengthening connectivity in order to supports more integrated ASEAN community.

During 2014 to 2016, there are four projects that including into Japan’s ODA contribution for Indonesia’s infrastructure development. These projects consist of two sectors which are electric power and transportation sector. Through development cooperation in this sector, Japan expects to contribute in addressing two current issues in Indonesia; rapid growing power demand and traffic congestion. Having a great potential of geothermal energy, the government make an efforts to utilize it to maintain stability of power supply. Furthermore, the construction of Java-Sumatra interconnection transmission line is expected to provide larger scale of transmission line. Therefore, electricity needs for households, industries and even transportation will fulfilled. The construction of Jakarta Mass Rapid Transit (MRT) which becomes the first subway in Indonesia is a big projects between Japan and Indonesia since it is included into the Metropolitan Priority Area (MPA). The Jakarta MRT aims to alleviate the severe traffic congestion and reduce traffic pollution in Jakarta as the center of business in Indonesia. Thus, Japan has been trying to help Indonesia in addressing its current two biggest issues through these projects.

Indonesia is one of the world's forces that is tied together with China, India and Russia. The existence of Indonesia increasingly calculated by the world in building world peace mission in Asia Pacific. Moreover, Indonesia has ambition to become a Global Maritime Fulcrum in Asia Pacific Momentum. In order to achieve this ambition, various effort is needed in conjunction with resources excellence and strategic position in terms of geopolitical and geoeconomic. Japan as one of the important country for Indonesia has interests to stabilize Southeast Asia region dynamically by supporting capital, technology and human resources development. Therefore, the contribution of Japan’s foreign assistance will very beneficial for Indonesia to achieve its ambition as well as to maintain its national stability in economic and social development.

Japan has significant role in ASEAN to becomes a donor of development assistance, a trade partner, an investor and a mediator in political disputes. In 2014, two-way trade between Japan and ASEAN reached US$229.1 billion that accounting for 9.1 per cent of ASEAN’s total trade. Whereas, foreign direct investment from Japan to ASEAN amounted to US$13.4 billion which accounting for 9.8 per cent of total FDI inflow into ASEAN. Through its economic assistance, Japan support the implementation of Master Plan on ASEAN Connectivity. ASEAN countries has commitment to narrowing development gap that would be essential to the successful of RCEP and AEC. Thus, Japan has been contribute to the infrastructure development in ASEAN which becomes a prerequisite of regional connectivity. For instance, through cross border infrastructure such as railways, power tranmission, highways and maritime links. In other words, Japan is one of the largest contributor to the initiative for ASEAN integration that leads to further regional stability.

BIBLIOGRAPHY

BOOKS Burchill, S., Linklater, A., Devetak, R., Donnelly, J., Paterson, M., Reus- Smit, C., … True, J. (2005). Liberalism. In Theories of international relations (3rd ed., pp. 55-83). Edström, B. (Ed.). (2011). Japan's foreign policy in transition: The way forward for Japan as an international actor in a world in flux. Heinonen, H., & University of Helsinki. (2006). Regional integration and the state: The changing nature of sovereignty in Southern Africa and Europe. Irsan, A. (2007). Budaya & Perilaku Politik Jepang di Asia. Keohane, R. O., & Nye, J. S. (2012). Power and interdependence. Lancaster, C. (2007). Foreign aid: Diplomacy, development, domestic politics. Miles, M. B., & Huberman, A. M. (1994). Qualitative data analysis an expanded sourcebook. Ohno, K. (2006). The Economic Development of Japan. The Path Traveled by Japan as a Developing Country. Sukma, R., & Soeya, Y. (2015). Japan-ASEAN Partnership in an Era of Multiple Regional Integration Frameworks. In Navigating change: ASEAN-Japan strategic partnership in East Asia and in global governance (pp. 83-97). Trinidad, D. D. (2007). Japan's ODA at the Crossroads: Disbursement Patterns of Japan's Development Assistance to Southeast Asia., 31(2), 95-125.

GOVERNMENT PUBLICATIONS Kedutaan Besar Jepang di Indonesia. (2012). Country Assistance Policy for the Republic of Indonesia. Retrieved from http://www.id.emb- japan.go.jp/oda/en/policy.pdf Ministry of Foreign Affairs of Japan. (2008). Country Assistance Evaluation of Indonesia. Ministry of Foreign Affairs of Japan. (2017). Diplomatic Bluebook 2016. Retrieved from http://www.mofa.go.jp/policy/other/bluebook/2017/html/index.html Ministry of Foreign Affairs of Japan. (2003). Japan’s Official Development Assistance Charter. Retrieved from http://www.mofa.go.jp/policy/oda/reform/charter.html

JOURNALS Dadabaev, T. (2016). Japan's ODA assistance scheme and Central Asian engagement: Determinants, trends, expectations. Journal of Eurasian Studies, 7(1), 24-38. doi:10.1016/j.euras.2015.10.002. Hadi, S. (2011). Japanese Diplomacy in ASEAN and Its Relevance to Indonesia. Understanding Contemporary Japan, 41-50. Manurung, H. (2014). Impact of Joko 'Jokowi' Widodo Leaderships on Indonesia's World Maritime Axis. Retrieved on March 2, 2018 from https://www.researchgate.net/publication/315363043_Impact_of_Joko_'Jo kowi'_Widodo_Leaderships_on_Indonesia's_World_Maritime_Axis. DOI. 10.2139/ssrn.2510986 Rana, W. (2015). Theory of Complex Interdependence: A Comparative Analysis of Realist and Neoliberal Thoughts. International Journal of Business and Social Science, 290-297. Trinidad, D. D. (2007). Japan's ODA at the Crossroads: Disbursement Patterns of Japan's Development Assistance to Southeast Asia., 31(2), 95-125.

REPORTS Japan International Cooperation Agency. (2015). Annual Report 2014 | Publications | JICA. Retrieved from https://www.jica.go.jp/english/publications/reports/annual/2014/index.ht ml Japan International Cooperation Agency. (2016). Annual Report 2015 | Publications | JICA. Retrieved from https://www.jica.go.jp/english/publications/reports/annual/2015/index.ht ml Japan International Cooperation Agency. (2017). Annual Report 2016 | Publications | JICA. Retrieved from https://www.jica.go.jp/english/publications/reports/annual/2016/index.ht ml Japan International Cooperation Agency. (2018). Annual Report 2017 | Publications | JICA. Retrieved from https://www.jica.go.jp/english/publications/reports/annual/2017/index.ht ml Ministry of Foreign Affairs of Japan. (2017). White Paper on Development Cooperation 2016. Retrieved from http://www.mofa.go.jp/policy/oda/page22e_000815.html

Ministry of Foreign Affairs of Japan. (n.d.). Japan's ODA Data for Indonesia. Retrieved from http://www.mofa.go.jp/files/000142543.pdf Sunaga, K. (2016, October). Japan’s assistance to ASEAN Connectivity in line with MPAC2025. Retrieved from http://www.asean.emb- japan.go.jp/documents/20161102.pdf United Nations Development Programme Bureau for Development Policy. (2011). TOWARDS HUMAN RESILIENCE: Sustaining MDG Progress in an Age of Economic Uncertainty. Retrieved from UNDP website: http://www.undp.org/content/dam/undp/library/Poverty%20Reduction/Towards_ SustainingMDG_Web1005.pdf

WEBSITES

Agustinus, M. (2016, June 27). Ini Dampak Kemacetan Terhadap Perekonomian Jakarta. Retrieved from https://finance.detik.com/berita-ekonomi- bisnis/3243447/ini-dampak-kemacetan-terhadap-perekonomian-jakarta An Interview with H.E. Ishii Masafumi, Ambassador of Japan to Indonesia. (2017, September 11). Retrieved from http://nowjakarta.co.id/an- interview-with-h-e-ishii-masafumi-ambassador-of-japan-to-indonesia Antaranews.com. (2017, May 18). Japan hosts "Dialogue for Quality Infrastructure -- Building Asia's Future" - ANTARA News. Retrieved March 2, 2018, from https://en.antaranews.com/news/110984/japan-hosts-dialogue-for-quality- infrastructure--building-asias-future Antaranews.com. (2017, October 27). Ginandjar: Doktrin Fukuda bawa perubahan ekonomi Indonesia-Jepang - ANTARA News. Retrieved from https://www.antaranews.com/berita/661260/ginandjar-doktrin-fukuda- bawa-perubahan-ekonomi-indonesia-jepang Ardhian, M. (2017, July 27). Pemerintah Siapkan Dua Strategi Dorong Pemerataan Ekonomi - Katadata News. Retrieved from https://katadata.co.id/berita/2017/07/27/pemerintah-siapkan-dua-langkah- dorong-pemerataan-ekonomi ASEAN. (2015, November 23). Chairman's Statement of The 18TH ASEAN- Japan Summit - ASEAN | ONE VISION ONE IDENTITY ONE COMMUNITY. Retrieved from http://asean.org/chairmans-statement-of- the-18th-asean-japan-summit/ Auslin, M. (2017, January 26). Japan's New Realism. Retrieved from https://www.foreignaffairs.com/articles/japan/japans-new-realism Azmi, R. (n.d.). Direct Lending Kepada BUMN Sebagai Alternatif Pembiayaan Infrastruktur. Retrieved from https://www.kemenkeu.go.id/sites/default/files/direct%20lending.pdf

Badan Koordinasi Penanaman Modal. (n.d.). Proyek Infrastruktur Indonesia Masuk Dalam Masterplan ASEAN 2025. Retrieved from www.bkpm.go.id/id/publikasi/detail/berita-investasi/proyek-infrastruktur- indonesia-masuk-dalam-masterplan-asean-2025 Barder, O. (2012, June 8). What Is Development? Retrieved from https://www.cgdev.org/blog/what-development Cambridge Dictionary. (n.d.). infrastructure Meaning in the Cambridge English Dictionary. Retrieved from http://dictionary.cambridge.org/dictionary/english/infrastructure Chi, A. (n.d.). Japan and Asia: developing ties - OECD Observer. Retrieved from http://oecdobserver.org/news/archivestory.php/aid/56/Japan_and_Asia:_d eveloping_ties.html Compare your country by OECD. (n.d.). Retrieved from http://www2.compareyourcountry.org/aid-statistics Dugay, C. (2014, August 22). Infrastructure remains top area of support for JICA. Retrieved from https://www.devex.com/news/infrastructure- remains-top-area-of-support-for-jica-84203 Economic and Social Infrastructure. (2015, March 23). Retrieved from https://www.ukessays.com/essays/economics/economic-and-social- infrastructure-economics-essay.php Economy and Trade: Japan: Fact Sheet. (n.d.). Retrieved from http://afe.easia.columbia.edu/japan/japanworkbook/economics/factshe.ht m Foreign Aid. (n.d.). Retrieved from http://internationalrelations.org/foreign-aid/ Haris, A. (n.d.). Pengaruh Penatagunaan Tanah terhadap Keberhasilan Pembangunan Infrastruktur dan Ekonomi. Retrieved from https://www.bappenas.go.id/files/3013/5228/3483/05abdul__20091014131 228__2260__0.pdf Importance of Infrastructure for socio-economic development of community. (n.d.). Retrieved from http://iasscore.in/economy/importance-of- infrastructure-for-socio-economic-development-of-community International Financial Law Review. (2017, March 29). The Japanese Overseas Investment Report 2017: Indonesia | IFLR.com. Retrieved from http://www.iflr.com/Article/3673587/The-Japanese-Overseas-Investment- Report-2017-Indonesia.html International Trade Centre (ITC). (n.d.). Trade Map - Bilateral trade between Japan and Indonesia. Retrieved from https://www.trademap.org/tradestat/Bilateral_TS.aspx?nvpm=1|392||360|| TOTAL|||2|1|1|1|2|1|1|1|1

Japan International Cooperation Agency. (2013, December 11). Fourth Steering Committee Meeting Held by Cabinet Members of the Governments of Japan and Indonesia on the Metropolitan Priority Area for Investment and Industry (MPA) in Jabodetabek | Press Releases | News & Features | JICA. Retrieved from https://www.jica.go.jp/english/news/press/2013/131217_01.html Japan International Cooperation Agency. (2015, December 18). Signing of Japanese ODA Loan with the Indonesia: Addressing the rapidly growing power demand | Press Releases | News & Features | JICA. Retrieved from https://www.jica.go.jp/english/news/press/2015/151218_01.html Japan International Cooperation Agency. (2015, December 4). Signing of Japanese ODA Loan with the Indonesia: Mitigating traffic congestion through construction of mass rapid transit | Press Releases | News & Features | JICA. Retrieved from https://www.jica.go.jp/english/news/press/2015/151204_02.html Japan International Cooperation Agency. (2017, October 9). Master Plan Study for Establishing Metropolitan Priority Area for Investment and Industry (MPA) in JABODETABEK Area Approved by the Steering Committee consisting of the cabinet members of the Japanese and Indonesian governments | News & Features | JICA. Retrieved from https://www.jica.go.jp/english/news/press/2012/121009.html Japan International Cooperation Agency. (n.d.). ODA and JICA | About JICA | JICA. Retrieved February 3, 2018, from https://www.jica.go.jp/english/about/oda/index.html Jefriando, M. (2016, March 30). Jokowi: Macet di DKI dan Bandung, Rp.35 Triliun Hilang per Tahun. Retrieved from https://news.detik.com/berita/d-3175635/jokowi-macet-di-dki-dan- bandung-rp-35-triliun-hilang-per-tahun Kantor Staf Presiden. (2016, May 16). Mewujudkan Pembangunan Indonesia- Sentris | Presiden Republik Indonesia. Retrieved from http://www.presidenri.go.id/program-prioritas-2/mewujudkan- pembangunan-indonesia-sentris.html Kantor Staf Presiden. (2016, May 18). Tiga Sasaran Program Listrik 35.000 MegaWatt | Presiden Republik Indonesia. Retrieved from http://www.presidenri.go.id/program-prioritas-2/tiga-sasaran-program- listrik-35-000-megawatt.html

Kantor Staf Presiden. (2016, March 30). Keterbukaan dan Kompetisi: Tantangan Bangsa Indonesia ke Depan. Retrieved March 2, 2018 from http://presidenri.go.id/berita-aktual/keterbukaan-dan-kompetisi- tantangan-bangsa-indonesia-ke-depan.html Kementerian Luar Negeri Republik Indonesia. (n.d.). International Organization. Retrieved from https://www.kemlu.go.id/en/kebijakan/organisasi- internasional.aspx Kementerian Perdagangan Republik Indonesia. (n.d.). 10 Main Commodities Ministry of Trade Republic of Indonesia. Retrieved from http://www.kemendag.go.id/en/economic-profile/10-main-and-potential- commodities/10-main-commodities Lumanauw, N., & Suhartadi, I. (2018, January 21). 1.500 Perusahaan Jepang Beroperasi di Indonesia | Investor Daily. Retrieved from http://id.beritasatu.com/tradeandservices/1500-perusahaan-jepang- beroperasi-di-indonesia/170987 Ministry of External Affairs, Government of India. (2013, January). India-Japan Relations. Retrieved from https://www.mea.gov.in/Portal/ForeignRelation/Japan_Relations_- _Jan_2013.pdf Ministry of Foreign Affairs of Japan. (2014, May 7). 40th Year of ASEAN-Japan Friendship and Cooperation. Retrieved from http://www.mofa.go.jp/region/asia-paci/asean/relation/ja40/index.html Ministry of Foreign Affairs of Japan. (2014, November 30). Japan's Official Development Assistance Charter ｜ Ministry of Foreign Affairs of Japan. Retrieved from http://www.mofa.go.jp/policy/oda/reform/charter.html Ministry of Foreign Affairs of Japan. (2015, February 10). ODA Reform ｜ Ministry of Foreign Affairs of Japan. Retrieved from http://www.mofa.go.jp/policy/oda/reform/ Ministry of Foreign Affairs of Japan. (2017, November 12). Japan-Indonesia Summit Meeting. Retrieved from http://www.mofa.go.jp/s_sa/sea2/id/page3e_000782.html Ministry of Foreign Affairs of Japan. (n.d.). Japan's ODA: Accomplishment and Progress of 50 Years ｜ Ministry of Foreign Affairs of Japan. Retrieved from http://www.mofa.go.jp/policy/oda/cooperation/anniv50/pamphlet/progres s1.html Ministry of Foreign Affairs of Japan. (n.d.). Japan's Security / Peace & Stability of the International Community. Retrieved from http://www.mofa.go.jp/policy/security/index.html

Novalius, F. (2018, January 19). OJK: Bangun Infrastruktur Butuh Dana Besar: Okezone Economy. Retrieved from https://economy.okezone.com/read/2018/01/19/320/1847243/ojk-bangun- infrastruktur-butuh-dana-besar Nurmayanti. (2017, March 7). Investasi Jepang di RI Capai US$ 19,7 Miliar dalam 6 Tahun. Retrieved from http://bisnis.liputan6.com/read/2878398/investasi-jepang-di-ri-capai-us- 197-miliar-dalam-6-tahun Ohno, I. (n.d.). Japan’s ODA Policy and Reforms since the 1990s and Role in the New Era of Development Cooperation [PDF document]. Retrieved from http://www.grips.ac.jp/forum- e/IzumiOhno_E/lectures/2014_Lecture_texts/03_KOICA_Ohno_1125.pdf Organisation for Economic Co-operation and Development. (n.d.). Aid at a glance charts - OECD. Retrieved from http://www.oecd.org/dac/financing-sustainabledevelopment/development-finance-data/aid-at-a-glance.htm Organisation for Economic Co-operation and Development. (n.d.). Official development assistance (ODA) - Net ODA - OECD Data. Retrieved from https://data.oecd.org/oda/net-oda.htm Parlina, I. (2015, November 23). Indonesia, Japan to work on infrastructure projects. Retrieved from http://www.thejakartapost.com/news/2015/11/23/indonesia-japan-work- infrastructure-projects.html Pinuji, S. (2017, November 15). Mengevaluasi Pembangunan Infrastruktur Pemerintahan Jokowi-JK. Retrieved March 1, 2018, from https://www.kompasiana.com/dewantoedi/5a0baf934d66913d4072fae4/m engevaluasi-pembangunan-infrastruktur-pemerintahan-jokowi-jk Public Safety Canada. (2015, October). Role of Critical Infrastructure in National Prosperity. Retrieved from https://www.publicsafety.gc.ca/cnt/rsrcs/pblctns/2016-rl-crtclnfrstrctr- ntnlprsprty/index-en.aspx Rappler.com. (2017, October 19). 3 Tahun Jokowi-JK: 5 pencapaian di sektor infrastruktur. Retrieved January 20, 2018, from https://www.rappler.com/indonesia/berita/185764-3-tahun-jokowi-jk-5- pencapaian-sektor-infrastruktur

Sachs, J. D. (2017). Japan's Leadership and Inspiration in Sustainable Development / JapanGov. Retrieved from https://www.japan.go.jp/tomodachi/2017/summer2017/professor_jeffrey_ D_Sachs.html Schaller, M. (2004, January). The Korean War: The economic and strategic impact on Japan, 1950-53. Retrieved from https://www.researchgate.net/publication/296202925_The_Korean_War_ The_economic_and_strategic_impact_on_Japan_1950-53 Sunaga, K. (2016, October). Japan’s assistance to ASEAN Connectivity in line with MPAC2025. Retrieved from http://www.asean.emb- japan.go.jp/documents/20161102.pdf Swaminathan, A. S. (2017, July 7). 20 years after the Asian Financial Crisis, Indonesia has lessons learned — and warnings. Retrieved from https://www.cnbc.com/2017/07/07/20-years-after-the-asian-financial- crisis-indonesia-has-lessons-learned--and-warnings.html The Colombo Plan Secretariat. (n.d.). Overview – The Colombo Plan Secretariat. Retrieved from http://www.colombo-plan.org/index.php/about- cps/overview/ The Editors of Encyclopaedia Britannica. (n.d.). Foreign policy | political science. Retrieved from https://www.britannica.com/topic/foreign-policy The Government of Japan. (n.d.). ABENOMICS - JapanGov. Retrieved from https://www.japan.go.jp/abenomics/index.html The Observatory of Economic Complexity. (n.d.). Products that Japan exports to Indonesia (2016). Retrieved January 9, 2018, from https://atlas.media.mit.edu/en/visualize/tree_map/hs92/export/jpn/idn/sho w/2016/ The World Bank. (2010, April 12). Infrastructure Development is Key to Rapid Growth in Middle Income Indonesia: World Bank Managing Director. Retrieved from http://www.worldbank.org/en/news/press- release/2010/04/12/infrastructure-development-key-rapid-growth-middle- income-indonesia-world-bank-managing-director The World Bank. (n.d.). Overview. Retrieved from http://www.worldbank.org/en/country/indonesia/overview United Nations Development Programme. (n.d.). Sustainable Development Goals. Retrieved from http://www.undp.org/content/undp/en/home/sustainable-development- goals.html United Nations. (n.d.). Infrastructure and Industrialization - United Nations Sustainable Development. Retrieved from http://www.un.org/sustainabledevelopment/infrastructure- industrialization/#

World Integrated Trade Solution. (n.d.). Indonesia | Exports and Imports | by Country | WITS | Data. Retrieved from https://wits.worldbank.org/CountryProfile/en/Country/IDN/Year/LTST/T radeFlow/EXPIMP/Partner/by-country World Integrated Trade Solution. (n.d.). Japan | Export (US$ Thousand) | All Products | Export | to Indonesia | 2012 - 2016 | WITS | Data. Retrieved from https://wits.worldbank.org/CountryProfile/en/Country/JPN/StartYear/201 2/EndYear/2016/TradeFlow/Export/Indicator/XPRT-TRD- VL/Partner/IDN/Product/Total#

APPENDICES

APPENDIX 1 Source: http://www.mofa.go.jp/policy/oda/reform/charter.html

APPENDIX 2

Source: http://www.mofa.go.jp/policy/oda/page_000008.html#indonesia

APPENDIX 3

Source: https://www.jica.go.jp/english/news/press/2012/121009.html

APPENDIX 4

Source: https://www.jica.go.jp/english/news/press/2015/151204_02.html

APPENDIX 5

Source: https://www.jica.go.jp/english/news/press/2015/151218_01.html

APPENDIX 6

Source: http://asean.org/chairmans-statement-of-the-18th-asean-japan-summit/

100

101