Foreign ministry, BI mutual assent

By Bantarto Bandoro

Our Foreign Ministry conducted its own "domestic diplomacy" by embracing the Central Bank (BI) in an attempt to improve the country's economic diplomacy (The Jakarta Post, April 3). Such initiative is considered a step forward in the ministry's strategy of total diplomacy.

The initiative is assumed to have been dictated by the fact that one of the dynamics of foreign diplomacy is economic diplomacy. In a globalized and interconnected world, economics is more important than ever as a determining element in international affairs.

The move by these two state bureaucracies clearly shows integrating foreign affairs with bank-related issues is not only necessary, but also imperative, particularly when the world economy has become even more liberalized and integrated and where Indonesia is in dire need to boost its economic leverage on global and regional levels.

The recently signed cooperation between the Foreign Ministry and the central bank underscored economics as a vital and often dominant component of Indonesia's bilateral and global relations.

The discussion of Indonesia's economic diplomacy reminds us of the time when the New Order government, during its first five years after the demise of the Sukarno administration, launched a quite extensive international diplomacy push in an attempt to rebuild the country's ailing economy, leading to the establishment of the Inter-Governmental Group on Indonesia (IGGI).

It is not clear, however, whether the central bank at the time played a part in the country's diplomacy, but the idea was to create a constant capital mobility in which investors could transfer funds into the country to reduce the surging inflation at the beginning of the 1970s.

Government emphasis was on diplomacy and development, the two arms of our foreign policy that we continue to see as relevant today.

The agreement between the Foreign Ministry and the central bank is assumed to have been based on the belief that traditional state-to-state diplomacy is being fragmented and made more complex due to participation in international economic relations by a growing number of non-state actors and, in particular, an increasing number of other government ministries, including the central bank.

The central bank serves as an arm of the government in the field of monetary, banking and payment matters, but it cannot act alone to promote the state's interest in those matters. It therefore needs to work in tandem with the Foreign Ministry to be able to adapt to growing economic and political inter-dependencies of world markets and states.

It is through such "collaboration" that the central bank will benefit from information received from the Foreign Ministry about activities of host countries. In addition, the ministry will also have to gather intelligence on business and market opportunities in host countries.

The exchange of data and information between these two state bureaucracies will help the government mitigate the repercussions of a sluggish global economy and possible monetary crisis.

Professionalism in the country's economic diplomacy will not become a reality if it is actually absent from the vocabulary of our diplomacy, unless our diplomatic officers demonstrate their ability to effectively manage result-oriented economic diplomacy.

As the agreement between the Foreign Ministry and the central bank is now in place, there exists a compelling reason for these state agencies to visualize their common perspectives so as to make our economic diplomacy more effective and meaningful.

While the contents of economic diplomacy are viewed through a changing domestic and international climate, its objective remains to strengthen and expand our economic relations with friendly countries and international institutions in areas of trade, finance, banking and private investment and economic cooperation for the promotion of our national interest.

With the agreement, we have come to expect our diplomats specializing in economic diplomacy, commercial diplomacy and monetary diplomacy to be more effective in serving the country's interests in the economic and monetary spheres.

The Foreign Ministry needs to expand its institutional capabilities in dealing not only with the central bank, but also other government ministries conducting diplomatic activities external to the traditional prerogatives of the Foreign Ministry. Otherwise, the ministry might as well accept the fact that it has to play a secondary role at international meetings.

The writer is the chief editor of The Indonesian Quarterly, published by the Centre for Strategic and International Studies. He is also a lecturer in the International Relations Post-graduate Studies Program at the School of Social and Political Science, University of Indonesia. He can be reached at bandoro@csis.or.id. Source: The Jakarta Post, April, 10 2008