As the first directly elected Indonesian president, Susilo Bambang Yudhoyono (SBY) served at a crucial juncture in Indonesia's history. Succeeding the three short presidencies of BJ Habibie, Abdurrahman Wahid and Megawati Sukarnoputri, his presidency had a lot to prove. The initial stage of transition to democracy under these preceding administrations was extremely challenging as state institutions underwent changes, while the elite grappled with the demands from the polity for better governance. The fact that the first three post-reform presidents only served a portion of their terms signifies the uncertainties of a post-authoritarian state and the intense politicking among the political elites. Indeed, succeeding these leaders with a two-term presidency is a testament to SBY's popularity and political flair. With a popularity that was remarkably broad across political parties and demographic groups (Liddle and Mujani 2004, p. 121), much was riding on his first victory in 2004 as voter dissatisfaction towards his predecessor Megawati Sukarnoputri transformed into great hope for his presidency.

Among SBY's many achievements, top of the list is the strengthening of democratic institutions. SBY did so by maintaining overall political stability, while ensuring certain important milestones such as setting up direct elections for local heads (at the province, district and municipal levels) and strengthening the Corruption Eradication Commission (KPK). Overall, he maintained peace and stability, two important conditions for keeping democracy intact and consolidating it. These milestones were particularly important, given that his two-term administration coincided with the country's democratic transition, one of the most crucial periods in Indonesia's history.

Alongside praise, SBY's government has also attracted criticism over his failure to further Indonesia's progress. Specifically, he was responsible for a period of democratic stagnation in Indonesia (see, for example, Tomsa 2010 and Mietzner 2012). As identified by scholars, some important signals of the push against and pull towards democratic institutionalization were the attempts by the elites to roll back the progress of democracy, on the one hand, and civil society's efforts to maintain the process of democratic institutionalization, on the other. Political freedom also started to deteriorate in his second term, with Freedom House downgrading the country's status from “Free” in 2013 to “Partly Free” in 2014, owing mainly to increasing government control over civil organizations.

I served as foreign minister of the Republic of Indonesia in President Susilo Bambang Yudhoyono's Second United Cabinet between 2009 and 2014. It has been a humbling experience — following in the footsteps of those who have ably served the nation and capping nearly three decades of diplomatic service — one that has indelibly shaped my world view and Indonesia's place within it.

That world view is one of an Indonesia whose conduct has the capacity to mould the region's affairs, earning it a position of leadership. It is one of an Indonesia that has a proud tradition of constructive activism in global affairs beyond its immediate shores and direct interests. It is of an Indonesia that pursues an independent and active policy — a capacity for independent decision-making in a complex and ever-changing world. It is of an Indonesia that presents itself as a regional power with global interests, a country that can be entrusted to be part of the solution, a bridge-builder for the varied challenges confronting the community of nations. It is of an Indonesia secure in a world of change, pursuing a million friends and zero enemies on the basis of the principles of mutual respect and benefit. And it is an Indonesia confident in the strength of its democracy.

Foreign Policy in an Interconnected World

My years implementing and formulating Indonesia's foreign policy rested on the firm belief that, ultimately, Indonesia's foreign policy cannot be divorced from its internal, national setting. We use the term intermestic to describe the inseparability of the international and domestic environments. To successfully navigate the world of the twenty-first century, the choice, indeed, is not between domestic or external priorities; instead, the two must be made to work seamlessly. Strenuous efforts must be made to ensure that there is a mutually reinforcing synergy between the internal and external dynamics. While this has been true throughout Indonesia's history, the linkage between the national and international milieus has become even more pronounced in the contemporary globalized era. The distinctions between the local, national, regional and global levels have become ever more blurred. Indeed, the distinctions between political, economic and social issues have become ever more tenuous.

President Susilo Bambang Yudhoyono (SBY) had to confront a series of terrorist attacks while in office. He built on his experience as coordinating minister for political, legal, and security affairs in the Megawati government (2001–4), when he had to deal with the 2002 Bali bombings and the 2003 bombing of the Marriott Hotel in Jakarta. In his ten years as president (2004–14), Indonesia continued to be plagued by a network of terrorist cells, but the risk of high-casualty attacks receded over time. The SBY government succeeded in managing but not eradicating the terrorism threat, and the decline of terrorist capacity was due to many factors other than government policy. In general, his government did better at rounding up perpetrators once they had committed violence than in preventing radicalization or “immunizing” communities against extremist ideology. This was in part because the police became skilled in crime scene investigation and using sophisticated equipment to track down known suspects. This reactive “hard approach” is almost by definition easier than a proactive “soft approach” of trying to tackle the problem at its roots. But it was also because once an attack had taken place, there was near universal political support for arresting those responsible. Prevention strategies aimed at extremist discussion groups or social media were much more sensitive, and SBY had little appetite for political confrontation. The result was that over his two terms in office, while several hundred suspected terrorists were arrested and over ninety killed in police operations, almost no progress was made on prevention and deradicalization. One consequence was that as a new threat appeared late in SBY's second term in the form of the Islamic State of Iraq and Syria (ISIS) terror group, the government had few good tools or people in place to address it.

The 2002 Bali Bombings: How Counterterrorism Efforts Began

On Saturday night, 12 October 2002, a one-tonne bomb exploded in two clubs, Sari Club and Paddy's Café. The two clubs, the most popular in the area of Legian, Bali, were totally destroyed. Cars and other vehicles in the area were turned into charred ruins. Windows throughout Legian were shattered and the roofs of cafes and homes flew off. In all, 202 people lost their lives and more than 300 were wounded.

During the presidency of Susilo Bambang Yudhoyono (SBY), the Indonesia–Malaysia relationship was regarded as one of the most important bilateral relationships in Southeast Asia. This was for two interconnected reasons. First, Indonesia was, and still is, the most populous and powerful nation in the region. Second, given this fact, the bilateral relationship with Indonesia's closest neighbour assumed greater significance than it otherwise would.

In the SBY era, both states constantly reaffirmed their commitment to the relationship, albeit framed in a slightly different way from past eras. Under previous leaders, much was made of the “sibling” identity shared between Indonesia and Malaysia. This notion was based on geographic proximity and a similar colonial and post-colonial history, underpinned by a shared language, a shared culture and a shared religion. The intimacy of the historical ties, which have been conceptualized in various pan-Malay imaginaries, led to numerous leaders from both countries to refer to the bilateral relationship as one premised on “Malay blood brotherhood” or, more commonly, Malay serumpun, which can be glossed as a shared Malay racial or ethnic stock. Under SBY, however, a more prosaic or pragmatic approach was taken, and thus notions of serumpun were deliberately avoided. Nevertheless, underneath SBY's “realpolitik” style was a deep current of genuine and mutual warmth, stretching back to the colonial era, when the independence activists of both countries worked closely together, teaching and inspiring each other.

The Indonesia–Malaysia relationship under SBY's watch was built on a firm foundation of years of interaction at all levels of state and society. During the first decade of the twenty-first century, however, which was marked by SBY's presidency, several issues seriously strained bilateral relations. Among these was the strong public reaction in Indonesia to maritime boundary disputes, claims over each country's cultural heritage, the cross-border impact of haze from Indonesian forest fires, and the poor treatment of Indonesian workers in Malaysia. Indonesia's liberal mass media, a capstone of its democratic consolidation progress under SBY, played a key role in inflaming the tensions. In addition to numerous anti-Malaysia columns, editorials and blogs, several semi-journalistic books discussing the bilateral relationship, often in highly inflammatory language, were published.

June 2011 was a month that encapsulated the highs and lows of Susilo BambangYudhoyono's (SBY's) policies on international migrant workers. On the eleventh of that month the Indonesian president proudly announced his support for the migrant worker convention in one of his many eloquent speeches, on this occasion given as a guest at the 100th annual meeting of the International Labour Organization (ILO) in Geneva. A week later this socially responsive approach was sharply questioned by the execution of the Indonesian maid Ruyati Binti Sapubi in Saudi Arabia, in part signalling a foreign policy failure on the part of SBY, and one that was widely criticized at home. Some have argued that international migration was one area among many where SBY promised more than he could deliver; while introducing a number of innovations, and eventually taking a hard line with several of the host countries for Indonesia migrants, it is said that the government struggled to get beyond “rhetoric” in devising practical policies and building the institutions to support them (Budianti, Chandrakirana and Yentriyani 2015, p. 210).

The government continued to strongly support international migration as a source of employment and of foreign exchange during the SBY years. During this period the number of Indonesians working abroad increased substantially and its composition changed, first more in favour of females and domestic workers and later back to a greater reliance on males and formal sector workers, mainly as a result of government reassessment of priorities. However, there was a policy shift during SBY's second term after shortcomings were increasingly exposed in the media and by civil society groups. Because of continuing reports of exploitation of female domestic workers in particular, culminating in the execution of Ruyati in 2011, the government temporarily halted the sending of domestic workers to the main recipient countries, Malaysia (in 2009) and later Saudi Arabia. At the same time, there were a number of important new institutional developments. These included bilateral agreements with receiving countries that had the potential to improve migrant conditions overseas. Regrettably, reform was slow and piecemeal. The regulatory and institutional changes did not have a positive impact on the welfare of migrant workers, which officials had promised and many observers had pressed for.

President Susilo Bambang Yudhoyono's (SBY) slogan of “a million friends and zero enemies” was effective in opening doors and is a useful starting point in reviewing how the president managed relations with Indonesia's key trading partners. However, this all-embracing framework is notoriously difficult to implement. In addition, impactful economic policies, it is often argued, rarely make everyone happy. For effective change to take place, one societal group usually gains more than the other, even in an all-win scenario. The argument is that making everyone happy leads to excessive compromise to avoid rocking the boat, which ultimately leads to, at best, incremental change and, at worst, the status quo being maintained.

This cautious and incrementalist theme, with a few exceptions, is reflected throughout SBY's term, and has hampered his administration's ability to chart an optimal course, especially at home. However, in a turbulent setting, where currents are shifting, this method has its merits. This chapter will assess whether SBY's government was able to get the best outcome from its three key trading partners, in light of rising tensions among them. Two of them, the United States and Japan, have had long trade and investment ties with Indonesia, while the third, China, is a more recent player. However, in a relatively short period of time, China has become a dominant economic and political power, dramatically shifting the status quo in the Asia-Pacific region.

This assessment will start with a brief background on how Indonesia's links with its three key trading partners — the United States, Japan and China — have evolved over time. It will then closely review economic policies during SBY's two terms and how they affected commercial links with each of these trading partners. In addition, it will review which of these policies met or fell short of their intended objectives. Finally, the chapter will examine whether there is anything that future governments can learn from the SBY administration's experience to better prepare themselves for further changes in future.

Events Leading up to SBY's Term

The forty-year period from when former President Suharto took over till SBY came into office saw the country's economic floodgates incrementally opening up as the country developed and gained confidence.

Over the course of Susilo Bambang Yudhoyono's presidency, Australia and Indonesia moved well beyond the pragmatic but distant relationship that had existed between the two countries since the 1999 crisis over East Timor. Government-to-government ties arguably reached a historic high point during Yudhoyono's second term, with a bilateral security treaty re-established, regular leader-level meetings taking place, and the Suharto-era dilemmas of cooperation with an authoritarian government firmly in the past. Yudhoyono himself contributed significantly to the deepening of ties. He was determined that Indonesia should have constructive external relations, as embodied in his much maligned “zero enemies, a thousand friends” foreign policy. He also had a personal connection to Australia, as his son was studying at Curtin University in Perth when Yudhoyono won office. None of Yudhoyono's counterparts as Australian prime minister held a similar connection to Indonesia, but they nevertheless mostly reciprocated Yudhoyono's desire for better bilateral ties. Yudhoyono's four presidential visits to Australia are one simple indicator of the intensifying intergovernmental relationship during his decade in power — Indonesia's five previous presidents had made only two visits between them.

Despite a new warmth and depth in bilateral ties, Australia– Indonesia relations remained beset by recurring crises on an annual basis during the Yudhoyono era. Transnational crime featured strongly in the causes, including the arrest and trial of Australian drug traffickers, the operation of people smuggling syndicates in facilitating the flow of asylum seekers to Australia, and public reactions to the punishments meted out to terrorists in Indonesia. But Australia and Indonesia also rowed over issues as diverse as the treatment of cattle in Indonesia, the arrival in Australia of asylum seekers from Papua, and Australian spying on Indonesia. Twice under Yudhoyono, Indonesia recalled its ambassador from Canberra, in 2006 and 2013. A positive spin on this pattern has been to term the relationship “cyclical” (Hyland 2006; Hogan 2014; Grattan 2015); a former Australian intelligence analyst instead mused whether bilateral ties were “condemned to crisis” (Ward 2015).

It has become a convention in analysis of the bilateral relationship to attribute significant fault for these ructions to the politicking of each country's leaders, and in particular to Australia's prime minister of the day.

This chapter looks at how the Indonesian government under Susilo Bambang Yudhoyono (SBY) succeeded in finding a resolution to the armed conflict that had raged for almost three decades in Aceh. After a short overview on the causes of conflict and its main stages, a number of failed peace initiatives are discussed. The main attention in the first section is on the Helsinki peace process that resulted in a memorandum of understanding (MoU) between the Indonesian government and the Aceh separatists and formed the basis for the ongoing peace process in Aceh. The second section discusses the process leading up to the highly controversial Law on the Governing of Aceh, which served to implement the MoU's stipulations but fell short of doing so in many respects. The concluding remarks reflect on the extent to which SBY's foreign policy decision-making helped bring a preliminary and, hopefully, sustainable end to thirty years of violent conflict in Aceh.

SBY's strong motivation to end the Aceh conflict as expressed in the above quote must not be solely seen as part of his overall presidential agenda to improve Indonesia's international reputation from 2004 onwards. His involvement in supporting dialogue to end the Aceh conflict started way before he campaigned for presidency and finally took office as Indonesia's fifth president in September 2004. The Cessation of Hostilities Agreement by which GAM and Indonesia had tried to negotiate a lasting solution collapsed in May 2003. Only shortly after, Jusuf Kalla (then Coordinating Minister for People's Welfare), in a closed meeting, proposed to then President Megawati Sukarnoputri in the presence of Gen. Endriartono Sutarto (then TNI Commander-in-Chief) and SBY (then Coordinating Minister for Security and Politics) to take another attempt to engage GAM in dialogue. All participants of this meeting gave at least oral support of his endeavour. This came as no surprise as SBY himself had long believed that “conflict had gone on too long; there were too many victims on both sides. And it was expensive, costing us about $130 million per year in security operations” (Morfit 2007, p. 125).

After the Reformasi era, Indonesia underwent a historic political transition, culminating in the peaceful direct presidential election of 2004 in which Susilo Bambang Yudhoyono, popularly known as “SBY”, was elected as the sixth president of Indonesia. Under President SBY, Indonesia managed to regain its economic footing. The country was the hardest hit by the 1997 Asian financial crisis, which caused its real gross domestic product (GDP) to fall by thirteen per cent in 1998. It was during the SBY presidency that Indonesia managed to rebuild its economy and achieve a respectable level of growth of around six per cent, close to the pre-crisis levels.

As the country had just recovered from the financial crisis, Indonesia faced many economic challenges during SBY's term, including crumbling infrastructure, an unstable financial market, high unemployment, and an increase in the poverty rate. Given these challenges, SBY and his economic team had arguably succeeded in putting Indonesia back on the investors’ radar. It is debatable, however, whether Indonesia's strong economic growth during SBY's administration was due to good management or merely good luck (Basri 2012). As a resource-rich country, Indonesia benefited from the commodity boom, which happened during the SBY presidency.

Regardless of the cause, Indonesia's relatively stable domestic politics and improved macroeconomic conditions to some extent set the foundation for Indonesia's regional and international economic engagement of “a million friends and zero enemies”. The slogan was seen as SBY's hallmark foreign policy to thrust Indonesia into a new global limelight as an unlikely star (Soesastro 2009). “A million friends and zero enemies” was a vision introduced by SBY in his effort to gain as much support as possible for Indonesia's national development and to advance its reputation in the region and the world. In fact, Indonesia during SBY's presidency tried to exploit several regional and international platforms to promote its vision of international economic cooperation.

The 2008 global financial crisis (GFC), along with a rising tide of protectionism around the world, however, represented a turning point in SBY's stance towards open regionalism and globalization. In spite of the changing political and economic dynamics at home, SBY's administration still managed to secure a foothold for Indonesia in many regional and global forums through its strategic contributions.