By Kanupriya Kapoor and Yayat Supriatna
JAKARTA (Reuters) - Chinese President Xi Jinping will on Thursday become the first foreign leader to address Indonesia's parliament, signaling a push by the Asian economic powerhouses to expand relations that were for decades frozen in hostility.
Xi arrived in Jakarta on a state visit on Wednesday, his first official visit to Southeast Asia's biggest economy and the world's third most populous country.
He will oversee the signing of a range of contracts, several of them focused on tapping the huge Indonesian resource sector to help feed the voracious Chinese economy.
A day before his arrival, China agreed a currency swap deal for the equivalent of $15 billion, to help Indonesia if its ailing currency comes under any more attacks. It has fallen more than 16 percent this year.
The urge to improve ties is in sharp contrast with the mid-1960s when Indonesia broke off relations with China, accusing it of backing an abortive coup it blamed on Indonesia's communist party, then the third largest in the world.
So bitter was the split, that until 1990 when the two resumed diplomatic ties, Indonesia effectively banned anything from China, and its nationals from going to China.
"From the Indonesian perspective, we need to welcome them because they're the biggest economy in the region," said Jusuf Wanandi, executive director at the Center for Strategic and International Studies.
"For China, this speech is quite important because they see Indonesia as a leader in ASEAN (the Association of Southeast Asian Nations)," he said.
"They realize that if we can't come to a decent resolution on the South China Sea issue, that means future relations with ASEAN will be at risk."
The 10-member ASEAN has been at odds with China over competing claims for territory in the South China Sea. Though Indonesia is not one of the countries with a claim, it has been openly critical of China's policy, concerned that it is creating tension in the world's fastest growing economic region.
After his Jakarta visit, where he will hold talks with President Susilo Bambang Yudhoyono, Xi heads to the island of Bali for an Asia-Pacific Economic Cooperation (APEC) summit, where the South China Sea is likely to be on the agenda.
Trade between China and Indonesia stood at nearly US$33 billion for the first eight months of 2013, making it Indonesia's second-biggest trading partner, after Japan.
The two will finalize a raft of deals, mainly in the mining sector, worth more than $30 billion. They include at least seven joint ventures in nickel and alumina smelting projects worth nearly $12 billion.
The deals will support Indonesia's bid to develop its domestic resource processing industries. Mining accounts for 12 percent of gross domestic product and China is a top buyer of those resources.
Indonesia plans to introduce an ore export ban next year to encourage miners to process the metal domestically and so lift the value of exports.
"So far, Indonesia exports raw materials such as coal, nickel ore to China to be processed. (They) become end products which are exported then to many countries, including back to Indonesia," said Industry Minister M.S. Hidayat.
Xi took over as president after changes in the Chinese Communist Party leadership last year.
A member of Indonesia's parliament said China had been quite aggressive in trying to build closer ties with Indonesia over the past 15 years and Xi's speech in parliament showed that both sides were serious about the relationship.
"I'd like to point out the difference between how Obama gave a speech in front of a university during his visit," said the legislator, who declined to be identified, referring to U.S. President Barack Obama's 2010 return to a country where he lived as a child.
"The Chinese president is quite different in his approach because he's actually trying to make a gesture towards parliament."
(Additional reporting by Rieka Rahadiana; Editing by Jonathan Thatcher and Robert Birsel)
- Foreign Policy
- Politics & Government
- South China Sea