Boston, MA -- (SBWIRE) -- 04/09/2014 -- The South East Asian region has shown a high level of stability in recent years, with rational diplomacy trumping hotheadedness. Only Sino-Philippine disputes over the Paracel, and other, islands, show significant friction. Jakarta's positive relations with both Beijing and its fellow ASEAN members may result in an ever-more significant role for Indonesia in the region. Military modernization continues apace, furthering Indonesia's advantage over its neighbours, although internal issues are of greater concern than overseas ones.

For its part, Jakarta has good relations with Beijing. However, the Indonesian side has expressed concern over some Chinese activities in the South China Sea, and Beijing must tread carefully in order to remain on good terms with South East Asia's key state. Indeed, Indonesian pressure will be critical in ensuring that China follows through on its promise to come to the table to negotiate a new Code of Conduct for the South China Sea, although progress to date has been limited, despite the best intentions of Jakarta and Washington, amongst others.

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Indonesia's regional importance as the driving force of the Association of Southeast Asian Nations (ASEAN) group has been reinforced in a number of respects. Australia's new prime minister Tony Abbott visited Indonesia in September 2013 and declared that the bilateral relationship with Jakarta's was Australia's 'single most important [one]' we have. US President Barack Obama cancelled a trip to Indonesia in October 2013 due to political problems back home, and was severely criticised by Asia watchers for passing up an important opportunity to boost relations with key regional allies.

Domestically, however, Indonesia has some security concerns. The economy remains under pressure, and this has potential implications for social stability and for Indonesia's ability to procure foreign weaponry. In August, Jakarta announced an 8.3% defence budget increase for 2014, but in US dollar terms the defence budget will fall as a result of the weakness of the rupiah.

As a result, military procurement will continue to be based on credit arrangements and on second-hand purchases wherever possible. But there will be exceptions: for example, the US confirmed in September 2013 that it will sell eight of its most advanced attack helicopters, AH-64E Apache Guardians, to Indonesia for US$500mn.

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