The US and China both have their eyes on a country at the heart of the Indo-Pacific

• As US-China competition intensifies, those powers are competing for influence in the Indo-Pacific.
• One of the countries they hope to win over has historically resisted picking sides: Indonesia.
• With tensions rising, and concern about China increasing, Indonesia is pursuing its own military buildup.
• See more stories on Insider's business page.

Tensions continue to rise in the Indo-Pacific, where China's economic growth and military modernization have drawn the attention and concern of politicians and defense officials in the region and around the world.

As China and the US compete for influence in the region, they are setting their sights on a country that has historically resisted getting involved in foreign affairs: Indonesia.

With over 270 million people, Indonesia is the fourth-largest country in the world and the third-largest in Asia. Made up of over 17,000 islands that straddle the Pacific and Indian oceans, it has a commanding position over the vital Strait of Malacca and the traditional maritime approaches to Australia.

"In the geopolitical challenges of the future, Indonesia sits in an incredibly important strategic location," Michael Green, senior vice president for Asia and Japan chair at the Center for Strategic and International Studies, told Insider.

Indonesia's importance to China, the region, and the world is hard to overstate, and while it maintains neutrality on most matters, it is pursuing a massive military modernization effort.

Historically non-aligned

Indonesia has long avoided picking sides between superpowers. A former Dutch colony, it took an anti-imperialist stance upon independence in 1949 under President Sukarno.

Indonesia was a founding member of the Non-Aligned Movement during the Cold War, and even hosted the group's first meeting in 1955. By the 1960s, though, Sukarno was tilting Indonesia toward Beijing and the Communist bloc.

The military, with the support of the US and other Western governments, reversed that tilt with a violent purge of Indonesian Communist Party (KPI) members, suspected leftists, and other minority groups after a failed coup attempt in 1965 for which the KPI was blamed.

The campaign is believed to have killed between 500,000 and 3 million people between 1965 and 1966. Communism was subsequently banned and remains so today, but Indonesia has never fully aligned with the West.

"Indonesia has a complicated history" with the US, Green said. "It's kind of been like a pendulum, back and forth."

Indonesia's relations with the West were strained during the latter half of the 20th century by its rivalry with Australia, criticism of Indonesia's human-rights record, and US and Australian support for East Timor's independence.

In the early 2000s, US military interventions in the Middle East were also viewed negatively in Indonesia, the world's most populous Muslim-majority country.

Relations have improved over the past 15 years, aided by increased security cooperation, especially on terrorism, and by US support after the 2004 earthquake and tsunami that killed over 130,000 Indonesians.

Military modernization

Indonesia's military, known for its brutal tactics, has always been large and relatively strong.

It has managed to contain Islamist terrorists largely on its own - to the relief of many in Washington and elsewhere in the region - but today it is gearing up for conventional enemies.

A draft proposal seen earlier this year outlined more than $100 billion in defense procurement and sustainment spending through the mid-2040s. While that spending may not be about China specifically, China's rise has been cause for concern in Jakarta.

Although Indonesia does not have any official territorial disputes with China, it is increasingly worried by Chinese activities in its waters, particularly in the Natuna Sea, the southern portion of the South China Sea.

Indonesia recently ordered six FREMM frigates (similar to the US Navy's future Constellation-class frigates) and two Maestrale-class frigates from Italian shipbuilder Fincantieri.

It is currently testing a new type of catamaran patrol craft dubbed "tank boat" because of the tank turret on its roof.

After recently losing a submarine, Indonesia's navy is hoping to increase its submarine fleet from 12 to as many as 36 boats. Companies from South Korea, France, Russia, and Turkey have all offered designs, and Japanese firms may as well.

Indonesia also has grand plans for its air force.

It is interested in buying eight F-15EX fighters from the US, 36 Rafale fighters from France, and possibly all 15 of Austria's Eurofighter Typhoons. It is also a joint partner in South Korea's KF-21 fighter program and plans to acquire 48 of them.

Indonesia's army is adding a slew of armored vehicles, including a new medium tank developed with Turkish assistance, to supplement its force of 103 Leopard 2 tanks, Czech Pandar II armored personnel carriers, and domestically developed Komodo armored vehicles.

Preparing for the worst

In addition to the purchases, Indonesia has sought increased cooperation with other countries.

In March, it signed a pact with Japan that allows the transfer of Japanese defense equipment and technology to Indonesia and paves the way for joint exercises.

In June, the US and Indonesia announced that the US would fund construction of a new training base for Indonesia's coast guard on Batam Island, close to the Strait of Malacca and the Strait of Singapore.

But Indonesia has maintained close ties with China.

China's navy is recovering the Indonesian submarine that sank in the Java Sea earlier this year. (Some believe Beijing's assistance with the recovery has a military motive). China has also sent tens of millions of its COVID-19 vaccines to Indonesia, where cases and deaths are rising.

Countries in the region have responded to China's growing influence and its competition with the West in different ways. Some, like Laos and Cambodia, have leaned toward Beijing, while others, like India, toward confrontation.

Indonesia, for its part, continues to focus inward while preparing for the worst.

"Right now, in some ways, Indonesia's a little bit of a paralyzed giant," Green said. "Indonesia's not moving either way very much to be honest, and under [President Joko Widodo] it's very domestically focused."

But with China's aggressive actions in the South China Sea, Indonesia is increasingly aware of the threat Beijing poses and of the value of the "a free and open Indo-Pacific" that the US and its allies advocate.

"That sense of common purpose as China throws its weight around is quietly growing," Green told Insider, adding that Indonesia's profile will only grow as that competition intensifies.

"It's striking how little attention Indonesia gets commensurate with its geopolitical importance," Green said. "In some ways it's the soft underbelly of this most crucial region right now."