Since Indonesia’s election period, President Prabowo Subianto—then still a presidential candidate—advocated for a “good neighbor” approach in shaping the country’s foreign policy. While this concept was not elaborated in detail, many assumed and encouraged Prabowo’s government to better articulate this idea to more grounded initiatives.

Borneo offers a compelling case study in this regard, thanks to its strategic geographical location and abundance of natural resources and biodiversity. Home to over 20 million people, the island spans across Indonesia’s Kalimantan provinces, Malaysia’s Sabah and Sarawak, and Brunei Darussalam. With much or less similar characteristics of its economic strengths and landscape, there is a room for complementarity among each other.

However, Borneo still faces numerous challenges, such as weak intra-Borneo trade, limited cross-border connectivity. and an existing struggle to balance industrial development with biodiversity and environmental conservation. Indeed, Borneo’s poor inter-island and rural-urban connectivity, particularly in transportation and communication, further hinder trade and economic integration.

Historically, Borneo’s land-based development fueled growth but also drove extensive deforestation and timber extraction from the 1970s to the early 2000s. Today, the island has shifted from being a major timber exporter to becoming a hub for sustainable palm oil. Pressures from global markets—including sustainability standards and environmental concerns—have prompted efforts to improve production efficiency and minimize forest loss.

Today, the island has transitioned from a major timber exporter to a sustainable palm oil exporter. Global market dynamics—including competition with soybean producers, the need to meet sustainability standards, and concerns over palm oil’s environmental impact—have driven continuous efforts to intensify production, enhance sustainability, and reduce forest loss.

Beyond these challenges, there is an urgent need to address land-use change and explore strategies for Borneo to move up the commodity value chain. Palm oil, for instance, could be further diversified into higher-value downstream industries such as oleochemicals and sustainable fuels. Similarly, biomass and heavy energy sectors could be developed using hydropower to support industrialization while reducing reliance on fossil fuels.

However, the capacity for economic transformation varies across regions. Brunei is likely to continue depending on LNG and petrochemicals, while Sarawak is exploring hydropower expansion as a diversification strategy. Indonesia’s part of Borneo, which lacks strong industrial capacity, may seek to promote border economies and enhance sub-regional cooperation to strengthen economic resilience.

During Indonesia’s ASEAN Chairmanship in 2022, the spirit of enhancing more sub-regional contribution to Southeast Asian economic growth is promoted through a couple of initiatives, including the establishment of the Borneo Economic Community (BEC). The BEC aims to involve more local businesses in an inclusive economic cooperation within Borneo. BEC serves as a business-driven collaboration focused on addressing challenges and identifying business opportunities in Borneo island.

With the growing nature of economic growth in the Southeast Asian region, the sub-regional actors in Southeast Asia have moved to enhance its economic competitiveness and strategize its ways to better tap into regional opportunities.

Sarawak for instance, is now enhancing regional trade connectivity through developing Tanjung Embang Deep Sea Port and aims to position Sarawak as a major integrated logistics hub for ASEAN. Moreover, to enhance regional connectivity, Sarawak has acquired AirBorneo (formerly MASwings) that will create another breakthrough in strengthening regional air connectivity. Among others, Sarawak has established Sarawak trade and tourism offices in Singapore and Brunei, with an upcoming office in Kalimantan, Indonesia. With this strategy, Sarawak is strategically bringing Borneo to the next level.

Meanwhile, Sabah also shares the spirit of regional integration of Borneo through the development of Pan Borneo Highway, which serves to improve land connectivity passing through Sabah, Sarawak, and Brunei. Another major project that will create essential progress in Borneo island.

Interconnectivity remains the key word for Borneo states, and that’s also the spirit that ASEAN owns and perceived despite global trends of isolationism and narrow nationalism. In many ASEAN visions and master plans, the importance of building regional connectivity among the member states is placed as the top priority.

Given the region’s vast renewable potential, it is natural to view Borneo as a hub for energy-intensive industries. The Government of Sarawak is leveraging hydropower as a driver of economic growth, seeking to enhance cross-border connectivity with Kalimantan for electricity exports while also expanding its reach to the wider region. It has already signed agreements to supply power to the Philippines and Singapore and is aiming to position itself as a future hub for green hydrogen development.

Despite these opportunities, Kalimantan has yet to play a significant role in fully optimizing Borneo’s economic potential. Its economy remains largely commodity-based, driven by coal mining and palm oil plantations. While these industries contribute to growth, they are highly susceptible to global market fluctuations and evolving sustainability standards. More critically, they have yet to fully harness the region’s human capital. The adoption of digital technologies, along with strategic investment in infrastructure and connectivity, could serve as a powerful catalyst for Kalimantan’s transformation.

There is a strong leverage for Indonesia to tap into Borneo’s economic integration, given its position as the region’s largest market. To unlock this potential, Indonesia must take a more proactive role in fostering cross-border energy trade, improving industrial linkages, and accelerating investment in high-value sectors. This requires not only national-level initiatives but also closer engagement with local leaders and stakeholders across Borneo.

President Prabowo seeks to make a "good neighbor policy" the hallmark of his foreign policy, by fostering deeper regional cooperation. Indonesia’s pursuit of energy and food security aligns with Borneo’s vast economic potential, but translating ambition into reality will require more than political will from Bandar Seri Begawan, Jakarta, and Putrajaya—it demands a nuanced understanding of the interests and aspirations of Borneo’s local communities.

As geopolitical shifts and sweeping transformations reshape the region, the question remains: Will Borneo emerge as a true engine of economic growth, or will fragmented interests and uneven development hold it back? and more importantly will Indonesia seek to be a main actor or a mere spectator?

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Noto Suoneto is the VP for International Affairs at the Indonesian Business Council (IBC). 
 

The views expressed in this article are those of the author.

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