Australia and Indonesia: from good neighbours to strategic partners?

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Dr Cameron Hill, Foreign Affairs, Defence and Security Section

Key issue 
As Indonesia becomes bigger and more powerful, many argue that Australia needs to re-frame its relationship with its largest neighbour.

Australia’s relationship with Indonesia remains at the centre of ongoing debates regarding our future strategic and economic prospects in the Indo–Pacific region. Australia’s ability to forge a resilient ‘strategic partnership’ with a dynamic (Figure 1), democratic and increasingly self-confident Indonesia was a prominent feature of policy debate during the 43rd parliament, with both major parties keen to display their credentials with regard to the bilateral relationship.

Figure 1: Indonesia and world economic growth (GDP, PPP)

Figure 1: Indonesia and world economic growth (GDP, PPP)

Source: Department of Foreign Affairs and Trade

Significant developments: 2010–2013

The period 2010–2013 saw a continued increase in the tempo and scope of relations. The structures surrounding the relationship were strengthened through several new dialogue mechanisms:

  • annual Leaders’ Meeting, since 2010
  • Australia—Indonesia Dialogue, since 2011 and
  • annual ‘2+2’ meeting of Foreign and Defence Ministers, since 2012.

These build on existing dialogues, such as the Australia–Indonesia Trade Ministers’ Meeting.

Issues and events, however, sometimes overwhelmed formal structures. Debates over irregular maritime arrivals from Indonesia, live cattle exports, the ongoing conflict in Papua, and consular issues revived negative and populist narratives in both countries. More importantly, they demonstrated the increasingly close and complex connections between domestic and foreign policy considerations in two democratic, albeit very different, societies.

In July 2013, the Rudd Government elaborated some of these connections through its ‘Indonesia Country Strategy’. This Strategy attempts to outline a long-term vision for the relationship and ‘identify opportunities for communities, business and government to participate in and contribute to the process of deepening and strengthening our regional engagement’. The Strategy, the first of its kind, is an explicit recognition of the centrality of Indonesia to Australia’s interests, as well as an implicit acknowledgement of several important policy debates concerning the bilateral relationship.     

Current policy debates

Politicians in Australia now regularly state that Indonesia is one of Australia’s most important strategic partners. What this actually means in terms of Australia’s foreign policy priorities and practices is, however, contested. In November 2012, former Prime Minister Paul Keating argued that, since 1996, successive Australian governments have not fully appreciated Indonesia’s strategic significance:

 … policy towards our nearest, largest neighbour, Indonesia, has languished, lacking framework, judgments of magnitude and coherence. It is as if Indonesia remains as it was before the Asian Financial Crisis—before its remarkable transition to democracy and before the re-firing of its wealth machinery.

The Labor Government was quick to reject Mr Keating’s criticisms, arguing that the contemporary relationship with Indonesia was close and comprehensive. The Coalition defended its record in similar terms and Tony Abbott made Indonesia his first overseas visit as Prime Minister.

One of the most frequent mantras surrounding the relationship is that Australia needs to be more ‘consultative’ with Indonesia in areas of mutual interest.  One positive example of this was the agreement, in April 2013, to designate Indonesia as one of only several countries with which Australia reciprocally consults in the preparation of Defence White Papers.

The Gillard Government’s mid-2011 decision, without consultation, to temporarily suspend live cattle exports to Indonesia and the Coalition’s stated policy of turning back asylum-seekers that originate from Indonesia (despite Jakarta’s repeated objections to this policy) suggest, however, that a genuinely consultative partnership sometimes remains more rhetoric than reality.

Despite the fact that Indonesia’s economy is forecast to be the world’s tenth largest by 2025, bilateral trade and investment links have not matched the growth in political and security ties over the last decade.

In an effort to address this imbalance, both major parties have committed to finalising the proposed Indonesia—Australia Comprehensive Economic Partnership Agreement. This may prove challenging, at least in the short-term, given Indonesia’s preference for increased protectionism over recent years and the growing domestic attraction of economic nationalism as it approaches its 2014 elections.

Injecting more ‘ballast’ in the relationship, in the form of greater people-to-people links that improve mutual understanding, also remains an important objective given the misconceptions, particularly among Australians, that endure in public polling on the relationship.

There is a related concern about the ongoing decline of Australia’s Indonesia ‘literacy’. Both the Labor and Coalition have sought to address this decline through schemes designed to send young Australians to Indonesia, as well as other Asian countries, as part of their tertiary education, and policies to boost the study of Asian languages, including Indonesian, in schools.

Looking ahead

Indonesia’s 2014 national election will see Indonesia’s current President, Susilo Bambang Yudhoyono, step down. The election will be a watershed, both in terms of Indonesia’s democratic consolidation and the bilateral relationship. The departure of ‘SBY’, who has been generally accommodative of Australia’s interests, is seen by some analysts as likely to make the relationship more difficult.

At the least, a growing and more powerful Indonesia means that Australia will need to make sound choices about what it requests of its neighbour. In the words of the current Secretary of the Department of Defence, Dennis Richardson:

It is only a matter of time before we have a neighbour in Indonesia which has a bigger economy in nominal terms than our own. We are not used to that. As Indonesia grows wealthier and more confident it will become increasingly difficult for Australia to gain the attention of Indonesian decision makers to the extent that we think our interests might warrant. In other words, we may need to become more selective in what we push and what we ask for.

Further reading

H White, ‘Northern exposure: what Indonesia’s rise means for Australia’, The Monthly, June 2013, pp. 30-37.

A Macintyre and D Rammage, Seeing Indonesia as a normal country: implications for Australia, Australian Strategic Policy Institute, 2008.

J Mackie, Australia–Indonesia relations: current problems, future prospects, Lowy Institute, Sydney, 2007.

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