Challenges and Opportunities for Indonesia and Australia Relationship in the Asian Century


On 17 May 2013, Counsellor in Politics and  Senior First Secretary of Economic Affairs of The Republic of Indonesia Embassy in Australia, Mr Widya Rahmanto and Mr Denny Lesmana shared some valuable  insights into  “Challenges and Opportunities for Indonesia and Australia (IA) Relationship in The Asian Century”. This discussion forum was organised by the Indonesian Embassy, South Australian Chapter of The Indonesian Student Association (PPIA), and fully supported by  PPIA at Flinders University, University of Adelaide and University of South Australia and  GoLive Indonesia.

The Nature of the IA Bilateral Relationships

The nature of the bilateral ties between Indonesia and Australia could be suitably defined as dynamic, multi-dimensional, and long historical relationship.   Despite the complex nature of the IA relationship, Mr Rahmanto claimed that the two countries’ current relationship is on its highest level over the past ten years.

The IA relationship is characterised by a strong Government to Government (G-to-G) relationship.  There are several mechanisms to solve bilateral problems and strengthen the IA relationship. These include the  Annual Leaders’ Meeting, bilateral meetings between the two Foreign Ministers and Defence Minister of State (2 +2 Ministerial Meeting) , and various meetings involving community leaders from two countries to enhance people to people links.  Some successful dialogues have led to the implementation of  Joint Declaration on Comprehensive Partnership  signed by President Yudhoyono and PM Howard in 2005, Agreement on the Framework for Security Cooperation (Lombok Treaty) in 2006, and Plan of Action Lombok Treaty in 2008  focusing on the acknowledgement of the Indonesia and Australia sovereignty.

Multi-sector relationships

The interdependence between Australia and Indonesia has intensified as both countries are partnering in various sectors. Within the context of geopolitical security, both countries have a common view of responsibility for ensuring the stability in the region. Due to its geographical proximity, Indonesia  is considered to be a transit country for refugee seekers travel making a journey to Australia. This has created people smuggling problems. Therefore, Indonesia has a strong bargaining position for the intensive cooperation to tackle people smuggling. Indonesia is categorised as the main partner in National Security Strategy and the Defence White Paper  of Australia.

The bilateral economic cooperation is progressive. The total trade of Indonesia and Australia is worth  US$11 Billion in 2012; Investment (US$743 Million); and the number of tourists reached  909.000 tourists in 2012. However, the Indonesia trade performance is still unsatisfactory since Indonesia is still outside Australia’s top ten main trade partners. In fiscal year 2011-2012, the total trade in goods and services between Australia and Indonesia reached  A$ 14,947 Australia positioning Indonesia to be in the 11th or 12th position, below China, Singapore, Malaysia, and Thailand’s trade positions. The partnership between Indonesia and Australia is getting more deepened due to the numerous advantages provided by both countries’ active involvements in regional and multilateral forums such as G20, ASEAN, ASEAN Regional Forum (ARF), APEC, East Asia Summit (EAS), Pacific Island Forum (PIF), Bali Process and Global Counter Terrorism Forum (GCTF). In addition to that, Indonesia also significantly benefited from the Official Development Assistance (ODA) Australia for Indonesia reaching A$558 Million during the 2011-2012 period.

Future Challenges

The future challenges which are arisen in the Indonesia-Australia mainly lies in the efforts to maintain the solid relationship through  three mechanisms: (i) how the relationship can contribute to the prosperity and role of Indonesia in global arena; (ii)  how to promote business and people to people cooperation; and (iii) how to further collaborative actions dealing with sensitive issues faced by the two countries.

Given the dynamics nature of the Indonesia-Australia partnership, two recommended strategies to fully reap benefits from this partnership are the improvement in the people to people link and strengthening the economic cooperation. The economic cooperation is crucial. It can be further enhanced via the utilisation of Free Trade Agreement Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) and ASEAN, Australia, New Zealand Free Trade Agreement (AANZFTA). In terms of the sectoral trade performance, Indonesia and Australia have almost identical comparative advantage in mining and oil sectors. Thus, the bilateral trade volume was not progressing as expected. Furthermore, Non-Tariff Barriers such as holding orders and quarantine, and the competition from China, Thailand, Malaysia, and Vietnam stand as the main obstacles in accessing the Australian Market. Therefore, it is imperative to comply with standards and requirements of Australian Quarantine and Inspection Services (AQIS).

Other strategies which are expected to  foster the  economic relations and people to people link are the strategies to improve Infrastructure connectivity in the MP3EI  framework, develop the sectoral economic integration model, such that Indonesia and Australia will cooperate based on their comparative advantages and jointly produce competitive products. These products can then be re-exported to other countries. For example, Australia can export live cattle to Indonesia, and the processing stage can be done in Indonesia considering Indonesia’s low labour cost compared to Australia. Thus, the processed beef can be exported to Middle East Countries with Halal labeling and certification.

Another area of improvement regarding the people to people link consists of the curriculum, increasing the number of exchange of students and teachers, engaging more cooperation between states and  provinces in Indonesia, promoting  sister cooperation by sectors such as Sister Hospitals or Sisters Universities, and  intensifying dialogues between stakeholders.

In the Q&A session, Sari from Flinders University highlighted the issue of people smuggling  and how the involvement of Indonesia and  Australia can solve this problem. Currently, the initiative to solve people smuggling is not just of an interest of Indonesia and Australia but also becoming a common interest in regional cooperation. The existing “Bali Process” initiative is now still focusing on the stage of  improving  the nations’ capacity building. In addition to that, Indonesia and Australia have also regularly conducted joint campaign programs to raise people’s awareness and advocate about the consequences of people smuggling particularly in high-risk areas in Indonesia, such as fishermen villages in coastal areas.

The issues of  common threats in existing cooperative forums between Indonesia and Australia and the implementation of sister cooperation by sector, particularly Sister University program, were raised by Yessy from the University of Adelaide.

From the political perspective, the IACEPA seems to be well supported by both governments. However, the problem lies on the people to people link. Therefore, promoting the Business dialogue between Indonesia and Australia business associations to identify the best way to improve the cooperation is imperative.

Akbar from The University of Adelaide raised concerns about Indonesia’s food security as Indonesia’s continues to import agricultural products from Australia. It is clarified that attaining self-sufficiency does not necessarily correspond to improving food security, since the food security concept is mainly concerned about providing all people access to affordable food.

*This report was prepared by Syarifah Amaliah, University of Adelaide.


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Filed under Agriculture, Australia, Culture, Democracy, East Asia, Economic development, Economic Integration, Education, Employment, Food and agriculture, Indonesia, Infrastructure, Investment, PPIA academic discussion, Services, Trade

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