October 22nd 2016

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Articles from this issue:

COVER STORY Bill Shorten imposes his political will on the nation

UKRAINE Russia responsible for MH17 crash: investigation

EDITORIAL Learning the lessons of SA power meltdown

THE ECONOMY Warnings call for new economic policies

CULTURE WARS Shame, pride and the AFL's arrogant posturing

OBITUARY Shimon Peres: last of Israel's elder statesmen

REGIONAL AFFAIRS Shifts in Australia-Indonesia relations

EUTHANASIA Paul Kelly makes the case against euthanasia

MANUFACTURING Australia's once and future car industry

MUSIC The dolorous tale of the disappearing tail

CINEMA In praise of professionalism: Sully

BOOK REVIEWS ASIO in the spotlight: official history vols I & II


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Shifts in Australia-Indonesia relations

by John McCarthy and Melissa Conley Tyler

News Weekly, October 22, 2016

Since 2011, Indonesia has transformed itself from a regional leader to a global influencer; it has strengthened economically and gained stability from the consolidation of its democracy. However, Australian perceptions of Indonesia have not changed to reflect these shifts. For the bilateral relationship to achieve its promise, leaders in each sector need to take ownership and act as role models to drive positive action. John McCarthy AO and Melissa Conley Tyler write.


Since the first Indonesia-Australia Dialogue was organised as a prime ministerial/presidential initiative to build better relations during President Susilo Bambang Yudhoyono’s visit to Australia in 2011, it is interesting to reflect on what has changed in relations between the two countries since then. Great shifts have occurred in this period, each making it imperative for Australia to adjust to a new relationship with its ever-stronger neighbour.

In the third Indonesia-Australia Dialogue in Yogyakarta in August, there was broad agreement on the importance of the bilateral relationship and acknowledgement that it cannot afford long periods of crisis. From the Australian perspective, there was a sense of urgency regarding the relationship: there is an opportunity right now for Australia to engage with a rising Indonesia, its closest powerful partner.

If Australia fails to engage, it is Australia that will suffer. Australia has to adjust to a new relationship with Indonesia based on three shifts: economic, geopolitical and political.

Economic and geopolitical shift

First, there has been a significant economic shift, which is still underappreciated by many Australians. The old stereotypes of Australia as a rich country and Indonesia as a poor one have been changed by a shift in the relative importance of the economies.

After 25 years of uninterrupted economic growth, Australia now has to deal with a downturn. By contrast, there is a sense of optimism in Indonesia built on economic growth. Indonesia is projected to rise to as high as a top-four economy; by contrast Australia may remain top 20 or slip to top 30.

Second, there is a larger geopolitical shift, with the gradual decline of the United States in political and economic strength. In Indonesia, Australia is seen primarily as a part of a West now in decline. Meanwhile, Indonesia, which historically has had a lower profile in foreign policy, has transformed itself from a regional leader to a global influencer; it has become a nation ready to play a role in the new world order.

Indonesia has much to offer as a member of the G20, a member of the Organisation of Islamic Cooperation, a leading member of ASEAN and the founding member of the non-aligned movement.

Indonesian Minister
of Foreign Affairs Retno Marsudi

Third, in parallel there has been a political shift where the two countries have swapped positions: Indonesia has gained stability from the consolidation of its democracy; while Australia has experienced a period of volatility and now has a more confused political situation where political debate may become more erratic and unpredictable.

While not as pronounced as in some other Western countries, there is the pull of populism in Australia from groups in society that feel they have been left behind.

To handle these shifts will require leadership from both countries. Australia needs leaders at the national level who are not frightened by the changes and see them as occasions to develop the relationship with Indonesia.

As Greg Fealy, a specialist in Indonesian politics at the ANU, said at the Third Indonesia-Australia Dialogue: “We need politicians who are informed about Indonesia beyond the next deal.” There is also the need for second-track – that is, informal contacts between private citizens or groups of individuals – and grassroots support.

There remains the issue of each country’s perception of the other. In particular there are problems in the way that Australians see Indonesia, especially given the decline in understanding of Indonesia in Australia. The New Colombo Plan is an example of building understanding through people-to-people contact. Digital communication is a key to influence.

Untapped trade potential

For business, there is untapped potential. Because of Indonesia’s economic trajectory, Indonesian business people have not yet had to look outside Indonesia to grow. At the same time Australian business people have not always seen the opportunities: only 2 to 3 per cent of each country’s trade is with the other. Australia invests more in New Zealand than in Indonesia.

As both countries shift from being fundamentally exporters of commodities, more opportunities for complementarity will arise: whether in agriculture, food, health, education and financial services or investment by Australian superannuation funds.

Partnership agreement in the making

Australian and Indonesian companies need to be willing to takes risks if they are to achieve the big returns. Once the negotiations for the Indonesia Australia Comprehensive Economic Partnership Agreement (IACEPA) are concluded, the agreement is likely to help considerably in harnessing this potential.

In innovation, science and technology, there is real potential. International collaboration in the sciences can help enhance prosperity and solve global problems, whether through university consortiums, cooperative research-centre partnerships or the new Indonesia Australia Science Innovation Fund. High-end science and technology can help break down the old images of Australia.

Both the media and the social and cultural realm were identified as areas of great potential, especially in promoting greater understanding. Australia and Indonesia have shared values of pluralistic democracy. People-to-people contact is positive and can be deepened; in times of natural disaster Australian and Indonesian citizens have recognised their shared humanity and offered support.

On regional and global issues, there is great potential for tangible collaboration between Indonesia and Australia, for example in the G20, the Indian Ocean Rim Association, through the Bali Process, in the South Pacific and in responding to the changing role of China in the region and how it impacts on both countries.

While the two countries’ thinking has been shaped by different strategic perspectives, the established schedule of annual leaders’ meetings, meetings of foreign and defence ministers and trilateral dialogues with other countries mean that there are many opportunities to discuss what Australia and Indonesia can do together in the region and in global economic and strategic policy.

Australia and Indonesia will always have a bilateral relationship. The issue is going to be to engage in friendship for mutual benefit.

As Minister of Foreign Affairs Retno Marsudi stated at the dialogue: “Australia and Indonesia are neighbours by destiny; we hope to be good neighbours.”

John McCarthy AO FAIIA is immediate past national president of the Australian Institute of International Affairs and a former Australian ambassador to Indonesia. Melissa Conley Tyler is the national executive director of the AIIA.

This article was first published on the website of the Australian Institute of International Affairs on September 30, 2016.

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