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The Future of Australian-Indonesian Relations: Are We Doomed to Bicker Forever?

On the heels of election victory; both Scott Morrison and re-elected Indonesian President Jokowi ‘Joko’ Widodo, have expressed an intention to strengthen Australian-Indonesian relations. This commitment comes after both states signed the Indonesia-Australia comprehensive Economic Partnership Agreement (IA-CEPA) in March. Despite the IA-CEPA signed months ago and both leaders expressing a commitment to strengthening relations, the Australia-Indonesian economic partnership has not progressed since.  This prompts us to ask; what is preventing these two neighbouring states from forging a stronger economic relationship?

Over the last few decades the relationship between Indonesia and Australia has been fickle, plagued with diplomatic in-fighting, blame-casting and egotistical stubbornness. In the last five years alone Australia has accused Indonesia of not doing enough to stop people smugglers, been caught spying on Indonesian government personnel and late last year, prompted further tensions by floating the idea of recognising Jerusalem as the capital as Israel. Consequently, Indonesia has accused Australia of not respecting their sovereignty. These fights and disagreements have evidently taken a toll on economic relations.

As of 2019 neither state is in the top ten trading partners of the other. Which, considering the geographic proximity of Australia and Indonesia, their expressed commitment to free trade, democracy and South East Asian cooperation, is insane. Something is preventing the relationship from progressing from cordial but fickle neighbours.

On the surface, it appears Indonesia and Australia have simply allowed bilateral disagreements to disrupt any real progress towards stronger economic relations. However, the deep-seated reality is that economic relations between Australia and Indonesia will never reach their full potential until Australia (and Australians themselves) change their attitudes toward Indonesia.

Indonesia is a rapidly growing economy. It is estimated that the Indonesian economy will grow to the size of Australia’s by 2025 and surpass Australia’s by 2040, should their growth continue at its current rate. However, to Australians, Indonesia remains the poor neighbour that is reliant on Australian aid and tourism dollars to survive.

Australians continue to view ourselves as the wealthier, white power in South East Asian region, and we approach economic relations with Indonesia with this mentality. However, this is not the reality of the dynamic between the states anymore. Despite millions of Australians travelling to Bali every year, the Australian population have little understanding of Indonesia as a country, ally and rising economic power. According to the Lowy Institute less than 1/3 of Australians are even aware that Indonesia is a democracy and only 62% of Australians believe Indonesia is an important economy for Australia. Our failure to learn anything about our close neighbour, beyond the best Bali bars and beaches, shows an evident disregard for Indonesia as a significant diplomatic and economy player in the South East Asian region.

As long as we continue to approach dealings with Indonesia with this egotistical approach and false mentality, the relationship will never reach its full potential. Indonesia does not need us to achieve economic growth, and they are aware of this fact. Unless Australia changes its approach, we will miss an opportunity to reap the benefits of Indonesia’s rapid economic rise. As Paul Keating said in his famous 1994 speech; ‘no country is more important’, we must echo the urgings of Keating in our approach to Foreign Policy and strengthen relations with Indonesia; starting by ratifying the IA-CEPA.

Grace Anderson, Australian Foreign Policy Fellow.


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