Since the Perth USAsia Centre’s inception, Indonesia has featured as a key country in our events and research. This is reflected by the fact that Ambassador Quinlan is the third of Australia’s ambassadors to Indonesia hosted by the Centre in the past five years. In the Centre’s view, the outlook on Australia-Indonesia relations has grown far more positive over that period. Both countries finalised and signed a free trade agreement
, IA-CEPA, in March 2019, which awaits ratification. They also signed a Comprehensive Strategic Partnership Agreement
in August 2018. Ambassador Quinlan’s visit to Perth, culminating in a roundtable discussion held at The University of Western Australia on 31 July focussed on promoting the benefits of the trade agreement to business.
Untapped economic opportunities
Indonesia and Australia have complementary economies, and Australia is well poised to contribute to Indonesia’s continued growth. Although growing steadily at 5 percent per year, Indonesia’s GDP needs to reach almost 7 percent to absorb new entrants to the workforce, and take advantage of its young demographics. The free trade agreement is a step in the right direction, allowing some competitive Australian goods tariff-free access and favourable service market gains in specific sectors like tourism and mining services.
However, some issues remain. Infrastructure gaps in Indonesia
continue to hold back economic growth. Better economic connectivity with Australia remains a challenge because Indonesia’s closest provinces to Australia, on the east side of the archipelago, remain underdeveloped while Australia’s sparsely populated northern regions grapple with their own economic limits
and remoteness. There is still a lack of practical ideas to unlock the potential economic power of Australia and Indonesia’s proximity.
Many levers in the broader Australia-Indonesia relations
Australia and Indonesia face a similar strategic environment, and now more or less agree on the geopolitical backdrop that frames the region: the emergence of the Indo-Pacific. Indonesia played a key hand in ASEAN’s adoption of the Indo-Pacific outlook
. Now that Australia and Indonesia can define their interests against this landscape, their attention can shift to what
both countries can do together to contribute to Indo-Pacific stability and prosperity.
Australia can be assured to pursue an active agenda with Indonesia, since it views its neighbour as a de facto regional power. The thinking is simple: where Indonesia goes, Southeast Asia follows. From another perspective, Australia has emerged as an important collaborator as Indonesia seeks to broaden its strategic partnerships.
Jokowi: the president with nothing to lose
The re-elected president, Joko Widodo, begins his final five-year term when he is sworn-in in October 2019. This is his last chance to re-shape Indonesia’s economic policy. Predictions of what he could achieve with his reform agenda vary, but his reputation as a president who can cut through bureaucratic red tape is on the line.
Jokowi needs to tackle long-standing issues such as over-regulation and inconsistent regulation, which makes it easy for businesses to be caught in a chaos that can be exploited by vested interests. This feeds into the country’s pervasive corruption problem. Indonesia’s attractiveness as an investment destination suffers as a result.
Inequality continues to be a problem. It is not only the concentration of wealth, but also the unequal distribution of economic opportunity across the country. Some of the poorest communities in the Indo-Pacific region are in the Indonesian archipelago.
It is clear from the discussions at this roundtable that President Jokowi does not have an easy task. A lot hinges on domestic politics: if the President can consolidate an effective coalition, if he can battle entrenched interests, and select a skilful and future-minded cabinet.
Businesses and individuals with a stake in Australia-Indonesia economic relations are encouraged to make submissions to the Joint Standing Committee on Treaties (JSCOT)
regarding the Indonesia-Australia Comprehensive Economic Partnership Agreements (IA-CEPA). Submissions are due on 23 August 2019