Beyond the Bilateral: Value Chains and the Future of Australia-Indonesia Economic Engagement
By Kyle Springer and Brian Kraft
In our latest publication, Beyond the Bilateral: Regional Value Chains and the Next Phase of Australia-Indonesia Economic Engagement authors Kyle Springer and Brian Kraft argue that Australia and Indonesia are entering a new phase in their economic partnership.
The Perth USAsia Centre held a public webinar on 1 July to officially launch the publication.
Participants in the discussion included co-authors Kyle Springer, Policy Fellow at the Perth USAsia Centre and Brian Kraft, Principal Consultant at Ndevr Environmental. They were joined by Alisha Sulisto, Indo-Pacific Fellow at the Perth USAsia Centre and Deputy Managing Director of Bower Group Asia. The panel was moderated by Dr Jeffrey Wilson, Research Director at the Perth USAsia Centre.
Australia and Indonesia are entering a new phase in their economic partnership. The rise of global and Indo-Pacific value chains and new trade instruments such as IA-CEPA and RCEP will re-define what is possible in their economic engagement. In many sectors, both countries have complementarity strengths that could be combined to create a value chain ‘powerhouse’. This includes agriculture, the battery value chain, the digital economy, and education. The webinar discussed key findings of the report, and opportunities for Australia and Indonesia to leverage these complementarities to develop a ‘powerhouse’ partnership.
Kyle Springer started the discussion by emphasising that value chains have become a major characteristic of international trade with the potential to enhance Australia-Indonesia economic engagement in the future. In the agricultural sector, the two countries can utilise IA-CEPA to pair Indonesia’s rising manufacturing capabilities and Australia’s strengths in agriculture resources to create high-quality products. In the electric vehicle supply chain, Australia is well positioned as a leading producer of nickel to produce lithium-iron batteries needed to fuel electric vehicles produced in Indonesia.
Brian Kraft highlighted education and workforce training as another sector where Australia and Indonesia can apply complementarity to become greater than the sum of their bilateral parts. Australia has a large supply of high-quality higher education, and Indonesia has a large population seeking educational opportunities, particularly in vocational and tertiary studies. As COVID-19 as disrupted the flow of students across borders, Australian universities can utilise preferential market access to Indonesia’s education and training market under IA-CEPA to meet the demands of its under-serviced market for education.
Alisha Sulisto also outlined opportunities in the higher education sector, pointing to Monash University’s recent move to set up the first fully foreign owned university in campus in Indonesia. The University’s new campus in South-west Jakarta demonstrates that it is possible for Australian universities to shift into new markets and pioneer investments abroad.
Regarding Australia’s post-COVID economic recovery, it was noted that a new toolkit is required to improve investment and trade opportunities between Australia and Indonesia. Although both governments have navigated the new environment by ratifying the IA-CEPA agreement, they are increasingly distracted by the need to support their medical communities and rollout vaccine initiatives. Going forward, business and government support for implementation of existing trade agreements is essential for closer value-chain cooperation.