Indonesia country brief
The relationship between Australia and Indonesia has never been stronger. Australia and Indonesia are close neighbours with a highly productive relationship that encompasses political, security, commercial, environmental, cultural and people-to-people links. The strength of the relationship can be seen in the depth and breadth of high level exchanges between leaders, ministers and prominent people of both countries.
Australia and Indonesia cooperate in practical ways on a wide range of international issues, including counter-terrorism, people smuggling, climate change and interfaith dialogue. Australia is committed to a long-term development partnership with Indonesia. In 2011-2012, Australia’s assistance to Indonesia will be worth an estimated $558 million, making it our largest bilateral aid program.
Close cooperation between Australia and Indonesia on security matters is underpinned by the Lombok Treaty (2006),which provides a treaty-level framework for addressing traditional and non-traditional security challenges.
Indonesia and Australia have a healthy trade and economic relationship with two-way trade (merchandise and services) worth $13.8 billion in 2010-11, and two-way investment worth around $5.7 billion in 2010.
Government and politics
Indonesia is a unitary state, headed by a President and Vice President who are directly elected for a five-year term by popular vote. The President and Vice President govern with the assistance of an appointed Cabinet. Indonesia's 692-member parliament includes a 560-member House of Representatives (DPR), elected by proportional representation, with the authority to make legislation, determine the budget and oversee the implementation of legislation by the Cabinet. A 132-member advisory body called the House of Regional Representatives (DPD), with four representatives from each of Indonesia's 33 provinces, completes the parliament.
Recent political developments
Indonesia is the third largest democracy in the world, after India and the United States. A robust media and civil society, combined with direct and fair elections, are at the heart of Indonesia’s maturing political institutions. Since 2005, Indonesia has held over 350 local elections. Sub-district and district leaders and provincial governors win office through direct elections. Voters are also able to select provincial and district-level parliamentarians. Indonesia has undergone a process of decentralisation since 1999, which has seen control of large amounts of public expenditure and service delivery transferred from the central government to over 450 provincial and local governments.
President Susilo Bambang Yudhoyono was elected to a second and final five year term in presidential elections in July 2009. Receiving around 61 per cent of the national vote and winning ballots in 28 of 33 provinces, President Yudhoyono was the first Indonesian president to be re-elected to office in free and fair elections. In October 2009, the Prime Minister and Minister for Foreign Affairs attended President Yudhoyono's inauguration in Jakarta. Now well into his second term, President Yudhoyono is focused on reducing unemployment and alleviating poverty. Sound economic growth underpins his political standing.
Indonesia held parliamentary elections in April 2009 for a new national House of Representatives (DPR), Regional Representative Council (DPD), provincial legislatures (DPRD-I) and district councils (DPRD-II). President Yudhoyono's Democrat Party finished first, with approximately 21 per cent of the national vote and around 27 per cent of DPR seats. The Golkar Party and the Democratic Party of Struggle (PDI-P) each won around 15 per cent of the popular vote. Islamic-oriented parties, though their overall share of the national vote continued to decline, took the next four places, with the Prosperous Justice Party (PKS) winning around 8 per cent. New parties, Gerindra and Hanura, led respectively by former generals Prabowo Subianto and Wiranto, won around 5 per cent and 4 per cent each.
The 2009 elections took place on a vast scale. There were 171,068,667 registered voters from 33 provinces, 489 districts and 77 electoral districts. The elections were widely judged to be free and fair and were largely free of violence. The elections marked another important milestone in Indonesia's successful transition to a vibrant, open democracy. The next round of national and presidential elections will be held in 2014.
The Indonesian economy withstood the global financial crisis better than many analysts expected and has continued to grow strongly since. After reaching 6.5 per cent growth in 2011, Bank Indonesia has forecast that 2012 GDP growth in Indonesia will be 6.4 per cent. This growth is expected to be underpinned by domestic consumption, the main driver of growth in Indonesia.
Australia and Indonesia’s relationship is strong and multifaceted, with a broad agenda for bilateral cooperation. Both governments elevated the relationship to a comprehensive strategic partnership in March 2010.
President Yudhoyono has visited Australia four times during his presidency, more than any of his predecessors. President Yudhoyono last visited Australia from 2-4 July 2012 for the Australia Indonesia Leaders’ Summit in Darwin. He was accompanied by a number of ministers who, with their Australian counterparts, participated in a joint ministerial meeting chaired by leaders. Prime Minister Julia Gillard and President Susilo Bambang Yudhoyono released a Joint Communique reaffirming Australia’s and Indonesia’s comprehensive strategic partnership, based on a mutual commitment to each other’s progress, prosperity and security. Prime Minister Gillard announced a new hospital staff exchange program, between Darwin and Bali, the provision of a stand-by loan facility for Indonesia through the World Bank and signed a Memorandum of Understanding (MoU) for the transfer of four Australian Defence Force C-130 Hercules aircraft to Indonesia.
Speech: Remarks following Indonesia-Australia Leaders' Meeting, Darwin, 3 July 2012.
The Annual Leaders’ Meeting underlined the importance of the two countries’ enduring and wide-ranging cooperation to confront regional and global challenges. Australia congratulated Indonesia on its strong regional leadership, including through ASEAN and the East Asia Summit (EAS), committing to work together to maintain momentum in the EAS’ important agenda. The two leaders recognised the opportunities and benefits of collaborating in 2013 when Indonesia chairs APEC, the pre-eminent regional economic and trade forum, and in 2014 when Australia hosts the G20.
Foreign Minister Bob Carr made his first visit to Indonesia as Foreign Minister on 13-17 July 2012, and visited Australian aid programs in Yogyakarta and met Indonesian Foreign Minister Marty Natalegawa in Jakarta.
- Support for tourism, jobs in Borobudur Indonesia, 15 July 2012
- Jobs, family planning and anti-violence aid for three million Indonesian women, 15 July 2012
- Statement on Australia-Indonesia talks , 17 July 2012
The inaugural two-plus-two ministerial meeting was held in Canberra on 15 March 2012, representing a significant milestone in the strengthening of the strategic partnership between the two countries. Defence and Foreign Affairs Ministers released a Joint Communiqué charting the many areas of existing bilateral cooperation and reaffirming each side’s commitment to working closely together to shape regional developments and address global challenges.
The second Indonesia-Australia Dialogue will be held in Sydney on 24 September 2012. The Dialogue explores new ways to deepen and expand people-to-people links. It draws together high-calibre delegations from both countries led by former Ambassador to Indonesia John McCarthy and the Centre for Strategic and International Studies (Jakarta) Executive Director, Rizal Sukma.
The Australian Government is committed to further strengthening the Australia-Indonesia business relationship. At their July 2012 meeting, Prime Minister Gillard and President Yudhoyono agreed great potential exists to promote trade and investment links between the two economies – the two largest in the region. Leaders welcomed the entry into force of the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) and looked forward to the first round of negotiations on the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) taking place prior to the annual Trade Ministers’ meeting later this year. Leaders agreed to encourage an increase in bilateral trade to US$15 billion by 2015.
An estimated 400 Australian firms operate in Indonesia in a range of sectors, including mining, construction, finance and banking, food and beverages, and transport. There have been more than 100 two-way ministerial visits between Australia and Indonesia since September 2007.
Australia is the largest bilateral grant-based donor to Indonesia, providing a wide range of technical and economic support to the country. Australia provides predictable, effective and high quality assistance to Indonesia in its efforts to strengthen and grow. Policy support from Australia provides an important complement to that provided by the multilateral banks to Indonesia. For more information please see the AusAID page for Indonesia.
Cooperation on climate change
Our partnership with Indonesia on climate change is substantial and growing, both in international negotiations and through initiatives to reduce emissions from deforestation and degradation. On 9 December 2010, the Australian Foreign and Climate Change Ministers announced an allocation of $45 million to extend climate demonstration work in Kalimantan, accelerate joint work on Indonesia's National Carbon Accounting System and support Indonesia's efforts to adapt to climate change.
During the then Australian Prime Minister’s June 2008 visit to Indonesia, he and President Yudhoyono released a Joint Statement on Climate Change [PDF], reaffirming Australia's and Indonesia's resolve to respond to the serious challenge climate change presents and calling on all leaders to agree to a long-term goal for emissions reductions as stipulated in the Bali Action Plan.
During the visit the two governments also signed the Indonesia-Australia Forest Carbon Partnership which established a framework for long-term cooperation in reducing emissions from deforestation and forest degradation in developing countries (REDD+). The Partnership is operating in three key areas: policy development and capacity building to support participation in international negotiations and future carbon markets; technical support for forest carbon monitoring and measurement; and the development and implementation of REDD+ demonstration activities.
Cooperation on counter-terrorism
Australia and Indonesia share a strong commitment to mutually beneficial engagement and cooperation to combat terrorism.
Australian and Indonesian authorities have cooperated closely to investigate several major terrorist attacks in Indonesia, including the 12 October 2002 Bali bombings, the 9 September 2004 bombing of the Australian Embassy in Jakarta, the 1 October 2005 Bali bombings and the 17 July 2009 bombings of the Ritz-Carlton and Marriott hotels in Jakarta. Indonesian authorities have proven highly effective in disrupting terrorist plots and networks. More than 470 terrorists and their accomplices have been convicted since 2000.
Counter-terrorism (CT) cooperation has grown significantly and now involves wide-ranging partnerships with Indonesian agencies, notably in the areas of law enforcement, legal framework development, criminal justice, CT financing, defence, transport and border security, intelligence, and the security of chemical, biological, radiological, nuclear and explosive (CBRNE) materials. The Jakarta Centre for Law Enforcement Cooperation (JCLEC), an Australia-Indonesia initiative, has become an important regional centre for law enforcement training. More than 11,000 officials from many countries have completed training courses at JCLEC. Regional participation in JCLEC courses since 2004 has helped strengthen networks and collaboration among law enforcement officials across South-East Asia in addressing transnational crimes, such as people smuggling and money laundering, as well as terrorism.
Australia and Indonesia have also taken the lead in promoting regional CT cooperation, including by jointly hosting the Sub-Regional Ministerial Conference on Counter-Terrorism in Jakarta in March 2007. That meeting provided impetus for closer regional counter-terrorism cooperation in the areas of law enforcement, strengthening legal frameworks, countering extremism and radicalism, preventing the illicit movement of weapons and mass casualty response. Australia and Indonesia co-chaired the inaugural meeting of the South-East Asia Working Group of the Global Counter-Terrorism Forum (GCTF) in Semarang, Indonesia, from 6-7 March 2012, which focused on enhancing the management of extremist prisoners.
Australia and Indonesia signed a bilateral Counter-Terrorism Memorandum of Understanding (CT MoU) in February 2002. Underlining the long-term nature of this mutual commitment, the two governments extended the CT MoU for a further three years in February 2008 and again in February 2011. Australia and Indonesia held the second round of bilateral senior officials’ counter-terrorism consultations in Canberra in October 2011.
The Agreement between Australia and the Republic of Indonesia on the Framework for Security Cooperation (Lombok Treaty) was signed by the then Australian and Indonesian Foreign Ministers in Lombok on 13 November 2006. On 7 February 2008, Foreign Ministers exchanged notes, bringing the treaty into force. At the 9th Australia-Indonesia Ministerial Forum in November 2008, Australian and Indonesian Ministers agreed on a Plan of Action to implement the Lombok Treaty which listed a number of priority areas of bilateral security cooperation.
The Lombok Treaty is forward-looking and aims to deepen and expand bilateral cooperation and exchanges on matters affecting our common security. It provides a strong legal framework for encouraging intensive dialogue, exchanges and implementation of cooperative activities to combat terrorism and transnational crime, and to strengthen cooperation in defence, law enforcement, counter-terrorism, intelligence, maritime and aviation security, and in relation to the proliferation of weapons of mass destruction, emergency management and response.
The Agreement also provides a firm basis for the conclusion of separate arrangements in specific areas. Existing and future MoUs on issues such as counter-terrorism, defence cooperation and police cooperation will operate within the overarching framework of the treaty-level Agreement and be guided by the principles in the Lombok Treaty. It contains a clear undertaking of support for each other's territorial integrity.
Cooperation on people smuggling
Australia and Indonesia work closely together to combat people smuggling, including through co-chairing the Bali Process on People Smuggling, Trafficking in Persons and Related Transnational Crimes. At the Bali Process Ministerial Conference held on 30 March 2011, Ministers adopted a regional cooperation framework for tackling people smuggling, including options for practical action such as:
- bilateral arrangements to undermine people smuggling and create disincentives for irregular movement;
- coordinated border security arrangements; and
- strengthened information and intelligence sharing.
The ongoing work of the Bali Process is a collaborative effort in which over 50 countries and numerous international agencies participate. Since its inception, the Bali Process has delivered direct practical benefits to operational agencies through a regular program of practical, operationally focused workshops, including on protection and repatriation issues, information sharing, document and visa integrity and immigration aspects of airport security.
During President Yudhoyono's March 2010 visit to Australia, officials signed a new Implementation Framework for Cooperation to Combat People Smuggling and Trafficking in Persons. This followed the signing of a Joint Statement on People Smuggling and Trafficking in Persons by Ministers in 2008. Cooperation on People Smuggling is also included in the Lombok Treaty as a priority for enhanced cooperation in the area of law enforcement.
Indonesia and Australia enjoy a strong education relationship. More than 15,000 Indonesian students are currently enrolled in Australian institutions, delivering close to $500 million annually to the Australian economy.
Australia's development assistance in Indonesia has a significant education component. This assistance is aligned to the Indonesian Government's goal to achieve universal access to nine years of good quality education.
The Building Relationships through Intercultural Dialogue and Growing Engagement (BRIDGE) Program was established in 2008 by the Australia-Indonesia Institute (AII) within the Department of Foreign Affairs and Trade. It is funded by The Myer Foundation and the Commonwealth Government through AusAID and is managed by the Asia Education Foundation. BRIDGE is an innovative program of teacher exchange and school e-twinning, involving 323 teachers and 189 schools. BRIDGE plays a critical role in professional development for Australian and Indonesian teachers, increases Asia literacy in Australian children, as well as connecting thousands of Australian and Indonesian school children through global learning and new technology. The intercultural benefits that flow from BRIDGE and the opportunities for Australian and Indonesian children to learn about each other’s cultures and traditions, including the role of Islam, offer unique and tangible benefits for both countries.
The Australia Awards offer educational and professional development awards to citizens of the Asia-Pacific region, including over 300 scholarships per year to Indonesians. The Awards support growth in our region and build enduring links at the individual, institutional and country levels through three programs: the Australian Development Scholarships, Australian Leadership Awards and Endeavour Awards.
The Australian Centre for International Agricultural Research (ACIAR) Fellowships Scheme provides opportunities for scientists in partner countries, including Indonesia, involved in ACIAR-supported collaborative research projects, to obtain postgraduate qualifications at Australian tertiary institutions. Since mid-2009 ACIAR has supported specialised postgraduate study in Australia by 44 Indonesian scientists and economists, 32 of which were PhD awards.
Regional Interfaith Dialogue
In December 2004, Australia co-hosted with Indonesia the initial Regional Interfaith Dialogue, which aimed to help empower mainstream religious leaders and underpin the key role of faith and community leaders in bridging differences and building harmony in South-East Asia.
After the Dialogue's first meeting, the Philippines and New Zealand joined Australia and Indonesia as co-sponsors. The second Regional Interfaith Dialogue was in Cebu, the Philippines (March 2006); the third Dialogue in Waitangi, New Zealand (May 2007); the fourth Dialogue in Phnom Penh, Cambodia (April 2008); and the fifth Dialogue in Perth, Australia (October 2009).
The sixth Dialogue was held in Semarang, Indonesia, from 12-15 March 2012 and involved the participation of religious leaders, civil society, academia and media. The theme for the Dialogue was “Strengthening Collaborative Communities to Promote Regional Peace and Security: Interfaith in Action.” The Dialogue was attended by 120 delegates from co-sponsoring countries Australia, Indonesia, New Zealand and the Philippines, as well as from Brunei Darussalam, Cambodia, Laos, Myanmar, Malaysia, Singapore, Thailand, East Timor, and Vietnam.
The Australia-Indonesia Institute
The Australia-Indonesia Institute (AII) was established by the Australian Government in 1989. The AII aims to develop relations between Australia and Indonesia by promoting greater mutual understanding and expanding areas of contact and exchange between our two peoples.
Bilateral economic and trade relationship
Bilateral trade relationship
In 2011-12, Australia's two-way trade with Indonesia was $14.9 billion, up 8.3 per cent from 2010-11. Two-way trade in goods rose to $11.5 billion in 2011-12 (up 9 per cent from 2010-11), while two-way trade in services totalled $3.5 billion (up 6 per cent from 2010-11). Australia recorded a $1.8 billion trade deficit with Indonesia in 2011-12. Indonesia is our fourth largest trading partner in ASEAN and our 12th largest trading partner overall. Australian investment in Indonesia remained steady in 2011 at $5.4 billion. Indonesian investment in Australia rose 11 per cent to $454 million in 2011. There is considerable potential to take advantage of the size, proximity and complementarities of our economies to increase bilateral trade and investment, which lags behind other aspects of the relationship. The Australian and Indonesian Governments are working actively to create the right environment for continued strong growth in bilateral business and investment.
The annual Australia-Indonesia Trade Ministers' Meeting (TMM) promotes trade and investment between the two countries and addresses impediments to closer economic ties. At the tenth TMM on 12 October 2012, Trade Ministers discussed a range of bilateral trade issues and how to take forward negotiations on the Australia-Indonesia Comprehensive Economic Partnership Agreement negotiations.
In March 2012, a joint ministerial and senior business delegation led by Australian Trade Minister Craig Emerson and Agriculture Minister Joe Ludwig visited Indonesia to broaden the trade and investment relationship with Indonesia. During the visit, an AusAID funded, ACIAR implemented $20 million IndoBeef project was announced. This project will build on the experience gained from previous ACIAR projects in Indonesia to improve the livelihoods of at least 75,000 smallholder farmers in the four Indonesian provinces of Southern Sumatra, East Java and West and East Nusa Tenggara.
ASEAN-Australia-New Zealand Free Trade Area (AANZFTA)
The Agreement Establishing the ASEAN (Association of Southeast Asian Nations)-Australia-New Zealand Free Trade Area (AANZFTA) was signed by the then Minister for Trade and his ASEAN and New Zealand counterparts, on 27 February 2009 in Hua Hin, Thailand.
AANZFTA is the largest FTA Australia has concluded. ASEAN and New Zealand together account for 18 per cent of Australia's total trade in goods and services, worth $110 billion in 2011.
AANZFTA contains regional rules of origin and substantial tariff reduction and elimination commitments, as well as World Trade Organization (WTO)-plus commitments in other areas such as services, which will provide commercially meaningful benefits to Australian business and further strengthen Australia's commercial ties with ASEAN.
AANZFTA is now in force for all 12 countries that signed the Agreement: Australia, Brunei Darussalam, Burma, Cambodia, Indonesia, Laos, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam. The Agreement entered into force for Indonesia on 10 January 2012.
Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA)
The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) will cover trade, investment and economic cooperation and will build upon the ASEAN-Australia-New Zealand FTA. The first round of IA-CEPA negotiations commenced on 26-27 September 2012 in Jakarta. When concluded, the IA-CEPA will provide new avenues for Australia and Indonesia, Southeast Asian region’s two largest economies, to benefit from our trade and investment relationship.
By including economic cooperation, the IA-CEPA will go beyond a traditional FTA. The pilot IA-CEPA economic project is underway and is looking at how Australia can help improve Brahman cattle production in Indonesian villages.
A second project involves the respective chambers of commerce and bilateral business associations, who have established the Indonesia-Australia Business Partnership Group (IA-BPG). The IA-BPG will develop joint Indonesia-Australia business positions on the opportunities for greater bilateral trade, investment and business cooperation. The IA-BPG consists of the Australian Chamber of Commerce and Industry (ACCI), the Australia Indonesia Business Council (AIBC), the Indonesian Chamber of Commerce and Industry (KADIN), and the Indonesia Australia Business Council (IABC). The IA-BPG presented a progress report to Dr Emerson and Indonesia’s Trade Minister, Gita Wirjawan, at the 10th Trade Ministers’ Meeting in Canberra on 12 October 2012. The IA-BPG will produce a final position paper for both governments, and this is expected to be handed over in mid-November 2012.
Australian irade and investment strategies
Australia continues to encourage Indonesia to maintain liberalised trade and investment regimes. The Australian Government takes every opportunity to seek reductions in tariffs and remedies for non-tariff barriers affecting Australian exports, bilaterally and through multilateral and regional trade forums.
The Australian Government is currently pursuing a number of market access issues with Indonesia, including tariff and quarantine issues related to horticulture products and recent changes to Indonesia's import regulations affecting a range of products including fruit, live animals, meat products and manufactured goods.
Australia continues to work closely with Indonesia within the Cairns Group of Agricultural Fair Traders (the Cairns Group) to increase liberalisation in international trade in agricultural products during the current round of WTO negotiations. As a significant exporter of agricultural goods, Indonesia is an important ally in the Cairns Group.
Trade and investment opportunities
Austrade estimates that more than 400 Australian companies have a presence in Indonesia. Many have significant investments or are planning additional investments. Australian businesses are well represented in the traditional sectors of mining, resources and agribusiness, and are increasingly represented and performing well in:
- services (finance, professional and business services, information and communications technology, education and training, health services and franchising);
- infrastructure (interest in large scale public private partnerships, projects in green building design and health infrastructure);
- clean energy and environment (renewable energies and water management); and
- consumer goods (bulk and branded food and beverages, branded consumer goods).
More information: Austrade country page for Indonesia.
Updated November 2012