Indonesia country brief

Overview

The world’s largest archipelagic state, Indonesia, is comprised of 17,508 islands, some 6,000 of which are inhabited. Bordering the Indian Ocean to the west and the Pacific Ocean to the east, Indonesia occupies a strategic position along global sea lanes.

Indonesia is the world’s third largest democracy with a population of approximately 253 million people (July 2014 est.). While Indonesia is a democratic, secular state, it is also home to the world’s largest Muslim population. Indonesia remains ethnically diverse, with over 300 ethnic groups and more than 700 local dialects in practice. The official language is Bahasa Indonesia.

Indonesia is one of Australia’s most important bilateral relationships. Our countries enjoy a highly productive and broad-based partnership that encompasses business, education, defence, security and people-to-people links. Australia and Indonesia cooperate in practical ways on a wide range of international and regional issues particularly in multilateral forums such as the East Asia Summit, the G20 and APEC. The strength of the relationship can also be seen in the depth and breadth of high level exchanges between leaders, ministers and prominent people of both countries.

Political overview

System of Government

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 the 560-member People’s Representative Council (DPR), elected by proportional representation, with the authority to make legislation, determine the budget and oversee the implementation of legislation by the Cabinet. The 132-member Regional Representative Council (DPD), with four representatives from each of Indonesia's provinces, has authority to deal with bills affecting regional governance, local government and the management of natural and other economic resources.

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 political culture.

Recent developments

Indonesia held national parliamentary elections on 9 April 2014. These elections were one of the most logistically complex in the world, involving more than 180 million registered voters across the archipelago who elected candidates at the national, provincial and district levels. Of the ten main parties that won seats in Parliament, PDI-P received the most with 19 per cent of seats in the DPR followed by the Golkar party with 16 per cent.

The presidential election was held on 9 July 2014. On 22 July, the Indonesian General Elections Commission (KPU) announced that Jakarta Governor Joko Widodo and running mate Jusuf Kalla had won the election with 53 per cent of the national vote. President Joko Widodo was inaugurated on 20 October, succeeding Susilo Bambang Yudhoyono, who was President of Indonesia for 10 years. The inauguration was attended by various heads of state and government, including Prime Minister Tony Abbott.

Foreign policy

In his inauguration address on 20 October 2014, President Widodo said that Indonesia would ‘continue to exercise our independent and active foreign policy dedicated for the national interest, and will take part in maintaining the world order based on independence, eternal peace and social justice’.  His election platform outlined four foreign policy pillars: prioritising Indonesia’s identity as an archipelagic state; increasing Indonesia’s global role through middle-power diplomacy; expanding engagement with the Indo-Pacific region; and formulating and implementing foreign policy with public participation.  President Widodo has also placed emphasis on maritime issues and economic diplomacy.

Indonesia is a founding and active member of ASEAN.  Australia and Indonesia are the only two members from the Southeast Asian region in the G20.  Indonesia is a member of the East Asia Summit, APEC, the Indian Ocean Rim Association (IORA) and MIKTA (comprising Mexico, Indonesia, South Korea, Turkey and Australia).  It is also a founding member of the Non-Aligned Movement (NAM), the Organisation of Islamic Cooperation (OIC), and the Group of 77.  Indonesia seeks to share its experience of democratic reform with other emerging democracies, including through the Bali Democracy Forum which was established by then President Yudhoyono in 2008.

Bilateral relations

Australia and Indonesia’s relationship is strong and multifaceted, with a broad agenda of bilateral cooperation. Our relationship is strengthened by shared history, our proximity and common interests. We enjoy an extensive framework of cooperation spanning political, economic, strategic, security, development and people-to-people ties. In 2005, Australia and Indonesia agreed a Joint Declaration on a Comprehensive Partnership. In recognition of the maturity in bilateral relations, both countries agreed to elevate the relationship to a ‘strategic partnership’ in March 2010.

The bilateral relationship is underpinned by a series of regular high level meetings that facilitate engagement between Australian and Indonesian leaders. This includes the Indonesia-Australia Annual Leaders Meeting, the 2+2 Dialogue between Foreign and Defence ministers, the annual Defence ministers’ meeting and the Joint Trade Ministers’ Meeting. The most recent joint statement of the 2+2 Dialogue from 3 April 2013.

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. Collaboration was enhanced in September 2012 with the signing of the Defence Cooperation Arrangement. Both countries reaffirmed their commitment to strengthening bilateral relations in August 2014 by signing a Joint Understanding in implementation of the Lombok Treaty. The Joint Understanding provides an agreed approach to enhance intelligence cooperation between Australian and Indonesian agencies.

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. There have been more than 900 terrorism-related arrests and some 650 convictions since 2002.

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 15,000 officials from 70 countries have completed over 650 training courses at JCLEC. Regional participation in JCLEC courses since 2004 has helped strengthen networks and collaboration among law enforcement officials across Southeast Asia in addressing transnational crimes, such as people smuggling and money laundering, as well as terrorism.

Australia also co-chaired the Global Counter-Terrorism Forum (GCTF) South-East Asia Working Group with Indonesia from September 2011 to November 2013.  In April 2014, the GCTF established a new working group, co-chaired by Australia and Indonesia, with a focus on detention and rehabilitation of terrorist offenders.

Cooperation on combatting people smuggling

Australia and Indonesia work closely together to combat people smuggling and human trafficking, including through co-chairing the Bali Process on People Smuggling, Trafficking in Persons and Related Transnational Crime. The Bali Process is led at ministerial level by the Foreign Ministers of both countries. Bali Process ministers meet biennially in Bali to provide a mandate for ongoing cooperation. The Bali Process works to strengthen regional cooperation and engagement including through the Regional Support Office (RSO) in Bangkok, launched in September 2012 and co-managed by Australia and Indonesia. The RSO promotes greater information sharing and practical cooperation on refugee protection and international migration, human trafficking and smuggling and border management.

At the Fifth Bali Process Ministerial Conference on 2 April 2013, Ministers agreed to establish cooperation between the RSO and the Jakarta Centre for Law Enforcement Cooperation (JCLEC) to maximise capacity building opportunities. Ministers agreed to practical measures to advance criminalisation of people smuggling and human trafficking and strengthen implementation of domestic people smuggling and human trafficking laws, including through policy guides developed to assist policy makers and practitioners to criminalise people smuggling and human trafficking. Ministers also agreed to establish a Trafficking in Persons Working Group that promotes more effective and coordinated responses to prevention, investigation and prosecution and victim protection.

Australia will continue to strongly support cooperative measures with Indonesia to improve border integrity and enforcement. We will also continue to work with our regional partners to combat people smuggling and human trafficking, by strengthening legal frameworks and boosting the capabilities of criminal justice agencies and civil society organisations.

People-to-people links

People-to-people links are a vital component of the close and broad-based bilateral relationship with Indonesia. Through tourism and cultural, sporting and educational engagement, people and communities enhance their mutual understanding.

Links between schools, exchanges, visits and scholarships provide an important foundation for engagement. Organisations, including the Australia-Indonesia Institute (AII), the Australia-Indonesia Centre, the Australia-Indonesia Youth Association and student associations are continuously building links between people.

The Indonesia-Australia Dialogue provides a forum for cross-sectoral engagement. The second Indonesia-Australia Dialogue was held in Sydney on 3-4 March 2013. The Dialogue explored new ways to deepen and expand people-to-people links. It drew 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 next dialogue is expected to take place in 2015.

The reciprocal work and holiday visa programme allows young people (aged 18-30) to have an extended holiday supplemented by short-term employment in each other’s countries. For more information see the Department of Immigration and Border Protection Fact Sheet on the Work and Holiday Visa Programme and the website of the Embassy of the Republic of Indonesia.

Australia will continue to promote new ties between people, communities and organisations to deepen understanding, awareness and cooperation between both countries.

Education

Indonesia and Australia enjoy a strong education relationship. Australia’s education and training links with Indonesia are formalised under the Memorandum of Understanding (MoU) on Cooperation in Education and Training between the Department of Education (then DEEWR) and the Ministry of Education and Culture (MoEC, then Ministry of National Education) which dates back to 1992. Indonesia was the seventh largest source of international students in Australia in 2013 with 13,300 students enrolled in over 17,100 courses. Indonesia is currently the fifth most popular destination in Asia for international study experiences by Australian university students and Indonesia is one of the first countries to participate in the pilot implementation of the New Colombo Plan, an initiative to encourage the best and brightest young Australians to work and study in the region. More information can be found on DFAT’s New Colombo Plan page.

The Building Relationships through Intercultural Dialogue and Growing Engagement (BRIDGE) Programme was established in 2008 by the Australia-Indonesia Institute (AII) within the Department of Foreign Affairs and Trade. BRIDGE uses technology to builds links between Australian and Indonesian teachers and students. The project has established 112 Australia-Indonesia school partnerships and directly involved almost 450 Australian and Indonesian teachers. More than 100,000 Australian and Indonesian students have been directly and indirectly impacted by the Australia-Indonesia BRIDGE Project and almost 6,000 Australian and Indonesian teachers have been indirectly engaged in the BRIDGE project since 2008. BRIDGE plays a critical role in increasing Asia literacy in Australian children and is an innovative model for linking Australian schools with partner schools in Asia. The intercultural benefits that flow from BRIDGE and the opportunities for Australian and Indonesian children to learn about each other’s cultures and religions offer unique and tangible benefits for both countries.

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 Australia Awards program for Indonesia is the largest and longest running scholarship program of its kind offered by the Australian Government to any of its development partner countries. The program is valued by Indonesia as a high quality, merit-based, scholarships program. It focuses on areas of importance to the development of Indonesia’s human resource gaps, including those aimed at strengthening economic governance and the delivery of services in health and education. For the 2014 intake a total of 829 new awards have been offered in Indonesia so far, comprising 525 long term and 304 short term awards. A total of 2982 long term awards and 1395 short term awards have been provided to Indonesia from 2007–2014.

The Australia-Indonesia Institute

Established 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. The AII has a number of fantastic flagship programs including BRIDGE, the Australia Indonesia Youth Exchange Program (AIYEP) and the Muslim Exchange Program (MEP). The AII also runs public grant rounds which fund innovative programs in arts and culture, education, religion and society, media, youth, women and girls and science and technology. These opportunities and many more can be accessed at the AII website.

Volunteers

The Australian Volunteers for International Development (AVID) program promotes economic growth and poverty reduction in the Indo-Pacific region by assisting host organisations to deliver effective and sustainable development outcomes. See www.australianaidvolunteers.gov.au.

Regional Interfaith Dialogue

Australia is also a co-sponsor of the Regional Interfaith Dialogue, together with Indonesia, the Philippines and New Zealand. In addition to the co-sponsoring countries, the eight remaining ASEAN countries also participate in the Dialogue, as well as Timor-Leste, Papua New Guinea and Fiji. The Dialogue has been held on six occasions, most recently in Semarang, Indonesia in March 2012. The theme of the Semarang Dialogue was "Strengthening Collaborative Communities to Promote Regional Peace and Security". The Semarang Dialogue followed on from a positive history of regional Dialogues: the Yogyakarta Dialogue on Interfaith Cooperation (December 2004), the Cebu Dialogue on Regional Cooperation for Peace, Development and Human Dignity (March 2006), the Waitangi Dialogue on Building Bridges (May 2007), the Phnom Penh Dialogue on Interfaith Cooperation for Peace and Harmony (April 2008), the Perth Dialogue on Future Faith Leaders: Regional Challenges and Co-operation (October 2009).

The Plan of Action from the sixth Dialogue is available here: Semarang Plan of Action

Economic overview

Indonesia has been among the strongest performing of the large emerging economies over recent years.  It is the largest economy in Southeast Asia and fifteenth largest economy in the world.  Economic growth averaged around six per cent in the six years to 2012.  Growth moderated to 5.8 per cent in 2013 and is forecast at 5.2 per cent for 2014.

Indonesia’s long-term economic potential is significant, with a population of approximately 253 million and a growing middle class of around 50 million people.  Continued economic growth is helping the country reduce poverty — although more than 40 per cent of the population still lives on less than $2 a day.

Trade and investment

There is considerable potential for Australia to expand its trade, investment and economic cooperation relationship with Indonesia. Rising Indonesian demand for consumer goods and services, particularly for food, education, financial services, healthcare, ICT and tourism, aligns well with Australian industry capabilities.

Australia’s two way trade with Indonesia was worth $14.9 billion in 2013, making Indonesia our 12th-largest trade partner. Two-way trade in goods was valued at $11.2 billion in 2013. Australia’s major merchandise exports to Indonesia are:

  • wheat ($1.2 billion in 2013)
  • sugar, molasses and honey ($363 million)
  • live animals (excluding seafood) ($302 million)
  • aluminium ($284 million)
  • crude petroleum ($207 million)
  • cotton ($195 million)

Two way trade in services reached almost $3.7 billion in 2013. Education-related personal travel continues to dominate Australia’s services exports to Indonesia (44.8 per cent of total services exports) and personal travel (excluding education) dominates Australia’s services imports from Indonesia (74.9 per cent).

Australian investment in Indonesia is growing in value.  In 2013, Australia’s total investment in Indonesia was valued at $10.9 billion, up from $6.2 billion in 2012. Indonesian investment in Australia was around $959 million in 2013.

Australian businesses in Indonesia

As Indonesia's economy develops and diversifies, Australian investment in Indonesia is also growing. Austrade estimates that more than 250 Australian companies now have a presence in Indonesia. Many have significant investments or are planning additional investments.

Australian investment in the banking, finance and insurance sectors is an important growth area. Australia's leading banks are prominent in Indonesia's financial services sector. ANZ is one of Indonesia's ten largest private commercial banks. The Commonwealth Bank has operated in Indonesia since 1997 and specialises in retail and small business banking and insurance. A number of other prominent Australian financial services providers, including Macquarie Group and IAG also have operations in Indonesia.

Australian companies in Indonesia are well-regarded for the quality of their work and their contributions to local communities through corporate social responsibility programs. Thirty-eight Australian-listed companies are active in more than 120 mining ventures across Indonesia, including BHP Billiton, Newcrest, Leighton and Thiess.

Australian companies are also active in agribusiness, and are increasing their profile in the services, infrastructure, clean energy and environmental sectors.

With Indonesia and Australia as the two largest economies in the region, there is considerable potential to take advantage of the size, proximity and complementarities of our economies to increase bilateral trade and investment. The Australian and Indonesian Governments are working actively to create the right environment for continued strong growth in bilateral business and investment.

Australian businesses seeking to invest in Indonesia should ensure that they conduct due diligence and familiarise themselves carefully with the business environment on the ground.

Austrade’s team in Indonesia focuses on trade and investment opportunities and would be able to assist Australian businesses in the following sectors:

  • Infrastructure
  • Agribusiness and food
  • Education and training
  • Healthcare
  • ICT and telecommunications
  • Automotive and advanced manufacturing
  • Financial and business services
  • Mining and oil & gas

Information on doing business and opportunities in Indonesia

Australian trade and investment strategies

A strong and comprehensive legal framework underpins our growing economic and commercial ties.

Australia continues to work closely with Indonesia in in multilateral, global and regional fora, including the World Trade Organization (WTO), APEC and the G20, to support global and regional trade liberalisation and economic growth. Indonesia and Australia work together in 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.

The entry into force of the Agreement establishing the ASEAN (Association of Southeast Asian Nations)-Australia-New Zealand Free Trade Area (AANZFTA) provides greater certainty to both Indonesian and Australian businesses and dramatically reduces tariffs on two-way trade. Negotiations have also commenced on a Regional Comprehensive Economic Partnership (RCEP), which will build on the outcomes of AANZFTA and promote liberalisation and growth in the region.

Negotiations have begun on an Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), to further liberalise bilateral trade, encourage greater foreign direct investment in Indonesia and provide a framework for greater economic cooperation.

Market access

Australia continues to encourage Indonesia to liberalise its 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 changes to Indonesia's import regulations affecting a range of products including fruit, live animals, meat products and manufactured goods.

Development assistance

More information on development assistance to Indonesia.

Direct Aid Program

The Direct Aid Program is a small grant scheme that partners with various organisations to support projects which directly contribute to the welfare and the income-generating capacity of poor or disadvantaged groups, or enhance the long-term productivity and sustainability of the physical environment.

Find out more about the Direct Aid Programme.

High level visits

Prime Minister Abbott has made three official visits to Indonesia since he entered office in September 2013. On his first official visit to Indonesia on 30 September-1 October 2013, accompanied by Foreign Affairs Minister Bishop and Trade and Investment Minister Robb, he led a delegation of senior Australian business people. Prime Minister Abbott and then President Yudhoyono released a joint communiqué welcoming the continued enhancement of the bilateral comprehensive partnership and underscoring the continued importance of working closely within regional and global frameworks.

Prime Minister Abbott met then President Yudhoyono again on 4 June 2014 on Batam Island, Indonesia, for further discussions to advance the bilateral relationship. During the joint press statement, President Yudhoyono said the meeting reinforced efforts to safeguard and further enhance cooperation and partnership between Australia and Indonesia.

President Yudhoyono visited Australia four times during his presidency, more than any of his predecessors. In 2010 he was accorded the honour of addressing a joint sitting of Parliament – the first by any visiting Indonesian. President Yudhoyono last visited Australia on 2-4 July 2012 for the Australia Indonesia Leaders’ Summit in Darwin.

Prime Minister Abbott attended the inauguration of President Joko Widodo on 20 October 2014, stating that the relationship was strong and he was confident it could be stronger in the future. President Joko Widodo attended the G20 Leaders’ Meeting in Brisbane on 15-16 November 2014.

Foreign Minister Bishop has visited Indonesia five times since coming to office. In addition to her first visit in September 2013 while accompanying the Prime Minister, the Foreign Minister attended the APEC Foreign Ministers’ meeting in Bali on 4-5 October 2013, the Bali Democracy Forum on 7-8 November 2013 and made a separate visit to Jakarta on 5 December 2013.  The Foreign Minister also visited Indonesia on 28 August 2014 to sign the Joint Understanding with her Indonesian counterpart.

On his first official overseas visit to Indonesia in September-October 2013, Trade and Investment Minister Robb focused on enhancing bilateral trade, building stronger business and investment links with Indonesia, as well as deepening regional economic integration. He also met with key ministerial counterparts and representatives of Indonesian business, including in the agriculture sector. During the visit, Minister Robb also attended Trans-Pacific Partnership negotiations and the APEC Ministerial Meeting in Bali.  Minister Robb visited Indonesia again for the 9th World Trade Organization (WTO) Ministerial Conference (MC9) and the Cairns Group Ministerial Meeting in Bali on 2 in December 2013.



Last Updated: 24 January 2014