The growing uncertainty in the relationship between the two regional neighbors has the potential to cause economic as well as political instability in a very fractious neighborhood. 
The Australian-Indonesian economic, political and trade relationship is a very delicate one.
On one side, you have Indonesia, one of the most successful and biggest democracies in the world. On the other side you have Australia, one of the largest country continents with a sparse population of 22 million and strong cultural and political links to the United Kingdom.
Regionally, the relationship between the two is quite significant, with both countries seeing the importance of regional stability through organizations such as ASEAN, the East Asia Summit (EAS), and the ASEAN Regional Forum (ARF).
In terms of economics, the relationship is quite robust. The two-way trade between Australia and Indonesia was worth around $14.9 billion in 2011-2012, and since then trade between the two countries has steadily increased at 7.8% per annum.
Indonesia is Australia’s largest recipient of aid, with $541.6 million in Australian development aid in 2012–2013. Furthermore, Indonesia is Australia’s second largest tourist destination after New Zealand, while Australia has a massive influx of Indonesian students in its higher education programs.
The “rise of Indonesia”
Australian foreign policy in the 1950s and 1960s saw Indonesia as the only potential threat to the territorial integrity of Australia’s northern borders. Australia was especially cautious when the adventurist President Sukarno ruled Indonesia. However, when President Suharto came to power, a more cautious foreign policy between the two states was undertaken, particularly in the cold war climate of the 1970s and 80s.
Since 1998, Indonesia has become one of the region’s most vibrant democracies and an economic powerhouse in the Southeast Asian region. Its economy has been growing at a steady rate of 5% per annum for the last decade and by 2030, Indonesia will have the 10th largest economy in the world.
The Indonesian economy has already surpassed the Australian economy in terms of GDP in 2010. However, Australia remains mute to the potential ability of the Indonesian market and trade remains slow, with Indonesia being Australia’s 12th largest trading partner.
Let us not forget that Indonesia also has around 250 million people and an increasingly more educated and more specialized workforce, which will inevitably see it play a bigger part in ASEAN and vis-a-vis China.
Boats, executions, and spies
Both powers share regional aspirations and recognize the importance of containing growing Chinese influence in South East Asia. However, politically charged issues have plagued this relationship and have the potential to affect trade and the political relationship between the two countries.
These last five years have not been the first time there has been controversy. There has been a history of issues affecting this relationship, including the killing of Australian Journalists in Balibo in 1975, Australia’s intervention in East Timor in 1999, and the banning of live sheep exports.
Most recently, the execution of two Australian citizens involved in the Bali Nine arrests for drug charges has led to the recent diplomatic spat between the two nations. Australia campaigned diplomatically for over a decade for clemency for Andrew Chan and Myuran Sukumaran, and this issue was a politically charged one in both countries.
Australia has recalled its Ambassador, and both the Prime Minister Tony Abbot and Foreign Minister Julie Bishop have stated that the relationship will “not be business as usual” and that “there will be consequences.” As a consequence, aid to Indonesia has been reduced by 40%.
This issue is combined with spying allegations that were leaked in 2013, indicating that the Australian Secret Intelligence Service (ASIS) had been tapping the phones of former President Susilo Bambang Yudhoyono’s and his immediate family.
This issue had been discussed between the two states, and relations were on the mend, however the execution of the two Bali nine members has once again thrown the relationship into turmoil. Also, the current conservative government of Australia’s hardline response to asylum seekers is not making many friends within the current Widodo government.
The Australian government has been accused of towing back boats full of asylum seekers into Indonesian sovereign waters and leaving them there. The repercussions of these events have led to a lack of cooperation in fighting against people smuggling, and increased issues of Australia violating Indonesia’s territorial sovereignty.
There is also the increasing issue of Australia flaunting its obligations in terms of refugees and leaving Indonesia to process these asylum seekers.
What lies ahead?
The big question that remains on the lips of both Indonesian and Australian policymakers is what will the future be for this relationship. Economically, there is great potential for both countries to increase trade and investment within each other’s economies.
Indonesia has an increasing highly educated workforce, and Australian businesses have the opportunity to invest in one of the quickest developing economies outside China and India. In terms of security, particularly with China’s increasing military projection in the South China Sea, it is important for Australia and Indonesia to work together.
Australia’s close relationship with the United States and Indonesia’s political prowess within ASEAN, EAS, and the ARF could provide a counterforce to increasing Chinese power projection in the region. However, as long as these politically charged issues remain, it will be hard to see much cooperation occur between these two.
Australia and Indonesia must realize that they have the potential to either become great allies, or even greater enemies.
Iain MacGillivray is an Independent Political Risk Analyst who focuses on Australian, South East Asian, Chinese and Middle Eastern Politics. He has worked as a Senior Academic Tutor in Middle Eastern Politics at the University of Melbourne and has been a freelance journalist for many years. Iain currently holds a Masters of International Relations from the Melbourne School of Government, University of Melbourne and has conducted research at Fudan University, Shanghai.
The Australian-Indonesian economic, political and trade relationship is a very delicate one.On one side, you have Indonesia, one of the most successful and biggest democracies in the world. On the other side you have Australia, one of the largest country continents with a sparse population of 22 million and strong cultural and political links to the United Kingdom.
Regionally, the relationship between the two is quite significant, with both countries seeing the importance of regional stability through organizations such as ASEAN, the East Asia Summit (EAS), and the ASEAN Regional Forum (ARF).
In terms of economics, the relationship is quite robust. The two-way trade between Australia and Indonesia was worth around $14.9 billion in 2011-2012, and since then trade between the two countries has steadily increased at 7.8% per annum.
Indonesia is Australia’s largest recipient of aid, with $541.6 million in Australian development aid in 2012–2013. Furthermore, Indonesia is Australia’s second largest tourist destination after New Zealand, while Australia has a massive influx of Indonesian students in its higher education programs.
The “rise of Indonesia”
Australian foreign policy in the 1950s and 1960s saw Indonesia as the only potential threat to the territorial integrity of Australia’s northern borders. Australia was especially cautious when the adventurist President Sukarno ruled Indonesia. However, when President Suharto came to power, a more cautious foreign policy between the two states was undertaken, particularly in the cold war climate of the 1970s and 80s.
Since 1998, Indonesia has become one of the region’s most vibrant democracies and an economic powerhouse in the Southeast Asian region. Its economy has been growing at a steady rate of 5% per annum for the last decade and by 2030, Indonesia will have the 10th largest economy in the world.
The Indonesian economy has already surpassed the Australian economy in terms of GDP in 2010. However, Australia remains mute to the potential ability of the Indonesian market and trade remains slow, with Indonesia being Australia’s 12th largest trading partner.
Let us not forget that Indonesia also has around 250 million people and an increasingly more educated and more specialized workforce, which will inevitably see it play a bigger part in ASEAN and vis-a-vis China.
Boats, executions, and spies
Both powers share regional aspirations and recognize the importance of containing growing Chinese influence in South East Asia. However, politically charged issues have plagued this relationship and have the potential to affect trade and the political relationship between the two countries.
These last five years have not been the first time there has been controversy. There has been a history of issues affecting this relationship, including the killing of Australian Journalists in Balibo in 1975, Australia’s intervention in East Timor in 1999, and the banning of live sheep exports.
Most recently, the execution of two Australian citizens involved in the Bali Nine arrests for drug charges has led to the recent diplomatic spat between the two nations. Australia campaigned diplomatically for over a decade for clemency for Andrew Chan and Myuran Sukumaran, and this issue was a politically charged one in both countries.
Australia has recalled its Ambassador, and both the Prime Minister Tony Abbot and Foreign Minister Julie Bishop have stated that the relationship will “not be business as usual” and that “there will be consequences.” As a consequence, aid to Indonesia has been reduced by 40%.
This issue is combined with spying allegations that were leaked in 2013, indicating that the Australian Secret Intelligence Service (ASIS) had been tapping the phones of former President Susilo Bambang Yudhoyono’s and his immediate family.
This issue had been discussed between the two states, and relations were on the mend, however the execution of the two Bali nine members has once again thrown the relationship into turmoil. Also, the current conservative government of Australia’s hardline response to asylum seekers is not making many friends within the current Widodo government.
The Australian government has been accused of towing back boats full of asylum seekers into Indonesian sovereign waters and leaving them there. The repercussions of these events have led to a lack of cooperation in fighting against people smuggling, and increased issues of Australia violating Indonesia’s territorial sovereignty.
There is also the increasing issue of Australia flaunting its obligations in terms of refugees and leaving Indonesia to process these asylum seekers.
What lies ahead?
The big question that remains on the lips of both Indonesian and Australian policymakers is what will the future be for this relationship. Economically, there is great potential for both countries to increase trade and investment within each other’s economies.
Indonesia has an increasing highly educated workforce, and Australian businesses have the opportunity to invest in one of the quickest developing economies outside China and India. In terms of security, particularly with China’s increasing military projection in the South China Sea, it is important for Australia and Indonesia to work together.
Australia’s close relationship with the United States and Indonesia’s political prowess within ASEAN, EAS, and the ARF could provide a counterforce to increasing Chinese power projection in the region. However, as long as these politically charged issues remain, it will be hard to see much cooperation occur between these two.
Australia and Indonesia must realize that they have the potential to either become great allies, or even greater enemies.
Iain MacGillivray is an Independent Political Risk Analyst who focuses on Australian, South East Asian, Chinese and Middle Eastern Politics. He has worked as a Senior Academic Tutor in Middle Eastern Politics at the University of Melbourne and has been a freelance journalist for many years. Iain currently holds a Masters of International Relations from the Melbourne School of Government, University of Melbourne and has conducted research at Fudan University, Shanghai.
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