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Indonesia Country Brief

Introduction/overview

Australia and Indonesia are close neighbours, with a highly productive relationship that ranges across political, security, commercial, 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, illegal fishing, people smuggling, avian influenza, climate change and interfaith dialogue. Australia is committed to a long-term development partnership with Indonesia. In 2009-2010, Australian aid to Indonesia will be worth an estimated $452.5 million, making Indonesia the largest recipient of Australian aid.

Security cooperation is enhanced by the Lombok Treaty, which provides a unique 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 $10.3 billion in 2007-2008, making Indonesia our 13th largest trading partner, and two-way investment worth around $4.5 billion in 2007-2008.

Political overview

Government and Politics

Indonesia is a unitary state, headed by an executive 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, and a 132-member advisory body called the House of Regional Representatives (DPD), with four representatives from each of Indonesia’s 33 provinces.

Recent Political Developments

Indonesia has experienced a major political transition since May 1998 with the fall of the Suharto Government, which ruled Indonesia for 32 years. The country has transformed into a democratic and decentralised state, with a vibrant media and active civil society. The decentralisation process, underway since 1999, has transferred control of large amounts of public expenditure and service delivery 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 on 8 July 2009. Winning around 61 per cent of the national vote and a majority in 27 of 34 provinces, Yudhoyono is the first Indonesian president to be re-elected to office in free and fair elections. Former President Megawati won 27 per cent of the vote and Vice President Kalla around 12 per cent.

Indonesia also staged parliamentary elections on 9 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 percent of DPR seats. Golkar Party and Indonesia’s Democratic Party of Struggle (PDI-P) each won around 15 per cent. Islamic parties 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 respectively.

The 2009 parliamentary and presidential elections ran smoothly despite some administrative problems, and marked another important milestone in Indonesia’s remarkable transition into a vibrant, open democracy. The elections took place on a vast scale. At the 9 April election, there were 171,068,667 registered voters in Indonesia from 34 provinces, 489 districts and 77 electoral districts.

President Yudhoyono and Vice-President-elect Dr Boediono will be formally appointed to a five-year term on 20 October 2009, and a new cabinet selected on, or shortly after, their 20 October inauguration.

Economic overview

The Indonesian economy has withstood the global financial crisis better than many analysts expected. Within the region, only China and India have outperformed Indonesia. The International Monetary Fund (IMF) has forecast growth in Indonesia of 4 per cent in 2009.

The IMF expects Indonesia to grow by 4.8 per cent in 2010. GDP growth in 2010 is expected to be underpinned by consumption spending, the main driver of growth in Indonesia. The implementation of the Indonesian Government’s fiscal stimulus package will also make a strong contribution to growth. The Indonesian Government has launched a fiscal stimulus package of Rp 73 trillion (US$6.2 billion). The package comprised tax cuts, infrastructure investment and subsidies aimed at boosting domestic demand.

The IMF expects Indonesia to return to trend growth of around 6 per cent within two years provided progress is made in key areas such as infrastructure, investment and energy subsidy reform.

In response to the global financial crisis and a request from Indonesia, Australia has agreed to provide a US$1 billion Standby Loan, as part of a US$5.5 billion World Bank-led package, which also includes the Asian Development Bank and Japan. Indonesia has also entered into currency swap agreements with China (US$14.6 billion), Japan (US$12 billion) and South Korea (US$2 billion) under the Chiang Mai Initiative (an initiative under the ASEAN+3 framework to create a network of bilateral swap agreements among ASEAN+3 countries).

Bilateral relationship

Australia-Indonesia Relations

Australia and Indonesia are close neighbours enjoying a wide-ranging relationship encompassing political, security, commercial, cultural and people-to-people links. Approximately 16, 000 Indonesian students were enrolled to study in Australia in 2008. An estimated 400 Australian firms are operating in Indonesia in a range of sectors, including the mining, construction, finance and banking, food and beverages, and transport sectors.

At the 8th Trade Ministers’ Meeting (TMM), held in Sydney on 19 February 2009, Minister Crean and his Indonesian counterpart, Dr Pangestu, reaffirmed their commitment to stand together to face the challenges posed by the global economic crisis. The Ministers also showed their strong support for concluding a comprehensive, balanced outcome in the World Trade Organization (WTO) Doha Round of trade negotiations in 2009. Both Ministers welcomed the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) (subsequently signed on 27 February) and the final draft of the Joint Feasibility Study on an Indonesia-Australia Free Trade Agreement (FTA). The feasibility study has now been completed and made available to the public on the Department’s website.

The Australia-Indonesia: Partners in a New Era conference, held in Sydney from 19-21 February 2009, saw the largest Indonesian delegation to ever visit Australia. A landmark event in bilateral relations, the conference helped generate a number of fresh ideas on how we can add new depth to links with our vital northern neighbour. Over 140 delegates participated from a range of sectors, including politics, business, the public service, media, academia, civil society and the arts/culture. Participants engaged in a lively exchange of ideas on the core conference themes of democracy and governance, economic development, trade and investment, the environment, and people and perceptions.

The Lowy Institute for International Policy has published a paper on conference outcomes, including a number of recommendations on how both countries can strengthen two-way people-to-people links to increase understanding and cooperation among Australians and Indonesians. Both governments are now working with conference participants to progress some of these ideas. The conference was organised by the Department’s South-East Asia Division, with support from the Australia-Indonesia Institute (AII), AusAID and the Lowy Institute for International Policy. ANZ, McRae Investments and Arthur Allens Robertson also provided generous financial support for key conference networking events.

The 9th Australia-Indonesia Ministerial Forum was held in Canberra on 12 November 2008 (see the text of the Joint Ministerial Statement and the Joint Statement on People Smuggling and Trafficking in Persons) and was attended by seven Australian and six Indonesian ministers. The Forum, established in 1992, is the peak bilateral consultative forum between the two governments. Ministers:

The 9th Australia Indonesia Ministerial Forum followed visits by the Prime Minister, Minister for Foreign Affairs and Minister for Trade to Indonesia in 2008. During his visit to Jakarta and Aceh in June 2008, Prime Minister Rudd:

In August 2008, Australian Foreign Minister Stephen Smith visited Indonesia for the second time. During his visit Mr Smith:

A Joint Declaration on Comprehensive Partnership between Australia and the Republic of Indonesia was signed during President Yudhoyono's visit to Australia on 3-6 April 2005.
In 2008-2009, the Australian Government managed a major cultural diplomacy program in Indonesia - IN2OZ. The program highlighted the creativity at the heart of Australia’s world-class science and technology industries and education sector, demonstrating Australia’s diversity, dynamism and tolerance. In 2008, IN2OZ supported Australian artists at the Jakarta International Java Jazz Festival, an Indonesian tour of Australian rock band Young and Restless and visits to Indonesia by Australian idol star, Jessica Mauboy. Events in 2009 included an Australian film festival in January and an exhibition of the work of Indigenous artists from the Balgo Hills in remote WesternAustralia.

Development Assistance

Australia is the largest bilateral donor to Indonesia providing a wide range of technical and economic opportunities to a fast-growing, middle-income Indonesia. Policy advice from Australia provides an important complement to that provided by the multilateral banks.

The aid partnership is central to the Australia-Indonesia bilateral relationship. It provides predictable, effective and high quality support to the Government of Indonesia in its efforts to strengthen and grow.

Work in education, health and infrastructure is helping the Government of Indonesia to meet the Millennium Development Goals (MDGs), particularly in the less developed eastern provinces.
Work around preventing deforestation is assisting Indonesia to meet climate change challenges. Australia has been a key ally to Indonesia as it shapes its response to the global recession.

This aid partnership is Australia’s largest and most innovative, with projected spending over the next five years to 2013 of up to $500 million per year. It is built around a commitment to assisting Indonesia meet the challenges of managing a diverse, decentralized economy of 230 million people where over 15 per cent are still living below the poverty line.

The program supports a range of innovative approaches in the poorest districts, aimed at demonstrating new and more effective ways of delivering services and fighting poverty. Lessons from these experiences feed into greater Australian engagement at the central and provincial levels of government. This allows the program to achieve an impact much larger than the original investment.

All this is underpinned by a pledge to deliver effective aid, with the signing in 2009 of the Jakarta Commitments, which oblige Australia to meet internationally agreed targets to improve the way that aid is delivered.

Australian aid is focused primarily on three specific sectors – education, infrastructure and health. Indonesia is making enormous investments in education, primarily by tripling its investment and ensuring that a decent education be available for all Indonesian children. Australia is helping this effort by ensuring the poorest communities gain access to a full nine years of primary and junior secondary schooling.

The flagship activity within this sector is the Australia- Indonesia Basic Education Program, which supports raising the net enrolment rate in junior secondary education from 75 per cent to 95 per cent by 2012. Under this program, the Australian Government is building or extending 2000 junior secondary schools across 21 provinces, including in some of Indonesia’s poorest and most remote areas. Construction is scheduled to be completed in 2009.

Infrastructure has long been acknowledged as one of the critical constraints to faster economic growth. Australia is working closely with Indonesian counterparts to improve infrastructure planning and investment. Some of the biggest problems to overcome include: long-standing issues with corruption; a poor investment climate for private sector partnerships; and inadequate program design and maintenance.

Australia is investing heavily in this critical sector to improve oversight, planning and quality control, with a special emphasis on ensuring that good quality infrastructure benefits Indonesia’s many isolated and poor areas.

Australia will support Indonesia’s ‘10 million additional water connections’ target and has provided technical assistance and funding for over 500 kilometres of high quality national roads that will be completed between 2009 and 2011.

Improving Indonesia’s maternal and baby mortality rates is one of Indonesia’s top health priorities. At present, the national ministry is facing difficulties making the types of systemic reform necessary for a better national health care system. Despite this, Australia is working in a significant number of provinces and districts where there are reformers and willing partners for joint programs.

Nusa Tenggara Timur (NTT) Province has the third highest provincial maternal mortality rate in Indonesia of 306/100,000 births. We are working to help reduce this to 153/100,000 live births by 2013. In HIV - where we have a 12 year history of collaboration - Australia has used its technical know how, based on domestic and international experience, to help develop national policies and to strengthen regional capacities and responses.

With these three sectors as priorities, Australia nevertheless works on a broad range of other issues. In economic governance, we have carefully strengthened our peer-to-peer institutional links and targeted high-quality technical assistance in policy areas around tax, debt, trade and financial systems stability.

Support to the justice sector and electoral programs is helping to further develop democracy and the rule of law. In disaster risk reduction, Australia recently announced the opening of the Australia Indonesia Facility for Disaster Risk Reduction.

Indonesia emerged from the 1998 economic crisis as East Asia’s largest and most stable democracy. Political reform has been accompanied by economic growth. No longer trapped by widespread poverty, Indonesia increasingly faces the development challenges shared by middle income and rich countries, such as developing a globally competitive economy; promoting equity by opening up opportunities for the poor; supporting a dynamic knowledge sector; and becoming a responsible participant in the conservation of the world’s environmental heritage.

Before the global recession struck, Indonesia was growing at approximately six per cent per annum. If such growth levels can be regained, the country will be well into middle income territory by 2015. Even so, there will still be more poor people in Indonesia than in the whole of the Pacific, East Timor and parts of the Mekong, so fighting poverty will remain the core objective.

With a bigger and more capable economy, the way that Australian aid will be delivered will need to change. The absolute quantity of aid will inevitably matter less than the quality of the ideas provided and how they are used. One thing, however, will remain constant – the Australian-Indonesian partnership will continue to mature and deepen in ways that reflect the growing ties between the two countries.

Cooperation on Climate Change

During Prime Minister Rudd's June 2008 visit to Indonesia, he and President Yudhoyono released a Joint Statement on Climate Change, 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 Prime Minister Rudd and President Yudhoyono also signed the Indonesia - Australia Forest Carbon Partnership, which establishes a framework for long-term cooperation on 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.

The Partnership incorporates $30million for the Kalimantan Forests and Climate Partnership (KFCP) and a $10 million bilateral package of support on forests and climate. The KFCP demonstration activity is focusing on protecting and rehabilitating a peat dome of more than 100,000 hectares of degraded and forested peatland in Central Kalimantan. With an overall funding target of $100million, the KFCP aims to raise the remaining funding through contributions from, or coordinated actions with, the private sector or other donor countries. The $10 million package on forests and climate is being used to assist Indonesia develop its National Carbon Accounting System, a national policy framework and strategies for REDD, and to better monitor, manage and prevent large scale forest fires in Indonesia.

At the 9th Australia-Indonesia Ministerial Forum on 12 November 2008, Ministers noted the pioneering role of the KFCP as the first large scale REDD demonstration activity in Indonesia aimed at informing how REDD could be fully integrated into a post-2012 global climate change outcome. Ministers agreed to develop a second REDD demonstration activity under the Indonesia-Australia Forest Carbon Partnership, and agreed that it should be differentiated in location and forest type from the KFCP. Ministers also agreed on the Roadmap for Access to International Carbon Markets that President Yudhoyono and Prime Minister Rudd agreed to develop in June 2008, and which will assist Indonesia access international carbon markets for the forest sector. Ministers also agreed that the Roadmap could be broadened to other sectors in the future.

Ministers noted that, as major producers and consumers of fossil fuels, Indonesia and Australia recognise the key role that Carbon Capture and Storage (CCS) technologies will play in reducing future greenhouse gas emissions while maintaining energy security. Ministers welcomed the commitment of both countries to continue cooperation on CCS technologies, renewable energy and clean coal technologies.

In December 2008, Indonesia and Australia provided a joint submission on REDD to the United Nations Framework Convention on Climate Change meeting in Poznan. This was a significant achievement in the climate change negotiations, and well received by other countries.

Cooperation on Counter-Terrorism

Australia and Indonesia have a strong commitment to mutually beneficial engagement and cooperation to combat terrorism. Indonesia also benefits from Australia's counter-terrorism (CT) assistance programs provided on a regional basis.

Australian and Indonesian authorities have cooperated closely to investigate several terrorist incidents, including the 12 October 2002 Bali bombings, the 9 September 2004 bombing of the Australian Embassy in Jakarta, and the 1 October 2005 Bali bombings. Indonesian authorities have successfully convicted almost 200 terrorists and their accomplices, and made over 400 arrests since 2000.

Building on the links established through these joint investigations, cooperation now involves wide-ranging capacity-building assistance to Indonesian agencies, including in the areas of law enforcement, CT financing, border control, transport security and intelligence. The Jakarta Centre for Law Enforcement Cooperation (JCLEC), a bilateral Australia-Indonesia initiative to which Australia has contributed $36.8 million over five years (2004-2009), has become an important regional centre for law enforcement training. Regional participation in JCLEC courses since 2004 has also helped to strengthen networks and collaboration among law enforcement officials across South-East Asia in addressing transnational crimes, such as terrorism and people smuggling.

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 and led to agreement on priorities for future CT action in South-East Asia.

In February 2002, Australia signed a non-legally binding bilateral Counter-Terrorism Memorandum of Understanding (CT MoU) with Indonesia. Underlining the long-term nature of our bilateral counter-terrorism cooperation with Indonesia, in February 2008, Foreign Ministers Smith and Wirajuda extended the CT MoU for a further three years. This extension reflects the strengthening and deepening of security cooperation between Indonesia and Australia envisaged under the Lombok Treaty. Australia and Indonesia also held inaugural bilateral counter-terrorism consultations at an officials level in Jakarta in May 2008.

Lombok Treaty

The Agreement between Australia and the Republic of Indonesia on the Framework for Security Cooperation (Lombok Treaty) was signed by Foreign Ministers in Lombok on 13 November 2006. On 7 February 2008, Australian Foreign Minister Stephen Smith and Indonesian Foreign Minister Dr Hassan Wirajuda exchanged notes, bringing the treaty into force. During Minister Smith's visit to Indonesia in August 2008, he emphasised that the Agreement's entry into force represented a new era for the bilateral relationship. 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. The Plan of Action noted a number of priority areas of bilateral security cooperation agreed between the two governments.

The Agreement 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, and 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.

The Agreement will contribute to the stability and prosperity of both countries and the broader Asia-Pacific region.

Interfaith Dialogues

On 6-7 December 2004, Australia co-hosted with Indonesia a regional Interfaith Dialogue which aimed to help empower moderate religious leaders and underpin the key role of faith and community leaders in bridging differences and building harmony in the South-East Asia region. This was the first event of this type organised jointly by the Australian and Indonesian Governments.

The Philippines and New Zealand joined Australia and Indonesia in co-sponsoring the second Interfaith Dialogue at Cebu in the Philippines from 14-16 March 2006, which adopted the Cebu Declaration on Regional Interfaith Cooperation for Peace, Development and Human Dignity'. The third Interfaith Dialogue was hosted by New Zealand on 28-29 May 2007 in Waitangi. The fourth Regional Interfaith Dialogue was held in Cambodia on 3-6 April 2008.

During Prime Minister Rudd's visit to Indonesia in June 2008, he and President Yudhoyono agreed to cooperate to expand interfaith dialogue. The fifth Regional Interfaith Dialogue will take place in October 2009 in Australia.

Cooperation on Avian Influenza

In December 2006, Australia announced an additional $18.5 million over four years to help Indonesia fight avian influenza. Indonesia has been the country hardest hit by the disease.

Australia's program is targeting three priority areas: control of the disease in animals, improved community awareness and strengthened surveillance of the disease in humans and animals. This brings Australia's total commitment to Indonesia's avian influenza response to $34 million. The $15.5 million already committed to Indonesia since 2004 has funded the training of lab staff in the diagnosis of the virus; supported rapid response teams to investigate all suspected human cases and associated animal outbreaks; and supplied 50,000 courses of the anti-viral medication Tamiflu to raise Indonesia's buffer stocks.

Cooperation on People Smuggling

Australia enjoys close cooperation with Indonesia in the effort to combat people smuggling in our region. At the 9th Australia Indonesia Ministerial Forum on 12 November 2008, Ministers released a Joint Statement on People Smuggling and Trafficking in Persons. Cooperation on People Smuggling is also included in the Lombok Treaty as a priority for enhanced cooperation in the area of law enforcement.

The two countries co-chair the Bali Process on People Smuggling, Trafficking in Persons and Related Transnational Crime, which is the only regional forum that comprehensively addresses these issues. The Bali Process was reconvened at ministerial level at the Third Bali Regional Ministerial Conference held in Bali on 14-15 April 2009. This meeting successfully refocused regional attention on people smuggling and trafficking issues. At the Conference, Ministers agreed to activate an Ad Hoc Group mechanism, whereby key source, transit and destination countries could develop responses to specific current challenges. This decision represents a significant new phase of regional cooperation under the Bali Process.

The ongoing work of this regional grouping is a collaborative effort participated in by over 50 countries and numerous international agencies. 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 document examination and air and port security.

Cooperation on Illegal Fishing

Australia and Indonesia are working closely to tackle the problem of illegal fishing in Australia's northern waters and more broadly in the region. Illegal fishing is highly damaging to Australia's marine environment and poses significant quarantine, immigration and security risks to Australia. A joint study of illegal fishing in the Timor and Arafura Seas is currently being carried out to better understand the nature and extent of the problem. In 2008-2009 (as at 21 May), 17 Indonesian fishing vessels have been apprehended, compared to 141 apprehensions in 2007-2008.

The Australia-Indonesia Joint Illegal Fishing Public Information Campaign to discourage fishers and their communities from participating in illegal fishing activity in Australian waters formally commenced in September 2006. To date, the information campaign has covered Rote, West Timor, Papua, Sulawesi and the East Java port of Probolinggo. In 2009, the campaign will conduct outreach visits to East Java, South Sulawesi, South-East Sulawesi and Maluku. On 1 April 2009, the Australian Embassy in Jakarta and the Indonesian Ministry of Marine Affairs and Fisheries (MMAF) held a forum in Bali to discuss the future activities of the campaign.

Australian and Indonesian officials are working through a joint fisheries surveillance forum and a working group to improve information sharing, build surveillance capacity and coordinate maritime patrols. Joint fisheries surveillance patrols were conducted on 30 October and 1 November 2007. Australia and Indonesia also held a workshop in Bali on 4-6 March 2008 on fisheries monitoring, control and surveillance. Australia is supporting the development of alternative livelihoods for illegal fishers in eastern Indonesia.

In 2007-2008, Australia committed an additional $603.8 million to combat illegal fishing in Australia's northern waters. The bulk of this funding will be used to increase monitoring, control and surveillance activity.

Education

Indonesia and Australia enjoy a strong bilateral education relationship. There are about 16, 000 Indonesian enrolments 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 quality education. Australia is financing around half of the Indonesian Government's school construction program over the period 2006-2009, which aims to close the remaining gap in net enrolment through building and extending schools in both public and private (Islamic) sectors. Under the Australian financed component of the program, known as the Australia-Indonesia Basic Education Program (AIBEP), around 2,000 schools (including Islamic schools) will be constructed and expanded across 21 Indonesian provinces, with the aim of creating at least 330,000 new junior secondary school places in 2009.

In addition to funding construction, AIBEP is improving the quality and standard of learning as well as strengthening education governance and accountability mechanisms. From 2010, Australia will work closely with other donors, including the European Commission, the Netherlands and the World Bank to support the Indonesian Government's education plan.

The Building Relationships through Intercultural Dialogue and Growing Engagement (BRIDGE) project was announced by Minister Smith in August 2008. BRIDGE is an initiative of the Australia-Indonesia Institute (AII) within the Department of Foreign Affairs and Trade and is funded with The Myer Foundation and the Commonwealth Government through AusAID. It is managed by the Asia Education Foundation. BRIDGE is an innovative three-year project of teacher exchange and school e-twinning, involving 180 teachers and 80 schools (including up to eleven Indonesian schools from the Australian Government’s $355 million Basic Education Program). Each year, groups of Indonesian teachers will spend several weeks jointly developing curricula with their Australian counterparts from a mix of metropolitan, regional and rural schools across all states and territories. The teachers will also visit and work with their twinned school and have a homestay in the local school community. The BRIDGE project aims to help create strong and lasting linkages between teachers, schools and communities in both countries, which will continue well beyond the three year life of the project, and better equip the students to live and work with some of their closest neighbours.

The Australian Scholarships Program offers educational and professional development awards to citizens of the Asia-Pacific region, including over 300 scholarships per annum to Indonesians. The Program supports growth in our region and builds enduring links at the individual, institutional and country levels through three programs, the Australian Development Scholarships, Australian Leadership Awards and Endeavour Awards. Further information about the Australian Scholarships Program can be found at www.australianscholarships.gov.au.

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. ACIAR supported specialised postgraduate study in Australia by 35 Indonesian scientists and economists over the last three years, 27 of which were PhD awards.

The Government's National Asian Languages and Studies in Australian Schools Strategy (NALSAS), to be implemented from 2009, will promote the study of Asian languages, including Indonesian, in Australian high schools.

The Australia-Indonesia Institute

The Australia-Indonesia Institute (AII) was established by the Australian Government in 1989, celebrating its 20th anniversary with a dinner that also marked the opening of the February 2009 Australia-Indonesia Conference in Sydney. 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. For more information visit: Australia-Indonesia Institute.

Bilateral economic and trade relationship

Bilateral Trade Relationship

Indonesia was Australia's 13th largest trading partner in the 2007-2008 period. Total two-way trade (merchandise and services) totalled $10.3 billion. Merchandise exports to Indonesia were valued at $4 billion and imports were valued at $4.6 billion. In 2007, services exports to Indonesia totalled $956 million and imports were valued at $851 million.

In 2007-2008, Australia's main merchandise exports to Indonesia were live animals, aluminium, wheat, crude petroleum and sugars. Major merchandise imports from Indonesia were crude petroleum, non-monetary gold, simply worked wood, electronics and paper.

In 2007-2008, the main Australian services exports were education-related travel and personal travel. Almost 16,000 Indonesian students were enrolled to study in Australia in 2008. Major services imports from Indonesia were personal travel and transportation.
Australia's stock of investment in Indonesia totalled $3.9 billion in 2008 (an increase of 12 percent on 2007 levels), making Indonesia our 18th largest investment destination. Indonesian investment in Australia was $624 million in 2008.

On 27 February 2009, Australia and Indonesia, along with the nine other ASEAN countries and New Zealand, signed the region-wide ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA). The agreement is the largest FTA Australia has ever signed and will reduce or eliminate tariffs across the region.

In July 2007, Australia and Indonesia agreed to commence a Joint Feasibility Study on the merits of a bilateral FTA. The final draft of the study was welcomed by the Australian and Indonesian Trade Ministers at the recent Trade Ministers’ Meeting in Sydney in February and made public on 1 April 2009. The study includes independent economic modelling and examines the potential implications for economic growth, trade, investment, commercial linkages and competitiveness. The joint feasibility study finds that a comprehensive FTA covering trade and investment would provide worthwhile economic benefits for both countries. It shows that the greatest gains would be achieved under an FTA that would eliminate all tariff and non-tariff barriers to bilateral trade and investment. It also finds that an FTA would be an opportunity to accelerate and deepen the integration of the Australian and Indonesian economies - the two largest in the region. The study further concludes that a bilateral FTA would complement and build upon Australia's other links with Indonesia.

Trade and Economic Cooperation

In addition to the Australia-Indonesia Ministerial Forum, the annual Australia-Indonesia Trade Ministers' Meeting (TMM) promotes trade and investment between the two countries and addresses impediments through dialogue at many levels. The 8th TMM was held in Sydney on 19 February 2009. Both Ministers welcomed the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) and the final draft of the Joint Feasibility Study on an Indonesia-Australia Free Trade Agreement (FTA). The major focus of the 7th TMM (in June 2007) was on reviewing progress under the Trade and Investment Framework (TIF), signed on 29 September 2005. The TIF is designed to strengthen bilateral commercial ties by enhancing business opportunities and improving facilitation of trade in goods, services and investment. The TIF represents a key step forward in implementing the Joint Declaration for a Comprehensive Partnership signed in April 2005.

Bilateral commercial links are also advanced through the Australian-based Australia-Indonesia Business Council and its counterpart in Indonesia, the Indonesia-Australia Business Council.

Australian Trade and Investment Strategies

Australia is encouraging 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, meat products and manufactured goods.

Export opportunities

Trade and Investment Opportunities

Indonesia continues to offer export potential for a range of Australian companies. Demand in Indonesia for consumer imports is strong, and Austrade has identified major export opportunities in: agribusiness; food and beverages; consumer products (fashion items and cosmetics); ICT (mobile telephony); and mining supplies. There is also good scope to expand services exports in construction and infrastructure development, finance, education and franchising sectors.

Australia is working with Indonesia within the Cairns Group of Agricultural Fair Traders to increase liberalisation in international trade in agricultural products during the current round of WTO negotiations.

Related Austrade country page for Indonesia

TradeWatch Contacts

If you would like more information on the trade and economic conditions in Indonesia, please e-mail the Department of Foreign Affairs and Trade.

 

Updated 19 October 2009