Indonesia country brief
Indonesia is one of Australia’s most important bilateral relationships. Our countries enjoy a highly productive partnership that encompasses political, security, commercial 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 and regional issues particularly in multilateral forums such as the East Asia Summit, the G20 and APEC. Australia is also a committed to a long-term development partnership with Indonesia. In 2012-2013, Australia’s assistance to Indonesia will be worth an estimated $540.1 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. Australia and Indonesia signed a Defence Cooperation Arrangement in September 2012 and have agreed to increase defence collaboration.
Indonesia and Australia have a healthy trade and economic relationship with two-way trade (merchandise and services) worth $14.9 billion in 2011-12, and two-way investment worth around $5.9 billion in 2011.
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.
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.
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 nearing the end of his second term, President Yudhoyono is justifiably proud of the boost to Indonesia’s stature achieved during his tenure. He has been an influential voice in the UN, EAS and G20 and is credited with leading Indonesia through a period of extended political stability, consolidated democratization and economic growth.
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. There have been more than 125 two-way ministerial visits between Australia and Indonesia since September 2007.
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 Gillard and President 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. 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 on Indonesia’s APEC hosting year in 2013, and in 2014 when Australia hosts the G20.
During her time as leader, Prime Minister Gillard has visited Indonesia four times, most recently attending the Bali Democracy Forum in Bali in November 2012, which she co-chaired with President Yudhoyono.
Media release: Growing Democracy in our Region
Foreign Minister Bob Carr made his third visit to Indonesia as Foreign Minister on 2-4 April 2013 for the fifth Bali Process Regional Ministerial Conference in Bali and the second annual 2+2 Dialogue in Jakarta. Following the 2+2 Dialogue the Australian and Indonesian Defence and Foreign Affairs Ministers released a Joint Communiqué reaffirming each country’s commitment to working closely together to address global challenges. The ministers discussed the common approaches Indonesia and Australia are taking in seeking to shape current regional developments and Indonesia welcomed Australia's commitment to deepening regional engagement as outlined in the Australia in the Asian Century White Paper and the National Security Strategy.
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 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. 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. It contains a clear undertaking of support for each other's territorial integrity.
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 line with its own national priorities. For more information see the AusAID page for Indonesia.
Indonesia is the largest partner-country program of the Australian Centre for International Agricultural Research’s (ACIAR). This is due to both its proximity and strategic importance to Australia and to the imperative of reducing the proportion of its population living in poverty. The agricultural sector accounts for 40% of employment but only 14% of GDP. This indicates the high proportion of the poor engaged in agriculture, and the consequent importance of strengthening the sector in order to reduce poverty. More information on ACIAR’s website.
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 800 terrorism-related arrests and 600 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 12,900 officials from 59 countries have completed over 540 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 and Indonesia co-chair the South-East Asia Working Group of the Global Counter-Terrorism Forum (GCTF). The first Working Group meeting held in Semarang, Indonesia, in March 2012 focused on enhancing the management of extremist prisoners. As a follow-up, the Working Group held a Prison Management Workshop in Sydney in early November 2012. The workshop brought together a total of fifty-five participants, largely prison practitioners, from 16 countries, the EU and the UN Office on Drugs and Crime. The second meeting of the Working Group in late November 2012 in Manila focused on youth radicalization.
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 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.
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. Australia co-hosted with Indonesia the Fifth Bali Process Ministerial Conference on 2 April 2013. Ministers agreed to further strengthen law enforcement cooperation and immigration management capacity building by linking the Bali Process Regional Support Office with the Jakarta Centre for Law Enforcement Cooperation. The ongoing work of the Bali Process is a collaborative effort in which more than 50 countries and numerous international agencies participate. Since its inception in 2002, 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
Australia is working towards the goal of an integrated regional framework for the processing of asylum claims. Australia has agreements with Nauru and Papua New Guinea which have resulted in regional processing centres in those countries. Australia sees potential to engage other Bali Process members in the arrangements as they develop. Australia will continue to strongly support cooperative measures with Indonesia to improve border integrity and law enforcement. We will also continue to work with our regional partners to build our capacity to combat trafficking, strengthening legal frameworks and boosting the capability of criminal justice agencies and civil society.
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 DIISRTE (then DEEWR) and the Ministry of Education and Culture (MoEC, then Ministry of National Education) which dates back to 1992. As of December 2012 there were 17,514 Indonesian students enrolled in Australian educational institutions.
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. BRIDGE uses technology to builds links between Australian and Indonesian teachers and students. It is expected that by the end of 2015, a network of 254 schools and 512 teachers across Australia and Indonesia will be established. This will engage around 1800 Australian and 2500 Indonesian teachers, and 100,000 Indonesian students and 76,000 Australian students. BRIDGE plays a critical role in increasing Asia literacy in Australian children and was cited in the Australia in the Asian Century White Paper as 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.
For the 2013 intake a total of 571 new awards were offered in Indonesia, comprising 472 long term and 99 short term awards. A total of 2029 long term awards and 911 short term awards were provided to Indonesia from 2007–2012.
Australia Awards focused 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.
Regional Interfaith Dialogue
Australia is 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 in Mid-March 2012. The theme of the Semarang Dialogue was “"Strengthening Collaborative Communities to Promote Regional Peace and Security”.
As an outcome from the sixth Dialogue, the Indonesian government sponsored a scholarship program for future faith leaders to study Indonesian arts and culture. Two young Australians participated in the program from 24 May to 8 July 2012.
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) and the Perth Dialogue on Future Faith Leaders (2009).
One of the recommendations from the Perth Declaration included the establishment of an interfaith website and online forum for participants in the Regional Interfaith Dialogue and others in the region interested in interfaith issues. The Australian Government has provided some financial support to a consortium of Australian community organisations to develop the Regional Interfaith Network, which was launched in March 2011.
The Australia-Indonesia Institute
Established in 1989, the Australia-Indonesia Institute (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.
Indonesia’s GDP grew by 6.23 percent in 2012 and is forecast between 6.1 and 6.6 per cent for 2013. With an estimated population approaching 250 million, a swelling middle class of over 50 million people and an economy soon expected to join the trillion dollar club, Indonesia’s economic potential is significant.
Bilateral economic and trade relationship
A strong and comprehensive legal framework underpins our growing economic and commercial ties. The recent entry into force of the Agreement establishing the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) provides greater certainty to both Indonesian and Australian businesses and dramatically reduces tariffs on two-way trade. Negotiations have begun on an Indonesia-Australia Comprehensive Partnership Agreement (IA-CEPA), to further liberalise bilateral trade, encourage greater foreign direct investment in Indonesia and capacity building in agriculture, mining, services and energy and the green economy.
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 in goods and services, investment and economic cooperation and will build upon the ASEAN-Australia-New Zealand FTA. The first round of IA-CEPA negotiations concluded on 27 March 2013 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 first pilot IA-CEPA economic project is underway and is looking at how Australia can help improve Brahman cattle production in Indonesian villages.
The second project established the Indonesia-Australia Business Partnership Group (IA-BPG). The IA-BPG, consisting 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), presented a position paper [PDF 2 MB] to Dr Emerson and Indonesia’s Trade Minister, Gita Wirjawan, in November 2012. The submission offers strong support for the IA–CEPA, and has put forward over 50 recommendations to improve trade, investment and economic cooperation outcomes.
As Indonesia's economy develops and diversifies, foreign investment in the banking, finance and insurance sectors is increasing. Australia's leading banks are prominent in Indonesia's financial services sector. Operating through its local subsidiary, PT ANZ Panin Bank, ANZ is one of Indonesia's ten largest private commercial banks. The Commonwealth Bank has operated in Indonesia since 1997 and specializes in retail and small business banking and insurance.
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. At $2.3 billion, Indonesia is Australia's third largest agriculture export market behind China and Japan.
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 decreased to $11.1 billion in 2012 (down 1.9 per cent from 2011). Australia’s major merchandise exports to Indonesia are wheat ($1.3 billion in 2012), aluminum ($296 million), copper ($247 million), crude petroleum ($2.5 billion in 2012), gold ($788 million), iron, steel and aluminum structures ($303 million) and refined petroleum ($203 million).
Two way trade in services totalled $3.5 billion in 2011-12, with Australia’s services exports to Indonesia reaching $1.3 billion and imports from Indonesia reaching $2.2 billion. Personal travel and education services are major components of the bilateral services trade relationship.
Australian investment in Indonesia rose to $5.4 billion in 2011 (up 1 per cent from 2010), while Indonesian investment Australia increased to $454 million (up 11 per cent from 2010).
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, 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. While in Jakarta, Dr Emerson also foreshadowed how the two nations could deepen their relationship as envisaged by the Australia in the Asian Century White Paper.
Australian trade 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 250 Australian companies have a presence in Indonesia. Many have significant investments or are planning additional investments. Austrade’s team in Indonesia focuses on trade and investment opportunities in the following sectors:
- Agribusiness and food
- Education and training
- ICT and telecommunications
- Automotive and advanced manufacturing
- Financial and business services
- Mining and oil & gas
Updated May 2013