How Australia has Gained from Multilateralism

By Peter McCawley, Former Dean, Asian Development Bank Institute, Tokyo

Indonesia’s development has been supported over several decades by one of the largest sustained multilateral aid efforts since the Second World War. As former aid official and Indonesia expert Peter McCawley writes, Australia too has been a major beneficiary in terms of the regional stability and security aid has helped deliver, but its contribution to the total has been relatively small.

Australian foreign policy often favours bilateralism. Australian governments have often been lukewarm towards multilateralism. Yet Australia has benefitted enormously from a very large multilateral program on our doorstep which has been sustained for over 50 years. But we are hardly aware of it.

The multilateral development program that began in the late 1960s in Indonesia is one of the world’s largest sustained international efforts in post-World War II history. Figures vary but if measured in today’s prices, the total gross flow over the fifty years to 2016 was around US $340 billion. And because the effort served to bolster peace and security in our large neighbour Indonesia, it was of great security benefit to Australia.

The international effort began, hesitantly at first, when President Soeharto established the New Order government in 1967. And then, in May 1968, the new president of the World Bank, Robert McNamara, decided that his first overseas visit after taking office would be to Indonesia. McNamara had just completed his term as US Secretary of Defense. The war in Vietnam was looming large in US planning so a key priority for McNamara was to bolster security elsewhere in Southeast Asia.

During his visit to Jakarta, McNamara promised an expanded World Bank lending program for Indonesia. Further, he announced that the Bank would take the unprecedented step of establishing a resident mission in Indonesia to support the economic policies of the new government. Around the same time, an international assistance consortium, the Inter-Governmental Group on Indonesia (IGGI) was established to coordinate the growing program of support to Indonesia.

The international effort coordinated through the IGGI, and its successor after 1992—the Consultative Group on Indonesia (CGI)—was supported by most OECD countries and multilateral agencies such as the World Bank and the Asian Development Bank.

Australia quickly joined the IGGI when it was established. However, Australia was never a major contributor to the funding of the international effort. Over 95% of total funding was provided by other members of the IGGI and CGI – by other OECD countries and multilateral agencies. Around one-third of support came from Japan (and more, if support provided by Japan through the Asian Development Bank is allowed for).


This international effort turned into a remarkable enterprise. There were ups and downs along the way, but, overall, the program was an outstanding success – both in terms of its support at an overall level for good development policy in Indonesia and in terms of the delivery of thousands of individual projects and activities.

Just a few examples of the way that the international community worked with Indonesia to promote long-term development are activities in the agricultural sector, in population planning, and in energy.

In agriculture, Indonesia policy makers and international agencies worked together through the 1970s to promote the Green Revolution in rice production. These efforts led to marked increases in rice output in the early 1980s. As a result of these and other programs, the supplies of food to ordinary people in Indonesia, both in terms of quantity and quality, have improved greatly in the last 50 years.

In population planning, the Indonesia government introduced a family planning program in the early 1970s. The population growth rate fell quickly during the 1980s and 1990s. By 2000, most Indonesian families were smaller, and children were better cared for, than in the difficult years of the 1960s.

In the energy sector, there have been huge improvements in Indonesia in the last fifty years. In 1970, electricity supplies across much of the nation were almost non-existent. Today, electricity consumption is around 1,000 kWh per capita. This is still low. Consumption in Australia is around 10,000 kWh per capita.  Nevertheless, the gains in Indonesia with the support of the international community have spread electricity across the nation.

One of the most important keys to the success of the program was strong leadership on the Indonesian side. For many years, leading Indonesian policy-makers such as Professor Widjojo Nitisastro set down the broad directions of Indonesia’s growth policies. More recently, senior economic ministers such as Minister of Finance Sri Mulyani Indrawati have outlined the priorities for Indonesia’s development effort.

All of these activities, and many others supported by the international community, brought benefits to Indonesia. But Australia was a major beneficiary of the huge multilateral program as well. And yet, over the 50-year period Australia contributed less than 5% in support of the effort.

We are hardly aware of it, but multilateralism has given a great boost to Australia’s security and to security in the region.

Peter McCawley is an honorary associate professor at the Australian National University, former Dean, Asian Development Bank Institute, Tokyo, and a former economic adviser to the Australian and Indonesian governments.

Banner image: World Food Programme ship delivering Australian-funded supplies to Northern Sumatra, Indonesia. Credit: M Anshar/DFAT, Flickr.