Stronger Indonesia-Australia Ties are a Necessity

By Muhammad Habib Abiyan Dzakwan, a Researcher at the Department of International Relations, Centre for Strategic and International Studies

Indonesian President Joko Widodo has made a priority of relations with Australia – he must ensure his successors see stronger ties as “not only our destiny given geographical proximity, but also a necessity”, writes Muhammad Habib Abiyan Dzakwan.

It is already public knowledge that the current Indonesian President, Joko Widodo (Jokowi), does not like traveling abroad. He has not attended a single United Nations General Assembly since his first-term inauguration in 2014. Nor has he ever traveled to neighboring Southeast Asian countries for purely bilateral visits with the exception of Malaysia and Singapore.

But Australia makes a different case. He had visited various parts of Australia three times, making this week’s visit the fourth one within his almost-ten-year of leadership. He spent some time in Brisbane back in 2014 when he attended the Group of Twenty (G-20) Summit, putting Australia among the very first countries President Jokowi officially visited. In 2017, Australia was the first country on Jokowi’s annual international travel schedule, albeit a reschedule trip due to political instability in Indonesia late the preceding year. Canberra also was the last overseas capital Jokowi visited before the COVID-19 pandemic, where he obtained some inspiration for his grand vision of constructing a new capital for Indonesia. This week’s trip by the President has special significance: it will likely be his farewell to Australians in his official capacity.

Australian leaders have reciprocated this commitment to the bilateral relationship in recent history. Following their inaugurations, all recent Australian Prime Ministers, including Tony Abbott, Malcolm Turnbull, Scott Morrison, and Anthony Albanese, have chosen Indonesia as their first international destination. This trend signifies the growing closeness between the two countries, exemplified by the signing of the Indonesia-Australia Comprehensive Strategic Partnership (CSP) in 2018. For Australia, it is the second of its kind with an individual Southeast Asian country after Singapore in 2015. However, there is one noticeable difference between the two. The Indonesia-Australia CSP still has ample room for improvement and further development.

Take bilateral economic relations as a starter. The reality is that ties have not lived up to their potential. For Indonesia, the bilateral trade deficit has grown since the ratification of the Indonesia-Australia Comprehensive Economic Partnership (IA-CEPA) in early 2020. By 2022, the size of the deficit had grown to US$6 billion compared to only US$3.2 billion in 2019 (see graph). Whereas Indonesia must put in more effort to convince Australians that its products are of high value and worth purchasing, Australia can assist Indonesia by building its capacity to meet the necessary standards and requirements set by the Australian market.

Net Value of Indonesia’s Trade in Goods with Australia 2019-2022 (USD)

Source: Indonesia’s Central Statistics Bureau

Net Value of Indonesia’s Trade in Goods with Australia 2019-2022 (USD)

The automotive industry is one promising area because of favorable IA-CEPA rules of origin. Indonesia’s inaugural export of locally built sport utility vehicles (SUV) to Australia last year may serve as a testament to that potential. Moreover, there are no irreconcilable conflicting interests in the automotive trade. Indonesia aspires to be a global manufacturing hub for electric vehicles (EVs). Meanwhile, Australia aims to accelerate the rollout of affordable, yet high-quality EVs for its population and decarbonization in its transportation sector. To manifest this convergence, Australia may want to help Indonesia understand its newly introduced Fuel Efficiency Standard, as outlined by the Australia’s first National EV Strategy.

Like the automotive industry, critical minerals offer a promising convergence between Indonesia and Australia. On one hand, Indonesia requires sustainable access to lithium reserves in the pursuit of its long-term EV manufacturing ambition. On the other hand, Australia can benefit from having another reliable buyer for the world’s largest lithium production. And Indonesian businesses have walked this talk. Earlier this year, a Memorandum of Understanding on a critical mineral partnership was signed by the Indonesian Chamber of Commerce and the West Australian Government. The first Indonesia-Australia lithium joint venture may emerge due to the Chamber’s persistent negotiation.

Nevertheless, more fuel is necessary to drive the Jakarta-Canberra economic partnership further. The first one must be strong political commitment at the official level. Unlike the continuing annual 2+2 meeting arrangement for foreign and defense ministers, Indonesian-Australian trade and industry counterparts have not had as reliable a platform to meet. The Plan of Action for the 2018 CSP requested the two governments establish an annual Economic, Trade, and Investment Ministers Meeting (ETIMM), but its future was unclear after the first session in 2021. Hopefully, President Jokowi’s Australia visit can breathe life to this strategic initiative.

The second boost must come from people. Despite all the commendable work involving Indonesian-Australian stakeholders, like in disaster preparedness (SIAPSIAGA), rural incomes (PRISMA), research (PAIR), economic development (PROSPERA), and effective policy (KSI), there is a lack of warmth in perceptions between the two nations. Asked in the 2023 Lowy Institute Survey rate the “warmth” of their feelings towards Indonesia, Australians gave a “temperature” reading of just 57 out of 100, trailing behind Singapore (72) and Timor-Leste (58). Similarly, in another Lowy Institute survey focusing on Indonesia in 2021, Indonesians gave Australia a rating of 58 – a four-point decline compared to the same survey conducted a decade prior.

Finally, President Jokowi should use this visit to convey that strong Indonesia-Australia ties are not only our destiny given geographical proximity, but also a necessity. The message should be clear not only to Australian officials, but also to all prospective presidential candidates running in Indonesia's 2024 national elections. It is crucial to underscore that Australia will continue to be a strategic partner for Indonesia, especially considering the growing fragmentation of the global supply chain and the worsening impacts of climate change.

Muhammad Habib Abiyan Dzakwan is a Researcher at the Department of International Relations, Centre for Strategic and International Studies. His research areas cover sustainable development, critical minerals, and emerging technologies.