Frustrated Indonesia still keen on Australia partnership – The Australian Financial Review

Sri Mulyani Indrawati is about as good a finance minister as any country in our region could wish for: articulate, smart, disciplined, and also a former managing director of the World Bank.

by Ross Taylor

On the eve of the Australia-Indonesia Business Council International Conference on the Gold Coast, there was collective relief this week as Indonesia’s Finance Minister, Sri Mulyani Indrawati, stated that, despite the fallout over the Australian embassy in Israel issue, “The relationship between Australia and Indonesia remains strong and Indonesia looks forward to formally concluding IA-CEPA (Indonesia-Australia Comprehensive Economic Partnership Agreement).”

This is good news, as over the past few years under the leadership of Malcolm Turnbull and his foreign minister Julie Bishop, the relationship between our nations was very warm; just quietly ask anyone from the Indonesian Ministry of Foreign Affairs or at its embassy in Canberra.

But first let us go back a little to understand why the Finance Minister remains upbeat about the trade agreement and the broader relationship.

Sri Mulyani is about as good a finance minister as any country in our region could wish for: articulate, smart, disciplined, and also a former managing director of the World Bank. Sri Mulyani has faced some strong headwinds in the past year as commentators around the world expressed concern that Indonesia was moving towards a more hardline conservative form of Islam, particularly after the jailing of then governor of Jakarta, Basuki Tjahaja Purnama.

Over the past few years under the leadership of Malcolm Turnbull and his foreign minister Julie Bishop, the relationship ... Over the past few years under the leadership of Malcolm Turnbull and his foreign minister Julie Bishop, the relationship between Australia and Indonesia was very warm. AP

Financial markets appear to have been slowly losing confidence in Indonesia’s leadership with concerns of too much focus on religious issues rather than economics. The rupiah has fallen significantly in recent times and Indonesia’s current account has been under heavy pressure. Sri Mulyani knows a strong economy is what really matters in the longer run to ensure continued growth, opportunities for school leavers and improving the standard of living for the 100 million Indonesians living in poverty.

Advertisement

With this in mind, President Joko Widodo would have been keen to see the IA-CEPA agreement concluded; a demonstration to the markets that Indonesia is ‘open for business’. The last thing Sri Mulyani, as Finance Minister in this fragile environment, needed was a diplomatic crisis involving Indonesia’s hard-right Islamic lobby. Australia’s PM then provided such an issue in saying he welcomed the idea that Australia should move its embassy from Tel Aviv to Jerusalem; a very sensitive subject in Indonesia and Malaysia.

Terrible timing on embassy issue

Fortunately for Australia, both the opposition (led by Prabowo Subianto) and Joko’s own pro-Palestine ministers chose to pursue the issue no further, other than have their Foreign Minister warn Australia that should this ‘thought bubble’ proceed then relations would be damaged severely.

Sri Mulyani would be very happy to see the embassy idea quietly pushed to one side, so the trade agreement (including the critical area of education and agriculture) can be concluded, and simultaneously allow the focus of Australia and Indonesia to return to issues including trade, defence, maritime security, anti-terrorism and (for Australia) anti-people-smuggling strategies.

Provided the relationship remains buoyant, Indonesia should be keen to seek concessions from Australia through an expansion of the Pacific Islanders’ working visas, by having it include Indonesian nationals; making it easier for young Indonesians to work here under a more liberal holiday-work visa arrangement, and for Australia to change the inbound tourist visa process to make it simpler and cheaper for Indonesians to have holidays here. With 9.1 million Indonesians travelling abroad last year, there is a huge upside for Australia if the settings are right.

What all this means is that with a stable and warm relationship, both nations, as neighbours, can benefit enormously. Therefore, it should have been no surprise that Indonesia reacted so strongly when, out of left field, Scott Morrison spoke of the Israel embassy shift concept. The timing for Indonesia was terrible – especially with the presidential elections scheduled for next year, the presence of a senior Palestinian delegation in Jakarta, a lack of consultation with Indonesia’s Ministry of Foreign Affairs or our own DFAT, and that Indonesia only recently secured a two-year term on the UN Security Council, where Foreign Minister Retno Marsudi declared that Palestine would be a major issue for Indonesia.

Sri Mulyani is right to talk-up the IA-CEPA and the broader relationship, as there are so many core issues at play that will enhance opportunities and the relationship for both nations and our people.

Moving Australia’s embassy from Tel Aviv to Jerusalem is not one of those issues.

Ross Taylor, AM, is the president of the Perth-based Indonesia Institute Inc.

Autralia economy news

Leave a Reply

Your email address will not be published. Required fields are marked *