Australia-Indonesia: Time for a closer future

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26 August 2013 | By Jared Heath (Partner)

Indonesia has run a distant third to China and India in discussions of “Asian Century” power and promise. But the significant opportunities presented by our northern neighbour demand an Australia-Indonesia renaissance.

Last month, Prime Minister Kevin Rudd launched the Australia in the Asian Century Indonesia Country Strategy, which outlines the 2025 vision for Australia’s relationship with Indonesia across government, community and business.

The Indonesia strategy is the first of five country-specific strategies to take forward the Australia in the Asian Century white paper.

Indonesia was identified alongside China, India, Japan and the Republic of Korea as priority countries for Australia, given their size, economic links with Australia and their strategic and political influence in the region and globally.

With a population ten times that of Australia, Indonesia is Southeast Asia’s largest economy and the only ASEAN member of the G20. 

Although Australia and Indonesia already share two way trade worth AUD$14.9 billion, Indonesia remains only Australia’s 12th largest trading partner.  There is significant unrealised potential in our economic relationship, making it appropriate for Indonesia to be the focus of the first country strategy.

At the core of the strategy is the need to comprehensively broaden and deepen Australia’s relationship with Indonesia and identify opportunities for greater cooperation and partnership.

The strategy identifies specific pathways to 2025, including updating Australian perceptions about Indonesia, encouraging Indonesian language and cultural studies, enhancing the mobility of people in both directions, strengthening the business-to-business framework and growing people-to-people engagement generally.

As part of this strategy, Australia commenced negotiations in 2012 on the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) to expand trade, investment and economic co-operation.  The IA-CEPA will build on the ASEAN-Australia-New Zealand Free Trade Agreement.

Indonesia is a vast emerging market for Australia.

Since 2010, Indonesia has grown by at least 6% each year and this is projected to continue until at least 2025.  A 2012 McKinsey International Institute Report predicted Indonesia will be the world’s 7th largest economy by 2030, with 135 million consumers.

In contrast to many other Asian countries facing the challenges of an ageing population (including Australia), Indonesia’s population is relatively young.  There are more Facebook and Twitter users in Indonesia than the entire population of Australia, with Jakarta the most active Twitter city in the world.

With so much promise on our doorstep, as well as with our shared history, Indonesia should figure prominently in Australia’s engagement with Asia.

However, genuine engagement requires knowledge, understanding and trust – dimensions that have been arguably lacking in Australia’s perception of Indonesia.

The Lowy Institute’s Indonesia Poll 2012 revealed that Indonesians consider Australia the 4th most warmly regarded country, behind Japan, Singapore and the United States.  Conversely, Australians ranked Indonesia as only the 15th most warmly regarded. 

More than a decade after Indonesia’s Reformasi transition to democracy, the third largest in the world, only 33% of Australians think it is a democracy.  Australia is also the single largest bilateral donor to Indonesia (followed by the US, Japan and Germany), although many Australians and Indonesians alike are unaware of this.

As with any partnership, the Australian-Indonesia relationship is complex.  Inevitably there are issues which give rise to tensions, from asylum seekers to cattle exports to terrorism.  However, as suggested by the ABC’s recent Q&A program broadcast from Jakarta, the relationship must be about more than beef, boats and Bali. 

Whatever the issue, whatever the political persuasion, Australia should approach these matters in a spirit of mature partnership, rather than looking to exploit them for domestic political purposes. 

Announcing relevant policies without notifying or consulting Indonesia, defending policies regardless of their adverse consequences for Indonesia, choosing to characterise such issues as handing over Australia’s sovereignty to Indonesia – none of this is in Australia’s national interest.  In a globalised world, thinking that Indonesians do not notice or care is unwise.

As a diverse liberal democracy, Indonesia has a complex system of law, regulation and courts.  While opportunities remain for institutional, legislative and regulatory development, and addressing corruption remains an important priority for government and business alike, the capacity and independence of Indonesia’s legal system continues to evolve and develop.  

It’s time to embrace Indonesia, including both the challenges and opportunities, as we build our future as neighbours, friends and partners. 


Corrs has formed a strategic relationship with one of Indonesia’s leading law firms, Soemadipradja & Taher (S&T) to assist Australian clients expand into Indonesia. Corrs and S&T are also seeking to collaborate on capacity building projects with the Indonesian government, which will drive growth and opportunities for business. Jared Heath is currently seconded to S&T as Foreign Counsel.




The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


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Jared Heath

Partner. Melbourne
+61 3 9672 3545

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