Albanese visit signals productive phase for Australia–Indonesia engagement
15 Jun 2022|

Anthony Albanese last week successfully passed what has become a foreign policy initiation for new Australian prime ministers: he established a good working relationship with his Indonesian counterpart.

Whether Albanese’s business-like exchanges with Joko Widodo grow into a personal rapport—or leadership ‘trust’ as Indonesian observers prefer—will depend on personal chemistry and circumstances.

But at least the visit set the tone for a productive phase in Australia–Indonesia relations. History shows us two things. First, much more gets done in the bilateral relationship when the two leaders get along. And, second, structural consolidation of ties usually occurs in distinct stages when the two sides seize on opportunities that are often created by unforeseen events.

The Indonesians were keen to ensure the first point by creating a familiar mood for the visit.

This was publicly illustrated by what might come to be known as ‘bamboo bicycle diplomacy’. Widodo and Albanese peddled around the gardens of the presidential palace at Bogor on bikes built with a bamboo frame—the quirky invention of a designer from Central Java.

The image of the two leaders riding side by side was used widely in the Indonesian media and played to Widodo’s carefully crafted image as an ordinary man. Some of his predecessors would more likely be seen astride Harley Davidsons. This little bit of theatre also usefully advertised Widodo’s purported commitment to transitioning Indonesia to clean new and renewable energy.

The ‘spontaneous’ ride wasn’t without its humour. Indonesia’s foreign ministry, which came up with the idea, had to first check with the Australian embassy whether Albanese could ride.

The hitch came when Widodo wanted to gift the bicycle to Albanese—Australian officials needed to ascertain the quarantine status of the bamboo. According to one official, the Central Java manufacturer was dumbfounded by the complexity of the questions.

Whether or not the bicycle ever makes it to Australia, it served its purpose. We are left with a picture of two leaders who are outwardly easy and relaxed in each other’s company—a subtle message that will resonate in Indonesia. When asked about the visit, Indonesians referred to the guy on the bicycle. At least Albanese will be remembered.

On the substantive agenda, the single most valuable signal Albanese sent on his visit was that Australia would play its part to ensure the success of this year’s G20 leaders’ summit, being hosted by Widodo in Bali in November. Widodo has a lot personally invested in the outcome, both domestically and internationally. Albanese confirmed that he would attend the meeting, distancing himself from his predecessor Scott Morrison’s comments that Russia should be expelled from the grouping and that Russian President Vladimir Putin’s presence would be a ‘step too far’.

This was the right call. While sorting out the diplomacy over Russia at the G20 won’t be easy, Australia is wise to keep its options open and to signal that its first priority is to secure the endurance and viability of the G20. As others have observed, it is the best international table at which Australia has a seat.

With the G20 diplomacy set aside for now, Albanese’s first encounter as prime minister with Indonesia sensibly emphasised shared economic interests rather than some of the thorny geopolitical issues of the day, on which Australia and Indonesia will not always agree.

There’s much that Australia and Indonesia can do together with refocused attention on the relationship. The opportunity to be seized arises from heightened fears that a global slowdown and soaring inflation will choke a post-Covid-19 recovery. It also arises from an awareness that regional strategic competition necessitates diversifying markets and sources of capital.

This could give renewed impetus to greater trade and investment. The economic relationship has been historically underdone. In 2020, Australia exported about $7.1 billion in goods and services to Indonesia and imported about $5.7 billion in return. It amounts to a small surplus in Australia’s favour, but Indonesian officials would like to close the gap. The pool of investment is similarly weak: Australia has about $3.2 billion invested in Indonesia, and Indonesia has about $1.8 billion invested in Australia.

The Australian government has long recognised this weakness. It was a key finding of a report from former Department of Foreign Affairs and Trade official Richard Maude to the Morrison cabinet, according to government officials. Maude’s report led to DFAT being asked to draw up a new Indonesia strategy, which is due to be completed by the end of the year.

But Australia already has the framework for economic engagement in place. The Indonesia–Australia Closer Economic Partnership (IA-CEPA) is far from being a perfect trade and investment agreement, but it provides a solid foundation to grow and diversify economic relations.

The previous government identified several areas in a blueprint for the partnership released last September. The blueprint targeted growth in mining and energy services; agriculture and processed food; health and aged care; and education, skills and training. The new government would be wise to pick this document up and build on it.

Still, it can be more ambitious. Two areas in which there’s potential to grow are the service economy—in, for instance, education, technology, health care, tourism and business advisory services—and infrastructure investment.

The first of these will require a new approach to labour mobility in both directions, which has been recognised as a missing ingredient in relations. This is not an easy proposition for either government, but it’s a necessary one if we are to establish deep and enduring people-to-people ties and better integrate the two economies.

The second could see some of Australia’s pool of retirement savings tap into Indonesia’s growing need for new sources of clean energy, transportation and other infrastructure.

But the investment model has to be right. And that might entail Jakarta issuing new regulations on investment vehicles and showing a willingness to flexibly deal with challenges faced in making individual investments. One approach that appears to have worked well in India is a fund in which foreign and national institutions pool their money and directly acquire infrastructure assets.

At a political level, these types of initiatives would play well with the natural games of Albanese and Widodo—two leaders whose backgrounds and agendas are steeped in infrastructure.

Whatever the two governments do, it’s a good time to set high ambitions. Of course, there will be plenty of failures and setbacks, and these should not detract from the mission. Another lesson from diplomatic history is that when Australia moves decisively and boldly in supporting relations with Indonesia at critical times, the rewards are long-lasting.