Are we taking Indonesia seriously?

In 2009 most Australians have not made up their mind whether they want to engage with Indonesia or not. Our hearts, minds and wallets are still elsewhere.

(pages 56-59 of printed journal)

By Howard Dick

Everyone understands the rise of China, but who talks about the rise of Indonesia? Yet Indonesia is now a G20 member along with the US, the European powers, Japan, China, India and Australia. Indonesia has been a democracy for the past ten years and this year held its third general election and second presidential election. These 240 million people will influence our future much more than six million Papua New Guineans or four million New Zealanders.

Nevertheless, we still see Indonesia as a problem rather than an opportunity. We are uncomfortable with Islam. We have been spooked by a series of terrorist incidents, most recently the Marriott Hotel bombing. 'Border security' translates subliminally into protection against threats from Indonesia. Then there is airline safety. All this negative news makes us unresponsive to a more prosperous, democratic and sophisticated neighbour. We are also squandering our educational and intellectual expertise.

Trust and betrayal

A special relationship between two very dissimilar neighbours was born of strife. Between 1945 and 1949 the Australian Government supported Indonesia's long and bitter struggle for independence while the Waterside Workers' Federation refused to load supplies onto Dutch ships. As late as the 1990s, Australians were still treated as special guests.

What finally shattered the special relationship was Australia's sudden change of policy to support the independence of East Timor. Indonesia's repressive rule and periodic atrocities in East Timor were not known to the Indonesian public, who believed their country was generously funding the development of its latest and poorest province. It did not help that at the time Indonesia was in turmoil because of the economic devastation of the Asian crisis and the transition from military dictatorship to parliamentary democracy. When Indonesia was in desperate need, the Australian Government was seen to have turned away.

Then came 9/11. As a predominantly Muslim country, Indonesia was portrayed by the Howard Government as the threat that many Australians had always believed it to be. The deaths of so many Australians in the Bali bombings of October 2002 and October 2005 seemed the ultimate confirmation.

Reconciliation

Fortunately, wiser counsel prevailed. The turning points were President Bambang Susilo Yudhoyono's election in late 2004 and the Aceh tsunami of December that year. The spontaneous response of the Australian public to the aid appeal and the Government's pledge of $1 billion in additional aid cast Australia in a generous light for the first time in several years. This paved the way for a good personal relationship between Mr Howard and the incoming President Yudhoyono.

A comprehensive Framework of Security Cooperation (the Lombok Treaty) was signed in 2006. A key principle is that both countries will 'refrain from the threat or use of force against the territorial integrity or political independence of the other.' The Treaty extends to practical forms of bilateral cooperation over defence, law enforcement, counter-terrorism, intelligence, maritime security, aviation security and emergency relief. Because Australia and Indonesia share long and porous borders, such forms of cooperation not only reduce threats but also help Indonesia to build a democratic civil society.

Business as usual?

In 2009 official Australia-Indonesia relations look to be back on a firm footing after the turbulence of the Howard-Bush years. The end of the Bush-Cheney presidency in the US, and the inauguration of Barack Obama with his Indonesian background, have helped create a more relaxed diplomatic climate. The Jakarta embassy is Australia's largest overseas post, ahead of London and Washington; Indonesia is Australia's leading aid recipient and its eleventh biggest trading partner. The Australia-ASEAN free-trade agreement has been ratified and an Australia-Indonesia free-trade agreement is well advanced.

Aid is perhaps the clearest Australian commitment to the long-term relationship. Indonesia now ranks ahead of Papua New Guinea as Australia's number one aid recipient. In June 2008, Mr Rudd and Mr Yudhoyono signed a new Australia Indonesia Partnership agreement for $0.5 billion per annum in aid until 2013. Priorities are education, health and development, especially in the poor eastern provinces.

At first sight, economic relations are also steadily improving. Since the Asian crisis two-way trade has grown steadily to $10 billion in 2007, albeit much less than with Thailand ($14 billion) or Malaysia ($15 billion). Service trade is a fast-growing component. Indonesia has now overtaken Malaysia and Singapore as the main Southeast Asian source of international students with around 15,000 enrolled in Australian schools and universities. Tourism flows, however, have fluctuated wildly in response to terrorist bombings and remain below their 1997 peak.

Investment figures are less encouraging. According to the Australian Bureau of Statistics, the stock of all types of Australian investment in Indonesia had risen quite slowly from $2.9 billion in 2001 to $3.4 billion in 2007. Foreign direct investment (FDI), where the parent company exercises managerial control, may be a better indication of long-term commitment: this figure rose from $0.5 billion in 2001 to $1.8 billion in 2007. Yet the 2007 total was still only 0.6 per cent of outward FDI, compared with 2.5 per cent for China and Hong Kong, and 15 per cent for New Zealand.

Proximity does not seem to encourage Australian firms to invest in Indonesia. Any developing economy of more than 200 million people growing at around six per cent per annum is generating a lot of business opportunities. Indonesia's investment climate, however, is a real problem, as recognised by the government itself. Investment and labour regulations, weak legal protection and erratic local government policies combine to deter direct investment. Nevertheless, for most Australian firms, Indonesia is simply not on the radar screen.

Challenges

Perhaps the greatest obstacle to closer long-term relations is that the Australian public remains deeply suspicious of Indonesia. This is partly the old bogey of the Threat from the North. There are a lot of people in Indonesia; ergo they must covet expansion to Australia. The fact that most Indonesians are Muslim makes the equation with terrorism. Finally, there are the perceptions that Indonesia is highly corrupt and its judicial system hopeless. The Schapelle Corby case and those of the Bali Nine were grist to that mill. There is little recognition that Indonesia is a country in transition and that such endemic problems will take a long time to overcome.

Growing Australian tourism to Indonesia does not seem to have made much difference. Bali is as far as most Australian tourists get, and this enclave experience of beaches and bars does not improve understanding of the country as a whole.

Education is a more reliable way to improve public understanding in both countries. Here, Australia lags well behind Indonesia. For university-educated Indonesians, proficiency in English has become essential as a means of access to global networks. English is taught in most secondary schools, though usually not very well.

In Australia, however, enrolments in Indonesian language at schools and universities have been in marked decline, accelerated by the Howard Government's withdrawal of Federal Government funding under the Asian languages (NALSAS) program. According to an October 2007 report by the Commonwealth Department of Education, between 2001 and 2005 the number of Indonesian language students in government schools fell by 19 per cent, more than double the rate of decline in overall language numbers.

The decline of language study would not matter so much if Asian Studies had continued to be widely taught in Australian schools, but Social Studies and Geography subjects have also been withering. There is no longer a platform for teaching on Indonesia, or indeed any other of our near neighbours.

The Australian Government's inflexible, high-level Travel Alert does not encourage the study of Indonesia. Parents are given official reason to believe that Indonesia is just too dangerous. For students who do persist, the travel warning leads to an insurance obstacle: Australian secondary students seeking in-country study of Indonesian can get closer than Darwin¹.

It gets worse. The flow-on effect is that the number of students studying Indonesian language and society in Australian universities is also in rapid decline - the Asian Studies Association of Australia (ASSAA) reports a 24 per cent fall between 2001 and 2007. Because staff numbers are tied to student enrolments, academics are being retrenched, programs shut down and departments closed. The University of Melbourne program has contracted to a skeleton staff without professor.

Vital research expertise on Indonesia is thereby being whittled away and there is almost no career path for aspiring young academics. Australia had built up an enviable international reputation as the world centre for Indonesian studies. On present trends, this will soon cease to be the case. A vital piece of the nation's soft infrastructure will thereby be lost.

One foot on the brake

The Australian Government's persistence with a level-4 travel warning to 'reconsider your need to travel' to Indonesia is a stumbling block to closer relations. The Philippines and Thailand, which also have local insurgencies, receive only a level-3 warning ('exercise a high degree of caution').

The Australian Government claims that the warning is continually reviewed upon expert advice. However, that expert advice is not made available for public scrutiny, while contrary expert advice by Australians who are well informed on Indonesia is ignored. Meanwhile, many Australians exercise their common sense and travel anyway.

Australia's official position is therefore like that of a bus driver steering with one foot on the brake. When challenged he defends it as a safety measure, adding, 'Don't worry, the brake doesn't work properly.'

A level-3 travel warning as applied to Thailand would be appropriate to Indonesia as long as known terrorists remain at large: 'exercise a high degree of caution because of the high threat of terrorist attack.against a range of targets, including tourist areas and other places frequented by foreigners.' This may be combined with warnings to avoid districts or provinces of the greatest danger.

Banks require re-capitalisation in order to deal with the consequences of the financial crisis. The capital required is in excess of US$1,000-1,500 billion (50-75 per cent of total global bank capital prior to the crisis) to cover losses. Capital is also needed for assets returning onto their balance sheet as the vehicles of the 'shadow banking system' are unwound. This capital is required to restore bank balance sheets. Additional capital will be needed to support future growth. Availability of capital, the high cost of new capital and dilution of earnings will impinge upon future performance.

Conclusion

In 2009 most Australians have still not made up their mind whether they want to engage with Indonesia or not. Our hearts, minds and wallets are still elsewhere.

Yet if old prejudices still hold sway, it is not the whole story. Compared with a generation ago, many more Australians have traveled through and even worked in Indonesia, learning Indonesian language and culture, and sometimes intermarrying. There is a body of expertise and experience, albeit largely outside the mainstream of Australian society.

Moreover, it is probably no longer true that educated Australians know more about Indonesia than educated Indonesians about Australia. Elite and middle-class Indonesians, who used to travel to Singapore, now visit Australia in increasing numbers for business, tourism, health and education. This includes senior Indonesian figures, often below the radar and not on official visits. Sometimes their children are being educated in Australia. In Melbourne and Perth especially, there are vibrant Indonesian communities. These cities are becoming familiar territory, part of the Indonesian world, and are a tribute to the stability of the relationship. But it is also a missed opportunity if Australians fail to make more of the two-way relationship.

In terms of its architecture, the Australia-Indonesia relationship is falling into place. The ASEAN and Indonesia FTAs will complement the Security Treaty and sit alongside aid, educational and cultural programs.

Nevertheless, there is no sense of urgency that building a common future requires a large investment in Asian education - to create a society that can envisage a shared future. Student interest is collapsing in schools and universities; teaching and research expertise is dissipating. With some notable exceptions, Australian business sees no future in its own region. Hence there are almost no career paths for Indonesia experts outside an attenuated public service.

Moreover, the Australian Government still insists upon an official policy of actively discouraging Australians from visiting Indonesia. This is absurd. Let the travel advisories advise Australians as to the risks, provide information on sensible strategies and, as in the case of most other countries, advise on the provinces or cities or places that are best avoided. The Nanny Australia warnings do us all a disservice.

¹ Australian secondary students of Indonesian language go to Darwin as a poor substitute for in-country study.

Top ^

This article forms part of a series of essays commissioned by Asialink at the University of Melbourne exploring Australia's engagement with Asia. The full referenced version can be found at www.asialink.unimelb.edu.au.

Professor Howard Dick is Honorary Professorial Fellow in the Department of Management and Marketing at the University of Melbourne and Conjoint Professor in Faculty of Business & Law at the University of Newcastle (NSW).