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Issue Two 2012 - Issue #16

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Calm waters - Securing our Indonesian stake in the Asian Century.

Opinion piece by Professor Kenneth Chern

View articles in related topics: Leadership, Politics, International Affairs And Business

Kenneth Chern
Kenneth Chern, Professor of Asian Policy and Executive Director, Swinburne Leadership Institute. Photo: Eamon Gallagher

According to an Indonesian proverb, calm water does not mean there are no crocodiles. That is handy advice for the Australian government as it prepares the White Paper on Australia in the Asian Century commissioned to address the global power shift to Asia.

The Swinburne Leadership Institute cautioned in its white paper submission that Australia must display values of innovation and courage to lead in the Asian Century, and that corruption in Indonesia must be uprooted if Indonesia is to fulfil its promise in partnership with Australia.

Indonesia’s population is the fourth-largest in the world. It is the third-largest democracy, and the largest Muslim population globally. It straddles vital sea lanes and is a close-by neighbour. Australia has an enormous stake in what happens there.

A solid foundation
Canberra and Jakarta seem to be getting on well. Security co-operation is productive, and the two governments work harmoniously in multilateral groupings on issues such as deforestation and climate change. President Susilo Bambang Yudhoyono, whose government has made great strides in democratisation, decentralisation, economic growth and international participation, terms Australia a “close friend”.

However, Australia needs to work to dispel public mistrust arising from the cultural gap between the countries, and to help Indonesia build a civil society and an economic foundation for a prosperous future. Australia needs to drive this process before President Yudhoyono retires in 2014. Beyond that lies uncharted water where crocodiles may lurk.

Australia has creditably supported Indonesian civil society via development assistance despite the culture gap. If Indonesia modernises its governance and deepens its democratic traditions, the gap could dissipate, as a vibrant pluralistic society resonates with Australian values and presents a compelling model for the developing world, particularly for Muslim countries. The construction of more than 2000 junior secondary schools in 2005–10, and 330,000 new school places, reflect this effort, as does 2011–12 funding to support civil society, justice and democracy.

Tackling corruption
However, certain factors in Indonesia’s governance may frustrate this interest. Last November in Foreign Affairs, former White House Asia Director Karen Brooks commended Indonesia’s progress under President Yudhoyono.

But she also flagged persistent corruption at all levels of government, including at high levels in the President’s political party and, ironically, “decentralisation of graft,” with officials from Jakarta to villages now demanding kickbacks. These phenomena threaten the prospects for an Indonesian model of multiparty democratic government.

Australia envisions expanded bilateral trade and investment through a Free Trade Agreement but, as the Lowy Institute’s Fergus Hanson notes, it is odd that Australian business is “so underdone in a country right on our doorstep set to become one of the world’s largest economies”.

With 240 million people, strong economic growth, and a rising middle class, Indonesia in 2010–11 was only Australia’s 12th largest trading partner, with bilateral trade of $13.8 billion, while New Zealand, with less than two per cent of Indonesia’s population and one-fifth of its GDP, was Australia’s seventh-largest partner, with $21.1 billion in trade.

Why is this so? In part because, as Karen Brooks wrote, Jakarta’s promotion of Indonesia as an open, investor-friendly country is mostly rhetoric. Indonesia has backslid on international commitments to reduce or eliminate trade barriers, notably in the ASEAN–China Free Trade Area.

And this February, Jakarta issued regulations requiring most foreign-owned mining companies to divest a majority share of their assets to an Indonesian participant after 10 years of production – a step “inward and backward”, as ANU’s Peter Drysdale notes.

 Greg Moriarty, the Australian Ambassador in Jakarta, warns of rising “economic nationalism”, and The Australian Financial Review links this to corruption defying governmental clean-up efforts, and the capture of Indonesian democracy by producer interests and business oligarchs.

The challenge ahead
Australia must find ways to help Indonesia renew its attack on corruption and re-engage with the world economy, if Indonesia’s trade, investment and democratic political system are to anchor its economic development and international role. These efforts need to start before President Yudhoyono retires.

This will be hard yards, but Australia’s overarching strategic interests in her near neighbour make it essential. Australia must bring to bear courage, integrity, innovation and communication – values that the Swinburne Leadership Institute is promoting – to help Indonesia fulfil its promise and enable Australia to meet its own destiny in the Asian Century.



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