As Indonesia grows into a major global player, Australia’s ties must be enhanced

Despite having one of the world’s largest populations, Indonesia has tended to punch below its weight in world affairs. As a developing and hard-to-manage country, its archipelago nature has meant economic issues have tended to loom largest. 

This has been reflected in Indonesian President Joko Widodo himself, whose background is small business rather than the usual South-East Asian path of family politics, corporate wealth or the military. Yet at the recent G20 summit in Bali — one where the Australian media was preoccupied on our relationship with China — the real story was Indonesia’s continuing emergence as a major player on the world stage. 

Widodo presided over what was widely regarded as a successful summit, one affirming the G20 as the premier grouping for the global economy. He also illustrated how non-alignment can play a key role in what are escalating conflicts between the world’s biggest powers, the United States, Russia, China and the European Union.

There have also been clear signs of Indonesia beginning to pull its weight in regional affairs in recent years. As ranked by the Lowy Institute’s annual Asia Power Index, Indonesia has increased by two places in the past year, having overtaken Thailand and Malaysia. 

As the index states: “In 2021, Indonesia saw its greatest improvement in its diplomatic influence, where it moved up two places. It now outranks Singapore as the most diplomatically influential player in South-East Asia, with President Joko Widodo having cemented his position as a leading statesman on the regional stage.”

Indonesia is Australia’s closest neighbour, something that has long been given at least lip service by a veritable conga line of Australian prime ministers. And after some notable stumbles in the Coalition years, our relationship with the nation appears to be changing for the better.

Further establishing Indonesia as an emerging economic might is the fact that is bubbling along fairly well in the face of global economic headwinds, and is expected to grow by 5.4% in 2022 and by 5% in 2023, according to a recent report by the Asian Development Bank (ADB). It is also South-East Asia’s largest economy with a GDP of US$1.2 trillion ($1.76 trillion) in 2021, ranking it 16th in the world. 

If Indonesia can keep growing around 5% a year for the next two or three decades, as it has done so far this century, it will be the fifth largest economy by 2040, and the fourth largest by 2050 — behind only China, India and the US.

Indonesia also has the third-largest standing military in the region with about 400,000 personnel — coming in behind Vietnam and Myanmar’s military dictatorship. In recent years it has been focused on upgrading its capabilities and in 2021 appointed General Andika Perkasa as the new military chief. He plans to tap his close ties to the US to help boost Indonesia’s capabilities with joint exercises as well as improve its border defence.

Indonesia — with Vietnam — has been at the forefront of pushing back against China’s maritime incursions, in particular by its paramilitary fishing fleet. Perkasa recently revealed that he wants to significantly increase participation in the annual Garuda Shield exercise, of which Australia is already a part.

A push to strengthen economic ties with Indonesia was begun under the Coalition government with the Comprehensive Economic Partnership Agreement in 2018, but booming trade did not follow. Indonesia still languishes behind China, Singapore, Thailand and Malaysia in terms of two-way trade.

Since Labor took power, Prime Minister Anthony Albanese and Foreign Affairs Minister Penny Wong have actively engaged with Indonesia’s senior leaders.

“The truth is that our economic relationship has struggled to keep pace with the reality of Indonesia’s extraordinary economic rise,” Albanese said during his first Jakarta visit as PM in July.

As the two sides attempt to ramp up economic ties and security cooperation, this momentum needs to be harnessed proactively by Australia, especially with a change of leadership in the north coming next May. Indonesia’s presidential election is of great importance to Australia, with the winner in a position to preside over the country’s continuing rise for the next decade.

As the contest for power in the Indo-Pacific between the US and China continues to escalate in coming years, ties with Indonesia — and Singapore and Vietnam in particular — will be vital if Australia wants to play a constructive role in the region, rather than simply being seen as standing in for the US.