2018/86, 4 September 2018
The newly elected Australian Prime Minister Scott Morrison visited Indonesia from August 31 to September 2. It is his first foreign trip a week after his inauguration. The visit indicates Australia’s foreign policy priority to improving bilateral relations with Indonesia.
Traditionally, new Australian leaders have always visited Jakarta as part of their first overseas visit. This latest visit seems to continue this tradition and serves as a signal that PM Morrison would further build cordial relations with Indonesia, which has been orchestrated by his predecessor, PM Malcolm Turnbull.
Prior to the visit, there have been expectations that PM Morrison would discuss key strategic and security issues with his counterpart, President Joko ‘Jokowi’ Widodo. Had it been the case, it would make the visit more complex and no tangible results could have been achieved as Canberra and Jakarta do not have convergent views on regional security issues. Instead PM Morrison focused mainly on enhancing economic relations. He seemed eager to accommodate Indonesia’s interests with the conclusion of the long-awaited “Indonesia-Australia Comprehensive Economic Partnership Agreement” (IA-CEPA). Enggartiasto Lukita, Indonesian Trade Minister and Simon Birmingham, Australian Trade, Tourism and Investment Minister signed the joint declaration that the negotiations on the IA-CEPA was completed.
The IA-CEPA talks had started in 2012. Since then both countries have been in negotiations to eliminate tariffs on goods and services as well as to open up investments in various sectors, including education, health and tourism. The latest round of talks took place in Jakarta in December 2017, with negotiators failing to conclude the deal. This time, both negotiators could quickly come to agreement during the PM Morrison’s visit. Earlier the Indonesian Foreign Minister, Retno Marsudi, said in an interview with the Jakarta Post (30 August) that there was no plan to sign the agreement given there were a number of unresolved issues that needed to be negotiated further.
However, during the two-day visit, in which both negotiators agreed to conclude the substantial issues. The agreement, if implemented, would mark a new milestone for the bi-lateral economic relations as it would open up Indonesia’s higher education sector to Australian investors. Currently, tens of thousands of Indonesian students are studying in Australia. So with the opening up of the sector to Australian universities, more Indonesian students would be able to benefit from high quality of education. In addition, Indonesia would lower import tariffs on Australian beef and cattle and other agricultural products. In return, Australia would relax tariffs on cars and garments shipped from Indonesia.
This agreement benefits both Morrison and Jokowi. For PM Morrison, this signals recognition of his new leadership, especially from its largest neighbour, which is considered critical from Australian security point of view. For President Jokowi, this agreement provides an opportunity for Indonesia to improve its trade relations with Australia and to become part of global value chain, amid growing protectionism and anti-globalization movement around the world.
The real test however is whether the two leaders can bring the agreement into implementation. Thereafter the agreement need to be ratified by their respective parliaments. This may not be smooth sailing. Politically, opening up the economy for foreign investors is a sensitive issue. For Indonesia, opening up the education and agricultural sector would invite criticisms from domestic stakeholders. For Australia, with highly dynamic internal politics, which has caused frequent changes of leadership, delays in the implementation of the agreement cannot be ruled out. Finally, what also remains unclear is that beyond economic relations, how the two countries will navigate their different interests in the strategic and securities areas.
Dr Siwage Dharma Negara is Senior Fellow and Dr Leo Suryadinata is Visiting Senior Fellow at ISEAS – Yusof Ishak Institute.
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