Inquiry into Australia's relations with Indonesia

Background Paper

The context of the inquiry

Indonesia comprises the world's largest archipelago, consisting of some 13,667 islands covering a total area of approximately 1.9 million square kilometres. Located between mainland South East Asia and Australia, the principal land masses are Sumatra, Kalimantan (approximately 60 per cent of Borneo), Sulawesi, (western) Papua and Java. The estimated population of Indonesia in July 2001 was almost 230 million.¹

Australia's interests

The 1997 White Paper on Australia's foreign and trade policy included the following assessment:

Australia's relations with Indonesia will always be fundamentally important. This reflects Indonesia's strategic location astride Australian's northern approaches through which 60 per cent of Australia's exports pass, and its size-Indonesia is by far the largest and most populous country in Australia's immediate vicinity.

Australia and Indonesia share significant strategic interests and an expanding structure of consultation and cooperation on strategic issues.²

The Australian Government has commissioned a new foreign relations 'White Paper', which is expected to be released later this year. Media reports in July 2002 speculated that the most significant emphasis would be placed on Australia's relationship with the United States of America.³ However, Foreign Minister Downer's speech at the National Press Club in Canberra on 7 May 2002 indicated that Asia and the Pacific remain the primary focus of Australia's foreign policy, notwithstanding a reassessment of international alignments after the terrorist attacks on 11 September 2001 and the pre-eminence of the United States in world affairs.⁴

The Committees continuing interest in Indonesia

Previous reports

Australia's relations with Indonesia have been the subject of several reports by the Committee and its predecessors, the first being an interim report presented in 1973.⁵ An issue of immediate concern provided the main focus of that report-tensions between pre-independence Papua New Guinea and the Indonesian province then named West Irian (later named Irian Jaya and more recently called Papua in the special autonomy package proposed in January 2002 by the Indonesian Government). Factual material on Australia's aid to Indonesia and the bilateral trade relationship were presented as appendices to the report.

In 1984, the Committee on Foreign Affairs and Defence presented its report on Australia's relations with ASEAN, including discussion of Australia's bilateral relations with Indonesia in the context of that regional grouping.⁶

The Committee's next report to examine the relationship between Australia and Indonesia was presented in November 1993. Entitled Australia's Relations with Indonesia, the report provided a comprehensive review of the full scope of bilateral relations. As part of its inquiry, a delegation of ten Committee members undertook a study tour of Indonesia in October 1992. An account of that visit was included as Appendix 4 to the Committee's 1993 report.

In 1998, the Committee again examined Australia's relations with Indonesia in the context of ASEAN. The Committee's report recognised the importance of the various bilateral relationships Australia had developed with individual ASEAN members, but acknowledged also that problems had arisen from failure to recognise that our relations with the region could not be seen simply as a sum of the parts. Nevertheless, the Committee concluded that the strengths in the bilateral relationships were built particularly on trading links, development assistance programs and growing defence cooperation, all of which were relevant to Australia's relationship with Indonesia. Despite the increasing strength of our bilateral relations, points of tension between Australia and Indonesia remained during the decade of the 1990s. These differences of view derived largely from issues relating to East Timor, the economic crisis facing Indonesia and South East Asia more generally, the future political leadership in Indonesia and Australian concerns regarding corruption and reports of human rights abuses in Indonesia.

Time to review the relationship

There have been enormous changes in the political, social and economic landscape of Indonesia since the Committee's last major review in 1993. The leadership transition since 1998 from President Soeharto to President B J Habibie and then in rapid succession to Presidents Abdurrahman Wahid and Megawati Sukarnoputri has signified a tumultuous period in Indonesia's recent history.⁷

The Asian currency crisis which began in mid 1997 hit Indonesia hard and the rupiah's value fell 82 per cent between July 1997 and February 1998, with a similar fall in the stock market. When Abdurrahman Wahid took office as Indonesia's fourth president in October 1999, the international community hoped that the country's first democratically-elected leader would drive long-overdue institutional reform of the political system. The institutional challenges facing the Wahid administration proved to be almost insurmountable, however, for a whole range of political, historical, social and economic reasons.⁸

The problems facing Indonesia under the leadership of Megawati Sukarnoputri are still immense. The struggling economy, the need for reform of the banking and legal sectors, the difficult transition towards democratic institutions after four decades of authoritarianism, continuing communal violence in Kalimantan, Sulawesi and Maluku, as well as secessionist movements in Aceh and Papua have all highlighted the need for Australia to review the bilateral relationship.

Relations suffered significantly as a result of Indonesia's responses to perceived criticisms from Australia on a number of sensitive issues, including:

• East Timor's struggle for independence and the Dili massacre in 1991;
• suppression of separatist movements and the outbreaks of communal violence in various parts of the archipelago;
• the role of the Indonesian Armed forces (TNI) in civil government; and
• allegations of political corruption and reports of human rights abuses.

A major breach in relations occurred in 1999 after Australia led the international peacekeeping force in East Timor (INTERFET).

While some tensions are still apparent, there have been encouraging signs of progress in achieving dialogue through the Australia-Indonesia Ministerial Forum and Australia's overall trade with Indonesia is currently at its highest recorded level. The special autonomy agreements proposed recently by the Indonesian Government to the provinces of Aceh and Papua also represent a significant shift in their relations with the central government.

These positive indicators suggest that now would be an appropriate time to re-examine and strengthen Australia's relations with Indonesia.

The terms of reference published on page 9 have been designed to focus in particular on opportunities to build a closer relationship in the future while at the same time acknowledging the current nature of relations between Australia and Indonesia. Hence, the aspects to be considered by the Committee have been expressed broadly in terms of the political, strategic, economic, social and cultural links between the two nations. Within those broad topics, the Committee expects to examine a very wide range of subject matter.

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