The ties that bind: strengthening our trade relationship with Indonesia

Foreign Affairs minister Kevin Rudd with his Indonesian counterpart, Marty Natalegawa. AAP

Foreign Affairs Minister Kevin Rudd recently gave a rev-up to Australian businesses about the neglected opportunity that exists on our northern doorstep. He accused Australian firms of harbouring decades-old negative feelings about Indonesia.

Despite the propinquity of the two countries, there has been a failure to develop a significant trading relationship, even though this was recognised as important by the end of World War II. Today, Indonesia does significant trade with Europe, North America and the rest of Asia. The undeveloped trade relationship is noted on the Australian government’s DFAT website as “lag[ging] behind other aspects of the relationship.” Politically, the links are strong. However, at the general public level, a common feeling towards Indonesia is distrust, bordering on fear. According to Simon Philpott in the Australian Journal of International Affairs in 2001, “Australian attitudes towards Indonesia are partly constructed in immutable discourses of fear and anxiety”.

From the start of the 17th century until the middle of the 20th century, Indonesia was dominated at first by the Netherlands’ Dutch East Indies Company and then the Dutch government from the mid 1800s. The East Indies spice trade proved so profitable for the Dutch that it made Amsterdam a fabulously rich European city. In 1939, the Dutch head of Indonesia, General de Jonde, said that the Dutch had “ruled the Indies for 350 years with a whip and a club and they will continue to rule for another 350 years with a whip and club”.

The Japanese, despite being WW2 invaders, gave some encouragement for potential political self-rule. At the end of the war, the Japanese were vanquished from Indonesia and Dutch immediately sent troops to the Indies to regain control of the resource-rich state for their own economic gain. An international war raged on Australia’s doorstep, where more than 100,000 Indonesian natives were killed. The Dutch were eventually ordered out of Indonesia by the United Nations after India and Australia argued for Indonesia’s independence.

Australia’s fear of Indonesia started when President Sukarno fostered the support of the Communist Party, PKI, in the late 50s. Their support would keep him power until the military farce in 1965 and the subsequent coup d’état of 1966. The Communist Party had grown to become the third largest in the world. President Eisenhower was concerned that if Indonesia were to go Communist then Indonesia’s largest trading partner, Japan, would also turn Communist.

When General Suharto came to power, his military supporters slaughtered more than 600,000 Communist Party members and sympathisers in a few weeks of violence. Time magazine said was the best thing to happen in Asia. According to John Roosa in his 2006 book on the event, it was “one of the 20th century’s worst cases of mass violence”. Using weapons reported supplied by the CIA, General Suharto’s supporters got rid of a Communist worry for the western world.

Indonesia had shifted from an anti-USA Sukarno period to a pro-USA anti-communist Suharto era. Prime Minister Menzies’ distrust of Indonesia was heightened when Sukarno ordered an invasion into Malaysian territory in 1962 after a long-running border dispute. The Australian security agencies predicted an Indonesian coup d’état was inevitable, and likely to end up a US-supported military dictatorship. Menzies was concerned the newly CIA-armed Suharto forces could invade Australia. Our distrust of Indonesia was now in full flight.

There have also been a number of other unfortunate events that have tarnished the relationship between Australia and Indonesia such as the Balibo Five, the Bali bombing and major bombing attacks in Jakarta where a number of Australians have been killed, and further attacks against the Australian embassy in Jakarta. These episodes add to a narrative of how we see Indonesia.

Suharto’s rule came to an end in the wash-up of the Asian Financial Crisis that started in 1997. The crisis was the result of out of control investments from western investment banks seeking short-term high-income returns from the Asian miracle nations. Massive international investments in natural resources industries resulted in billions of dollars flowing into Indonesia but, at the first sign of a problem, the investment groups pulled the money out, leaving the country in a financial mess. Indonesia was the most affected Asian nation during the crisis. The Indonesian government, as well as all of Asia, has done a remarkable job in regaining its economic status.

Often we conclude that a wayward adult is the product of a poor childhood. In Indonesia’s case it continues to struggle with its poor history, rooted in brutal colonial control and two authoritarian presidents. It has only been fully democratic since 1999. A major task has been to undo the past and dismantle the structures that were put in place during the long dictatorships.

Despite its challenges, the Economist in 2009 described Indonesia as the freest nation in Asia — a remarkable turnaround in less than a decade. Fighting against corruption didn’t really begin in earnest until Susilo Bambang Yudhoyono came to power after the 2004 elections. Since then, Indonesia has been elevated 33 places on the Transparency International Corruption listing. Perhaps it is time the grounds for our distrust should begin to fade and then perhaps the governments of Australia and Indonesia can realise their dream of a dynamic trading partnership.