Why a frustrated Indonesia still wants to be friends with us.

On the eve of the international AIBC Conference on the Gold Coast, there was a collective sigh-of-relief yesterday as Indonesia’s Finance Minister, Sri Mulyani Indrawati, stated that - despite the fall-out over the Australian Embassy in Israel issue - "the relationship between Australia and Indonesia ‘remains strong’ and Indonesia looks forward to formally concluding the IA CEPA trade agreement."

This is very good news, as over the past few years the G-to-G relationship between our two nations has been quite warm; just quietly ask anyone from the Indonesian Ministry of Foreign Affairs or at their embassy in Canberra.

But first let us just go back a little to understand why the finance minister remains upbeat about the trade agreement and the broader bi-lateral relationship:

Ms Sri Mulyani is about as good a finance minister as any country in our region could wish for: articulate, smart, disciplined, and also a former managing director of the World Bank. Mulyani has faced some strong headwinds in the past year as commentators around the World expressed concern that Indonesia is moving towards a more ‘hardline conservative form of Islam', particularly after the jailing of then governor of Jakarta, Basuki Tjahaja Purnama or 'Ahok'.

Financial markets appear to have been slowly losing confidence in Indonesia’s leadership with concerns of too much focus on religious issues rather than economics. The Rupiah has fallen significantly in recent times and Indonesia’s current account has been under heavy pressure. Ms Mulyani knows that a strong economy is what REALLY matters in the longer turn to ensure continued growth, opportunities for young school leavers and improving the standard of living for the 100 million Indonesians still living in poverty.

With this in mind, it should not have been surprising that President Jokowi was keen to see the IA CEPA agreement concluded; a demonstration to the markets that Indonesia is indeed, ‘open for business’. The last thing Ms Mulyani, as finance minister in this fragile environment, needed was a diplomatic crisis involving Indonesia's ‘hard right Islamic lobby group’. Australia’s PM then provided such an issue in saying he welcomed the idea that Australia should move its embassy from Tel Aviv to Jerusalem; a very sensitive issue in Indonesia and Malaysia.

Fortunately for Australia, both the opposition (lead by Probowo) and Jokowi’s own pro-Palestine ministers chose to pursue the issue no further other than their foreign minister to warn Australia that should this ‘thought bubble’ proceed then relations would be damaged severely.

Ms Mulyani, therefore is one minister who would be very happy to see this ‘embassy idea’ quietly pushed to one side, so that the trade agreement (including the critical area of education and agriculture) can be concluded, and simultaneously allow the focus between Australia and Indonesia to get back to issues including trade, defence, maritime security, anti-terrorism and (for Australia) anti people-smuggling strategies.

Provided the bi-lateral relationship remains buoyant, Indonesia should be keen to seek concessions from Australia through an expansion of the Pacific Islanders working visas, by having it include Indonesian nationals; making it easier for young Indonesians to work here under a more liberal Holiday-Work Visa arrangement, and for Australia to change the inbound tourist visa process to make it simpler and cheaper for Indonesians to holiday here. With 9.1 million Indonesians travelling abroad last year there is a huge upside for Australia if the settings are right.

What all this means, is that with a stable and warm relationship, BOTH nations – as neighbours – can benefit enormously. It should therefore have been of no surprise that Indonesia reacted so strongly when out of 'left-field' PM Scott Morrison spoke of the Israel Embassy shift concept. The timing for Indonesia was terrible - especially with the presidential elections scheduled for next year, the presence of a senior Palestinian delegation in Jakarta, and without consultation with Indonesia’s MoFA or our own DFAT.

Sri Mulyani is right to talk-up the IA-CEPA and the broader bi-lateral relationship, as there are so many core issues at play that will enhance opportunities for both nations and our people. 

Moving Australia's embassy from Tel Aviv to Jerusalem is not one of those issues.

Ross B. Taylor AM is the president of the Perth-based Indonesia Institute Inc., and a former National Vice President of the Australia Indonesia business Council.

• (This article appeared in The Australian Financial Review Newspaper on Thursday 8th November 2018)