Recently, Prime Minister Malcolm Turnbull met with President of Indonesia Joko Widodo (Jokowi) on the margins of the Australia-ASEAN Special Summit. Although Turnbull seems to have built the positive personal relationship with Jokowi that eluded Tony Abbott, managing the bilateral relationship won’t be any easier for Turnbull than his predecessor.
The fate of the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) illustrates the difficulties Turnbull faces. The signing of this agreement, under negotiation for almost a decade, was originally expected to provide the fresh “announceable” development that such meetings between leaders demand.
Although the signing may still happen, its likelihood has been descreasing for some months, all the more so as senior Indonesian ministers told the press on Tuesday that talks remain deadlocked.
Even if a deal is finally signed off, implementing it will be just as hard as its negotiation – maybe even more so. For all Jokowi’s repeated rhetoric of Indonesia being “open for business”, in reality his country remains strongly protectionist.
In part this is due to a tradition of populist mistrust of foreign capital, stoked by increased nationalism since the presidential elections of 2014. It is also partly because of a too-often corrupt and obstructionist bureaucracy, and a result of wealthy oligarchs’ capturing much of the political process and a good slice of the media too.
Jokowi’s promises count for little if these oligarchs choose to stymie deregulatory reform. The gap between his reformist policy announcements and the wicked problems foreign investors still face on the ground remains enormous.
Of course, the difficulty of developing bilateral economic ties cannot solely be attributed to Indonesia’s challenging business environment. Australia’s business underperformance in Indonesia is also a result of the persistent popular misunderstandings of the country that led Australians to ignore our shared geography and miss out on the benefits of Indonesia’s 5% growth and much-predicted boom.
This creates a vicious circle. As Dave McRae and Diane Zhang argue in their contribution to our newly published volume on Australia–Indonesia relations, Strangers Next Door?: Indonesia and Australia in the Asian Century, Australia’s shallow economic ties with Indonesia leave nothing to counterbalance popular security fears about Indonesia. The Indonesian diaspora in Australia is surprisingly tiny given their home country’s enormous size and close proximity.
Popular anxiety about Indonesia in Australia was also aggravated by the rise of racial and religious identity politics evident in the Jakarta gubernatorial election last year, which saw the Christian ethnic Chinese incumbent Ahok imprisoned for blasphemy.
In fact, Indonesian Islam’s growing social and moral conservativism could become even more problematic for our relations with Indonesia. Having finally managed to legalise same-sex marriage, Australians will react badly if the Indonesian legislature’s current plans to amend its Criminal Code to criminalise homosexuality are successful. This has the potential to trigger an international tide of criticism against Indonesia, which will probably only strengthen anti-foreigner sentiment.
Fear and anxiety works both ways. Australia’s popular reputation in Indonesia is also often poor. A persistent perception of Australia as firmly “white” feeds nationalist suspicions of its supposed neocolonial motivations in dealing with Indonesia.
Papua will therefore continue to be a major fault line in the relationship, sitting at the intersection of powerful and often conflicting ideas about human rights and national sovereignty in the two countries. Many Australian activists who lobbied for democracy in Indonesia and self-determination for East Timor now see Papuan independence as a similar cause, infuriating Indonesian leaders.
Indonesian suspicions about Australian ambitions also dovetail neatly with nationalist scepticism of Australia’s significance to Indonesia, given the latter’s economic and geopolitical “rise”. This is manifest in the frequent comments of Indonesian opinion-makers to Australians that, “You need us more than we need you,” or, as Indonesia rises, “You need to show us why you matter.” As then DFAT secretary Dennis Richardson wrote in 2012, a wealthier and more confident neighbour makes it “increasingly difficult for Australia to gain the attention of Indonesian decision-makers, to the extent that we think our interests might warrant”.
There are plenty of other human rights and criminal law issues on which Australians and Indonesians frequently do not see eye to eye, including the death penalty and drugs sentencing. Asylum-seeker policy is another obvious fault line.
Amid this turbulence, bilateral ties have grown incrementally broader and, in a range of respects, warmer, since Indonesia democratised in 1998. Turnbull’s regular meetings with Jokowi and the annual “2+2” defence and foreign ministers meeting, which will accompany the ASEAN summit this weekend, are each part of the wide range of government cooperation has developed. Nevertheless, the two-way tensions, fears, and misunderstandings signal that bilateral ties face a bumpy ride ahead.
In fact, there is a real risk that as the Asian Century rolls on, Australia and Indonesia may find themselves largely going their separate ways.
Preventing this from happening, and deriving some benefit for Australia from Indonesia’s fast-moving transformation, will be a huge challenge for Turnbull, regardless of his personal rapport with Joko Widodo. IA-CEPA would be a nice start, but don’t hold your breath.
Tim Lindsey and Dave McRae are the editors of Strangers Next Door?: Indonesia and Australia in the Asian Century, published by Hart Publishing in February.
By Jarryd de Haan; Futures Directions International, Perth WA
The Indonesian tourism industry is a major economic driver and will continue to be fuelled by the surge of inbound tourists from China.
The lack of tourism infrastructure and the funds needed to remedy it will be a major challenge for Indonesia. It is a problem that could hamper the goal of attracting twenty million tourists in 2019.
The growing “halal tourism” market holds significant potential for Indonesia.
While Australian tourists play a key role in the Indonesian tourism industry, the same cannot be said for the number of Indonesian tourists coming to Australia.
Adjusting Australian visa requirements for Indonesian tourists to better match those of other South-East Asian countries could help to encourage a larger Indonesian presence in the Australian tourism industry.
Tourism in Indonesia has more than doubled over the past decade, with some media reports claiming that 2017 saw over fifteen million tourists visit the archipelago state. The tourism industry has flourished and become a major driver of the economy and a central feature of the government’s economic growth strategy. To facilitate further growth, the Indonesian Government is hoping to replicate the success of Bali as a tourist destination in a number of other locations spread across Indonesia.
Overview and Future Obstacles
The tourism industry is a major economic driver for Indonesia. In 2016, foreign exchange earnings from tourism totalled $16.3 billion. When indirect and induced incomes from travel and tourism are included (such as investment spending and spending by employees), that figure increases to $72.4 billion, or approximately 6.2 per cent of GDP in 2016. This level ranks Indonesia’s tourism industry as the twenty-second largest in the world, according to the World Travel & Tourism Council. It is larger than the average tourism industry in South-East Asia, but smaller than those of Australia, Thailand and the Philippines. Strong growth is expected for the Indonesian industry, with indirect and induced incomes predicted to reach $141.3 billion annually by 2027, according to the World Travel & Tourism Council report.
The Indonesian Government, however, may be too optimistic in its growth projections. In 2016, Tourism Minister Arief Yahya claimed that he wishes to double the number of international visitors coming to Indonesia to total over twenty million by 2019. Yahya has made similar ambitious claims before. In 2014, he told Reuters that he wished to double the number of Chinese visitors by 2016, but, in reality, the number grew by only 45.6%; although that is still an impressive figure.
His most recent claim also appears too ambitious. Given that 2017 saw 14 million foreign arrivals, the minimum growth rate required to reach 20 million tourists by 2019 is 19.4% per annum. As seen in Figure 1, that is a difficult target, given that the growth rate for foreign arrivals over the past five years has averaged 11.9%. Consistent growth of around 20 per cent for three years straight would be unprecedented in Indonesian history and is a rare occurrence for other tourism industries throughout South-East Asia. So, while not impossible, achieving such a high target does seem unlikely.
There are also obstacles facing Indonesia’s tourism industry, namely, poor infrastructure and the lack of investment required to fund the necessary infrastructure projects. From 2015 to 2019, the funds required to meet Indonesia’s overall infrastructure needs amount to approximately $450 to $520 billion. Looking at projected government spending in contrast to investment and other contributions, it is likely that the government will fall short of the required funds for infrastructure by at least $120 billion.
To fill that funding gap, the Indonesian Government has made a number of bilateral agreements with countries such as China and Japan and sought loans from the World Bank and the Asia Infrastructure Investment Bank. According to PricewaterhouseCoopers, however, many of those agreements are fraught with challenges, due to being politically, rather than commercially, driven. As a result, funds tend to be slowly dispensed and often not fully utilised.
That has left tourist-related infrastructure in a poor position. According to the World Economic Forum (WEF) in its 2017 Travel and Tourism Competitiveness Report, tourist service infrastructure was the worst performing area in its analysis of the Indonesian tourism industry. With a score of 3.1 out of seven, Indonesia’s tourist service infrastructure is worse than that of Kenya and only slightly better than Venezuela. Ground and port transport infrastructure is also ranked poorly in the report. While the Indonesian Government has recognised the poor state of infrastructure, in remedying that problem it must consider the potential environmental impact of developing new hotels, roads or airports.
That must be done not only for the sake of general environmental concerns, such as native wildlife, but also to preserve the forests and beaches as tourist attractions. In the WEF Report, Indonesia ranked poorly in environmental sustainability, but highly in natural resources. Maintaining those natural resources should be a vital component of Indonesia’s tourism industry.
“Ten New Balis”
President Joko “Jokowi” Widodo and his ministers have spent time seeking overseas investment to fund the project known as the “Ten New Balis”. The project, announced in February 2016, is a government initiative to develop ten new tourist hubs across the country. According to 2016 statistics, the vast majority of foreign tourists spend their time in Indonesia on Bali (49%) and Java (30%).
Those two islands together account for just 7.6 per cent of Indonesia’s total land mass. Attracting visitors to other areas will be essential to plans aimed at expanding the Indonesian tourism industry. According to the Ministry of Tourism, the tourist destinations chosen for development are already known as tourist attractions, but would greatly benefit from better access and more amenities.
One of the locations selected, Lake Toba, is a good example. Lake Toba is well known among tourists travelling to Indonesia, but has lacked easy access. Before a new international airport was built in Silangit, to get to Parapat near Lake Toba, most tourists had to catch a domestic flight to Medan (over two hours from Jakarta), then head to the lake via bus or car, which took another four to six hours. With the new airport, however, travel times will be reduced to only two hours. That will significantly increase the prospects for tourism in the Lake Toba area. The government hopes to see the first international flights to the new airport sometime this year.
The chosen locations of the “Ten New Balis” are: Lake Toba (North Sumatra), Tanjung Lesung (Banten), The Thousand Islands (Jakarta), Tanjung Kelayang Beach (Bangka Belitung Islands), Borobudur Temple (Central Java), Mount Bromo (East Java), Mandalika (West Nusa Tenggara), Labuan Bajo (East Nusa Tenggara), Wakatobi (South Sulawesi), and Morotai Island (North Maluku). The three priority locations that will be focused on first are Mandalika, Borobudur Temple and Lake Toba.
In developing those locations, the government hopes to expand tourism as an economic behemoth, without devaluing existing tourist destinations. It is highly unlikely that Indonesia could accommodate twenty million tourists in 2019 without diverting some of those tourists to locations other than Bali. That would have the added benefit of creating local jobs in the new tourist areas.
Comparing the number of foreign and local tourists within a given province during 2016, as shown in Figure 2, shows that the vast majority of foreign tourists stayed in Bali, while Indonesian tourists mostly confined themselves to Jakarta, Central Java and East Java. The figures are somewhat generalised, however, as they look at the number of tourists staying in the entire province, rather than the specific locale of the tourist attraction that the government wishes to develop. Still, the stark contrast between the numbers shown in Figure 2 indicates that the popularity of tourist destinations within these provinces differs significantly.
It is likely that the government sees an opportunity to replicate the success of Bali elsewhere. In their current state, however, most of the destinations earmarked for the “Ten New Balis” do not have the capacity to handle a major influx of tourists, nor do they have easy access in the first place. It raises the question of whether the government is being too ambitious in its plans, especially when taking into account the previously-mentioned lack of funding for the associated infrastructure projects.
If the Indonesian tourism industry is to achieve the targets that have been set for it, Jokowi will need to concentrate on the Chinese market. As seen in Figure 3, Chinese visitor numbers have just overtaken those from Singapore, Malaysia and Australia, the three source markets that have traditionally dominated the Indonesian tourism industry.
Over the past ten years, tourist numbers from China have grown by 428%, a growth rate only topped by Bangladeshi tourists, who still only account for 0.34% of all inbound visitors. If current trends continue, Chinese visitors could make up 20 per cent of all inbound tourists by 2019, up from 14 per cent in 2016.
While the growth in the number of Chinese tourists is strong, the Indonesian Government also has an opportunity to entice them to spend more. On average, a Chinese tourist spends approximately $1,383 per visit, compared to the average of $1,423. In developing strategies to increase tourist spending, however, it is worth considering that shopping no longer appears to be the primary motive for travel among Chinese tourists.
While Chinese tourists make up the bulk of inbound arrivals in the Indonesian tourism industry, some attention should be focused on promoting halal tourism. Halal tourist services are differentiated from standard services by adherence to Muslim laws and customs, such as alcohol- and pork-free hotels and restaurants and separated swimming areas or prayer rooms for men and women. That can be difficult to offer due to a lack of international standards and the fact that many Islamic customs and laws can be interpreted differently among different Muslim communities. It is, however, an emerging market that could hold great potential for the Indonesian tourism industry.
Tourists from the Middle East, for instance, spend approximately $2,284 per visit, far more than the average tourist, but only around 200,000 nationals from that region choose to holiday in Indonesia annually. Halal tourism is a relatively new concept in Indonesia, with the soft launch of a halal tourism programme taking place in 2012 and regulations for Sharia-compliant hotels being introduced in 2014. In an annual reportproduced by Thomson Reuters, Indonesia is ranked as the fourth-best developed Islamic economy for Muslim travel, behind Malaysia, the United Arab Emirates and Turkey. As the report says:
Indonesia moves into the top ten straight to fourth place, realising its potential as a top destination for Muslim [travellers], aided by substantial efforts to develop Halal Tourism in the country, reflected in a high ecosystem score, as well as a substantial increase in media discussion on halal tourism.
Promoting halal tourism should not be confined to Middle Eastern countries alone. South Asian countries, such as India, Pakistan and Bangladesh, are all in relatively close proximity to Indonesia. In 2016, approximately 500,000 tourists from the South Asian region visited Indonesia.
Given the popularity of Bali for Australian holidaymakers, Australia may be seen more as a solid, reliable market, rather than a priority for the Indonesian tourism industry. Even so, it still holds great significance in the overall bilateral relationship. In a previous Strategic Analysis Paper, tourism was identified as the most important aspect of the Australia-Indonesia economic relationship, from the perspective of Jakarta.
That still holds true when using the updated estimates in Figure 4, which show tourism to be the largest source of revenue for Jakarta when looking at the top three Indonesian goods and services exports to Australia. Additionally, tourism has generally proven to be a more reliable source of income when other exports have slowed due to decreasing demand or falling prices. That may, however, say more about the lack of diversity in the economic relationship than the strength of the Australian tourism market.
Indonesian Tourists in Australia
While Jakarta enjoys significant revenues from Australian tourists, Australia all but misses out on the potential revenue from Indonesian tourists. As seen in Figure 5, the number of Indonesian tourists arriving in Australia has only grown marginally, while tourist arrivals from China have grown significantly and are likely to dominate the market in the future.
The low number of Indonesian tourists coming to Australia raises questions, especially when considering the fact that Australia enjoys significantly more tourism from Indonesia’s neighbours, even though they have much smaller populations.
As put by Indonesia Institute President Ross Taylor, ‘When one considers the size of Indonesia and its strong and growing middle class, the figures for travel to all of Australia are also disappointing – we attract a mere 1.03 per cent of the market for overseas travel [specifically those travelling to holiday] from Indonesia’.
One reason for the small numbers of Indonesian tourists coming to Australia is the generally low number of Indonesians who are able, or want, to holiday overseas. Despite having the world’s fourth-largest population, relatively few Indonesians choose to holiday overseas; a point that becomes even clearer upon comparing the numbers of Indonesian outbound tourists with those of other high population countries, such as China.
When looking at Figure 6, the low number of Indonesian tourists coming to Australia makes perfect sense: there are fewer Indonesians holidaying in Australia because there are fewer Indonesian tourists in general.
Adding other South-East Asian countries, such as Malaysia and Singapore, to the data, however, shows that there are other factors involved. Despite Indonesia having similar numbers of outbound tourists to those countries (at least in raw number terms), Australia attracts twice as many tourists from Singapore and Malaysia as from Indonesia.
One reason for that is strict visa requirements, which do little to attract Indonesian holidaymakers to Australia. For an Indonesian national to holiday in Australia, s/he must obtain a Sub-Class 600 visitor visa. That visa costs $140 per application, requires each applicant to fill out a 12-page form and takes up to 34 days to process. Tourists from Malaysia and Singapore, on the other hand, can apply online for an Electronic Travel Authority (Sub-Class 601), which costs $20 and is processed in less than 24 hours. Indonesians have been able to apply for their visa online since November 2017, but the application cost and documentation requirements remain unchanged. The possibility of the visa application being rejected after paying $140 (with no refund) is a further deterrent.
Remarking on the visa costs for Indonesian tourists, Mr Taylor added that when Indonesia waived its Visa-On-Arrival fee for Australian tourists, it initially cost the government $50 million, but added $145 million to the economy the following year due to a surge in tourists. For Australia, waiving the visa fee for Indonesians coming to holiday here would cost the Australian Government approximately $13.2 million in lost fees per annum. To cover that, Australia would need to attract around eight per cent more Indonesian holidaymakers for each year that the fee is waived. Such a figure can be achieved, as is borne out by at the effects that reduced visa regulations have had on tourism flows in other countries.
Things are looking up for the Indonesian tourism industry. Although challenges such as the lack of infrastructure will need to be addressed, they will not necessarily damage the industry and are more likely to merely restrict its potential. It is unlikely that Indonesia will see twenty million tourists in 2019, despite the strong growth recorded in 2017.
Considering the Australian tourism industry and the lack of Indonesian tourists, however, expensive and bureaucratic visa requirements could be directly hindering the number of arrivals. Unlike the challenges facing Indonesia’s tourism industry, that could be fixed relatively easily to facilitate significantly more Indonesian visitor arrivals in the longer term.
The former special forces general and presidential candidate in Indonesia’s last election, Prabowo Subianto, will make another bid for the top job when the country goes to the polls next year to choose its head of state.
A formal announcement is not expected until next month at the earliest. Even so, top officials at Prabowo’s party, the Great Indonesian Movement Party, or Gerindra, said they have begun preparations early in a bid to better organise the vast and unwieldy campaign machinery needed to woo a majority of Indonesia’s 185 million voters. The preparations are also intended to avoid what they claim were irregularities that cost them the election in 2014.
“He’s running,” said Fadli Zon, the deputy speaker in Indonesia’s parliament and the vice-chairman for Gerindra.
“We are confident this time. There were widespread irregularities and the result was close. Our preparation this time will be enough.”
Prabowo Subianto, left, and Joko Widodo, meet in Jakarta after the 2014 election. Photo: AP
A three-star general, who is accused of human rights abuses in East Timor in 1983 and during the anti-Chinese riots in 1998 that ousted his former father-in-law, the dictator Suharto, his candidacy will be a hard sell. In 2014, he lost decidedly as President Joko Widodo tapped into disgust over corruption and poor services.
This time Prabowo, who declined to be quoted for this article, is betting a slower economy will propel him to victory, his senior aides said.
WATCH: Widodo speaks to the SCMP on Chinese investment in Indonesia
“Economic issues will drive the campaign,” Zon said. “If you go to the markets and you ask the people is their life better now than four years ago, they say, ‘No. It’s hard to find good jobs.’”
In the lead up to the election in 2014, Widodo promised GDP growth of about 7 per cent. Instead it has languished at about 5 per cent despite billions of US dollars being pumped into infrastructure from power plants to ports to better drainage systems.
The International Labour Organisation thinks Indonesian incomes are a third of what they are in neighbouring Thailand or Malaysia.
Adding to Prabowo’s fortunes is the narrow field of challengers. Anies Baswedan, the governor of Jakarta, who swept to power on a wave of conservative Muslim support last year, has said he will not stand. The reformist mayor of Bandung, Ridwan Kamil, is running for governor of West Java. Gatot Nurmantyo may mount a bid but polls at less than 2 per cent, according to February data from Indo Barometer.
A student protests against the ban on wearing niqabs on university grounds. Courting the conservative Muslim vote has become more crucial in Indonesia. Photo: AFP
Thanks to his squeaky clean image and track record with big infrastructure projects, Widodo enjoys approval ratings ranging between 60 per cent, according to a January survey by Indo Barometer, and 76 per cent, according to a December survey by Saiful Mujani Research and Consulting. In a four-way race Widodo enjoys support of 43 per cent according to the Indo Barometer poll, more than double Prabowo’s support.
That means defeating Widodo will probably include dirty tricks that paint him as being on the take. That won’t be easy, said Kevin O’Rourke, Indonesian affairs analyst and author of the weekly newsletter Reformasi.
“Prabowo has to portray Widodo as corrupt,” he said. “Last time they smeared Widodo with everything they had. They will try it again but I don’t think Widodo will be any more vulnerable than he was last time.”
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Maybe so, but those smears – in which Prabowo denied having a role – were effective. Rumours that Widodo was either a Christian, or born in Singapore and of ethnic Chinese descent, were so crippling that his double-digit lead over Prabowo evaporated. Widodo made an eleventh-hour dash to Mecca to burnish his religious credentials just ahead of the vote. In the end, Widodo prevailed with 53 per cent of the vote.
Muhammad Qodari, Indo Barometer’s executive director, said Widodo’s approval ratings are relatively low. By comparison, Widodo’s predecessor, Susilo Bambang Yudhoyono, was averaging 80 per cent at this point ahead of the 2009 election.
Adding to Widodo’s headaches is the added importance of religion in the world’s most populous Muslim-majority country. Following the landslide loss of former Jakarta governor, and close Widodo ally, Basuki Purnama, a Christian of ethnic Chinese descent, religion has become the trump card, Qodari said.
Subianto supporters march to the Constitutional Court in 2014 to challenge the election result. Photo: AFP
A survey taken two weeks ahead of the election in April last year suggested Purnama, who is better known as Ahok, had an approval rating of 74 per cent. Nevertheless, he lost by a margin of nearly 20 points and was later jailed for insulting the Koran.
However, the wine-drinking, British and Swiss educated Prabowo may be a poor vehicle for religious conservatives. For moderates, accusations that he played a role in the massacre of East Timorese and student protesters may again spook voters to Widodo. In 1983, soldiers under his command were accused of killing hundreds of East Timorese. In 1998, Prabowo was linked to the abduction of student activists. Later that year he decamped to Jordan after being summoned to account for the allegations. Prabowo was denied a US visa in 2000, it is thought because of his background.
Even so, Gerindra’s parliamentary coalition partner, the hardline Muslim Prosperous Justice Party (PKS), could give Prabowo traction. The party has a national network and helped organise the mass rallies in late 2016 that eventually led to Purnama’s ouster. Already, Gerindra and PKS have coordinated in their selection of gubernatorial candidates at regional elections particularly on the vote-rich provinces across of Java.
Still the favourite: Joko Widodo. Photo: AFP
“PKS is willing to work hard, they get out and knock on doors,” Qodari said. “That sort of mobilisation of voter turn out can make the difference.”
The party expects to woo the electorate with populist policies that seek to roll back some of Widodo’s biggest reforms. Reintroducing fuel subsidies to help drive down living expenses is on the table, Zon said.
Widodo eliminated the benefit, which was eating up as much as a fifth of the budget, to free up cash for infrastructure such as toll roads, improved ports and free health care. Widodo had promised that infrastructure investment would fuel the economy and add jobs. Zon said the programme failed and now a more modest approach targeting poor farmers, fishermen and small businesses is the priority.
“Jokowi put the priority onto infrastructure. But it hasn’t stimulated economic growth,” Zon said referring to Widodo’s nickname.
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Zon said a Prabowo administration would continue to support the country’s graft watchdog, the Corruption Eradication Commission, pointing out Gerindra didn’t participate in the parliamentary hearings that wrapped up in January seeking to sanction the agency.
Senior Gerindra party officials say privately they will dispatch volunteers to polling stations at each of the regional elections which are slated for June and at the presidential elections next year to ensure no tampering with ballot boxes. The 8 million-vote margin of victory in 2014 amounted to fewer than 16 votes for each of the country’s 550,000 ballot boxes that year.
Prabowo was far from blameless when the country was briefly in limbo following the election result. O’Rourke said polling firms linked to Prabowo’s campaign published highly questionable estimates of the final vote to help muddy the outcome and nudge the candidate to victory. Demonstrations by youth groups in the city’s downtown area following the election had to be broken up by police using tear gas.
To be sure, Widodo remains the favourite to win. But he’ll need to work hard to reach out to the Muslim faithful to assure victory. Qodari said Widodo’s priority will be finding a Muslim conservative running mate.
The upcoming ASEAN-Australia Special Summit has led to a surge in analysis of the Association of South East Asian Nations and Australia-ASEAN relations in Australia.
In February, ASPI released a special report by Graeme Dobell recommending Australia seek ASEAN membership claiming that ASEAN is Australia’s third largest trading partner after China (a country) and the European Union (a customs union). John Blaxland, on The Interpreter, argued“Australia is overwhelmingly dependent on ASEAN working and working well,” while claiming that ASEAN has 637 million people and accounts for $93 billion dollars of Australia’s international trade last year. The Australian Government concurs with this ASEAN trade figure and predicts that ASEAN’s population will reach 685 million by 2022.
Unfortunately, these figures are not ASEAN figures at all but aggregate figures for the 10 diverse countries of South East Asia. ASEAN does not trade nor does it have a population (beyond, possibly, the few hundred that work at the underfunded ASEAN Secretariat in Jakarta).
This conflation of ASEAN, a lightly institutionalised inter-governmental institution, with South East Asia, the region its member-states comes from, is extremely common and very hard to avoid. However, it is best avoided as it is intellectually distorting, and leads to bad policy recommendations.
The trade figures highlight this distortion problem very well. Unlike Europe and the European Union, South East Asian states have not created a custom union through ASEAN, nor have South East Asian states surrendered sovereign rights to negotiate trade agreements to the ASEAN Secretariat.
Australia has three existing free trade agreements with South East Asian states – Singapore, Malaysia, and Thailand – that are deeper than the ASEAN-Australia-New Zealand Free Trade Agreement. These three states account for close to two-thirds of Australia’s trade with South East Asia and are home to more than three-quarters of Australia’s foreign direct investment stock in South East Asia. Four South East Asian states are TPP-11 signatories and seven are among the 21 member economies of APEC.
The other 10 states that signed the TPP-11 agreement along with Australia last week in New Zealand are a much larger “trading partner” for Australia than the 10 economies of South East Asia, as are the other 20 APEC economies. Last year, Australian trade with the other TPP-11 economies was 1.6 times larger than with South East Asia and the other TPP-11 economies hosted 3.5 times more Australian foreign direct investment than the 10 economies of South East Asia.
These South East Asian aggregate figures should not be used as a reason for attempting to elevate Australia’s current dialogue partner relations with ASEAN that are focus of this week’s Summit or to claim that Australia is dependent, overwhelmingly or not, on ASEAN. Even South East Asian states are not dependent on ASEAN.
The silence of ASEAN on the plight of Rohingya in Myanmar speaks volumes to this point. The first principle of analysing ASEAN and Australia’s dialogue partner relationship with ASEAN is to not conflate Australia’s dialogue partner relations with ASEAN with Australia’s much deeper and broader relations with South East Asian states that are, mostly, not mediated through ASEAN.