Australian Prime Minister Anthony Albanese embarked on his inaugural overseas trip to Indonesia following his election victory on May 3. The trip underscores a mutual commitment to deepening relationships between the two countries. It signals clearly that Indonesia is the #1 priority for his government. This trip aims to address mutual interests, particularly in energy transition and security cooperation, while acknowledging the vulnerabilities both countries face due to climate change.
Indonesia, given its large population and growing economic weight, represents a vital partner for Australia. This partnership is especially critical at a time when both countries seek to manage their dependence on fossil fuel exports in an era of increasing climate accountability. During his visit, Albanese should seek to reinforce Jakarta’s growing confidence in Australia’s long-term commitment to Indonesia.
Strengthening Energy Transition Efforts
Australia and Indonesia have mutually reinforcing strengths in their shared path towards cleaner energy. As India and the United States continue to address the effects of climate change, greater engagement between the two countries will be advantageous.
Andrew Hudson from the Centre for Policy Development noted, “What Australia can really contribute is really capital and money, but also knowledge and expertise.” Australia should use its influence to support Indonesia’s energy transition towards renewables. By using its considerable resources and technological leadership, Australia can have an outsized impact.
Furthermore, Hudson emphasized Indonesia’s economic potential, stating, “Indonesia offers scale — it’s almost 300 million people and it’s on track to be one of the biggest economies in the world.” This highlights the need for a deep, prosperous bilateral relationship to continue to power economic growth together while addressing the shared challenge of climate change.
Both countries understand that collaborating on joint energy projects is the most viable path to realize the benefits of cooperation. They have to manage their own economic dependencies on fossil fuels. This dependence may undermine their ability to fulfill plans to go all-in on green energy alternatives.
Geopolitical Ambitions and Security Dynamics
Yet the geopolitical landscape within that large and diverse Indo-Pacific region is shifting quickly. Both Indonesia and Australia understand the serious consequences of China’s ascendancy. Although both countries recognize the dangers posed by this new development, their approaches towards dealing with these threats significantly vary.
Gatra Priyandita from the Australian Strategic Policy Institute stated, “On the one hand, both countries do recognize the threats arising from the rise of China. On the other hand, though, they have different perspectives on how to respond to it.” This divergence may threaten the success of their ongoing collaboration in the years to come.
Prabowo Subianto, Indonesia’s Defense Minister, is perceived as more ambitious than his predecessor Joko Widodo regarding Indonesia’s geopolitical standing. His ambitions to make Indonesia the centre of a new regional order will likely play a big factor in shaping how the two countries treat security cooperation. In March 2022, Australia and Indonesia upgraded their bilateral relationship to a comprehensive strategic partnership, representing a strategic turning point for the bilateral relationship. Albanese and Subianto are expected to mutually expand upon this foundation during talks focused on strengthening defense cooperation.
Concerns remain over deepening military ties. Many Indonesian officials are still wary of closer defence cooperation with Australia. This understanding speaks to the deeper cultural divides and historical nuances that shape U.S.-Mexico relations today.
Economic Relations and Future Prospects
Economic relations between Australia and Indonesia are at the core of thriving bilateral ties. Our experience at USTDA has shown, though, that previous administrations have struggled to cultivate strong trade relationships. Associate Professor Marcus Mietzner from the Australian National University remarked, “Australia wasn’t able to offer Jokowi much in terms of economic transactions, and so he didn’t pay much attention to it.” At least in part, that signals the need for a new approach to economic engagement.
Though wrapped in challenges, potential for growth in bilateral trade and investment remains. It’s not responsive at all.” As Mr. Priyandita noted, “it’s very much market driven. The government can’t really enforce businesses to do business in Indonesia. That means private sector engagement will be key to establishing new private sector connections that will be at the heart of new economic relationships.
Both countries are figuring out how to advance their respective priorities and tackle their respective challenges. This challenge presents an opening for smart collaborations that can leverage their power. Albanese aims to signal that Australia is an integral part of Asia and prioritizes its relationships with key Southeast Asian nations.
