“Not just close neighbours — but great friends,” Scott Morrison said during his first international visit as Prime Minister in 2018, as stated in an ABC News article.
This year marks the 70th anniversary of Australia-Indonesia diplomatic relations, reaching a pivotal highlight when Indonesian President Joko Widodo addressed the Australian parliament on Monday (10/2), the last day of his three-day visit in Canberra, Australia. Widodo is the second Indonesian leader to do so after his predecessor, Susilo Bambang Yudhoyono.
According to an analysis from ABC News, Widodo’s invitation acceptance signals a ‘strategic turning point’, despite previous disagreements on key issues such as capital punishment in the case of the Bali Nine or people smuggling, among others. While close geographical proximity does not equate closer economic integration, former Australian shadow minister for trade and investment, Jason Clare said “Australia and Indonesia are like neighbors who barely look over the fence.” The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA), signed in March last year and approved days before the visit, aims to improve not only trade, services, and investment but closer relations across the spectrum.
Days before the visit, the Indonesian Parliament approved the bilateral trade agreement (IA-CEPA) which Widodo “gifted” to Australia. On Monday (10/2), Ministers expressed their expectations of higher interest and investments towards Indonesia’s textile and automotive sectors, as stated in an article by the Cabinet Secretariat.
“We know that investment from Australia so far has not entered the top five of investment in Indonesia. The range is between US$400-700 million,” Coordinating Minister for Economic Affairs Airlangga Hartarto said during a press statement. Hartarto also said, “It is expected that with through the IA-CEPA, even if the import duty will be reduced on average from 5% to 0%, it will encourage textile and automotive (industries).”
Minister of Trade Agus Suparmanto expressed hopes for greater market access through the trade deal, “The increase of market access means reducing deficits as well as improving exports,” he said, adding that Indonesian products are also expected to have more competitive prices.
This enthusiasm, at the governmental level, is hardly shared with the average Australian, as noted by the analysis.
According to a 2016 Australia-Indonesia Centre Report, 70 percent of Indonesian respondents agreed that “Indonesia is more important to Australia than Australia is to Indonesia.” Whereas 39 percent of Australian respondents agreed that “Australia is more important to Indonesia than Indonesia to Australia.” The Lowy Institute also surveyed Australians over the past 15 years and results consistently reflect a lack of knowledge on the archipelago. In 2019, only 34% of Australians agree that “Indonesia is a democracy.”
Beyond a trade deal
More than what its name suggests, the IA-CEPA is more than a conventional free trade agreement (FTA). Both governments will not only trade in goods, services, and investments but will also cooperate across communities and people.
The main selling points of the agreement, according to an ABC News article, cover an eventual elimination of all Australian trade tariffs to reductions in non-tariff measures, barriers, trade in services, and investment. It also establishes a system of tariff quotas. The pact provides greater access to the Australian market which gives Indonesia multiple opportunities to supply machinery, electronics, automotive (hybrid and electric vehicles), textiles, boost exports of timber, rubber, carpets, and medicinal goods to Australia. It also serves as a platform to identify other economic opportunities.
Barriers to Australian agricultural exports are scrapped. Despite being competitors in the commodity market, Australia is an important source of wheat and beef.
The broader opportunities for cooperation lies in education including skills training, capacity building, and tertiary education, and worker movement. Australia and Indonesia have agreed to reciprocal skills exchange programs, vocational training, and the first foreign campus established, Monash University.
Monash University’s campus establishment will offer Master studies and PhD degrees, among other offerings. The campus “will contribute powerfully to Indonesia’s economic, social and technological development,” Australian Prime Minister, Scott Morrison told Australia’s parliament on Monday (10/2).
The second benefit is an increased in work-holiday visas to Australia, from 1,000 to 4,100 per year.
The technical assistance under the partnership would be a great boon for accelerating institutional capacity building because inadequate or poor institutional capacity has been one of Indonesia’s banes in its economic relations with other countries.
While many view the economic agenda as an overall positive contribution there are other voices that express their reservations concerning its impact on Indonesia’s tertiary education and whether trade under the agreement is as liberal as it seems.
Reservations on the deal
On Wednesday (12/2), an article titled, “Indonesian Private Universities Refuse to Accept Monash University” (PT Swasta Tolak Monash University), by Haura Hafizhah and Inas Widyanuratikah, recorded Indonesian Private Higher Education Association (Aptisi) Chairperson Budi Djatmiko’s concern that the foreign campus could negatively shift state and private universities. The presence of the initial foreign campus will, perhaps, lead to other foreign campus establishments in which local campuses will experience a decrease in enrolments, he said when contacted by Republika on Tuesday (11/2).
He cited Indonesia’s education system as not ready and suggested the government to consider the fate of local lecturers as foreign universities would bring lecturers from their countries. Djatmiko suggested conditions for foreign universities to have unique courses that are unavailable in Indonesia along with Indonesian language proficiency in teaching for foreign lecturers.
“First solve the problems of the education system in Indonesia, especially in the field of higher education. Don’t just think about profit orientation, but think about the fate of the young generation in the future,” he said.
Meanwhile, Minister of Education and Culture (Mendikbud), Nadiem Makarim welcomed the establishment of Monash Indonesia. He explained that the existence of an Australian campus can influence and improve the quality of other tertiary institutions. Going forward, he adds that it will also increase collaboration with local universities, and encourage future partnerships between local tertiary institutions and world-class tertiary institutions.
According to a Melbourne university paper, by Donny Pasaribu and Krisna Gupta (PhD students), the economic importance of the deal remains to be seen. A chapter of non-tariffs measures (NTMs) under the agreement mentioned the elimination of NTMs (such as quotas) but does not provide a specific list of goods to which it will be applied to. Its diction includes caveats such as “except in accordance with its WTO rights and obligations or this Agreement,” and “unless otherwise provided” which questions whether NTMs are truly dealt with as one of the main barriers to trade in Indonesia is NTMs.
Another issue is the abundant use of caveats in the main text about trade and investment. Indonesia’s conditions mentioned most laws that are, according to the paper, deemed as restrictions in trade. For instance, the establishment of Monash Indonesia will still be based on the 2012 Law on Higher Education, not IA-CEPA per se.
Reservations are understandable as implementing the trade deal would need to change Indonesian regulations at the ministerial and local levels. In addition, not everyone shares the same sentiment regarding the deal.
According to the analysis from ABC News, they also contacted a leading foreign policy think tank in Indonesia for comment, an economics analyst said of their colleagues that “none of them has been involved and/or followed in any way the Indonesia-Australia CEPA negotiations.” Another reservation is from the Centre for Southeast Asia Studies Indonesia director Arisman and he said “IA-CEPA only benefits Australia.”
Critics have also noted the absence of environmental protects and discussions on labour rights.
Despite so, Elaine Pearson, director of Human Rights Watch in Australia emphasized of President Joko Widodo and Prime Minister Scott Morrison’s relationship, “the relationship should be strong enough between both of them that they can accept some robust criticism on areas where they need to improve.”