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The Indonesian President Visits Australia

On a cold and windy Sunday, President Joko Widodo (Jokowi) of Indonesia arrived in Canberra to a 25 gun salute. This is the most important visit to Australia since Scott Morrison became the Prime Minister. The visit has been given added significance because of the outbreak of the coronavirus. So far Indonesia has had no cases of the disease but as Australia’s largest close neighbor the prospects of it spreading there is a major risk.

There is no doubt that the talks between the two leaders will focus on containing the disease with Australia offering medical assistance to Indonesia. As well, the talks will see the conclusion of the Regional Comprehensive Economic Partnership (free trade agreement) between the two countries, which has been ten years in negotiation.

President Widodo will address Parliament on Monday in a gesture that indicates how close the relationship between the two countries has become. ”Now it’s the best relationship it’s been’, the President told the media on the eve of his visit to Australia.

The trade agreement is important for both countries as they seek to diversify their economies away from China. Indonesia wants more foreign investment so it is not hostage to President Xi Jinping’s Belt Road Initiative. It also has a potential conflict with China over its claims to the South China Sea.

Unfortunately Indonesia has an extremely complex investment regime that acts as an impediment to foreign investment. The hope on the Australian side is that the FTA can be a framework for dismantling the impediments to trade and investment. For its part, Indonesia wants to persuade Australia to free up visas for Indonesian workers who want to come to Australia.

The trade agreement removes 99% of the Indonesian tariffs from exports of interest to Australia such as beef, grains and horticulture. It also opens foreign investment to majority owned Australian businesses in the mining, healthcare, aged care, vocational training and tourism sectors.

Indonesia is under pressure to find employment for a growing cohort of university graduates and skilled workers who can’t find jobs. The agreement provides that Australia will open up access for Indonesian professionals and skilled workers. By way of example there is likely to a big demand for construction and oil and gas workers in the Northern Territory, as the gas fields there are developed.

Indonesia is a huge potential market for Australia. Its population is 10 times that of Australia but the economy is stagnating at the moment with negative growth in the last quarter of 2019. The Jokowi Government hopes that opening the market to Australian food products will reduce cost of living pressures and stimulate the economy.

Indonesia is a democracy which means that, like other democracies, there are strong pressures from populist, nationalist political movements. Australian businesses say that Indonesia is a hard nut to crack and a resurgence of nationalism will not help the business climate.

Commentators say that Scott Morrison will have a hard time managing the tensions between the Queensland Nationals and the moderate Liberals over climate change. This is nothing compared with Jokowi who has to balance hard line Islamic groups against secular students and the impact of political corruption on the creation of a business environment based on legal principles.

It is in Australia’s interest that he should be successful.

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