The 1998 film “Sliding Doors” starring Gwyneth Paltrow explores the different paths her characters, Helen’s life might take after she does, and doesn’t, find her lover in bed with another woman. It’s a reminder of how timing can be everything.
It’s also a reminder for Australia of the dangers of falling in love with the wrong neighbour, as a recent PWC report shows Indonesia growing to be the 4th largest economy in 2050. The same report finds Australia tumbling down the list from 18th to 28th. If true, this means two things:
1. A seismic shift in the economic power balance in South East Asia.
2. A dramatic change in the relationship between Australia and Indonesia.
If we accept the PwC findings it won’t be for Australia to play the role of local Sheriff. Nor will it be a strategic partnership defined exclusively by Bali, boats and beef.
Instead, advanced manufacturing, education, infrastructure, finance and pubic administration should define Australia’s future relationship.
A McKinsey Global Institute report titled “The archipelago economy: Unleashing Indonesia’s potential” highlights the advantages of having one of the world’s youngest demographic profiles—60 percent of the population is below 30 years of age, and the population is growing at a rate of 2.5 million a year. Australia’s higher and vocational education system is well placed to take advantage of this growth in demand.
Just as Australian $2 trillion superannuation funds would benefit from Indonesia’s massive infrastructure demands.
The sensible thing to do for Australia would be to invest in this relationship so we benefit from the growth on the world’s next economic super power. But are we?
According to Australia’s Department of Foreign Affairs and Trade (DFAT), Australian investment in Indonesia in 2013 totalled $10.9 billion in 2012.
Compare that with Australia’s $46 billion of foreign direct investment in New Zealand – a country with fewer than 4.5 million people and a growth rate of around 3%. Compared with Indonesia with over 250 million people and a growth rate of around 5%.
And so if the dollar investment is so small perhaps we are better invested in other aspects of the relationship. In doing those things that build trust.
But instead of building trust the Abbott government has done the opposite. Foreign Minister Julie Bishop making comments that Indonesia needs “to enforce sovereignty over its borders”. Cutting the Indonesian aid budget from $605 million to $366.4 million. And comments from Prime Minister Abbott at the time Andrew Chan and Myuran Sukumaran were on death row saying the Indonesian government ought to show mercy as a form of reciprocity, given Australia’s generosity in the aftermath of the 2004 Boxing Day Tsunami.
Low investment, mistrust and a lack of initiative to correct either. It really feels like we are walking through the wrong sliding door. We need a course correction. We need a reboot. That means asking the right questions. I offer a few:
What will Indonesia want? What can Australia offer? Can we provide them and if not why not? Where should we focus the functions of Australia’s innovation system to capitalise on this growth? And what areas of the economy are likely to be most critical for Australia in the Asian century?
Is it the case that rising Indonesian demand for consumer goods and services, particularly for food, education, financial services, healthcare, advanced manufacturing and public administration aligns well with Australian capabilities.
For example wheat consumption in Indonesia is on the rise and Australia ranks as the fourth highest exporter it is well positioned to capitalise. Primary products like beef and wheat is just part of the mix, the rising middle class means more disposable incomes for premium produces.
And from this example what will Australia be producing that delivers high yield in 2050 that Indonesia will want? We should be exploring the consumption changes and consider whether we need to change what we produce.
What will be the impact of climate change on agriculture by 2050? Water scarcity is a reality today, look at California. Australia is a pretty dry continent and we’ve developed some real expertise in water conservation and water supply systems. We should be world leaders in the space and providing Indonesia with help to ease the water constraints they confront particularly in their growing urban areas.
But even more so are chances for Australia to assist the Indonesia political system to be its best self.
As Sam Roggeveen from the Lowy Institute points out “without a more capable state sector that provides better health care, education, economic regulation, and infrastructure, Indonesia may not even achieve the projections made by PwC.” Australia has an excellent record when to comes to public administration, government accountability and transparency.
According to Transparency International Australia ranks 11th out of 175 nations when it comes to corruption whereas Indonesia ranks 107th. This is an area where Australia has expert and institutional knowledge to assist Indonesia.
So not only are there opportunities for business to trade but there are also opportunities for government to trade as well.
The answer to all of these questions is yes. Yes to developing a broader and deeper relationship.
And just as we answer yes to these questions we must stop answering yes to small-minded short-term domestic political parochialism.
Because if we want to fully benefit from the economic giant a mere 344 kilometers from our shore a vision, policies and action now could step us through the right door.