Evaluating the Importance of. Australia Indonesia Economic Relations

Transcription

1 Evaluating the Importance of Australia Indonesia Economic Relations BUDY P. RESOSUDARMO (IP ANU) KIKI VERICO (LPEM FEB UI) DONNY PASARIBU (LPEM FEB UI)

2 Preview of the paper and its substance

3

4 Contents 1. Preview of the paper and its substance (Lowy survey in 2006 on how important Indonesia for Australians shown proportion of 75% : 22% = Important : Too Different/Less Important) 2. Static Comparative: Australia & Indonesia 3. Historical Overview: Political, Security and Economic Perspective 4. Descriptive Data Analysis: Trade, Investment and People Movement (Tourist & Student) 5. Conclusion

5 Preview of the paper and its substance 1. Relations, Interactions, challenges, lessons learnt, improvements 2. Historical overview: comparison both static and overtime 3. Descriptive data analysis: empirical fact confirming historical overview

6 Static Comparative: Australia & Indonesia Factor Australia Indonesia 1. Geography & Demography Large continent, temperate zone, sparse population most living close in side-line Largest archipelagos, tropical climate, dense population most living in Java Island 2. Historical Background British Settlement Not a Dutch settlement 3. Institutional Character (Acemoglu, Johnson and Robinson 2001) Good institutional framework 4. Initial Comparative Advantage Primary sector: Agriculture (cereal, wool, wheat, dairy products, meat) & Mining (Gold, Iron & Steel, Inorganic Chemical, Coal) 5. Economic Classification Developed (abundance, international, institution) (McLean, 2004) Extractive institution Primary sector: Agriculture (wood, rubber, jewellery, animal & veggie oil) & Mining (Oil, Articles of Iron & Steel, Gas) Developing (lack, narrowed linkage & institution) 6. Economic Orientation EU (UK), US and Asia Asia (ASEAN+JCK), US and EU 7. Economic Structure (Current) Service, Primary, Manufacture Service, Manufacture, Primary Note: export electrical machinery

7 Static Comparative: Australia & Indonesia 2013 Indonesia Australia Population (million) Population Density (sqm) GDP (billion US$) 868 1,560 GNI per Capita (current US$) 3,580 65,400 Agriculture to GDP (%) Agriculture VA per Worker (US$) 1,018 49,723 Mining to GDP (%) 11 8 Mineral Rents of GDP (%) Manufacture to GDP (%) 24 7 Manufacture Export to Total Export (%) Manufacture Import to Total Import (%) High-Tech Export (current US$) Tariff Rate, MFN, Simple Mean in Manufacture (%) Service to GDP (%) Service Export (BoP,billion US$) Indonesia Net Export (Million US$) 2012 Japan 7,367 United States 3,296 Singapore -8,952 China, People's Republic of -7,728 Korea, Republic of 3,080 Australia -392 Source: WDI WB, ADB Statistic, own calculation

8 Historical Overview Early Independence 17 th & 18 th century US & UK alliance Support Indonesia independent (1949) Old Order Suspicious relation (communism vs colonialism) RI-Malaysia tension, West Papua issue Menzie s non Asia aim Lack trade & investment interest (Arndt, 1968) Colombo Plan (1953): Indonesia is the largest aid recipient for Australia as Australia the fourth largest donor for Indonesia New Order Western orientation Cooperation instead of tension Dismantling White Policy (1960s) & Whitlam s restoration with China (1970s) From resources boom to competitive reform East Timor (1975) & SMH (1986 ) Reform Era Criminal issue (2002, 2004, 2011, 2014) G to G issue (1999, 2013) Improved economic relations especially in trade for Indonesia & FDI for Australia

9 G to G (Government to Government) Economic Agreements 1. Indonesia Australia Comprehensive Economic Partnership Agreement (IA CEPA) start negotiation September 2012 (Trade & Investment): Under negotiation (2 nd round 2013) 2. Regional Comprehensive Economic Partnership (RCEP) start negotiation November 2012 (ASEAN+6: 10 ASEAN+C,J,K,I,A & NZ): Under negotiation (trade, investment, dispute & settlement) 3. Socio-economic related: Colombo Plan (1953), Cairns Group (1986), Kyoto Protocol, Avoidance double income taxation (1992), ARF, EAS, WTO, WB, ADB, APEC, G20, AANZFTA (2010) 4. IA-Transport Safety Partnership (2007), Lombok Treaty (Bilateral Security) & Maritime Boundary Treaty (1997), Timor Gap Treaty (1991)

10 G to G Relations: More frequent official visits in reform era compare to those in Old & New Order Official visits Year Indonesia (first ambassador 1947) Australia 1959 Menzies to Jakarta 1968 Gorton to Jakarta 1972 Suharto to Canberra McMahon to Jakarta 1973 Whitlam to Jakarta 1974 Whitlam to Yogyakarta 1975 Suharto to Townsville 1976 Fraser to Jakarta 1983 Hawke to Jakarta 1992 Keating to Jakarta 1994 Keating to Bogor 1996 Howard to Jakarta 2001 Gus Dur to Sydney 2002 Howard to Jakarta 2003 Howard to Jakarta 2004 Howard to Jakarta 2005 Howard to Aceh 2006 Howard to Batam 2007 Rudd to Bali 2008 Rudd to Jakarta and Aceh 2010 SBY to Canberra Gillard to Jakarta 2012 SBY to Darwin Gillard to Bali 2013 Rudd to Jakarta, Bogor Abbott to Jakarta and Bali 2014 Abbott to Batam Abbott to Jakarta 2014 Jokowi to Brisbane

11 Historical and Empirical Movement (Goods & Capital) 1,000 Ina-Aus Trade Balance (TB) & Aus FDI Inflows in Ina (million US$) Aussie Indonesia economic gap AFC: Asian Financial Crises AFC Bali Bombing Commodity Price Booming Global Financial Crises ACFTA Tap/ Spying -1,000-1,500 TB (million US$) FDI (million US$)

12 Historical and Empirical Movement (People) People Movement: Student & Tourist Aussie Indonesia economic gap Asian Financial Crises East Timor Bali Bombing Embassy Bombing Air Transport Crashed in Yogyakarta, Cattle, Tap, B9, etc Number of Indonesia Student in Aussie Number of Aussie Tourist in Indonesia

13 Descriptive Data Analysis (Trade)

14 Descriptive Data Analysis (Trade) Hill, 1990: Production Network of Indonesia in Asia enters Aussie s market

15 Descriptive Data Analysis (Long Run Investment/FDI)

16 Descriptive Data Analysis (Education)

17 Descriptive Data Analysis (Education)

18 Descriptive Data Analysis (Education)

19 Descriptive Data Analysis (Tourism)

20 Conclusion 1. Weak economic relations in early & old order era then getting stronger in new order era with some government to government (G to G) tension thus more strong in reform era with more market based and more criminal issues than G to G tension. The latest needs more people to people (P to P) and business to business (B to B) based relation and solution (frequency of G to G official bilateral visits increases) 2. Potential solid economic relations given Australia s high income country with service and primary sector based and Indonesia s emerging economy with service and manufacturing (GPN & GVC) & export led growth (trade & investment important role) 3. People to People relations on short visit but frequent movement (Australia tourists in Indonesia) and medium movement (Indonesia s students in Australia) 4. Note: G to G under multilateral frameworks: ASEAN and ASEAN+6 thus RCEP (10 ASEAN countries + JCK + I + NZ & Australia)

21 Terima Kasih Thank You JAKARTA, 29 APRIL 2015