Sunday, September 5, 2010

Indonesia and Australia - A relationship in need of a rethink

In the aftermath of the global financial crisis, there doesn't seem to be anyone willing to challenge the assertion this will be the Asian century. We seem to be content to predict that Asian societies will become more wealthy and powerful and leave it at that, not bothering to think through what the implications of this might be.

A big part of the explanation for this, I think, is people have predicted the rise of Asia since the 1960s, but not much has changed. Asia has risen astoundingly quickly, but we're still wealthy and the Americans are still powerful; the Japanese, South Koreans and Chinese are buying more and more of our wheat and minerals; and south-east Asia is still a cheap and accessible spot for a holiday.

There is one Asian country whose rise will change our world dramatically: Indonesia. There has always been a streak of paranoia about Indonesia in our public mind; it seems to epitomise all our fears about crowded, poor Asian societies poised to overrun our wealthy but sparsely populated continent. For decades it was, for some, the model of an Asian dictatorship, and more recently it has come to symbolise the face of violent Islam for many Australians. But there is also a tendency not to take Indonesia too seriously. A neighbour of its size and location should be a big preoccupation, but most Australians tend to look over it to the great powers of the northern Pacific. It could be argued this is justified.Indonesia's economy is just over half the size of ours, and its military budget is less than a quarter. It has historically been internally focused and without a strong voice internationally.

Indonesia has had an international footprint appropriate to a country one-tenth its size.

This situation will almost certainly change within the next decade. The Indonesian economy has been growing strongly for most of this century and most economists are optimistic that it will continue for some time. If we extrapolate current growth rates for the Australian and Indonesian economies, ours will be the smaller economy within a decade. Our population will be less than one-tenth of the size of Indonesia's projected 254 million people. If Indonesia's military spending grows in proportion to its economic growth, it will not surpass our defence budget (assuming ours grows in proportion to our economic growth) until 2048. But Indonesia's defence spending may well grow faster. Its northern shores are lapped by the South China Sea, a realm of growing military tensions between China and the countries of south-east Asia.

As the US, China, Japan and India jockey for bases and positioning in the western Pacific and the Indian Ocean, the Indonesian archipelago will become a strategic fulcrum for that competition. The US and Japan, which worry about China's growing might, are likely to begin investing in the defence capabilities of Indonesia, a large regional country with a traditional ambivalence about China. And as democracy stabilises in Indonesia, it will become less worried about its internal order and more interested in the world beyond the archipelago. All this means that in a startlingly short period of time, Australia will for the first time in its history have a more powerful neighbour. This will represent the most profound wrench to our geostrategic situation since the decolonisation of Asia 60 years ago. It will mean there will be no relationship as important to us as that with Jakarta. We will have a significant stake in its internal political dynamics, hoping that a president hostile, or even indifferent, to our interests does not come to pass.

But even a stable, dynamic Indonesia with a close relationship with Australia will present its own challenges. One will be to our sense of our importance in the world. A stable, strong and internationally engaged Indonesia will have the capacity to contribute to order in our region in a way that would make Australia's contributions largely irrelevant. A powerful Indonesia would guarantee our security implicitly because, just as Canada is essential to the northern approaches to the US, so we would be crucial to Indonesia's southern approaches. We would be in the same situation as New Zealand is in now, with little incentive to invest in serious military capabilities. This might yield a tidy "peace dividend", but would be a blow to our sense of importance to the regional order.

Another challenge will be that a powerful, western-leaning Indonesia will pose profound questions about our relationship with the US. Washington will pay a lot more attention to a strong Indonesia than it does now, especially in the context of a growing rivalry with China. If so, it is almost inevitable our importance to the Americans will decline, just as our resentments will rise if Washington helps build Indonesian strength through arms sales, technology transfers, and training. In this sense, Indonesia has far more potential to disturb the Australia-US alliance than China does.

A powerful Indonesia will also shake us out of our complacency about Asia. New Zealand and Canada are in a comfortable place because they share the same culture and language as their more powerful neighbour; they understand them implicitly and when push comes to shove, know which levers to pull to get it to see things more their way. This is a skill that extends way beyond their diplomats to all sections and levels of society. Our capacity to understand Indonesia, to speak its language, and to understand what makes it tick has been in decline for decades. We are a long way from being ready to deal with the Indonesia of the 2020s. It is time to stop obsessing about minor issues like asylum seekers and face up to the big challenges that are just around the corner.

By Michael Wesley executive director of the Lowy Institute. (Sydney Morning Herald)

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