Long-term commitment: Australia and East Asia

This is the first of two articles based on a speech delivered by Australian Minister for Foreign Affairs Alexander Downer at a meeting of the Indonesian Council on World Affairs and the Indonesia-Australia Business Council in Jakarta on July 9.

JAKARTA: Australia is committed to standing by Indonesia, its largest and most populous neighbor, in these troubling times because its prosperity, stability and security will always be influenced by Indonesia's.

We are encouraged by the steps the Indonesian government has taken toward political reform.

It is up to the Indonesian people themselves, and not foreigners, to determine the precise format and content of reform.

The Australian government is committed to work with the Indonesian government in its process of change. It is clear that economic and political reform must go hand in hand -- one leads inevitably to the other.

The Australian government is encouraged by the commitments the Indonesian government has already made to reform its economy to meet the challenge of the financial crisis, and will assist in any way it can to move the process of reform forward.

We have, for example, already led international opinion by arguing forcefully in Washington in favor of the economic reform agenda Indonesia has agreed with the International Monetary Fund (IMF). At those meetings I said that the reform program needed to be implemented flexibly and sensitively, bearing in mind the impact on those most vulnerable in society and recognizing Indonesia's individual circumstances. The IMF has understood this imperative and this is reflected in the latest IMF program.

Australia is aware that the international markets are looking for continued implementation of the IMF program in a steady, thorough and credible manner. For our own part, Australia will maintain its commitment to the second tier funding support for the IMF program, including the early advance of US$300 million from our total $1 billion commitment.

The links between Australia and Indonesia are enduring and valuable to both sides, despite the inevitable effects of the financial crisis.

The latest statistics for the 11 months to May 1998 indicate that our total exports to Indonesia have fallen by 14 percent. However, Indonesia's exports to Australia grew by 45 percent, to $2.46 billion, reflecting the increased export competitiveness which is one of the few benefits from the sharp depreciation of the rupiah. The imbalance in trade between Australia and Indonesia, which is less important than global balances, is now firmly in Indonesia's favor.

Investment links have grown strongly in recent years. Australia is currently the eighth largest foreign direct investor in Indonesia. Australian investment is expected to increase sharply once Australian companies have factored the new investment opportunities available in Indonesia into their business plans.

At the government level, links in economic cooperation are also strong. The Australia-Indonesia Ministerial Forum, which meets every two years, provided a forum for their governments to coordinate economic policies in order to provide a better environment for bilateral business. This mechanism has proved its value in the last four years.

Links between eastern Indonesia and Australia have been the special focus of the Australia-Indonesia Development Area (AIDA), which Coordinating Minister for Development Supervision and State Administrative Reforms Hartarto Sastrosoenarto and I launched in Ambon in April 1997.

We are funding several studies into the investment environment, which is undoubtedly changed in some positive ways on the Indonesian side, by economic reform and the increased competitiveness of export industries. We are also assisting with training in key industries in the AIDA region.

Australia is opening six honorary consulates in Indonesia (including four in the AIDA region) to facilitate increased people-to-people contact between the two countries.

Australia continues to assist Indonesia through a development assistance program. Australia has been a development partner with Indonesia for more than 30 years and contributed substantially to the great progress made in that time. We are adjusting our development program to reflect changing needs, in close cooperation with Indonesian authorities. To use an Australian vernacular expression, we are doing this in the spirit of "regional mateship".

Australia's humanitarian response to help Indonesians disadvantaged by drought and the financial crisis now totals around $50 million. This is in addition to our $1 billion commitment to Indonesia's IMF package, and our contribution so far of approximately $900 million in trade insurance cover. Australia's total budgeted aid flows to Indonesia will increase from $89 million in 1997/1998 to $108 million in 1998/1999.

I just signed with Minister of Foreign Affairs Alatas a general agreement on development cooperation. I have also announced a program of activities designed to promote economic management capacity and reform. The program, which will involve assistance of up to $70 million over three years, will cover such issues as the reform of state-owned enterprises, bankruptcy and commercial law, foreign investment, trade policy and capital market development.

On East Timor, Australia has for many years recognized the integration of the territory into Indonesia. We would like to see an early reduction in the military presence, a dramatic improvement in human rights and a situation in which the East Timorese people manage their own internal affairs. We welcome the emergence of a dialog as illustrated by the meeting between President Habibie and Dili Bishop Carlos F. Ximenes Belo.

There is a long row to hoe. However, constructive dialog can lead to a solution to these painfully difficult issues. Ali Alatas, a world-class diplomat, needs the opportunity to achieve a solution in East Timor. We stand ready to help him, the government of Indonesia and the people of East Timor.