Long-term commitment: Australia and East Asia

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.