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Relations with New Zealand
Indonesia Overview
New Zealand’s trade relationship with Indonesia is steadily growing. In 2006, trade between Indonesia and New Zealand was worth NZ$1.35 billion annually. In 2006, Indonesia was New Zealand’s tenth largest export market, and the largest NZ export market in ASEAN. Within ASEAN, Indonesia is ranked New Zealand’s fourth largest bilateral trading partner. The Indonesian and New Zealand markets are complementary and largely non-competitive. That said, there are sectors of mutual interest. For example, in forestry and wood products our bilateral trade is worth around NZ$219 million, almost equally divided between imports and exports.
In 2006 the value of New Zealand exports to Indonesia was NZ$613 million, up 31 percent on the previous year. New Zealand’s dairy exports to Indonesia were NZ$250 million and wood and wood products were NZ$127 million. New Zealand’s exports of frozen beef and of ferrous waste and scrap are two sectors that have rapidly expanded, both nearly tripling in size in just four years from 2002. The dairy industry continues to find new products to export to Indonesia, with whey products recently finding a sizable market. Exports of timber have also seen a significant expansion, going from NZ$6 million in 2004 to NZ$35 million in 2006.
Indonesia’s imports to New Zealand were valued at NZ$674 million in 2006, a 15 percent increase over the previous year. Of the ASEAN countries, Indonesia is New Zealand’s fourth largest source of imports. In 2006, New Zealand imported forest and wood products worth NZ$91 million from Indonesia. Indonesian exporters are rapidly increasing their share of the New Zealand market for petroleum oil (crude and refined), coal, and natural rubber, textiles, clothing and footwear. Crude oil, worth NZ$264 million in 2006, is Indonesia’s largest single commodity export to New Zealand. The services sector offers considerable scope for growth, especially in the education sector. Around 600 Indonesian students were studying in New Zealand in 2006.
New Zealand and Indonesia have had diplomatic relations and a development assistance programme since the 1950s. A New Zealand Government tsunami aid package of NZ$68 million was announced on 18 January 2005, the biggest ever New Zealand response to a humanitarian crisis. The New Zealand Agency for International Development (NZAID) is responsible for managing this response. Of this package, approximately NZ$25 million was directed to relief and reconstruction programmes in affected areas of Indonesia in the 2004/2005 financial year. That was channelled through selected UN agencies operational on the ground and New Zealand NGOs working with local partners. A further NZ$20 million of the package has been allocated over a five-year period to an expansion by 50% of New Zealand’s existing bilateral programme in Indonesia.
The overall focus of the wider Indonesia programme is on poverty elimination by supporting democratisation, economic reform and social development in Indonesia. The programme, with a budget of NZ$60 million over five years (NZ$40 million before the tsunami), concentrates on six key areas: Basic Education, Community Development, Natural Resource Development, Humanitarian Assistance, Governance, Institution/Capacity Building, and a long-term reconstruction and development programme in Aceh and Northern Sumatra.
New Zealand and Indonesia are party to the following bilateral agreements:
Commercial air services between New Zealand and Indonesia are governed by the May 1988 Air Services Agreement and the associated August 1999 Memorandum of Understanding which allow for services between Indonesia and New Zealand via intermediate points in Australia. Garuda Indonesia currently operates scheduled commercial services between Jakarta/Denpasar and Auckland via Australia.
New Zealand is one of Indonesia's leading suppliers of dairy products. It is also a growing market for New Zealand beef and forestry products. In 1998, Indonesia disestablished quantitative restrictions on dairy and meat imports. Approximately 90% of New Zealand's exports to Indonesia are primary products (principally dairy products (about 40%), wood pulp, other wood products and meat).top of page
As a result of the significant reform in the TNI and the strengthening of our bilateral relationship, at the end of 2006 New Zealand resumed low-level cooperation with the Indonesian military (TNI), which had been suspended in 1999 in protest at the failure of authorities to hold accountable those in the TNI responsible for crimes in Timor-Leste. top of page
In 2006, around 600 full-fee-paying Indonesian students attended New Zealand educational institutions. Around half were studying at tertiary level, 12% at secondary schools and the remainder at other institutions such as English language colleges.top of page
In 2006, 6,929 Indonesians made short-term visits to New Zealand (staying less than 12 months) and there is a small but growing Indonesian resident community in New Zealand (in the year 2005/2006, 256 Indonesians had New Zealand residence applications approved).top of page
New Zealand and Indonesia enjoy an open trading relationship. Indonesian applied tariffs on products exported by New Zealand are generally below 5 percent, but tariff bindings on agricultural products remain high at about 47 percent. New Zealand tariffs on Indonesian products are also low. top of page
New Zealand and Indonesia cooperate on security, political and economic issues through multilateral forums such as the United Nations, World Trade Organisation, APEC, ASEAN Post-Ministerial Conference, ASEAN Regional Forum and the Cairns Group of agricultural exporting nations. Indonesia and New Zealand also participate in regional and multilateral groupings that promote closer linkages between the countries of ASEAN and Australia/New Zealand (AFTA/CER) and Asia and Latin America. Indonesia became a Pacific Islands Forum Dialogue Partner in August 2001 and both countries participate in the annual South West Pacific Dialogue. Since 2005, Indonesia and New Zealand have also been partners in the East Asia Summit.top of page
Post 9/11 there has been growing international support for interfaith and inter-civilisational dialogues aimed at building cooperation and respect for other cultures and faiths. Such dialogues can support wider counter-terrorist strategies and help to counter terrorist recruitment by addressing religious radicalisation and strengthening the position of religious moderates. Like Indonesia, New Zealand is an active supporter of interfaith and inter-cultural dialogues. The third meeting of the regional Interfaith Dialogue will be held at Waitangi in May 2007.top of page
The Indonesia Chapter of the ASEAN-New Zealand Combined Business Council, based in Auckland, promotes business relations between New Zealand and Indonesia, as does a similar organisation based in Jakarta. New Zealand and Indonesian government and business representatives met under the auspices of the Indonesia-New Zealand Joint Commission on Economic and Trade Relations (JETC), to facilitate business and trade relations. A meeting of the Joint Ministerial Commission (which will subsume the JETC) is planned for the first half of 2007. The Asia New Zealand Foundation is active in promoting greater understanding of Indonesia and other Asian countries among New Zealanders. The New Zealand-Indonesia Association also promotes Indonesian culture in New Zealand.top of page
Land Area - 1,904,443 kmē - Population - 242 million - Capital City - Jakarta - Religion - Predominantly Muslim, also significant Christian, Hindu and Buddhist populations - Language - Bahasa Indonesia, plus approximately 360 regional languages and dialects - Currency - Rupiah - Exchange rate - NZ$1 = Rp6,667 (April 2007) - EEZ - 3,166,163 km²
Political system - Constitutional democracy -
National government - Dr Susilo Bambang Yudhoyono was elected President on 20 September 2004 in Indonesia's first direct presidential election, replacing Megawati Sukarnoputri. -
National legislature - The 550-member House of Representatives (DPR) was elected by popular vote on 5 April 2004. The Regional Representative’s Assembly (DPD), consisting of 4 representatives from each of the 32 provinces, was also elected by popular vote on 5 April 2004. The highest constitutional body, the People’s Consultative Assembly (MPR), which consists of the DPR and the DPD sitting together, is required to meet once every 5 years (but in practice has met more often). In 2002, a constitutional amendment rendered the MPR of equal statusto that of the president and parliament. -
Last election - April 2004 (parliamentary), September 2004 (presidential) -
Next election due - Mid 2009 -
Head of State - President Susilo Bambang Yudhoyono -
Head of Government - President Susilo Bambang Yudhoyono
- Key Ministers - Vice President: Jusuf Kalla, Coordinating Minister for Political, Legal and Security Affairs: Widodo Adi Sucipto, Coordinating Minister for the Economy: Boediono, Coordinating Minister for People’s Welfare: Aburizal Bakrie, Minister of Foreign Affairs: Hassan Wirajuda, Minister of Defence: Juwono Sudarsono, Minister of Finance: Sri Mulyani Indrawati, Minister of Trade: Mari Pangestu - Main Political parties - Golkar (reformed Suharto-era political vehicle), Indonesian Democratic Party of Struggle (PDI-P), National Awakening Party (PKB), United Development Party (PPP), National Mandate Party (PAN), Prosperous Justice Party (PKS), and the Democrat Party (PD).
GDP (nominal) - US$ 350 billion (2006) - GDP breakdown - Goods 60%; Services 40% - GDP per capita (nominal) - US$3,800 (2006 est) - Real GDP growth - 2006: 5.4%; 2005: 5.6%; 2004: 5.1%; - Exports of goods - US$103 million (for year ended Dec 2006) - Imports of goods - US$73.5 million (for year ended Dec 2006) - Main exports - Crude oil/natural gas, textiles - Current account - US$6.9 billion (2006) - Inflation - 2006: 13.1%; 2005: 10.5%; - Gross external debt - US$130.4 billion (2006)
NZ Exports (FOB) - NZ$613.2 million (annual value, for year ended December 2006) - Main Exports - Milk/dairy products (42%), wood products (20%), meat products (19%) - NZ Imports (CIF) - NZ$737.2 million (annual value, for year ended December 2006) - Main Imports - Fuel products (petroleum/crude oil, coal) (49%),wood and paper products (10%) - Services Trade - Around 600 fee-paying Indonesian students studied in New Zealand in 2006, and 6,929 Indonesians visited New Zealand in the year ended December 2006.top of page
Indonesia is the world’s third largest democracy, with the largest Muslim population in the world. The population is thought to be up to 242 million (the fourth most populous country in the world). It is also the world’s largest archipelago with approximately 17,000 islands spanning the equator and three time zones. It is ethnically diverse, with around 360 languages spoken. There are six official state religions or belief systems: Islam, Protestantism, Catholicism, Hinduism, Confucianism and Buddhism. Approximately 88 percent of the population is Muslim (Protestants make up 5%, Roman Catholics 3%, Hindus 2%, Buddhists and Confucians 1%). Mainstream Indonesian Islam is moderate, relatively tolerant and less austere than in other parts of the world. The introduction of Islam in Indonesia since the 15th century has seen it superimposed on a mixture of Hinduism, Buddhism and indigenous, animist beliefs. It has traditionally been dominated by Sufi mysticism.
Indonesia’s political system is a constitutional democracy, led by a directly elected president. The current system is a result of various constitutional amendments after the fall of the authoritarian President Suharto in 1998. The president is now elected in a general election every five years. The legislature is made up of two bodies – the House of Representatives (DPR) and the Regional Representatives Assembly (DPD), which are mandated to deal with regional affairs. The supreme constitutional body is the People’s Consultative Assembly (MPR), consisting of both the DPR and DPD sitting together. The MPR is the final arbiter – after Parliament and the Constitutional Court – of impeachment proceedings. The main ideological strands in Indonesian politics are secular/nationalist and religious, with the former historically being in the ascendancy.
After three years in power, Megawati Sukarnoputri was replaced in October 2004 by Dr Susilo Bambang Yudhoyono (former Coordinating Minister for Political and Security Affairs) in Indonesia’s first direct presidential election. President Yudhoyono, a retired general, who led the UN peacekeeping mission UNPROFOR in Bosnia, has made fighting corruption and improving the investment climate two of his top priorities. Indonesia has considerable influence in regional and international affairs, both bilaterally and through forums such as the UN, APEC, ASEAN, EAS, OPEC and the Organisation of Islamic Conference (OIC). It is currently a non-permanent member of the United Nations Security Council. Indonesia is important to New Zealand and other members of the Asia-Pacific region by virtue of its size, strategic location and natural resources.
New Zealand and Indonesia enjoy a strong and growing trade/economic relationship. The bilateral relationship is also underpinned by cooperation in regional and international forums such as APEC, the ASEAN Post-Ministerial Conference (ASEAN PMC), ASEAN Regional Forum (ARF), the East Asia Summit, the South West Pacific Dialogue and by New Zealand's long-standing development assistance programme in Indonesia (which is the largest NZAID programme in Asia).
The devastating earthquake and tsunami of 26 December 2004 caused enormous damage and loss of life in the provinces of Aceh and North Sumatra. Recovery in this region is continuing, and will take many years, but the overall economic impact on the country has been slight.
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Indonesia declared independence from the Netherlands in August 1945, but the Dutch only ceded sovereignty in 1949 after four years of armed struggle. Indonesia’s current borders are based on those of the former Dutch East Indies. The post-independence political landscape has been dominated by Presidents Sukarno (1949-66) and Suharto (1967-98).
The Sukarno years were marked by political instability, economic decline and the dismantling of Indonesia's first parliamentary democracy. Sukarno was a charismatic, self-styled revolutionary leader whose name still has widespread public appeal in Indonesia, evidenced by the popularity of his daughter, former president Megawati Sukarnoputri. He pursued a radical foreign policy, which included military confrontation with Malaysia and the Netherlands (in Papua).
The instability of the Sukarno era culminated in an abortive armed coup in September 1965, which the military blamed on the Indonesian Communist Party. It is estimated that 500,000 or more Indonesians were killed in the consequent violent suppression of the Communist Party and alleged communists. Major-General Suharto rose to power during the violent upheaval and formally assumed the Presidency in March 1967.
President Suharto's rule from 1967-98 was marked by economic development, political stability and close relations with the West. It was, however, marred by human rights abuses, centralised authoritarian rule, weakening of the non-executive branches of government, increased military involvement in politics and business, the violent annexation of East Timor in 1975, and rampant corruption. The final years of the Suharto era were marked by growing public disenchantment and increasing street protests, fuelled by the severe impact of the 1997 Asian financial crisis and the collapse of the Indonesian economy. Having lost public, military and Cabinet support, Suharto resigned on 21 May 1998.top of page
The sudden collapse of President Suharto's centralised authoritarian rule was accompanied by a resurgence of communal and separatist tensions across Indonesia. Other challenges facing Indonesia's post-Suharto governments included the need to revitalise the economy through measures such as bank recapitalisation, commercial law reform and restoration of investor confidence; management of the devolution of political and economic powers to the regions; strengthening the non-executive branches of government; the redefinition of civil/military relations; and enhancing respect for the human rights of Indonesians. Analysts still identify corruption as a major problem.
In 1998 Suharto was succeeded by his Vice-President, BJ Habibie, who responded to public expectations by introducing political reforms, the most significant of these being the democratic, national parliamentary elections held in June 1999. President Habibie's government also oversaw a UN-sponsored ballot in East Timor in August 1999 (which resulted in East Timor’s secession from Indonesia later that year and full independence, after a period of United Nations administration, in 2002). The MPR subsequently elected moderate Muslim leader Abdurrahman Wahid as President. President Wahid's government made limited progress towards addressing the problems faced by Indonesia. In July 2001 the MPR voted overwhelmingly to revoke President Wahid's mandate and replaced him with his Vice-President, Megawati Sukarnoputri.
During President Megawati’s term, macro-economic indicators improved (although foreign direct investment (FDI) remained sluggish and unemployment very high) and there was enhanced political stability. Her government put in place the mechanism for the first direct Presidential election. In the second round of that election on 20 September 2004, Dr Susilo Bambang Yudhoyono won the popular vote by 61% to Megawati’s 39%.
The tsunami disaster that struck northern parts of the island of Sumatra on 26 December 2004 was the worst natural disaster (in human terms) Indonesia has ever suffered. As at February 2005, the International Committee of the Red Cross and Red Crescent estimated that 242,347 Indonesians had died (compiled from official sources). The Asian Development Bank assesses that while the poverty impacts will be substantial, particularly at local level, the macroeconomic effects will be slight, leaving the Indonesian economy barely affected by the tsunami.top of page
President Yudhoyono faces similar challenges to those that confronted his predecessors in the post-Suharto era. The need to address corruption, sagging FDI flows, unemployment/underemployment and legal reform are priorities for his Government. A defining achievement of his presidency so far has been the peace agreement and subsequent peaceful elections in Aceh, ending years of armed conflict. Yudhoyono has also indicated that he places importance on consolidating the Special Autonomy Law for Papua and Irian Jaya Barat. The military (TNI) remains an influential player in Indonesia – principally as a consequence of its territorial command structure – although it no longer has a direct role in political affairs, having lost its reserved seats in parliament after October 2004.
International human rights organisations continue to express concern about human rights, particularly in Papua and Irian Jaya Barat. But there is recognition by many observers of a discernable improvement in respect for human rights in Indonesia generally. In 2000, the Government agreed to approve the establishment of an ad hoc human rights tribunal to try those implicated in the crimes against humanity committed in East Timor in 1999. Eighteen officers and Government officials, including three army generals, were tried, but higher courts have since overturned all but one of the six sentences handed down by the tribunals. A Truth and Friendship Commission between Indonesia and Timor-Leste is currently underway, with the mandate to uncover the conclusive truth of the events of 1999. It has no prosecutorial function, however, and has the power to recommend amnesties. The Commission is due to present its findings in late 2007.
In 2004, Indonesia’s first permanent Human Rights Court (for Eastern Indonesia) had been established in Makassar, Sulawesi. It is the first of four planned nationally. In the same year, Indonesia’s Ministry of Justice and Human Rights launched its five-year National Action Plan on Human Rights 2004-2009, which deals with human rights dissemination, education and implementation at every level of government, including the Police and the TNI. In 2006, Indonesia ratified the International Covenant on Civil and Political Rights (ICCPR) and International Covenant for Economic, Social and Cultural Rights (ICESCR) and has indicated it will look to join the International Criminal Court (ICC).top of page
The Indonesian economy grew less dependent on oil and agriculture during the Suharto New Order. The severe contraction of Indonesia's economy at the time of the 1997 Asian financial crisis, however, highlighted the shortcomings of the New Order economic model (increasingly wasteful use of foreign investment, declining international competitiveness). Indonesia's GDP contracted by 13 percent in 1998. GDP per capita in 2000 was US$671, well down on the 1996 level of US$1,150. The economy has shown signs of recovery more recently, and GDP per capita (PPP) was estimated at US$3,800 in 2006. Economic growth has gradually increased from 3.3% in 2001 (led by the export sector) to 5.4% in 2006. Services (which represent 42% of GDP), manufacturing (28%), agriculture (15%) and mining (9%) account for most of the origins of Indonesia's GDP.
The Indonesian Government initiated a wide-ranging economic reform programme in 1998, with strong IMF advisory and financial support, to address the impact on Indonesia of the 1997 Asian financial crisis and to lay the foundations for long-term sustainable growth. On 1 January 2004 Indonesia graduated from the IMF’s lending programme, and in early 2007 took the decision to disband the Consultative Group on Indonesia, a donor forum of which New Zealand was a member, preferring instead to focus on bilateral development assistance. The World Bank welcomed this step as a further sign of Indonesia’s renewed economic confidence.
President Yudhoyono’s 2005 decision to raise fuel prices (one rise in March 2005 of 28% and a further in October 2005 averaging 108%) was taken in light of the need to cut the government’s fuel subsidy programme, which was keeping fuel prices in Indonesia artificially low and accounting for about 20% of the national budget. The fuel price rises led to high inflation and interest rates, with accompanying sluggish domestic demand and lowered GDP growth through 2006, but most signs point to a recovery in 2007.
Despite improved macroeconomic conditions, prospects for a sustained high level of economic growth will depend to a large extent on the pace of critical economic reforms, particularly those concerning investment, tax and labour laws, and the economic impact of decentralisation. All of these factors are relevant to the restoration of investor confidence, which the IMF regards as central to Indonesia's long-term economic recovery. The Investment Law passed by the Parliament in early 2007 is seen as a crucial step in stimulating renewed investor interest. Indonesia operates a relatively open economy, but non-tariff barriers (NTBs) remain an impediment to trade.top of page
Foreign policy under President Sukarno (1949-66) was radical, characterised by Sukarno's self-styled role as leader of the Non-Aligned Movement. Under President Suharto (1967-98), Indonesian foreign policy was marked by an emphasis on stability, with Indonesia developing a leading role in ASEAN, APEC and the Non-Aligned Movement but also maintaining good relations with the West. President Yudhoyono has maintained an emphasis on Indonesia’s traditional ‘free and active’ foreign policy settings, and in that context has indicated Indonesia’s increasing willingness to become involved in regional and international issues, particularly in the Middle East. Indonesia’s current non-permament membership of the United Nations Security Council has seen its stance on a number of issues come to increased international notice.
Indonesia is a leading member of the Association of South East Asian Nations (ASEAN), and has been at the forefront of moves to renew the body, particularly in the drafting of a new ASEAN Charter and the establishment of an ASEAN Community.
Indonesia was vaulted into the international fight against terrorism after the Bali bombings in 2002 (followed by the bombings of the Marriott Hotel in 2003 and outside the Australian Embassy in Jakarta in 2004).
Japan, ASEAN countries (especially Singapore), the United States, the EU and Australia are important export markets and sources of investment for Indonesia. Indonesia's economy is well integrated into international markets, with exports equivalent to 25% of GDP. Indonesia is a capital importing country. Foreign investment declined sharply after the 1997 financial crisis, but has shown some signs of recovery in recent years.top of page
New Zealand's and Indonesia's political leaders and ministers maintain regular contact through bilateral meetings when attending multilateral and regional gatherings. In 2006, the Minister of Defence met with his Indonesian counterpart at the Shangri-La Dialogue in Singapore (June); the Minister of Foreign Affairs met with his counterpart at the General Assembly in New York, and the Minister of Trade met with Indonesia’s Minister of Trade at APEC in Ha Noi .
Prime Minister Helen Clark made a bilateral visit to Indonesia in May 2002. Hon Phil Goff made bilateral visits to Indonesia in April 2000 and March 2002 as Minister of Foreign Affairs and Trade. The Minister for Trade Negotiations, Hon Jim Sutton, also visited Jakarta in 2000. The Prime Minister and the Minister of Foreign Affairs and Trade both visited Jakarta in January 2005 for the ASEAN-led post-tsunami summit.
President Yudhoyono visited New Zealand in April 2005, accompanied by the Coordinating Minister for Economic Affairs (Aburizal Bakrie), the State Secretary (Yusril Ihza Mahendra), and the Ministers of Foreign Affairs (Hassan Wirajuda), Trade (Mari Pangestu) and Finance (Jusuf Anwar). President Abdurrahman Wahid visited New Zealand in 2001, the first visit to New Zealand by an Indonesian President since 1972. Hassan Wirajuda, also Foreign Minister under President Megawati, visited New Zealand in November 2001. Finance Minister Dr Jusuf Anwar visited New Zealand separately in February 2005. top of page
The Safetravel website provides a travel advisory for travellers to Indonesia [external link].
