Australian leader Anthony Albanese and Indonesian President Prabowo Subianto. Image: X Screengrab
In a telling move, Australian Prime Minister Anthony Albanese jetted to meet his Indonesian counterpart, President Prabowo Subianto, just a day after he was sworn into office for a second term.
In prepared remarks, Albanese said Indonesia was an “indispensable partner” and urged Prabowo to follow through on an agreement struck last year to forge closer defense ties.
That agreement covers maritime security, counterterrorism and disaster response. Significantly, Albanese’s visit came amid reports that Russia requested to base military aircraft in Papua, located about 1,200 kilometers from Australia’s northern military base at Darwin – a request Prabowo says his government denied.
The Indo-Pacific’s future hangs in a delicate balance. Rising geopolitical tensions, driven by the Trump administration’s upending of the prevailing trade and geo-economic orders, are compelling nations like Indonesia and Australia to reconfigure their strategic and economic relationships.
But communiques and plans of action are inadequate the considering the gravity and urgency of current challenges. The two neighbors need concrete breakthroughs to tie a tighter bilateral knot, and in turn, forge a more resilient and secure regional architecture.
There is plenty of motivation for Australia and Indonesia to draw closer together.
Indonesia faces mounting economic pressure, evidenced in falling GDP growing, a weakening rupiah and wild vacillations on the stock market, including a recent single-day plunge that forced a halt in trading. Trump’s proposed but now paused 32% tariffs on Indonesian goods have heightened economic anxieties.
Australia is similarly affected by trade war-induced economic disruptions. Its deep trade and investment ties with China, especially in natural resources and manufacturing, pose growing risks amid rising geopolitical volatility. Those economic reverberations are being felt across the region, impacting Australia’s key trade partners like Japan, South Korea and India.
The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) offers a foundation and has spurred certain optimism in the Indonesia and Australia business communities, but its promise remains half-fulfilled.
Regulatory tangles and bureaucratic red tape still stifle Australian investment in Indonesia, which plateaued at US$550 million in 2023. To overcome those hurdles requires bold moves in harmonizing standards, creating joint task forces to resolve disputes and treating economic integration not as a policy checkbox but as a lifeline.
While economic integration is vital, it must be underpinned by regional stability. Over the years, though, Indonesia and Australia have navigated different strategic paths.
Australia’s involvement in AUKUS, the Quad and Five Eyes underscores its Western alliance, while Indonesia adheres to its non-aligned foreign policy prioritizing ASEAN’s centrality diplomacy.
Australia’s decision to acquire nuclear-powered submarines from the US and UK under AUKUS has heightened concerns about regional stability, underscoring the two sides’ strategic differences.
That divergence is apparent enough that Russia, which has provided Indonesia with weaponry over the years, felt it could request and possibly receive basing rights.
Despite these differences, though, bilateral security cooperation has found substantial traction. The 2024 Keris Woomera joint military exercise exemplified a shared commitment to regional stability, maritime security and counterterrorism.
Trust-building requires more than sporadic drills, though. Institutionalizing annual defense dialogues and leveraging ASEAN platforms like the East Asia Summit could transform tactical cooperation into strategic synergy.
Two areas where Indonesia and Australia are clearly keen to collaborate are energy and food security. Indonesia aims for net-zero emissions by 2060 through a transition to renewable energy sources. While coal remains vital to Indonesia’s economy, the government is committed to reducing its reliance on fossil fuels.
The 2021-2030 electricity plan envisions a significant shift towards solar, wind, biofuel, geothermal and hydropower. Indonesia’s state electricity company, PLN, though, is threading carefully to ensure economic viability and supply adequacy before retiring coal-fired power plants as planned.
Australia could be a key partner in this energy transition. The Indonesia-Australia Energy Dialogue facilitates cooperation in green energy, while a $200 million financing facility between PLN and Export Finance Australia supports renewable investments.
Expanding collaboration in mining equipment, technology, battery storage, and green hydrogen could all help to drive Indonesia’s long-term energy resilience.
So would a literal solar bridge connecting the two nations. A high-voltage transmission line stretching from Australia’s Northern Territory to Java-Bali, the heartland of Indonesia’s population and industry, could revolutionize both economies.
Early analyses, drawing on projects like Australia-Asia PowerLink, suggest a solar interconnection could eventually power millions of Indonesian households, displacing coal while fostering cross-border innovation.
Bali would no longer be just for vacationing Australians, but could turn into a regional green and digital hub, powered by the Outback sunrays. This is not mere infrastructure; it is a statement that decarbonization can be a shared ambition, not a zero-sum game.
Food security is another potential convergence point. Indonesia’s food security efforts face complex challenges in balancing climate commitments and agricultural policies.
The government’s food estate program aims to reduce imports but risks deforestation and peatland degradation. Meanwhile, biodiesel mandates (B35 and B40) place additional pressure on farmland. To mitigate environmental impacts, Indonesia is pursuing food diversification, land restoration and carbon market initiatives.
Vulnerable communities continue to struggle with food accessibility, making initiatives like Indonesia’s Free Nutritious Meal program vital. However, its success depends on infrastructure, governance and supply chain efficiency. Regional disparities in food affordability and reliance on rice imports remain pressing concerns.
Australia contributes to Indonesia’s food security through trade, agricultural investment and technology transfer, with programs like PRISMA supporting local farmers.
Deeper cooperation could focus on precision farming techniques, improved water management systems and the development of sustainable supply chains. Investments in Indonesia’s food infrastructure, such as cold storage facilities and logistics networks, are essential for enhancing resilience.
Furthermore, facilitating reciprocal trade growth by increasing Indonesian coffee, cacao and tropical fruit exports to Australia, alongside Australia’s wheat, beef and dairy exports to Indonesia, would create a more balanced and mutually beneficial trade relationship.
Encouraging Indonesian investment in Australian agriculture, potentially through Prabowo’s newly established sovereign wealth fund, Danantara, could further enhance food security and reduce import costs.
The stakes transcend food and fuel. A cohesive Indonesia-Australia partnership would offer the Indo-Pacific and the world a new hopeful model of middle-power cooperation in an age of extremes.
Jakarta’s ASEAN leadership and Canberra’s Western heritage create a unique hybridity—a third way that neither placates nor provokes Beijing or Washington but prioritizes regional agency.
For Prabowo and Albanese, this is not a wishful partnership so much as a strategic necessity. Indonesia-Australia joint ventures in renewables, agriculture and food systems, if pursued with gusto, could show the world that regional resilience is not built through militarization or protectionism, but rather through interdependence and innovation.
Adi Abidin is a Public Policy & Stakeholder Management Specialist at Kiroyan Partners.
Source: Asia Times, May 16, 2025.
