Australia Indonesia Business Council

Address by the Hon Alexander Downer MP, Minister for Foreign Affairs, to the Australia Indonesia Business Council Forum

Sheraton Hotel, Melbourne, 20 July 1999

(Check Against Delivery)

Well thanks very much. Rob Hogarth, the President of the Australia Indonesia Business Council. Ambassador ???, it's always a delight to see you and be with you and ladies and gentleman.

Well let me say, it's a great pleasure for me to accept the invitation to speak to your forum tonight. As you will know, Indonesia has been a very prominent part of my own personal agenda as the Foreign Minister over the past few years and to say the least it's been a very significant part of my agenda over the last fifteen or sixteen months.

So I do want to take the opportunity to discuss some of the major issues that are facing Australia and Indonesia as we move into the next century. Especially with an audience which is obviously as well informed and, if I may so, as important to the development of the relationship as this audience tonight is.

In our White Paper that we produced in September 1997, on foreign and trade policy, we identified as a government, Indonesia as being one of those countries which is at the absolute centre of Australian foreign policy. The other three being china, the United States and japan.

Now that focus on Indonesia in our foreign policy won't change, regardless of the transformation that we're now seeing in Indonesia. And it will remain constant, I suppose, until pretty much the end of time, because Indonesia's strategic location won't vary and neither will its size in terms of geography and population.

All the changes that have swept through Indonesia haven't altered the fact that it remains a key player in our region, one whose policies and actions have advanced regional cooperation and stability in South East Asia and indeed in the wider Asia pacific region.

And as you all appreciate, Indonesia's importance as a trade partner for Australia, which had been steadily growing in recent years, won't lessen in the medium to long term. Now in my remarks tonight, I want to touch on some of the major changes we're currently witnessing in Indonesia, including in the political arena and inevitably say something about the issue of East Timor.

Before doing so, though I also want to look at the impact of the regional economic crisis on Indonesia and what that's meant for trade with Australia. In doing so, it's inevitable that I'll talk about some of the formidable challenges for both Indonesia and Australia. But what I want to convey to you is the sense that out of all those problems, I believe great opportunities are arising, opportunities to build a better Indonesia and improve the lives of ordinary Indonesians and opportunities to make the Australia Indonesia relationship stronger and more productive.

There is no doubt that Indonesia has been one of the countries though in East Asia most heavily hit by the economic crisis. Its economy shrank by 14% in 1998 and inflation soared to more than 70%.

From being one of the world's economic miracles, Indonesia became one of the world's economic problems. The old comforting assumptions about endless growth and wealth, they all went out the window and the nation was forced to do some serious thinking about economic reform. The crisis had an immediate effect on our trade with Indonesia. From a situation where our exports grew by over 20% in 1996, just before the crisis hit, our exports fell by 37% last year.

We recognise the seriousness of the situation that faced Indonesia and we did act as quickly as we could to try to help. As you'll be aware, we committed more than a billion dollars US to Indonesia's IMF package and I took the lead to ameliorate the original package when it became, frankly, rather obvious that it wasn't completely appropriate for Indonesia's situation.

We were also quick to provide export credit, insurance to assist trade and to boost our bilateral aid program by over one third in the last financial year. This year we've committed more than $120 million in assistance and we've continued to work actively in exploring effective international responses to global financial volatility and regional economic problems.

On the trade front we weren't spooked though, by the prospect of falling exports to Indonesia and other countries in our region. We maintained our overall export performance by finding markets elsewhere and by pursuing sales in East Asia where we could find them.

Most importantly for Indonesian exporters, we resisted the temptation to impose import barriers and retreat from Australia's global commitment. The result was that our imports of Indonesian goods have risen substantially reflecting in part, the remarkable resilience of the Australian domestic economy and its ability to withstand the regional economic downturn.

This is an important principle for Australia. In times of regional economic hardship, we believe that all nations should hold out against populist and illusory calls for greater levels of protection. Our economies are all interconnected through global trade. We'll either swim calmly together or we'll all drown like panicked swimmers, trying to scramble to safety by standing on each other's shoulders.

It was precisely such 'beggar thy neighbour' policies which led to the prolongation of the Great Depression in the 1930's.

But looking to the future, I'm pleased to note that there's been some encouraging news in recent months for Indonesia on the economic front.

We've seen some growth in the first half of the year and this, I think, is likely to strengthen by early next year. The exchange rate has strengthened very substantially. There's actually been slight deflation over the past couple of months. The inflation outlook for the rest of the year is good and should be less than ten percent.

Confidence is returning to the Stock Exchange. Some major new investments have been made, including ANZ's expanded investment in its joint venture partner Pannen (?). P&O's $157 million investment in the Surabaya Port. Cheetham's Salt investment agreement with PT Garham (?)

Interest rates have been trending downwards and this, together with the stronger exchange rate, should brighten the prospects for resolution of the corporate debt problem in Indonesia.

There have been some encouraging agreements in this regard, including with such major corporates as Astra. The IMF said that Indonesia is generally sticking to its reform program and we do agree with that conclusion.

Finally, we also take great heart from surveys that indicate that overall poverty levels in Indonesia haven't increased after the onset of the crisis as dramatically as I personally feared, and as a government we feared, as well as many others.

The road to recovery of course for Indonesia will be long and difficult but the country -- let's face up to it -- is certainly heading in the right direction. Long term reforms, though, must be pursued and meaningless quick fixes avoided.

Further progress on bank and corporate sector restructuring are high priorities. Australia will continue to do all it can to help Indonesia meet its social and economic needs, though, as it moves towards normality.

I'm going to Jakarta on the 28th of July, that's next week, and will meet with President Habibi and senior government and opposition figures to press the case for the continuation of the reform agenda.

I'll also emphasise the continuing importance and strength though, of our bilateral relationship and ways in which it can be developed in the months and the years to come.

More broadly there's a need for the international community after years of calling for reform and calling for democracy in Indonesia, now to support what is happening there. The meeting of the consultative group on Indonesia next week will be an important test of the international community's commitment to these ideals.

The Government will also continue to support the efforts of the Australian business community to build trade and commercial links with Indonesia. I'm pleased to see the business councils taking the initiative to maintain the momentum of the long term commitment to building up that commercial relationship.

Your business forum here, held concurrently with this year's successful Ministerial Forum in Bali which took place in February was also an important signal of the business community's commitment. The level of business attendance at the Bali Ministerial Forum, back in February was most impressive.

Those of you who were present, and a lot of you were, will know that the Ministerial Forum meeting provided both countries with a useful opportunity to reaffirm our commitment to the relationship, to review the economic relationship and to talk about some new directions.

We're keen to see the momentum retained over the broad range of activities taking place bilaterally. We look forward to working with whatever new government emerges in Indonesia. As you know the next forum is planned for the first half of 2000, here in Australia. We see that as an opportunity to take forward the relationship and to demonstrate the commitment of both governments to supporting bilateral trade and commerce.

The business sector has been involved in various working groups that feed into the Ministerial Forum process and we in the Government certainly appreciate the interest and the cooperation of business.

An important initiative we'll be pursuing next year will be the holding of a major investment conference on Indonesia. The Prime Minister, Mr Howard, announced this at the time of the meeting with President Habibi in Bali in April.

The conference should provide an excellent opportunity for Australian businesses to explore, in particular investment opportunities with their Indonesian counterparts, as well as to get the measure of the new Indonesian Government and its policies.

The other area of fundamental change in Indonesia has occurred of course in the field of politics. Just think of the political scene in Jakarta two short years ago. President Soeharto, after more than 30 years in office, but inflexible and political reform was certainly completely off the agenda.

Contrast that with the situation now. A new president in place with no guarantee of being endorsed at this year's presidential elections, Golcar now only one of several dozen very active political parties, political prisoners released and reform on everyone's lips. The nation where everything was so predictable has become the nation where anything is possible.

The general election for the people's representative council on the 7th June was symbolic of the fundamental change in direction that Indonesia has taken. With that step, Indonesia became the world's third largest operating democracy.

Now true, there may have been some irregularities but when compared to the total number of votes lodged, they appear to have been relatively minor but when compared to the total number of votes lodged, they appear to have been relatively minor.

The report that Australia's group of election monitors gave us, indicated a generally free and fair ballot, a judgement that was also backed by other international monitors.

While some may have been concerned at the gap between the vote and the result, the requirements of Indonesia's election law had to be followed properly and when you've had over 100 million people selecting candidates from 48 different parties in national, provincial and district elections, all of which were conducted and counted at the same time, you're bound to have some problems.

I'm cheered that the Indonesian electoral commission, the KPU, has insisted on conducting these elections absolutely by the book. That's an attitude that bodes well for the strength of democracy in Indonesia in the future.

The result's now been declared and all that remains is certification by the parties and the election commission. Some form of coalition arrangement seems likely for the election later this year, if the president and if legislation is to pass smoothly.

The handling of those two matters, as much as the recent election itself, will be of course, a test of the resolve of Indonesians to make their new found democracy work. In this area, Australia too stands ready to help its neighbour. We've already provided $15 million in assistance for the elections and we did send a 25 person monitoring team.

We've also provided support for judicial training and for Indonesia's national human rights commission, the Com Nassham (?), to name just two areas of cooperation. In fact we've committed nearly $70 million over three years to the broad area of good governance in Indonesia, covering such things as technical assistance for the development of new laws to training of accountants, lawyers and administrators.

These efforts should reflect in a more predictable and secure environment in which business can be conducted and make the Indonesian economy better able to resist financial and other shocks that will inevitably impact on it from time to time in the future.

The Indonesian people have shown their determination to use their hard won democratic rights responsibly and wisely. They've shown that credible elections can be run even after the hiatus of four decades. That kind of commitment and courage deserves, in fact it demands, appropriate support and Australia is determined to provide it.

Any discussion of change in Indonesia does involve consideration of the future status of East Timor. Australia has also played an important role on this issue. Both President Habibi and Xanana Gusmao have told me how Prime Minister Howard's letter to the President late last year, help set in motion the process that led to Indonesia's decision on an act of self determination in East Timor and Mr Gusmao's transfer from prison to house arrest.

Australia was fully supportive of the negotiations between Indonesia, Portugal and the United Nations, that produced the tripartite agreement on the territory's future, including through our commitment to help with the agreement's implementation in whatever way we could.

Our commitment's been demonstrated in the $10 million we've already given to the United Nation's Trust Fund and our pledge of an additional $10 million in in kind logistical support to the United Nation's mission in East Timor, which is known as Unimet.

We already have Australian federal police officers on the ground as United Nation civilian police advisers and six Australian Defence Force personnel are now deployed as military liaison officers.

Australian Electoral Commission officials have been helping to advance the United Nation's electoral planning. And as I've told the United Nation's Secretary General, Kofi Annan, we're ready to offer additional logistical support for the United Nation in East Timor.

In my own department, we've established an East Timor Taskforce to coordinate work on the territory. We've set up a liaison office in Lisbon to ensure closer dialogue with Portugal and we now have an Australian Consulate in Dili, up and running.

As the United Nation's mission on East Timor has unfolded, Australia has at all times acted to help ensure that the terms of the tripartite agreement are upheld. And that Indonesia's commitment to a valid vote by East Timorese on their future isn't frustrated.

If that's to be achieved, more must be done to improve security on the ground and that responsibility at the end of the day does lie with the Indonesian security forces.

Those responsible for violence and killings in East Timor must be brought to account. And East Timorese must be able to exercise their right to vote freely without fear or intimidation.

On every possible occasion and at every level, from the President and the Chief of the Indonesian Armed Forces downwards, we have forcefully pressed the point with the Indonesian Government. I think any fair observer would agree that the representations that we and others have made have borne some fruit and that security in Dili and at least some of the other major centres in East Timor has started to improve. But there hasn't been a commensurate improvement in conditions elsewhere and more must be done.

It's simply unacceptable that the violent acts directed against ordinary East Timorese and even against United Nation's officials, that we've seen on our television screens recently can be allowed to continue.

We together with the United Nations and others will continue to press authorities in Jakarta and Dili to stop these thugs. I spoke at some length with Kophia Naan last month on progress towards holding the ballot on East Timor's future. I support the Secretary General's announcement last week to proceed with registration. We know that time is growing short and there's much work to be done before a vote can be held. But the ballot must be free and fair and we'll continue to liaise closely with the United Nations on its assessment of whether that can be achieved.

As part of that assessment process, I'll be myself travelling to East Timor on the 30th of July, following my visit to Jakarta to talk with Australian officials, Unimet staff, Indonesian government representatives and community and political leaders.

Just before travelling to East Timor, as I mentioned earlier, I plan to meet with President Habibi and Defence Minister and TNI Commander, General Warranto (?), as well as Xanana Gusmao in Jakarta to discuss the latest developments leading up to the ballot.

My visit to East Timor will be the first by an Australian Foreign Minister. It isn't a visit taken lightly. We want to do all we can to help facilitate the ballot and help after the votes have been counted, no matter what the result.

We're now on the cusp of a once in a generation opportunity to move a long way toward settling an issue which has dogged our region for a quarter of a century.

Our approach has been instrumental in helping get this process this far. We must all continue to do all we can to ensure this opportunity isn't squandered, because there may never been another chance like this one.

Whenever the ballot is held and whatever its outcome, one thing is clear, all the parties in the territory will need to embrace the cause of reconciliation. The cycle of violence and retribution must come to an end. We must try to ensure that there are no victims in post ballot East Timor.

Both sides will need to make concessions and recognise the necessity of long term coexistence, under whatever form of government the East Timorese may choose. Australia will continue to lend a hand in post ballot East Timor.

As the largest bilateral aid donor to the territory, we provide over $7 million in development assistance each year at the moment. And we've sent several Ausaid missions to East Timor this year to assess the humanitarian requirements of the next century.

Since the onset of the economic crisis, Indonesia has been buffeted by forces that have transformed it as a nation. If the vote in East Timor is against autonomy, there's every prospect that we'll see a new millennium with a new nation in our neighbourhood.

In both places, Australians can be proud of the role their country has played in helping to smooth the road to transition. We've acted quickly to meet humanitarian needs. We've moved to provide assistance with economic and political changes that few in Indonesia and East Timor had experienced in their life times. We've gone about those tasks when many in Australia were more concerned about settling scores in our domestic political context.

Because we've kept our eye on the opportunities, rather than the problems, we have made a difference. We've helped Indonesia hold its first democratic election since the 1950's and we've helped put in place an act of self determination for the people of East Timor. Both would have seemed impossible just two years ago. No doubt we'll see more problems for Indonesia and East Timor in the future. But with the commitment and resourcefulness of the people and the continued good will and support of Australians, I'm sure that those problems will continue to be converted into opportunities for us all.

Let me end with one final comment because in Indonesia the People's Consultative Assembly, the NPR, will soon make its decision over the future of the Indonesian presidency.

You can rest assured that we will make no public comments about this issue which would, in any way, indicate our support for any candidate and certainly, as a neighbouring country, we would never want to express our support for one candidate or another. It would be very wrong to do that.

So what I want to say now shouldn't be interpreted as support or otherwise for anybody in the context of the presidential elections. But I do want to say that President Habibi, during his period as the President of Indonesia, his contribution has often been most unappreciated in the outside world. And the international community, I think to a much greater extent than it has done, needs to recognise the changes that President Habibi has brought about in Indonesia.

He's the president who liberalised the press, he's the man who released political prisoners, he's the man who put in place a process which led to Indonesia's first democratic election since 1955 and he's the man who's brought about the opportunity for the people of East Timor to determine their own futures.

Now whether he continues as the president or whether one of the other becomes the president, I won't get into the game of predicting that, but whatever happens in the future, I think it will be well remembered for generations to come that President Habibi as the president of Indonesia undertook enormous reform during his time in office, which led to an historic transition in Indonesia.

Was that good for Australia? Yes, that was good for Australia. What has been very good for Australia is that our next door neighbour, our largest neighbour, a country with a population more than ten times the size of our own population has transformed from being a dictatorship to a democracy. And it will be an easier neighbour for us to live alongside, a better partner for us in regional issues. This period that we've been through over the last two years will be remembered as a truly historic period for Australia but above all for Indonesia.

I don't think that the contribution that President Habibi made to that transformation in Indonesia should be forgotten, underestimated or overlooked. Now that isn't to make any comment about the future political environment in Indonesia.

Of course, when people vote in the People Consultative Assembly on who to have as their president, they will look to the future and who they choose is somebody we will work with and I'm sure we'll work with happily and constructively but it is also important, given the focus in our media on the East Timor issue and typically on the negative side of the East Timor issue to ensure that people really understand the weight of the reforms that have occurred in Indonesia in recent times and they give credit for those reforms where it is due.

It's not just due to the international community, above all it's due to what the people in Indonesia themselves have done and what their president has done presiding over all of that.

Thank you again, very much for having me this evening. It's been a pleasure to have the opportunity to talk to you and good luck with continuing your business links with Indonesia. Short term problems shouldn't cloud the medium to long term view. In the medium to long term, the economic opportunities with Indonesia are going to be enormous and companies that have hung in there through the hard times I think will be richly rewarded, because Indonesia will get back onto the path of growth, of recovery, of prosperity. And I want to see Australian business involved in that process.

Thank you very much.

Thank you very much Minister for your candid view and your view on the business opportunities. I think it's a view that's very much shared by our bank and two words stick to mind from the Minister's speech. One is commitment and the other one is determination.

I think as business leaders, we shall both think we've got a terrifically bright future in Indonesia and we at least try to follow that path. I think it's terrific that the commitment and determination shown by the Minister and the Government is going to help us achieve our goals.

I have a token of appreciation for your effort tonight. So thank you very much again.

QUESTION:

... going to East Timor now?

ALEXANDER DOWNER:

Well, I'm going to East Timor for a number of reasons. First of all, to provide moral support to the Australians who are there, both in the civilian police and also Australians who are involved in the general United Nations operation.

Secondly, to give encouragement and support to the continuation of the registration process. We clearly want to see the ballot a success. And, thirdly, to talk to some of the people on the ground there, both the pro-independents and pro-integration people as well as the Indonesian security authorities, and in particular reinforce our message about the need for appropriate security so the ballot can take place in a constructive environment.

QUESTION:

What fears do you have for your own safety?

DOWNER:

I don't have fears for my own safety.

QUESTION:

At all? It's a fairly turbulent situation over there.

DOWNER:

Well, it's a difficult situation. I think the last few days things have started to look a little better. I can say that the registration process has so far been proceeding quite well and we're very pleased to see that, but, yes, it's a difficult security environment.

But there are a lot of Australians there and I think it's appropriate that a member of the Government goes and gives moral support to those people.

QUESTION:

Some senior Indonesian officials have apparently urged the Government to get out, predicting that there's going to be a pro-independence victory. How do you respond to that?

DOWNER:

Well, I'm not sure how senior the official who was supposed to have written the report really is and I understand that that report which has been widely covered in the Australian media today is not a statement of official Indonesian policy.

Let me say this. If the ballot goes in favour of integration, it's important that provided the United Nations signs off as it being a free and fair ballot that that is accepted and endorsed by people in East Timor, but equally if the ballot goes in favour of independence we would also expect people in East Timor to accept the judgment of the people of East Timor, and for the Indonesians our expectation would be that they would carry out the broad policy that was enunciated to me quite some time ago by both President Habibi and Foreign Minister Alitas, and that is that Indonesia wouldn't pull out of East Timor in a precipitous way, that there'd be a process of transition to independence.

But I can only hope that that's what happens, and obviously the post ballot environment will be an issue that I'll be talking in Jakarta with my interlocutors about.

QUESTION:

In the eventuality that the East Timorese choose the independence path, what assistance will Australia and the Australian Government make, because it's going to be a big job for them if it happens, isn't it?

DOWNER:

Yes. I mean, I don't want to get into too much speculation about the mechanics of what will happen if East Timor votes for independence, but let me just make this point that whichever way East Timor goes, if the ballot is a free and fair ballot and is accepted as such by the United Nations, Australia is prepared to be helpful to the people of East Timor.

We already are the largest bilateral aid donor to East Timor, and if East Timor chooses integration with Indonesia we'll continue to provide generous support to East Timor. If East Timor chooses independence there's no doubt that the East Timorese equally can count on strong support from the Australian Government.

We will certainly provide in that environment considerable support to East Timor, but the details of that have yet to be worked out and, of course, at this stage, it's quite hypothetical.

QUESTION:

In the event of integration with Indonesia, would Australia accept refugees from East Timor?

DOWNER:

Well, I would hope if the ballot is free and fair and integration happens to be the view expressed by the people of East Timor that the East Timorese will accept that. I mean, this question of refugees is actually an important question, because it raises the issue of whether the losers in the ballot are going to be prepared to accept the outcome of the ballot and whether the winners will treat the losers with appropriate respect.

Now, the point I would make is this: that whoever loses the ballot deserves to be respected. They deserve to have their human rights upheld by the winners of the ballot. It is very important that East Timor which has been such a deeply divided society for so long works towards reconciliation, regardless of the outcome of the ballot.

Obviously there is going to be a winner and there is going to be a loser. The winners must not have a winner take all approach and intimidate and undermine and destroy the human rights of the losers. They must respect the losers as residents of East Timor, whether they be citizens of East Timor or citizens of Indonesia, depends on the outcome of the ballot, but it is very important that both sides rise above an environment of retribution and make sure that those who lose in the ballot have their rights properly respected.

QUESTION:

So would we accept refugees, though? In the circumstance where there were problems with the sort of outcome you've just described, would we accept refugees?

DOWNER:

We have a well-known approach to refugees which is based on the United Nations convention on refugees and we would continue to apply the refugee policy that we have at the moment.

People who wish to seek refuge do so according to certain criteria which are laid down by the United Nations convention. It's a question that's simply impossible to answer, because you don't know what the environment is going to be.

But I would hope there wouldn't be refugees. There will only be refugees if, in particular the losers in the ballot, are treated in an oppressive and discriminatory way. They should not be. The losers in the ballot should have their rights respected.

Can I just say in that context that is one of the points that has been made over and again by Xanana Gusmao, who has said that in the event of independence being the favoured outcome by the people of East Timor, those who had supported integration should have nothing to fear. Now, that is right.

If it goes to independence, then pro-integrationists should have nothing to fear. If East Timor goes for integration, then those who had supported independence equally should have nothing to fear.

QUESTION:

There are reports also in today's press that SAS troops are on stand-by to withdraw United Nations officials if the situation becomes difficult. Can you confirm those reports?

DOWNER:

Well, I've just seen a vague newspaper report, and I don't think -- can I say this -- I don't think that it's going to help the situation in East Timor if I get into that kind of speculation. I don't wish to cover anything up.

I just want to make the point to you, though, that it is very important we do everything we possibly can to keep the environment stable in East Timor and we keep working towards making sure that this ballot is successful and that the post ballot environment is a stable environment. Now, getting into that kind of speculation isn't going to be helpful.

QUESTION:

Can the ballot actually stop the violence that's occurred? I mean, how hopeful are you that this will be the end of the violence?

DOWNER:

Well, I said when this process began some months ago that there'd be good days and there'd be bad days, and that has proved to be a very accurate forecast. There certainly have been good days and there have been some very bad days as well, and after the ballot has taken place we'll obviously be calling very much for restraint in that environment.

If the ballot is free and fair, I think it will be all the easier for there to be a proper order in East Timor. If the ballot is in some way distorted, then that might not be so easy.

QUESTION:

Is this visit overdue?

DOWNER:

Is what overdue?

QUESTION:

Is your visit to - -

DOWNER:

Oh, is my visit overdue? No, it is not overdue. I think it's important not to make visits to other countries in the interests of publicity and stunts. I think it's important to make a visit if you think your visit can make a difference.

Now, up until now, I haven't judged that a visit would be wise. I've been concerned that a visit could be provocative, but now that the environment is as it is in East Timor and that is that it's a difficult environment, but we have a lot of Australians there and there are some signs of an improvement in the efforts the Indonesian authorities are making to uphold security, I think it is appropriate that I go.

But, look, if I'd gone six months ago or a year ago or two years ago, I'm not convinced that that would have been helpful, but I think at this particular time a visit is well judged.

QUESTION:

President Soeharto has been taken to hospital. Do you have any comment on that situation?

DOWNER:

I don't have any information on that, except an AFP report that I have read and so I really just don't know. I can give you no more information than AFP have provided.

Okay.

ENDS

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