Why Australia's relationship with Indonesia is so important

But equally I think it is important we recognise – both sides recognise – that this is not a reason to downgrade or diminish what is one of the most important bilateral relationships in our region.

"Indonesia is destined to become a much larger economic player and a more significant regional power."
Mike Smith, Chief Executive Office, ANZ

Indonesia has a population 10 times the size of Australia's and an economy half the size. It won't stay that way. Much research, including ANZ's own recent ASEAN study, leaves little doubt Indonesia is destined to become a much larger economic player and a more significant regional power.

ANZ operates in 34 countries and, by definition, we are therefore guests in 33 of them. We strive to be welcome guests. For our business, for business in general, it is vital we recognise there are very real differences in cultures and values and legislation. The key to better understanding, indeed the key to having your position understood, is more engagement, not less.

Australia does not always behave in a manner Indonesia accepts or understands – the recent unilateral suspension in live cattle trade and the espionage saga involving the former President spring to mind.

Business has a vital role to play in deepening this engagement. I spoke recently at the launch of Monash University's Victoria-Indonesia Leadership Program in Melbourne in which Indonesia's Victorian Consul-General made an important contribution. The feeling from the Indonesian side was very positive.

My message was if we are to build on our relationship, to the benefit of both nations, there needs to be more cooperation between business, government and education institutions. Not only does such cooperation generate understanding, it has an economic benefit, particularly when it comes to innovation.

One of the examples of this is Silicon Valley, and while I know there are many aspirants to be the next Silicon Valley, the essence is that a genuine partnership between business, government and education can create very successful outcomes.

Business people need to be educated about doing business in other cultures and that education is best when it comes from actual practitioners. Real, first-hand knowledge is the key.

In this sort of environment, you can build an awareness of different forms of corporate governance, political systems, culture and values.

In many cases, no one system is right, the systems are just different. People view events through different lenses. And this is something we try to instil in our people at ANZ – particularly where we are guests.

From the Australian perspective, the banning of live cattle exports was seen through the – legitimate – lens of animal welfare. But in Indonesia it was a major disruption in the food supply for ordinary people.

Again, the answer ought not to be withdrawal. The more we can do to build trade and investment engagement, the more we share education, the more interdependent our economies become, the more our differing perspectives can be understood and ultimately brought closer to together.

It may sound blunt but these economic incentives do work.

Our political relations will ebb and flow – as indeed they do with many countries – but with a solid foundation the impact of those flows is less. The deeper the business engagement, the deeper the political engagement. Inevitably, business and political leaders come together more often formally and informally when such ties are deep.

This is not just about making money in the short term; it is enlightened self-interest. Economic benefits are more sustainable when political and cultural ties are strong.

From our perspective as bankers, deeper economic engagement with Indonesia will be focussed around infrastructure, food and education.

The new government has moved rapidly to acknowledge Indonesia needs to build and modernise its infrastructure if it is to take full advantage of the potential of its resources and young population.

From Australia's perspective, there is a chance to build on our existing destination as an attractive place to educate young Indonesians.

I am constantly reminded of the long-term value of education when I meet with Indonesian business people who have studied in Australia – there is already a foundation of understanding. The current Victorian Consul-General is an alumnus of Monash.

I am not saying business is the answer to difficult situations like those we have recently been through. But business is a way to deepen our ties, deepen understanding, and deepen interdependence – and ultimately that deepens our ability to lessen the chances of future issues emerging.