The Indonesian Government has started to improve programs for children aged 0-6.  Photo: Erly Tatontos / World Bank

The Indonesian Government has started to improve programs for children aged 0-6.
Photo: Erly Tatontos / World Bank

Australia’s aid cuts to Indonesia aren’t retribution. But they are a missed opportunity, writes Benjamin Day.

The Australian Government will cut aid to Indonesia by 40% over the coming year, from $542.5 to $323 million. A reduction in aid to Indonesia had been widely anticipated since the Government announced a $1 billion cut to aid in December – the largest in the aid program’s history.

Ahead of the Abbott Government’s second budget, speculation began to mount that the size of cuts would be perceived as retribution for Indonesia recently executing two members of the Bali Nine on 29 April.

In an editorial last week, the Jakarta Post argued that the timing of the cut to aid to Indonesia “suggests that it is more likely connected to the recent execution of two Australian drug convicts” and that the move “suspiciously looks like a retaliatory backhand aimed at Jakarta.”

The Indonesia-Australia relationship, vital as it is for both parties, is fraught; those looking for ulterior motives will have little trouble finding them. Perceptions matter and are not easily shifted.

Nonetheless, there are three good reasons to believe that Australia’s choice was not driven by a desire to punish Indonesia. Australian Minister of Foreign Affairs Julie Bishop presumably conveyed these to Indonesia who have signalled they have accepted that the aid cuts and the executions are not linked.

First, as the Development Policy Centre’s Matthew Dornan wrote, “cutting the aid budget by 20 per cent was never going to be an easy task.” As Australia’s second largest aid recipient (behind Papua New Guinea), the Indonesian country program was always likely to be scoured for substantial savings. It helped that many programs begun in the aftermath of the 2004 Tsunami had reached a natural end point.

Second, despite segments of the Australian community calling for punitive cuts to aid to Indonesia in the aftermath of the Bali Nine executions – most notably Senator Jacqui Lambie – this view is not held by the majority of Australians. A poll by the Lowy Institute for International Policy taken after the executions found only 28 per cent of Australians supported suspending aid.

Third is Treasurer Joe Hockey’s assertion that, when it came to deciding on the aid cuts, “there wasn’t any specific targeting of any country at all, it was all done with a formula.” Hockey’s claims, in this case, are borne out by the budget detail. Unfortunately, the formula employed was especially crude, betraying a hurried, top-down approach which paid little heed to issues of aid quality.

In essence, the formula for the cuts can be described as ‘geographic determinism’. Aid to our immediate region, the Pacific, remained largely unchanged. On the other hand, contributions to countries furthest from Australia’s sphere of influence was cut drastically. Aid to Sub-Saharan Africa was reduced by 70 per cent and to North Africa and the Middle East (excluding the Palestinian Territories) by more than 80 per cent.

Recipients located between these extremes, except for the special cases of Cambodia and Nepal, simply had 40 per cent docked from their programs. In addition to Indonesia, we find that a host of countries in East, South and West Asia, including, but not limited to, the Philippines, Myanmar, Vietnam and Pakistan, have had their aid rather arbitrarily circumscribed by that figure.

But just because there is some rationale to the cuts, and that this rationale seems to have been acceptable to Indonesia, doesn’t make the decision a smart one.

The ham-fisted approach to apportioning the cuts reveals the absence of strategic direction in Australia’s aid program. A precipitous scale up in funding, begun under Prime Minister John Howard and reaching a peak under Labour, has been followed by precipitous cuts, removing arguably the singularly most important attribute the aid program can offer its partners to advance development objectives: stability. And yet stability was precisely what Julie Bishop promised upon taking the reins of the aid program. It was a key way she differentiated the Coalition’s approach from Labour’s.

Now, instead of burnishing them, the instability in the aid program is undermining our diplomatic objectives. The speculation surrounding the reason for the cuts to aid to Indonesia quickly became another unhelpful irritant to smooth relations.

It didn’t have to be this way.

Most disappointing about the way these cuts were enacted is that it is not too difficult to imagine a scenario where cutting aid to Indonesia could have be framed as an achievement for both sides.

Australian aid to Indonesia almost quadrupled following the 2004 tsunami. Along with reducing poverty, aid has functioned as a key source of goodwill in the relationship over that time, one of the few consistently bright spots in an often tumultuous relationship. Aid has helped to “bed down the democratic transition” underway in Indonesia and has offered a low-pressure platform conducive for high-level diplomatic engagement.

Yet despite these successes, the direction of the aid program was overdue for change. Aid will continue to be useful – after all, at $323 million the program remains substantial – but it will be deployed differently into the future.

Like other emerging powers, Indonesia is transitioning from being a recipient of aid to a donor itself. As the Development Policy Centre’s Robin Davies has pointed out, “it is very difficult to maintain that Indonesia, a country whose net aid receipts turned negative for the first time ever in 2013, needs anywhere near $543 million in Australian aid each year.”

Indonesia is embracing its new status. Indonesian Foreign Ministry spokesman Arrmanatha Nasirindo, in refuting the claims that retribution was part of Australia’s motivation for the cuts, was clear that Indonesia is no longer “a country that relies on foreign countries for our development.”

Australia has missed an opportunity to proactively recast our aid relationship with Indonesia. With Indonesia graduating to becoming a donor in its own right, this is an aid success story. But instead of being told the story of why our engagement with Indonesia needs to change, significant portions of the publics on both sides of have been left wondering about Australia’s motivations for cutting aid. Meanwhile, Australia’s diplomats in Jakarta have been left to explain why existing projects will suddenly have to stop.

If the Abbott government is to make good on its promise of “more Jakarta, less Geneva”, then this sort of ripe, low hanging fruit needs to be proactively plucked, not left to wither on the vine of public perceptions.

Benjamin Day is a PhD scholar researching aid and foreign policy at the Coral Bell School of Asia Pacific Affairs, The Australian National University.