To what extent does their location relative to each other affect Australia's relationship with Indonesia?

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Geographic proximity is an important factor in the relationship between Australia and Indonesia.  Their physical locations provide the basis for a relationship, especially in the economic realm.  Countries prefer to trade with partners that are physically close, as it makes the movement of goods easier and cheaper.  Geography is not, however, the sole determinant in the relationship.  In fact, it is a relatively minor consideration relative to the convergence of interests that has often existed.  Physical proximity is an underlying reality, but the history of the relationship could have been considerably worse but for that convergence of interests, especially in the area of national security.  From the Australian perspective, the mutuality of interests was expressed in a recent White Paper issued by that country’s Ministry of Defence:

“Australia benefits from having a strong and cohesive Indonesia as a partner to the north, as Indonesia does from a secure Australia to its south.  Geographic proximity means that Indonesia’s and Australia’s security interests are intertwined.  We have a shared aspiration for the stability and economic prosperity of our region that underpins our partnership and is driving increased breadth and depth in our defence cooperation.” [“Mr. Rudd Goes to Jakarta,” The Strategist, The Australian Strategic Policy Institute, July 2013]

But for the fact that Indonesia has maintained a secular form of government with a moderate interpretation of Islam, and was a staunch opponent of communism during the Cold War, the proximity of the two nations would not have provided the basis by itself for a close relationship.  Southeast Asia is deeply divided politically, with free market, western-oriented governments sitting side-by-side with autocratic totalitarian regimes in Myanmar, Cambodia and Vietnam. 

While geographic proximity is an important factor in the relationship, however, that same proximity has also contributed to tensions between the two countries.  The issue of East Timor independence provided the basis for a serious deterioration in relations and the current crisis over the handling of refugees from across the region – neither country wants to absorb them – has caused much tension.  This development aside, Australia continues to view its relationship with Indonesia through a geopolitical perspective, summarized in its 2013 Indonesia Country Strategy report:

“[Indonesia is] . . . a rising regional power and an emerging global player.  Combined with its geographic proximity to Australia, this makes Indonesia a vital strategic partner in the Asian century.” []

The Indonesian perspective is less respectful of Australia.  The ongoing crisis involving the refugees from regional conflicts has angered many Indonesians, as was evident in the following from The Jakarta Post:

“To us, Australia is a nation that has little respect for Indonesia, while we do not believe that we deserve such treatment as a great nation.  We would like Australians to learn more about Indonesia because of its pivotal role in the global community.” [Kornelius Purba, “Indonesia, a Reluctant Good Neighbor to Australia,” Asia News Network, April 7, 2013]

Whether the convergence of interests that keeps the two countries together will continue to outweigh the issues that divide them is the question for the future.