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Canada - Indonesia Relations

Political and Economic Overview

Indonesia is a dynamic country, an influential regional power and a global player that offers Canada many opportunities for engagement. It has an emerging economy and is the world’s third-largest democracy, fourth-most populous country and has the largest Muslim population of any country. Straddling the Southeast Asia/Oceania divide, the country is as diverse as it is vast; its 17,500 islands span a total area of 1,812,000 km² and feature some 300 ethnic groups speaking a total of over 700 languages.

Indonesia has enjoyed rapid economic expansion during the last decade and has considerable growth potential. It has a growing middle class and almost two-thirds of its population are of working age. Indonesia is listed 73rd in the World Bank’s 2019 Ease of Doing Business ranking.

Bilateral Relations

Even before the establishment of formal diplomatic relations in 1952, Canada and Indonesia enjoyed positive relations. In 1948, diplomatic efforts by Canada’s Ambassador to the UN, General Andrew McNaughton, helped to resolve deadlocked negotiations between Indonesia and the Netherlands, its former colonial power, paving the way toward international recognition of Indonesia’s sovereignty in December 1949. Since then, Canada and Indonesia have maintained a strong partnership across many areas, including trade and investment, good governance, human rights, poverty reduction, and capacity building in the security and counter-terrorism sector.

At the multilateral level, Canada and Indonesia collaborate in the G20, APEC, the Association of Southeast Asian Nations (ASEAN) and at the United Nations.

Trade and Investment

Indonesia is Southeast Asia’s largest economy, a G20 member with solid long-term macro fundamentals and strong economic potential. Indonesia is our largest export market in the ASEAN region and despite a slowdown in 2016 (low commodity prices, completion of major aircraft order, late harvest season), bilateral trade and Canadian exports have reached new heights in 2018. This is thanks to growing exports of cereals, wood pulp and fertilizers. In 2018, merchandise exports were valued at $2.14B ($1.72B in 2017; $1.45B in 2016). Merchandise imports were valued at $1.75B ($1.73B in 2017; $1.62B in 2016). Total bilateral trade in 2018 was $3.9B (compared to $3.46B in 2017; $3.07B in 2016).

Indonesia is the second-largest destination for Canadian direct investment in Southeast Asia, at a total stock of $3.2B in 2018.

Development

Canada and Indonesia share over 60 years of collaboration in areas including decentralization and local governance, natural-resource management, inclusive economic growth, human rights, gender equality, enterprise development as well as supporting the values of pluralism and secularism in Indonesia’s higher-education system. Canada also has a long history of engagement in eastern Indonesia, where poverty rates are higher. Since 1954, Canada has provided more than $2.0B in official development assistance to Indonesia and, in 2017-2018, Canada delivered $50.5M to improve sustainable economic prosperity for the poor and to support Indonesia’s democratic-governance reform agenda.

May 2019

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