Franky Welirang is bemused to learn his instant noodles have become the feel-good emblem for Australia’s tangled and occasionally spicy relationship with Indonesia. “I am a standard guy. The mee goreng is OK,” says the 74-year-old, when asked to pick a favourite from the 60-odd noodle flavours made by his company, Indofoods.
“The younger generation is different … They like spicy things, I don’t like spicy things.” The 39 billion packets of instant noodles that Indofoods will sell this year would not be possible without several layers of co-operation with Australia. When war in the Middle East fractured fertiliser supply chains earlier this year, the Indonesian government struck a deal to ensure Australian farmers got emergency volumes of urea. That support has helped Australian farmers to grow a wheat crop that, as of September, was on track to be 3 per cent bigger than average.
Much of that wheat will be put on a ship and sent back to Indonesian flour mills, such as Indofoods, which rely on Australian farmers for about 55 per cent of their wheat and paid $1.85 billion for it last year. “Australia is the nearest to us, so our priority would be Australia,” says Welirang, when asked about the potential to buy wheat from American or Russian rivals. The nexus between fertiliser, wheat and instant noodles is not the only reason diplomatic relations between Canberra and Jakarta are on a high.
A record number of Indonesian students, about 25,000, are studying at Australian universities. Two-way trade has doubled over the past decade to reach a record high of $33.1 billion, and in February’s Jakarta treaty, Australia earned the sort of security relationship that was previously thought to be impossible under Indonesia’s policy of sovereign neutrality.
The bilateral relationship has been spared the sort of spicy elements that strained relations in the past; notably the separatist movements in places like East Timor and Aceh, as well as the capital punishments handed out to Australian drug smugglers in Bali. But as the two nations grow closer, one important ingredient remains absent from the mix. Australian investment in Indonesia has crashed, and was last year 74 per cent lower than in 2017. Will this investment strike stop good neighbours from becoming good friends?
“We are good friends,” says Dr Ridha Wirakusumah, as we catch up in Jakarta for the first time in two years. “But when it comes to investment, we [Australia and Indonesia] are good neighbours that talk like strangers.” The last time Wirakusumah caught up with The Australian Financial Review, he was in Melbourne on a mission to get superannuation funds and other big Australian institutions to co-invest with the sovereign wealth fund he was leading at the time, the Indonesian Investment Authority (INA).
“I found them to be curious, intrigued, interested,” he recalls, of the mood he found among the Australian investors in 2024. “It hasn’t translated fully yet in terms of them coming in.” That’s an understatement. Australian investment in Indonesia last year tallied just $1.95 billion – well below the 2017 peak of $7.57 billion.
Each of the 11 years to 2018 saw more Australian investment in Indonesia than occurred in 2025. This year looks no better. Rising US interest rates have sucked capital out of several emerging markets this year, and Indonesia is one of them. But the 2024 election of President Prabowo Subianto, a 76-year-old former military commander whose unpredictable style is often likened to US President Donald Trump, has also dented investor sentiment. The Prabowo regime has favoured greater nationalisation of primary industries and given politicians greater power over institutions such as Indonesia’s central bank. The result has been lower export volumes of key commodities like coal, and a sharp fall in the local sharemarket.
The local currency, the rupiah, has slumped to levels not seen since 1998 when an International Monetary Fund bailout forced strict and unpopular austerity measures on the Indonesian people. The weak rupiah has made Indonesia’s reliance on foreign oil and wheat more costly. It has also eroded the investment stock that Australian investors have accumulated in the country over time. Last year, Australia controlled investment stock worth $6.8 billion in Indonesia, down from $8.4 billion a decade ago and a peak of $10.8 billion in 2017. “If the rupiah continues to slide, the investments must make up for the depreciation,” says Wirakusumah, on the currency conundrum facing foreign investors.
Indonesian Business Council chairman Arsjad Rasjid says Prabowo’s first two years had been marked by surprise announcements that have been light on detail and prone to change. A prime example was the announcement of a single, government-controlled export agency for all Indonesian commodities known as Danantara Sumberdaya Indonesia, which was later watered down to be a monitor of private sales contracts in pursuit of fraud. “They had very bad communication in the very beginning,” says Rasjid of the Prabowo administration. “The government communication is like: too many noises, everybody talks.”
Australian food exporters have this year experienced the erratic and unco-ordinated nature of Prabowo’s regime. Indonesia has sought to tighten the halal certification standards on imported food, and the proposed rules have changed on several occasions, creating major concerns for Australian farmers trying to ship perishable goods. A rule that forces foreign investors to park their earnings in an Indonesian state-owned bank for 12 months before repatriating them is also not popular.
Rasjid says the combination of policy surprises and poor communication had prompted many businesses to take a “wait and see” approach through the first two years of Prabowo’s regime. “There was a lot of surprises that made the businesses jittery,” says Rasjid, whose members include the wealthiest Indonesian business dynasties, including the Widjaja family of Sinarmas fame and noodle maker turned coal miner Anthoni Salim. “Businesses are not used to this different style … If Indonesian businesses are in surprise and are trying to adjust and understand it, then how about the Australian businesses!”
But Rasjid says the government’s communication and co-ordination seems to be improving, and he hopes the remaining three years of Prabowo’s term will be marked by greater certainty for investors. “Let’s look at Indonesia not just on a one-year or two-year situation, look at Indonesia in the long term,” he says, hinting at the nation’s attractive demographics. Indonesia, with 284.4 million people, has the fourth-biggest population on Earth. Indonesians are, on average, 10 years to 20 years younger than the workforces in Australia’s three major trading partners in North Asia: China, Korea and Japan. About 68 per cent of Indonesians are of working age.
This large and young market shares a time zone with Australia and is close: it takes five days to ship Australian wheat to Indonesian flour mills, compared with 21 days from Canadian and American farmers. Despite these natural alignments, Wirakusumah says he has found Australian investors to be more cautious towards Indonesia than peers from further afield “The thing I was pushing hard in Australia was that their peers – the Canadians, some Europeans including specifically the Dutch, some of the well-known sovereign wealth funds from the Middle East – they are actually coming in and partnering with us more,” he says.
“There is definitely an element of swimming against the tide,” says Winston Mandrawa, managing director at Affirma Capital, when asked why he was willing to spend $US35 million ($50 million) acquiring Indonesian renewable energy company Bright Nusantara Energy earlier this year. Mandrawa was born in Australia to Indonesian parents. He was schooled at Melbourne’s prestigious Camberwell Grammar and now helps manage the $US4.2 billion of funds entrusted to Singapore’s Affirma Capital. This year’s acquisition of Bright means one of Mandrawa’s funds – the Kinetik Affirma Capital Climate Transition Fund – is now the owner of solar farms in Sulawesi and Lombok as well as a hydroelectricity project in Sumatra.
“You will hear a lot of noise from investors saying Indonesia is uninvestable, but they are still coming to Indonesia, they are still attending the conferences, having the conversations,” says Mandrawa when asked about the sentiment among foreign investors. Winston Mandrawa is responsible for investing Australian taxpayers’ funds into Indonesian renewables. Jefri Tarigan “If it was really uninvestable they would just put their pens down and say ‘I am not even going there’. “I think they want to invest, but there are definite challenges at the moment,” he says.
Mandrawa’s solar and hydro acquisition might be a sign of things to come; Rasjid reckons renewable energy might be the thing that lures Australian investors back into Indonesia. When Indonesia submitted its official emission reduction targets to the United Nations last year, it estimated the transition to a net zero economy by 2060 would cost 7552.5 trillion rupiah ($605 billion). Consistent with the pledges made by rich nations at multiple UN climate conferences since the Copenhagen meeting in 2009, Indonesia fully expects developed nations to help fund its journey to net zero.
On several occasions this year, Prabowo has put his populist muscle behind the clean energy push. In July, he set an exceptionally ambitious target of rolling out 100 gigawatts of new solar power capacity across Indonesia within two years. To put that target in context, it would more than double Indonesia’s entire electricity generation capacity, which stands at about 88 gigawatts. The nation’s installed solar capacity is less than two gigawatts, meaning the skills ecosystem required for such an installation boom is almost non-existent.
Australia is one of the world’s most enthusiastic adopters of solar panels, but installed just 4.6 gigawatts of capacity last year. Prabowo’s 100-gigawatt target is widely considered to be impossible. It also contradicts the more data-driven plan published by Indonesia’s state-owned electricity provider PLN, which has forecast that solar additions to the grid in the nine years to 2034 will be closer to 17.1 gigawatts But even if Prabowo’s big solar target cannot be achieved, Rasjid says it gives investors a clear sense of priorities, and he argues it is consistent with some other moves the Indonesian government has made in recent years.
For example, a ministerial reshuffle on October 1 saw Prabowo’s elite cabinet expanded from seven co-ordinating ministers – a type of senior minister who oversees the work of multiple junior ministers – to eight. The new addition to the cabinet was Bahlil Lahadalia, who was given the official title of “co-ordinating minister for downstreaming and energy transition”. “That clearly in a way is a statement that Indonesia is very serious in downstreaming and the energy transition,” says Rasjid.
Indonesia has also introduced several rules over the past five years that were designed to make its renewable energy sector more attractive to foreign investors. One significant example requires PLN to strike contracts with renewable producers that are US dollar denominated, meaning foreign investors like Mandrawa can rule out foreign exchange risk.
The first $50 million into Mandrawa’s fund was from the Australian taxpayer, on the condition it be spent on energy transition investments in Indonesia. That money, plus $US3.5 million from Standard Chartered, funded the acquisition of Bright. Mandrawa is now seeking private investors to follow Australian taxpayers and fatten out the fund to about $200 million. As an anchor investor in Mandrawa’s fund, the Australian government hopes to be a kind of chaperone that gives private investors the confidence to take on Indonesia’s higher risk threshold. By “crowding in” private finance under the Kinetik program, the Australian government believes it will make its dollars will go further.
Private Australian investors like Minderoo and the Paul Ramsay Foundation have previously followed Australian taxpayers into a similar investment structure on the Indonesian island of Java, where the focus was a coconut sugar export business. If everything goes to plan, Australian taxpayers will make a profit on both investments. The $US35 million paid for Bright has given the company the funds required to double the size of its Sulawesi solar farm, and Mandrawa hopes returns could be as high as 30 per cent by the time his fund exits sometime in the next seven years.
But there are no guarantees, and an Australian-backed clean energy project in Sumatra is having a tougher time of it.
Supreme Energy has been producing geothermal energy from subterranean steam in Sumatra since 2019, and recently borrowed $US15 million from Australian taxpayers to fund an expansion. Supreme’s chief financial officer, Tomohiro Yabushita, says the rates PLN will pay for geothermal energy arre less attractive than in the past when the project was commissioned.
“The current situation is not attractive to investors,” he says bluntly during a meeting with the Financial Review in Jakarta.
“The government policy is changing almost every day, it is kind of risky, it is not transparent. That is one of the biggest hurdles for foreign investors to face.” Yabushita is on secondment to Supreme from the company’s 50 per cent shareholder, Japanese giant Sumitomo. He says the geothermal expansion will not get close to the 12 per cent return on investment that is typically desired for such projects.
“I think it is more like 6 per cent or 7 per cent, and sometimes 4 per cent or 3 per cent, so we have a huge gap,” he says. Australian taxpayers’ support for Supreme was part of a $US92.6 million loan from the Asian Development Bank; an institution that counts the Australian government as a shareholder. Yabushita says the lenders had agreed to take lower returns if the project struggled.
“If the project is going well, we will pay a higher margin, but if we struggle, the margins on interest will become low,” he says.
“It is like a win-win solution ... If we win, we can share some profits with the Australian fund. If we are losing, they support us.
“We want to see this kind of facility more because it is supporting our projects,” says Yabushita.
Perth-based Michael Ricci fits somewhere between the Indonesia idealists – who are seduced by the potential of the nation’s massive population – and the Prabowo pessimists, who refuse to look past the nation’s immediate challenges. Ricci, as chief executive of ASX-listed Atlas Pearls, employs about 1100 Indonesians at seven pearl farms across the archipelago. He says most permit and administrative matters take longer than expected, and he has been surprised by how many public holidays are available for his staff to take each year.
But he insists it’s worth the effort.
“Building relationships, navigating processes and establishing trust all require time and patience, but the rewards can be significant for organisations willing to make that investment,” he tells The Australian Financial Review in Labuan Bajo. Atlas Pearls chief executive Michael Ricci at the Pungu Island pearl farm in Indonesia. Peter Ker Atlas is looking to grow and is considering acquisitions, expansions of existing pearl farms, and a pivot into a new aquaculture business.
Ricci says he would not attempt any of those growth projects in Australian waters, preferring instead to swim against the investment tide in Indonesia. “With a population of almost 300 million people, Indonesia represents one of the most significant growth opportunities in our region. There are enormous opportunities for Australian businesses to sell products, services and expertise into this market,” he says. “Indonesia is our closest neighbour, and the economic, cultural and strategic ties between our countries will only become more important in the years ahead. The opportunity is too significant for either side to overlook.”
The author travelled to Indonesia as a guest of Australia’s Department of Foreign Affairs and Trade under the Elizabeth O’Neill Journalism Award.
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