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Canada-Indonesia relations

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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, religious freedom and pluralism; poverty reduction; counter-terrorism and security capacity building; and, the prevention of human smuggling and illegal migration.

Political and economic overview

Indonesia is a dynamic country, an influential regional power and a global player which offers Canada many opportunities for engagement. It is the world’s fourth most populous country and third largest democracy. With 86% of the population adhering to Islam, Indonesia is home to approximately 13% of the global Muslim population, making it the world’s largest Muslim-majority country. Straddling the Southeast Asia/Oceania divide, the country is as diverse as it is vast: its 17,500 islands spanning a total area of 1,812,000 km² are inhabited by some 300 ethnic groups with over 700 languages spoken.

Indonesia has enjoyed rapid economic expansion over the past decade. With a growing middle class and a population of which almost two-thirds are of working age, Indonesia has considerable growth potential and offers significant long-term commercial opportunities for Canadian companies.

Trade relations

Indonesia is SE Asia’s largest economy and a G20 member with significant potential for economic growth. In 2020, Indonesia was Canada's 24th-largest trading partner worldwide and fourth-largest among ASEAN countries, with two-way merchandise trade totalling $3.4B. Canadian merchandise exports to Indonesia were valued at $1.8B (down from $1.9B in 2019) making it Canada’s largest export market in Southeast Asia. Canada’s main exports were cereals, fertilizers, wood pulp, oilseeds, and machinery. Canada’s merchandise imports from Indonesia, valued at $1.6B (down from $1.8B in 2019), consisted primarily of rubber, electrical and electronic equipment and knitted and woven apparel. In 2019, services exports to Indonesia totaled $192M, while the value of services imported from Indonesia was $209M.

Indonesia is the second largest destination of Canadian Direct Investment Abroad (CDIA) in SE Asia, with a total stock of about $3.8B in 2019. The stock of Indonesian direct investment in Canada was officially $116M, although investment from Indonesian corporate entities originating from other jurisdictions likely exceeds $2B.

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Development

Canada and Indonesia share a long-standing partnership of over 65 years. Since 2000, Canada has provided  over $1 billion in official development assistance (ODA) to Indonesia with an average of  $44 million (all channels combined) per year over the past 5 years. Bilateral funding to Indonesia in the fiscal year 2021 to 2022 was approximately $13.5 million.

As the largest Southeast Asia economy, Indonesia has made impressive economic gains over the past 20 years, including cutting the poverty rate in half (from 24% to 9.78% in 2020). Prior to the COVID-19 crisis, Indonesia was able to maintain consistent economic growth; however, these gains have been impacted by COVID-19. As of July 1, 2021, the World Bank downgraded Indonesia to lower-middle income status.

Despite this progress, about a third of the population remain poor or vulnerable to poverty (77 million people), income inequality is one of the highest in Asia and key well-being indicators are stagnating at rates similar to those seen in least developed countries (such as maternal mortality, child malnutrition, and child, early and forced marriage). As an emerging economy, access to financing for development is transitioning rapidly from ODA to other sources, while domestic resource mobilization remains under-developed. Indonesia's tax-to-GDP ratio was 10.1% in 2020, below the Asia and Pacific average of 19.1%.

In addition, Indonesia remains a key contributor, as well as extremely vulnerable to climate change. Indonesia is the world’s largest archipelago and the fourth-most populous country, with the world’s second-longest coastline after Canada. Indonesia is home to some of the planet’s most important biodiversity hotspots, including 10% of the world’s tropical forests (60% of Asia’s tropical forests) and about 36% of the world’s tropical peatlands. These ecosystems are being degraded due to unsustainable land management practices and this impacts the livelihoods and food security of up to 60 million Indonesians, 10 million of whom live in poverty.

The Government of Indonesia has outlined a number of development priorities in its National Medium Term Development Plan 2020-2024, as well as in other important policy documents. These priorities include:

Going forward, Canada and Indonesia remain committed to unlock financing to help Indonesia achieve the Sustainable Development Goals targeting poverty reduction, gender and income inequality, the rights of women and girls, climate change and plastic pollution, while promoting green, inclusive economic growth. Specifically, Canada’s bilateral international assistance program will focus on:

Environment and climate action

While Indonesia is one of the world’s top countries for biodiversity, it is nonetheless among the highest emitters of greenhouse gases, and is highly vulnerable to climate change and natural disasters, with an estimated 40% of the country’s inhabitants at risk. Going forward, Canada and Indonesia remain committed to supporting Indonesia’s efforts to achieve Sustainable Development Goals targeting climate change and plastic pollution; while promoting green, inclusive economic growth.

Gender equality and the empowerment of women and girls

With high levels of violence against women and girls and high rates of early and child marriage which link to the country’s high maternal mortality rate, gender equality is a significant challenge. Women continue to be concentrated in low wage, low value segments of the economy with limited access to financial resources. Canada will continue to support Indonesia’s efforts to achieve Sustainable Development Goals targeting gender and income inequality.

Canada’s development assistance also support Indonesia’s fight against the COVID-19 pandemic and its efforts to alleviate the economic impact on the most vulnerable and poor Indonesians, particularly women. Canada will also continue to promote innovative partnerships for financing development outcomes.

Canada’s International Assistance footprint in Indonesia (in the fiscal year 2021 to 2022) is programmed via multiple channels:

Search the Project Browser to see what Canada is doing to support development in Indonesia.

Partnerships and organizations

To develop effective responses to today’s most pressing global challenges, Canada and Indonesia work closely in multilateral fora, such as:

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