The emerging Pacific security paradigm.
In February 2026, Indonesia and Australia signed the Treaty on Common Security (“the Jakarta Treaty”), a commitment to developing joint training facilities in Indonesia, increased cooperation and information sharing, and consulting on security matters at ministerial level between the two countries. But in the last two months, this already important agreement gained greater significance, as it has expanded to include Papua New Guinea (PNG) and Japan. It seems that a new security paradigm and new trade partnerships are emerging in the Pacific.
Indonesia and Australia have a relationship that is both close and strained. Whilst the two nations signed a major trade agreement in 2020 that has seen the trade relationship between them deepen and blossom, it took over ten years to pass amid diplomatic scandal and international crises. In 2013, for instance, President Yudhoyono said that ties between Indonesia and Australia had been damaged after it came to light that Canberra had been spying on President Yudhoyono’s calls with his ministers. Not only did it cause diplomatic embarrassment, but it led to major protests in Jakarta, where residents burned the flag of Australia, saying the country was “insulted.” Likewise, in 2015, Jakarta announced that two Australian citizens—Andrew Chan and Myuran Sukumaran—had been executed over drug smuggling into the country, causing serious rifts between the two nations. Trade talks were shelved that year.
Nevertheless, the 2020 agreement—the Indonesia–Australia Comprehensive Economic Partnership Agreement (IA-CEPA)—in retrospect marked the beginning of deeper ties between the two countries that has led to a desire for greater cooperation, culminating in the Jakarta Treaty of this year.
Since the IA-CEPA came into force, trade between the two nations has nearly tripled, rising from $12.91 billion in 2020 to $35.38 billion in 2024, the most significant shift in bilateral trade for Australia and Indonesia in a generation.
The road to this particular agreement began as a result of, first, the election of Indonesian President Prabowo Subianto in October 2024 and, second, the re-election of Australian Prime Minister Anthony Albanese’s Labor Party in May 2025. As Albanese’s first overseas bilateral engagement of his second term, the discussions were intended to build on the 2024 Australia–Indonesia Defence Cooperation Agreement, which established the joint military exercises that would later be concretized in the Jakarta Treaty.
But the broader geopolitical context is, inevitably, the main catalyst. Indonesia joined the BRICS group in early 2025, and announced it had become a signatory to US President Trump’s Board of Peace in January 2026. This is a nation increasingly looking to deepen its integration in global politics, and Albanese’s own preference for deeper ties means that the opportunity was there to take, while hedging Canberra’s bets on Indonesia’s position.
Moreover, Danantara, Indonesia’s sovereign wealth fund, is already exploring partnership with Australia over industries that have opened up as a result of the Jakarta Treaty, especially in farming and renewable energy. Most significantly, Danantara is eyeing up partnership opportunities in Indonesia’s $5 billion waste-to-energy projects, which Australian businesses look keen to invest in.
Thus the Jakarta Treaty emerged as a mutually beneficial treaty. Its expansion to include Japan and PNG in March 2026, however, involves two very different sets of factors. For Japan, the interest is strategic, while PNG’s motivations are more geographic and immediate.
In Japan, recent political history has been marked by a major repositioning of itself from a passive security consumer into an active regional partner, with Southeast Asia as central to such a project. It should come as no surprise, then, that in 2021 Japan and Indonesia signed a security agreement on the transfer of defense equipment and technology, enabling joint research and development, as well as the capacity to produce defense systems. This existing relationship was deepened in 2025 when Japan supplied high-speed patrol boats to Indonesia, enhancing maritime surveillance near the Strait of Malacca.
Japan is, therefore, an important partner for Indonesia in maritime security, but is also quite reliant on Indonesia for maritime security, due to its structural vulnerabilities, especially its dependence on seaborne energy imports and consequent exposure to chokepoints that run through the Indonesian archipelago.
Not only that, but Japan and Australia are deeply close, but have thus far relied on US investment to reinforce their defensive posture against China. In 2024, Japan was Australia’s third-largest importer, with an estimated value of AUD 32.2 billion ($23 billion), of which motor vehicles accounted for over a third. Likewise, Japan was (and still is) Australia’s fourth-largest foreign direct investor, holding nearly AUD 285 billion ($203 billion).
With FDI becoming increasingly unreliable, Indonesia has become an attractive regional ally for both Japan and Australia due to its non-aligned stance, it being the largest economy in Southeast Asia, and being a country that China takes seriously. Formalizing and deepening the relationship with Indonesia makes sense for both Australia and Japan on multiple fronts—economically, strategically, and politically—without upsetting Beijing.
But there is one opportunity that this pact unlocks access to: Japan’s newly-burgeoning defense industry. Already valued at $44.7 billion in 2026, it is forecast to reach over $50 billion by the end of the decade. This is driven by a political decision to double the size of defense spending from 1% to 2% of GDP by 2027—and has already risen to 1.8%. This is a significant opportunity for Indonesia, with a longstanding infrastructure that allows the opportunity to be seized.
For PNG, the land border it shares with Indonesia’s Papua province makes the security challenges real, not abstract. PNG Defense Minister Billy Joseph framed trilateral talks between PNG, Indonesia, and Australia as opening “new pathways for deeper trust and coordinated action on issues such as border control, maritime security, disaster response, and Defense capability development.” Joseph emphasized the geographic, cultural, and strategic ties that all three nations shared, that “make collaboration essential.”
The emergence of the trilateral agreement is, in turn, built on the PukPuk Treaty signed between PNG and Australia in October 2025 on mutual defense. The strategic infrastructure for a deeper relation between PNG and Australia already existed, meaning that the trilateral agreement is by no means a new development, but rather the natural extension of a strategic relationship to the nation that is PNG’s largest neighbor and with whom it shares the most immediate security concerns.
The Jakarta Treaty and its expansion represent, therefore, a major milestone in the region: for the first time in decades, the Indo–Pacific’s middle powers are acting autonomously to build their own regional security architecture, and building stronger economic ties with their neighbors.
