Australian, Indonesian Companies Overlooking Shared Opportunities
Despite the recent economic performance of both our economies, the business relationship between Australia and Indonesia is still underweight — as evidenced by the trade and investment statistics — and yet we are neighbors with growing and complementary economies.
The opportunities are enormous for Australian business to take advantage of the strong future growth outlook for Indonesia.
This country's growing urbanization, growing working-age population and growing economy need the goods and services produced by Australia. Indonesia is already Australia's largest market for soft commodities including live cattle, wheat, sugar, cotton and soybeans. And Indonesia also has an urgent need to develop infrastructure in telecommunications, transport, power, ports, health and education and develop its services sector.
And Australia needs what Indonesia produces. For Indonesian business, there are opportunities to export to Australia manufactured goods, skilled labor services, oil and gas processing plants and food such as noodles and specialized tropical fruit. Indonesian investors are active in Australia, with interests in commercial property, mining and agriculture, but the level of investment could be higher.
So, despite these opportunities, it seems that business in both countries is overlooking the opportunities sitting right on their doorstep.
I propose three areas in which business and government in both countries can work together to develop closer relations:
Firstly, the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) provides a framework for greater engagement between the Australian and Indonesian business communities. It is as much about the process as it is about the outcome.
The scope of the IA-CEPA is much broader and more strategic than a traditional free trade agreement. IA-CEPA will be a new type of agreement that seeks to bring the two economies closer together, covering investment and industry cooperation; dealing with "behind the border" issues that frustrate business; and delivering significant capability transfer initiatives.
The process is important because when the commencement of negotiations was announced, it was made quite clear that there must be opportunities for Australian and Indonesian companies to directly participate in the framing of this agreement.
And this is happening. Last year, a Business Partnership Group was formed comprising the Indonesian Chamber of Commerce and Industry (Kadin), the Australian Chamber of Commerce and Industry, the Indonesia Australia Business Council and the Australia Indonesia Business Council.
The IA-CEPA BPG met three times during the year, consulted widely with the business communities in both countries and presented a joint position paper to ministers of trade of both countries last November.
This is the first time in Australia and Indonesia's trade negotiation history that business in both countries has reached such an agreement before a trade agreement has been negotiated. This should rapidly advance negotiations.
The BPG report is extremely comprehensive and found that a successful IA-CEPA is expected to result in a significant increase in trade and investment between our two countries. The report also identified areas of opportunities and partnerships, not just barriers. It was agreed that the first area to be examined is that of a healthy diet: The objective is to increase the intake of protein in the Indonesian diet and to increase the consumption of tropical fruit in the Australian diet.
And that is why the IA-CEPA is more than just a typical bilateral trade negotiation — it requires imagination and innovation. It is not just about tariffs and quotas. The goal is to develop a partnership between two complementary economies operating in a global economy.
And it should be a dynamic agreement that continues to evolve as the economies develop and the issues change. It is also fundamentally important for business to continue to be involved.
Secondly, there is a critical need for a different approach to trade and investment promotion and facilitation. Despite the recent favorable media coverage, Indonesia is still not on the radar for many Australian businesses. And if it is, the perceptions do not match the reality.
There should be increased resourcing by both governments for more sophisticated market development and promotion. This should start by identifying the key opportunities in the global supply chain and then identifying where specific Australian and Indonesian industry sectors and companies can partner to capitalize on these opportunities.
The old days of generic trade missions are over. We need to have the economic development agencies more resourced and therefore able to take a more pro-active approach to assist business to identify opportunities and potential partners.
Thirdly, one of the fundamental ingredients to deepening the business relationship is education of our business leaders. The AIBC supports more resources for the teaching of Indonesian studies in Australia's schools and universities and supports the Australian Opposition's New Colombo Plan policy, especially as it involves educating Australia's next generation of business leaders with practical work experience in Asia.
But we also need to educate our current business leaders. The AIBC has brought together executives from companies that have successfully invested in Indonesia and also executives from companies considering investing in Indonesia. The objective is to develop a "mentoring" or "buddy" relationship so that Australian companies can share experiences about what worked and what didn't. This program promotes Indonesia as a business destination, encourages Australian investment and most importantly, educates Australian executives about the market sitting right on their doorstep.
I am sure there is scope for a similar program to be hosted in Indonesia for Indonesian executives to share their experiences about doing business in Australia.
If government and business in both countries work together on these three initiatives, it will go a long way to encouraging greater business engagement. But in the end, it is up to Australian and Indonesian business to look up and realize the many opportunities out there.
Chris Barnes is national vice-president of the Australia Indonesia Business Council.
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