Exporting to Indonesia

Even current global economic anxiety hasn’t stopped the World Bank forecasting that Indonesia is well-placed to navigate the slowdown, even if its present growth rate will ease, and then only by a modest five-to-six percent. The Bank credits this strength on Indonesia’s investments in structural reform and sound macroeconomic policies over the last 10 years.

Indonesia has long been an important market for major Australian mining companies and, in recent weeks, BHP Billiton revealed plans for a $2.2 billion-plus nickel laterite project there within three years. But it isn’t all about giant corporations. Australian SMEs are supplying products, technologies and services to major Indonesian infrastructure and mining projects while others are pursuing a broad range of other opportunities.

They include companies like Perth-based legal, commercial and training specialists Hugh Fraser International; Global Track crane components from Geelong, Victoria; video hire service Video Ezy; Ray White Real Estate and Gloria Jean’s Coffee. All have established strong footholds in the market.

And that’s far from the end of it; Australia is Indonesia’s largest supplier of live cattle, dairy products and sugar with growing opportunities in building and construction, agribusiness, food and beverage, ICT, education, and industrial machinery, processes and technologies.

Australia’s ‘top end’ has evolved its own special relationship with Indonesia through the establishment of the Australia-Indonesia Development Area (AIDA), which seeks to involve the private sector as a key player in developing relations with the eastern provinces of Indonesia.

So why does Indonesia’s image in many quarters in Australia remain so depressingly negative?

Austrade’s chief economist Tim Harcourt is perplexed about how a rumour—claiming that trade missions from Australia had been banned—ever gained any currency. “Austrade’s Jakarta office regularly organises trade missions to Indonesia,” he says.

The Department of Foreign Affairs and Trade (DFAT) says current travel warnings do warn against travel to the Indonesian archipelago, but in Canberra the attitude is that DFAT has an obligation to all Australians to warn them when problems exist and are not expressly to preclude business travel. There’s an expectation that business travellers will use common sense when dealing with the subject.

Significantly, Australia and Indonesia are now in the final stages of a feasibility study into a possible bilateral Free Trade Agreement (FTA) with a report expected in mid-2008. “One third of all Australian exporters send at least some of their products to the ASEAN (Association of Southeast Asian Nations) region,” says Harcourt. “Clearly, an FTA with Indonesia, and the possibility of a broader agreement on trade between ASEAN, Australia and New Zealand, would be tremendously important for us in terms of market access.

“We’re hoping an FTA might deliver to us three vital things: good market access with no tariffs or other barriers; good trade facilitation, taking care of issues like visas and border access; and a good investment climate and superior security. If we can get those three things sorted out we will be in a very good position.”

There’s no doubt problems exist in other areas of Indonesia’s establishment, like infrastructure and law reform in forestry and mining, while easier access for Australians is needed in the key economic growth areas of telecommunications, financial services and mining.