Business in the new Indonesia
On a positive note
The combination of Vice-President Boediono and President Yudhoyono is considered a positive step for Indonesia. Hal Hill of the East Asia Forum, said: “International reporting on Indonesia, including that from Australia, has tended to oscillate excessively, from the euphoric to the gloomy. Let there be no mistake. The recent Jakarta bombings, the first in almost four years, is a terrible tragedy. But the country is in good hands, and its economy is doing better than most at the moment.”
Taylor shares this view, commenting on signs that Indonesia is rebuilding: “Already our major banks have expanded their activities in Indonesia. CBA [Commonwealth Bank] and ANZ are leading the race to meet the needs of this fast-emerging democracy. Foreign SME activity has also increased in recent times.”
The Indonesian economy is reasonably open to foreign trade. EFIC states: “Trade (exports plus imports) were 60 percent of GDP in 2008.” Donnelly also notes that the International Monetary Fund expects the economy to grow by 3.5 percent in 2009, outperforming all other major Asian economies except China and India.
With this in mind, a step in the right direction this year for Indonesia and Australia’s economic relationship is the landmark ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), expected to come into effect in early 2010. It is the largest free trade agreement to which Australia is signatory: ASEAN and New Zealand together account for 21 percent of Australia’s total trade in goods and services.
As a result of this agreement, Australia will eliminate tariffs for ASEAN countries that do not already benefit from duty-free treatment—Vietnam, Indonesia, Malaysia and the Philippines. Early legal analysis of the agreement by Minter Ellison suggests that it will promote greater certainty and provide a framework for ongoing services negotiations with ASEAN countries.
If Australians can retain confidence in the country’s security and political stability, there are many sectors of opportunity. DFAT reports export potential exists for a range of Australian companies with strong demand for agribusiness services, food and beverages, consumer products including fashion items and cosmetics, ICT including mobile telephony, and mining supplies. There is also good scope to expand services exports in construction and infrastructure development, finance, education and franchising sectors.
The investment climate is improving, says Donnelly: “In 2007, a new investment law was passed which mandates national treatment for foreign investors and cuts red tape. A powerful anti-corruption commission has been established which has been pursuing high-profile individuals. SBY [Yudhoyono] has also put in place a reform-minded economics team, headed by Boediono and Finance Minister Sri Mulyani Indrawati.”
With personal travel high on list of Australia’s trade with Indonesia, it is interesting to also note that there is a lot more development that could take place in this area, potentially signalling prime opportunities for infrastructure specialists.
The need to open up other areas of Indonesia apart from Bali for tourism is important too, says Taylor: “This is largely dependent upon addressing the poor state of infrastructure throughout the archipelago. It’s simply not much good having some of the most beautiful places to visit on earth when tourists cannot reach them without a horrendous road journey and poor quality hotels.”
When paradise has been lost, the upshot is the opportunity to find it again.
Got something to say? Join the export forum here at DynamicExport.com.au.
