Friday, August 12, 2016

Australia leaves itself short changed in efforts to unlock Indonesia’s economy

The street peddlers who hawk kitchenware, garden plants and sweet pastries have no Javanese word for ‘disposable income’.  But they can sniff money, which is not difficult when carports are full.

When the Asian boom got underway late last century Sawojajar was just another ricefield on the outskirts of Malang, the ancient Indonesian hilltown – population now one million.

Developers slapped thin asphalt over the rich volcanic soil and knocked up cheap housing. They flogged two-bed terrace homes at 20 per cent interest to young couples who’d broken with tradition: both worked.

The buyers represented a new demographic with no easy translation: upwardly mobile. Also flexible and resilient. Only the hardy survived the 1998 economic crisis.

Change accelerated when their ambitious offspring headed for the city’s tertiary institutions. Previous generations had rarely gone beyond high school. Now the graduates are in the workforce; they’ve moved from two wheels to four and park the babies with the oldies while commuting through traffic that gets denser daily.

So extra storeys have been added with individual designs smothering sameness. Other tastes are changing: Three new boutique bakeries sell to locals who once ate only rice.

Enlarge by many millions and this is the much-hyped ‘emerging middle-class’ whose accounts Australia is desperate to open but has yet to find the passwords.  The exceptions are grains – challenged by Russia – meat – competing against India – and milk powder, where NZ has the cream.

Last year former Trade Minister Andrew Robb led the “biggest ever” delegation of 360 businessfolk to Java, all keen to partner with Australia’s northern neighbour.

Nine months later there are few births to announce. Australia-Indonesia Business Council President Debnath Guharoy, who has been tougher than most in his assessments of the hurdles, tried to be upbeat:

“While the feedback from (delegation) participants was very positive, there is no formal survey to back up any claims,” he told this writer.

“Robb’s visit stirred Australia’s lacklustre involvement with Indonesia … and more of our exporters are engaged.  New entrants from our non-traditional sectors are exploring investment opportunities … ranging from electricity to e-commerce, shipbuilding to tourism.

“Perth’s Oropesa signed an MOU in Palembang to develop a new port in the Special Economic Zone. Others are looking at similar opportunities in the infrastructure arena.

“Existing investors … are adding hundreds of millions in dollars to their current operations across the country. Good news, getting better.”

But is it?  ‘Engaged’, ‘exploring’ and ‘looking’ are euphemisms for failure.  Companies that nail major deals usually trumpet success to investors – but the orchestra has been curiously mute.

There are many reasons but two harsh facts remain deeply embedded. The first is that the people next door are barrier builders, while we are free traders.

The second is pride and fear.

The nation of 250 million desperately wants to be seen as a big guy on the world stage, an image hard to uphold when it can muster only 28 athletes for the Rio Olympics against Australia’s 418.

But it’s in the food court that Indonesia is most on trial. Once self sufficient and a produce exporter, it now imports staples like meat, sugar and rice.

Indonesia dreads reliance on its Western neighbor, worried the archipelago could be economically swamped and farmers ruined.  This is Indonesia’s version of our asylum seeker nightmare and just as politically volatile.

Nor are we trusted.  The sudden halt in live beef exports back in 2011 showed Australia to be an unreliable supplier. That hasn’t been forgotten.

But Indonesia isn’t popular in Australia either because it takes a fickle approach to trade, one moment dropping harbour booms against imports, the next lifting  them when stocks fall and domestic prices rise. Indonesia’s reluctance to confront corruption and clean up the courts also worry investors.

Seeking stability, Australia still publicly reckons a Comprehensive Economic Partnership Agreement is possible. Negotiations collapsed three years ago but were reassembled in March.

Till this month the signs were sunny. Trade Minister Thomas Lembong, 45, was a Harvard-educated urbane Catholic banker who knew how to talk business in a language all understood.

He visited Australia, said an agreement was on its way and seemed to charm all he met.  Though not back in the Republic. The Australian effused he was an ‘apostle of liberalisation’ which was probably the kiss of death in a legislature and bureaucracy committed to tariffs, tolls and taxes.

Lembong also failed to keep food prices down (impossible in an ill-disciplined economy) so was flicked sideways.  He lasted just 11 months; his predecessor Rachmat Gobel survived for 10.

Lembong’s replacement by Enggartiasto Lukita, 64, brought this laceration from The Jakarta Post’s managing editor Rendi Witular:

“A veteran politician with a questionable past and no slight expertise in both domestic and international commerce (who)  crawled up the national ladder as a real estate and property businessman…(is) also  a member of the House’s graft-ridden budget committee.

“For the first time in more than a decade, Indonesia has a trade minister with no international business network and who lacks the eloquence in English to sway his international counterparts during trade negotiations.”

Lukita’s opposite is also a newbie.  Steve Ciobo replaced Robb (who retired from politics) and headed to Jakarta waving a ‘position paper’ called Two Neighbours: Partners in Prosperity.

This gobbledegook proposes more people-to-people links because “there are vast, untapped areas of complementarity.” The Javanese don’t have a word for that either.

No comparable document has come from the Indonesians. A similar paper was produced earlier this decade, considered then shredded.

After their meeting in Jakarta last week, the three trade ministers (two current, one past his used by date) promised their own Star Trek moment – to deliver a yet to be defined FTA that boldly goes where no agreement has gone before. May such efforts live long and prosper.

But I don’t hold out much hope. Ciobo, a lawyer and Liberal politician for the past 15 years, came out of the meeting with Lukita saying nothing of value.

Both men continue to claim they want some sort of deal before 2017 becomes history. By then there’ll be a new minister in Jakarta with another ideology, and headlines from Canberra shouting: Trade Talks Positive, Says Minister.

Meanwhile back in Sawojajar the hawkers have no time for position papers, junkets or jargon. They just get in and sell.

Australian journalist and author Duncan Graham lives in East Java and writes for the Indonesian media.

The Australia Indonesia Business Council national conference, “Breaking barriers – Building bonds”, will be held in Perth mid-November


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