Thursday, November 3, 2011

Indonesia Trade An Opportunity For The Taking

Australia can do big business with Jakarta

THE fourth most populous nation, the third biggest democracy, our second nearest neighbour and the world's largest Muslim country -- Indonesia is by any account a giant.

But despite its success in developing into a modern democracy and economy, Indonesia stays below our radar. In the words of its Australian-educated Foreign minister, Marty Natalegawa: ``The international community hasn't become fully aware of the Indonesian

success story. Ten years ago, Indonesia had obituaries written, but through a difficult process we began to reap a democratic dividend. It's still a work in progress, and we're not complacent.''

The question is not whether Indonesia is complacent, but whether Australia is. Put another way, is Australia failing to capitalise on the transformational leadership of President Susilo Bambang Yudhoyono and generate the broadest benefits for the strategic and economic relationship?

One area where we should be doing much more is the trade and investment relationship.

According to the Department of Foreign Affairs and Trade, Indonesia is Australia's 13th biggest and most significant trading partner, with two-way trade totalling $9.8 billion last year. Compare this with Singapore. Its economy is less than a third of Indonesia's and its population about one fiftieth, yet Singapore is our sixth biggest trading partner, with two-way trade totalling $16.8bn.

The telling point for Australian business is that Indonesia is a chance going begging. Some of our major companies are there, including Leighton, ANZ, BlueScope, Thiess, Santos and the Commonwealth Bank -- but judging by the economic trajectory there is room for many more. Already the 18th largest economy in the world, Indonesia is forecast by the IMF to achieve robust GDP growth of more than 6 per cent this year and next, and the fund is full of praise for the overall macroeconomic outlook.

With a resource-rich economy, a burgeoning middle class and a youthful population, half of them under 30, it's no wonder Indonesia is seen by economic analysts as part of the next wave of emerging economic success stories, following on from the BRIC group -- Brazil, Russia, India and China. Given our geographical and political proximity to Indonesia, Australia is well-placed to capitalise on this opportunity.

With a joint feasibility study completed, a bilateral free trade agreement would be of benefit, alongside the existing ASEAN-Australia-New Zealand pact -- but we need something more.

In an excellent Lowy policy briefing last year, Fergus Hanson called for a ``multi-decade vision for the economic relationship'' and cited the Closer Economic Relations Agreement with New Zealand as a successful example. This deserves close attention.

While the New Zealand and Indonesian economies are clearly different in size and shape, the CER -- facilitating co-operation on a range of issues including customs, technical trade barriers, government purchasing and business laws, among others -- may prove a useful model for deepening the bilateral economic relationship.

One area of commerce that plays to Australia's strengths is food supplies.

Food security is a major issue for the Indonesian leaders as domestic supplies come under pressure from the country's vulnerability to flooding, drought and cyclone and demand increases in line with the size of the population and the more calorie-intensive diets of the rising middle class. This is playing out across the food chain. For example, Indonesia was once self-sufficient in rice, but is now a net importer of this basic staple.

Conscious of the opportunities, the Coalition is examining ways in which Australia could double agricultural production in our north by building dams that would open up vast tracts of new farming land. Taking this one step further, Australia should be boldly thinking about a landmark food supply agreement with Indonesia that could benefit both countries in economic and strategic terms over the long term. It is because of Jakarta's acute sensitivity to the food security issue that the Australian government's recent decision to suspend all live cattle exports to Indonesia, our largest market for livestock, was particularly egregious.

As a client, as a neighbour and as a friend, Indonesia deserved better treatment from the Australian government. It is indisputable that Indonesia is a global player, a member of the Group of 20, the leader in ASEAN and fast becoming one of the largest economies in the world.

With the presidency of Dr Yudhoyono, we have been presented with a unique opportunity. His record of bilateral visits, co-sponsored initiatives and genuine warmth towards Australia illustrates more than a dispensation to make the relationship work. This is invaluable for Australia as we seek to broaden our trade and investment ties and leverage the relationship to deal with important regional issues.

But the clock is running. By ruling himself out of a third term in 2014, we know SBY's presidency will come to an end. What happens then is unknown. This creates a sense of urgency for Australia. There could be no better time to reach out to Indonesia and actively build on the foundations already in place. If not now, when?
By Josh Frydenberg federal Liberal member for Kooyong. This is based on a speech delivered to the Lowy Institute for International Policy in Sydney (The Australian)

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