Monday, September 07, 2015

Activating business as a constituency for the relationship means getting more Australian companies into the Indonesian market – not just exporting to it

On 30 July 2015, Mr Peter Varghese AO, Secretary of Australia’s Department of Foreign Affairs and Trade, addressed the Crawford School of Public Policy in Canberra on the 50th anniversary of the ANU Indonesia Project which, he said, “has played an important role in giving us a framework for thinking about Indonesia, why it matters to Australia and how it is changing.”

Reviewing the Australia-Indonesia relationship over the past half-century, he identified a continuing weakness: business-to-business. Importantly, he said, “the economic, investment and commercial relationship has not yet achieved its
Mr Peter Varghese AO
full potential.”


He explained that, until now, both countries have been “large commodity-exporting economies working somewhat in parallel, often with the same customers.  We both look north. Beyond tourism, we have not had a connection in the kind of services trade which is now becoming possible with the growth of the Indonesian consuming class …
“The Australian Government emphasises economic diplomacy – that is, using all the political, diplomatic, aid and other levers at our disposal to strengthen our economic and commercial relationships.  On this front, we see great potential in the health, education, infrastructure and maritime sectors.”

The Indonesia Australia Report invited Mr Varghese to expand on the specific business issues restraining two-way trade and investment between Australia and Indonesia and he kindly provided the following article which was first published in our Client's Briefing:

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From Mr Peter Varghese: 

THE LONG-TERM GROWTH of Indonesia’s economy offers great potential for Australian business.  The trend towards greater regional economic integration also opens opportunities for Australian and Indonesian businesses to partner in global value chains.

But we need to be realistic: Indonesia is also a difficult and uncertain market in which to do business.  Both sides have to remain committed to sound economic reform to realise the mutual benefits of stronger investment in Indonesia by Australian business – which is the focus on Australia’s economic diplomacy in Indonesia.

Activating business as a constituency for the relationship means getting more Australian companies into the Indonesian market – not just exporting to it.

Business being present in country broadens mutual understanding and gives each side an important reason to support positive bilateral relations.

The key to success for Australian business in Indonesia is a commitment by senior management to taking a long-term approach to the market and building strong, enduring relationships with Indonesian partners.

While there is a wealth of knowledge on Indonesia in Australia, this needs to be translated into greater business understanding of the opportunities – and risks – of investing there; and how to do it.

This is a priority for the Government.

The Minister for Trade and Investment, Mr Andrew Robb, will lead a large delegation of Australian business leaders to Indonesia in the near future.  The Prime Minister’s first visit to Indonesia in 2013 was accompanied by a targeted group of CEOs and board members. The Government will support a visit to Australia by Indonesia’s Investment Coordination Board to identify mutually beneficial opportunities and link business partners.

We will tap into opportunities to connect to regional and global value chains through Indonesia.  We will continue to encourage Indonesian awareness of the benefits of liberalised trade and encourage regional economic integration, such as the ASEAN Economic Community.

Negotiations towards the Indonesia-Australia Comprehensive Economic Partnership Agreement, while a long-term endeavour, are driven by business on both sides.  The Indonesia-Australia Business Partnership Group made an important contribution to identifying the key priorities the agreement should address (PDF report is available on the DFAT website).

Australia’s new consulate in Makassar will focus on building business links in eastern Indonesia, to take advantage of opportunities beyond Java and Bali.

Indonesian businesses are hosting Australian interns under the New Colombo Plan, playing an important role in helping future Australian business leaders develop an understanding of the Indonesian market.

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