`Business prospects boom in Indonesia -- for now'

`Business prospects boom in Indonesia -- for now'

By Jack Taylor

SYDNEY (AFP): Australia should move quickly to capitalize on Indonesia's burgeoning economy which is creating new opportunities for foreign companies, according to a government report released here yesterday.

But it said Australia, slow in the past to recognize opportunities there, could not rest on a presumed advantage of proximity and for both countries to maximize the potential for mutual benefit, "strategic thinking and flexibility" were necessary.

It also warned that while Indonesia had achieved an impressive measure of political stability under President Soeharto, it was uncertain how its people and institutions such as the military would adapt to his eventual retirement.

And it said Indonesia faces external pressures, especially from the United States, which was pressing for improved wages and workers' conditions, while East Timor had also attracted international attention.

The report, by the East Asia Analytical Unit of Canberra's foreign affairs department, was released here to coincide with a major Australian trade promotion now underway in Indonesia.

Prime Minister Paul Keating, currently in Jakarta with a number of his ministers for the promotion, held a talk with Soeharto yesterday.

The report said the way forward for both countries "clearly lies in economic developments which transcend national boundaries and expand horizons.

"Integration into global transport, telecommunications and electronic data interchange networks will be of enormous benefit to both economies in an increasingly globalized environment."

The rapid takeoff in Indonesia's economy had taken Australia by surprise, although Indonesia was now Australia's 11th largest trading partner and two-way trade had trebled in five years to three billion dollars (US$ 2.2 billion).

"Few would imagine that by the year 2020 Indonesia could be our fifth largest export destination," it added.

Both countries were now enjoying the benefits of financial deregulation in the 1980s and regional partnerships would provide gains to both countries over a range of manufacturing, resource- based, agricultural and service industries.

Australian partnership in major Indonesian projects had been limited in the past to a few ventures involving firms like food group Goodman Fielder's and mining companies BHP Co. Ltd and CRA Ltd.

Doing business in Indonesia was "notoriously difficult" with language and cultural barriers and a maze of bureaucratic regulations.

Growth in Indonesia's industrial base would drive demand for a range of goods and services that Australia could supply, such as in infrastructure development where there was already a backlog of demand in communications, power, steel production and automotive parts.

Australia was also well placed to help develop Indonesia's rich mineral resources.

"Having established a capability to handle Indonesian projects, Australian companies should have excellent prospects of building on this success as Indonesia's mining industry moves to the next stage of development."

With Indonesia's middle class "set to explode during coming decades", prospects for retailing were also "very bright" -- both in supplying the products and building the modern shopping complexes.

"Notwithstanding the fact that most Indonesians are Moslems, the potential for beer sales in Indonesia may be enormous, given the size of the population and the growth of disposable income."