Improving RI-Aussie trade alliance

By Bob Widyahartono

JAKARTA (JP): The Asia Pacific is currently considered as the world's most dynamic region of growth in trade and economic output.

This dynamic growth, as noted by Ross Garnaut and Peter Drysdale (Asia Pacific Regionalism, 1995), reflects countries' strategies built on the powerful use of opportunities for international specialization in production. This led to intensified economic international ties within the region.

As the Pacific Rim warms up economically, as described by John Naisbitt & Patricia Aburdene in Megatrends 2000, Australia and New Zealand have been trying to "think and feel Asian."

Now the "Asian Century" has arrived. Australia is beginning to feel its economic role as a key part of the Asia Pacific Rim and is beginning to identify with Asia. Feeling and thinking Asian will not be easy for many Australians of European origin. Should Indonesia be considered Australia's close and trustworthy neighbor, rather than a distant relative, the United Kingdom?

Within the Association of Southeast Asian Nations including Indonesia most business executives including top managers consider the real driving force of development to be market driven trade and investment. Asian nations have not been enthusiastic about a formal economic integration of the European Union type.

There are no treaties nor a region-wide free trade agreement within the Asia Pacific except the ASEAN Free Trade Agreement. The successful initiative of the growth triangle of Singapore- Johor Baru-Riau has led to another growth zone to its north; the triangle linking northern Sumatra with Malaysia and southern Thailand.

The concept links the advances in Malaysian and Thai industries with the development in Sumatra of oil and gas resources in the Aceh province, manufacturing in the Medan area, and the seaport and manufacturing in Belawan. The activities could be extended to resort development in Malaysia's Penang and Indonesia's Toba Lake areas as well to include joint programs combining agriculture and fishery.

In recent years initiatives have been taken to develop the northern growth area linking the economies of Brunei Darusalam, the eastern part of Malaysia, North Sulawesi and Eastern Kalimantan, and the southern provinces of the Philippines (called the BIMP growth area).

Regional cooperation between Australia and the Eastern Indonesia areas of Irian Jaya, Nusa Tenggara and Timor could be developed.

The Nusa Tenggara islands, for instance, are close to Australia. Tourism could be further developed starting from Bali and Lombok on the western side and from Darwin and Kupang on the eastern side, forming a kind of corridor, which could be more professionally managed in a spirit of business alliance between Australian private enterprises and Indonesian local tourism enterprises.

The Nusa Tenggara islands could also be developed as an intermediate zone in a manufacturing network linking Australia with the other provinces and beyond to other areas in Southeast Asia.

In the outer regions, especially the remote ones, there are not many industrial sites. When large foreign-affiliated or even wholly Indonesian firms open in such regions, their profit is sometimes drawn off to Jakarta or even abroad, leaving only a fraction for the regions concerned.

In Sulawesi, industrialization potential could be developed through the effective use of primary products such as lumber, rattan, ebony, coffee, cocoa, tea and marine products.

At present, furniture and spices are processed in Surabaya. The possibility of opening processing plants at the site of production (raw material oriented) could be feasible with improvement of ports, roads, feeder transportation and telecommunications. Assurance of quality could be developed through better skills and transfer of technologies from the foreign partner.

In Irian Jaya, it would be vital to exploit mineral and marine resources. Transportation in the hinterland is hindered by mountains and forests and the greater linkage would have to be reached through marine transport. The linkage to Maluku should also be improved.

Promoting industrialization in Eastern Indonesia calls for incentives i.e. tax exemption and deductions, subsidies to local government, infrastructure and the development of small and medium scale enterprises. In this regard a Council of the Development of Eastern Indonesia has been set up.

For Australia and particularly Australian business specializing in agriculture and related industries as well as ecotourism, Eastern Indonesia provides ample opportunity for pioneers willing to invest for returns in the long term.

But again, how quickly will Australian business circles feel and think Asian?

For Australian and Indonesian business executives, cultural influences are at work in their relationship. An unwritten code of conduct guides the relationship between executives and their customers, between superiors and subordinates. In Indonesia mutual respect and avoiding open criticism or blaming others publicly are still important values.

While western societies love formalities and while "modern" urban Indonesians formally adopt modern western management, trust and partnership still form the basis of cooperation and alliance.

In an Indonesian setting it is necessary to be able to read the behavioral and cultural signals correctly and to respond in ways that will not disturb sensitivities.

Many behavioral differences are strongly influenced by how people value the individual compared to the group, how they handle time and space, openness or ethnocentrism, how they respect tradition and the elderly, and how much value is placed on new knowledge, risk taking, efficiency and harmony.

The importance placed on respect, courtesy and harmony is reflected in the judgement of others. Westerners or Indonesian managers trained in a western management methods, in which the ideal CEO or manager is portrayed as tough, competitive, result oriented and able to manage conflict and crisis, will find it difficult to deal with the Indonesian business community and environment.

The West and Australian organizations operate on a "guilt culture", the East on a "shame culture". Behavioral control in the West and Australian business is therefore internal, where people respond to their conscience and guilt when they don't meet standards and strict criteria. Behavioral control of the East is more "the fear of losing face".

The West works to the order of competitiveness, challenge and confrontation and conflict situation, whereas most Indonesian CEOs and managers work to the order of compromise, accommodation and consensus. In this way Indonesians appear to be tolerant compared to westerners. Behavioral control in Indonesian society is thus external -- the fear of losing face in front of others.

Effective interpersonal relationships and communication requires a tuning in to cultural sensitivities and different behavioral norms. Indonesians are basically more tolerant in the process of reaching agreement in negotiations. Although many Indonesian firms have already opted to take up modern management with clear-cut strategies, structures and systems, executives still appreciate face-to-face communication, consensus building and conflict avoidance in reaching decisions.

Continuous growth, the development of Eastern Indonesia in collaboration with Australia during the decade to 2000 and beyond will largely depend on the availability of professional entrepreneurs and executives to manage and influence change to achieve specific objectives.

The alliance of Indonesian and Australian business will thus be crucial to provide the appropriate blend of entrepreneurship and professionalism. This kind of alliance should be a long term process and based on a "win-win" relationship.

In developing such an alliance, are prospective partners willing to share their mission and vision of their strategy?

A thorough study is needed on the infrastructure, land availability and transparency in the investment climate as well as rules and regulations for Australia to invest in the agricultural sector, and market access.

The infrastructure and agricultural facilities to be developed by the Indonesian government as well as the private sector could facilitate private sector investments.

A business alliance is always a long term exercise requiring professional entrepreneurs with long term vision.

The writer is a lecturer at the School of Economics at Trisakti University in Jakarta.