Improving RI-Aussie trade alliance

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.