Local firms reluctant to export to Africa

Local firms reluctant to export to Africa

Zakki P. Hakim, The Jakarta Post, Jakarta

Fifth years have passed since the historic Asia-Africa
Conference took place in Bandung, but many Indonesian businesses
are reluctant to get involved with the continent, says a senior
official at the Ministry of Trade.

"It has been hard to convince local businesspeople to consider
Africa as an alternative market," the ministry's Director for
Bilateral Cooperation Deddy Saleh told reporters recently.

According to Deddy, big firms in Indonesia considered the cost
of shipping goods to Africa as being out of proportion to the
potential market size.

The firms said the freight costs were about the same to exporting
to North America and Europe, but the market size was far smaller
compared to the lucrative markets in the U.S. and the European
countries, he said.

As for small and medium enterprises, Africa was too far away
and too expensive to serve as an export market.

Deddy said that most local companies preferred to exploit the
domestic market of 220 million people.

"They ask, why should we risk exporting to Africa if we
already have a lucrative domestic market. Moreover, they enjoy
all kinds of facilities here, which they might not get in selling
to Africa," he said.

Therefore, Deddy said, African and Asian nations, particularly
Indonesia, should use the upcoming golden jubilee of the Asia-
Africa Conference to also strengthen trade ties -- including
sealing trade agreements providing incentives and facilities --
that would encourage more trade between the countries of the two
continents.

"After all, nowadays economic ties are more important than
mere political relationships," he said.

The Ministry of Trade sees Egypt, South Africa, Morocco,
Libya, Tunisia and Nigeria as among the most important nations
with which Indonesia should develop stronger ties.

Although the balance of bilateral trade with Libya was
relatively small, standing at US$7.4 million in 2003, the country
has offered its Mirasata industrial and trade zone to Indonesia
to use as a door for expanding exports to the whole North Africa
region.

Tunisia has also offered to serve as a hub from which
Indonesia can penetrate the 26 North African countries, although
it is more likely that Indonesia would take advantage of the
country's trade preference facility in exporting to the wealthy
European countries.

South Africa has also offered a similar strategic arrangement,
through which Indonesia could boost its trade throughout the
Southern Africa Customs Union (SACO).

"The SACO grouping also has a preferential trade agreement
with the EU," Deddy said, adding that there are 22 countries in
the southern Africa region.

Indonesia is now pursuing bilateral preferential trade
agreements with Egypt, Tunisia and Morocco, while at the same
time studying the cost and benefits of a FTA with South Africa.

According to Deddy, Uganda, Nigeria and South Africa had
expressed interest in holding bilateral meetings with Minister of
Trade Mari E. Pangestu during the summit later this month.

Mari is scheduled to lead a trade delegation to visit the
Middle East and a number of African countries, including Egypt,
in mid-June.