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.