Resurgence of trade, investment
This is the second of a two-part article presented to the Indonesia Australia Business Council in Jakarta on Aug. 29 by Mark Vaile, Australia's Trade Minister.
JAKARTA: I came to Indonesia to look at ways in which we can work together to further build the trade and investment relationship.
I have had very productive discussions with the President, the Vice President, the Minister for Industry and Trade, the Minister for Energy and Mineral Resources and the Minister for Agriculture about how we can work together to achieve this.
Now is the time for Australian and Indonesian business to get on with the pragmatic and important work of building a strong commercial and economic relationship.
While the economic crisis has caused much hardship and difficulty, it did also have something of a silver lining.
Enormous progress has been made in democratization and political reform, and while much remains to be done in restructuring the economy and repairing the financial sector, a solid start has been made.
Indonesia has undertaken many trade liberalization measures through the monetary crisis and under the Wahid administration. Many Indonesian tariffs are now below World Trade Organization commitments and trade in major agricultural commodities has been deregulated.
Recent announcements on investment restrictions have also opened opportunities for investors in a number of sectors, most notably medical services, telecommunications and air services/airlines.
In short, we are seeing the construction of a more liberal trade and investment environment.
Australia is very keen to support the process of economic restructuring and reform that is underway and to encourage growth and development throughout Indonesia.
Australian bilateral aid to Indonesia is expected to total $A120.5 million in 2000-2001. Program priorities will emphases efforts to help implement the reforms needed to sustain growth and development.
With the challenges of regional development and continuing development needs in Eastern Indonesia, Australia will continue to support the development of Eastern Indonesia through business oriented efforts under the Australia-Indonesia Development Area (AIDA) initiative as well as through the aid program.
To this end, I was very pleased to announce that Australia will fund a study under the aid program to assess prospects for the development of small and medium enterprises (SME's) in Indonesia, and to prepare a detailed business and implementation plan to help overcome constraints to the growth of SME's.
I also believe there are initiatives that can be pursued by the Australian and Indonesian Governments to promote trade and investment between our two countries.
In this regard, senior Australian business figures have raised concerns about the business environment they face in Indonesia.
The telecommunications sector, for example, is becoming less attractive to foreign investors because of uncertainties associated with the regulatory environment and restructuring of the sector.
Australian mining companies, who have had a long association with Indonesia and are active in both the exploration and extraction of coal and metals, are also concerned with the business environment.
The past two years have seen heightened difficulties with law and order, illegal mining, and uncertainties as to how the industry will be regulated under the regional autonomy.
Australian investment in mining makes a significant contribution to the Indonesian economy in terms of employment opportunities, taxes and exports. I have raised the concerns of the Australian mining industry with the relevant Indonesian Ministers given the mutual benefits such investment brings to our countries.
From the Australian government's perspective, we want to encourage greater awareness by Australian companies of the opportunities that exist here.
There are a number of initiatives we are pursuing. These include an investor services centre in Makassar, South Sulawesi, a report on investment opportunities in Indonesia by the East Asian Analytical Unit of the Department of Foreign Affairs, and support for the Indonesia Bank Restructuring Agency Roadshow to Australia later this year.
There is also scope for cooperation between Australia and Indonesia in regional forums that will assist in building trade and investment ties.
In October 1999, my colleagues from the Association of Southeast Asian Nations and New Zealand and I agreed to establish a task force to examine the feasibility of establishing an ASEAN Free Trade Area-Closer Economic Relations (AFTA-CER) free trade area by 2010. We agreed that the Task Force would report to Ministers in October 2000.
An AFTA-CER free trade area (FTA) would create a market of over 530 million people and the 12 member countries would have a combined gross domestic product of around US$990 billion in today's dollars.
An analysis of the impact of an FTA undertaken by the Centre for International Studies found that there are economic benefits for all countries in terms of productivity, investment, income and welfare.
The gains in GDP from forming an AFTA-CER FTA are estimated to be $US 48.1 billion (in net present value terms over the period 2000 to 2020).
The larger share of these gains, totaling $US 25.6 billion, would accrue to ASEAN countries.
The final meeting of the Task Force was held in Cambodia this month and a report is now being finalized. Our government is looking forward to the final recommendations.
We believe that an AFTA-CER FTA will bring substantial benefits for all members, including the smaller ASEAN member countries.
It would also considerably enhance our efforts to facilitate increased trade, investment and technology flows between Australia and Indonesia. The proposal also has broader strategic and political significance as it raises the international profile of the region as a whole.
Australia and Indonesia also continue to work together to forge stronger economic and commercial ties in APEC where we are working on an agenda designed to achieve practical business outcomes. These include stronger legal systems, more effective reporting of achievements in market opening, the alignment of national standards and the implementation of paperless trading.
Since Seattle, Australia has been working towards the earliest possible launch of a short, sharp market-access focused WTO round, concentrating on further liberalization in agriculture, services and industrials.
We are also working with others, including the Cairns Group, to ensure early progress on mandated negotiations on agriculture and services as a means to build momentum towards a new round launch.
Australia recognizes the need for WTO negotiations to address the interests of developing countries, including through the delivery of technical assistance. Australia has offered to provide technical training to Indonesian trade policy and trade law officials.
There is also scope for Australia and Indonesia to work together within the WTO to achieve a better multilateral trading system.
Australia and Indonesia have worked closely together in the Cairns Group of 18 fair agriculture trading nations.
The Cairns Group is becoming an increasingly important vehicle for agricultural reform in the WTO. This is because, as a group, we are able to create more and fairer opportunities for our farmers, and protect our rural concerns.
We look forward to continued close cooperation with Indonesia in this important forum.
I believe now is the time for Australian and Indonesian business to get on with the pragmatic and important work of building further our commercial and economic ties.
There is much our governments can do in assisting this process: through improving the climate in which business operates; through raising awareness of the opportunities for investment in Indonesia; and, through regional initiatives such as the AFTA-CER FTA proposal and cooperation in APEC to build integrated regional markets.
I look forward to our governments and our businesses working together to expand the bilateral trade and economic relationship to the mutual benefit of both of our countries.