Resurgence of trade, investment

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.