The Australia-Indonesia Development Area

The Australia-Indonesia Development Area

The Australia-Indonesia Development Area (AIDA) was launched
on April 24, 1997, by the Australian Foreign Minister Alexander
Downer, and Indonesian Coordinating Minister for Production and
Distribution Ir Hartarto.

AIDA is intended to develop closer economic relations between
Australia and the Indonesian provinces outside Java and Sumatra.
It is designed to improve the "enabling environment" for business
activity.

The private sector has a key role in the AIDA process. Six
working groups, led by private sector representatives, have been
established to examine challenges to business activity in
priority sectors and to look for solutions, and to identify
business opportunities, including joint ventures.

These working groups cover the following sectors: agriculture,
fisheries and animal husbandry; mining and energy; transport;
tourism; education and training; and trade and industry.

At the launch of AIDA, a series of initial measures were
announced to respond to business concerns raised during the
preparatory process.

Downer announced the following:

* Australia would open two honorary consulates within the AIDA
region to facilitate business activity and the movement of people
in the region. He also announced that a Visitor Visa Agency
Agreement had been signed in Ambon, which will reduce the
processing time from seven days to one day for a visa to visit
Australia. This is the third such agreement to be signed within
the AIDA region.

* Funding for a major study of eastern Indonesia, through Ausaid.
This study will focus on identifying the opportunities and
challenges to trade and investment in the AIDA area.

* Australia would contribute to a feasibility study into the
establishment in eastern Indonesia of an office of the World
Bank's International Finance Corporation. This office would
provide technical assistance to private firms to develop
"bankable" investment project proposals.

* Funding for two commercially oriented training projects: a
pilot project on mining competency standards to be conducted in
conjunction with the Indonesian Mining Industry Training Board;
and support for the introduction of competency standards for the
tourist industry.

* A technical and vocational education development assistance
program aimed at increasing the relevance to industry of
Indonesia's technical and vocational education providers, the
Partnership in Skills Development Program, to directly benefit
eastern Indonesia and would begin shortly.

The Indonesian Coordinating Minister announced eight specific
actions in response to concerns raised by the private sector
during the preparatory meetings of the Special Working Group:

* Exemptions from departure tax (fiskal) for Indonesians
traveling within subregional economic cooperation areas (which
applies in the ASEAN "growth triangles") will be extended to
almost all of the AIDA region. The government of Indonesia will
explore, as a matter of urgency, policy changes relating to
departure tax, necessary to cover Australians holding temporary
residence permits.

* Indonesia has undertaken to increase air services between
Indonesia and Australia, in particular within AIDA, and to
explore the development of new air routes by airlines of
Indonesia and Australia.

* An invitation to Australian investors to take advantage of the
fiscal incentives available for investment in Integrated Economic
Development Areas (KAPET) located throughout the provinces which
are member areas of AIDA.

* Approval in principle to provide computerized customs services
at certain AIDA ports which experience heavy international trade
loads in order to improve efficiency of service.

* Greater market access for commercially driven education and
training activities. The Indonesian government encouraged
businesspeople involved in this area to provide information about
exactly what problems they face and which regulations or policies
are constraining their activities.

* A review of Indonesian policy and procedures on expatriate work
permits in order to find ways to attract qualified Australians to
assist private sector business cooperation activities in the AIDA
area.

* Visa-free short-term entry to Indonesia for foreigners from
specified countries, including Australia, to be extended soon to
all AIDA international ports and airports.

* In order to facilitate investment, including by expediting
approvals, the government wished to receive concrete information
from private sector businesspeople who were facing constraints to
investment.

Significantly, Indonesia also announced it would extend to
AIDA the same range of benefits available to various subregional
economic groupings.

Work under AIDA will now move into developing and implementing
the more detailed work programs of the six sectoral Working
Groups over the next year. To illustrate the sort of work that
has already been undertaken, the following are examples of issues
already included in the work programs of the sectoral Working
Groups:

* The Mining and Energy Working Group has identified the small-scale
production of coal briquettes as a potential joint-venture
project, and the streamlining of procedures for the importation
and use of helicopters, particularly in Irian Jaya, as a measure
that would improve the enabling environment.

* The Tourism Working Group has identified the Sydney 2000
Olympics and the Global 2000 Conference to be held in Jakarta as
prime targets for a joint AIDA approach.

* The Transport Working Group has identified the need for
continued deregulation of legal and/or administrative
requirements for joint ventures to improve the enabling
environment. It has invited studies into the development of
airports, terminals and cargo facilities in eastern Indonesia, as
well as into the design, building and commercial operations of
ferry links.

* The Education and Training Working Group will be looking at the
development of competency standards, and the development of
centers of excellence in the AIDA region.

* The Agriculture, Fisheries and Animal Husbandry Working Group
has identified a joint initiative in the cattle industry to be
developed.

* The Trade and Industry Working Group will be looking at
improving information flows on trade and investment in the AIDA
region, and looking to assist SMEs. It has a number of specific
ideas on its agenda with regard to improving the enabling
environment.

Although AIDA is very new, commercial opportunities are
already emerging. Businesses that are interested in operating in
eastern Indonesia are encouraged to contact the relevant sectoral
Working Group. AIDA is an open and inclusive process and new
players are welcome. Businesses are encouraged to communicate
their views through the sectoral Working Group process.

The next ministerial meeting under AIDA will be held in
conjunction with the fourth meeting of the Australia-Indonesia
Forum to be held in Australia in 1998.