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.