Indonesia an overlooked opportunity
Ian Satchwell of the Australia Indonesia Business Council. Picture: Marie Nirme Source: The Australian
“I LIVE in Perth. Of the ten closest cities, seven are in Indonesia and only three are in Australia,” says economic strategist Ian Satchwell.
Geography, career, personal passion and economic analysis are all elements in the vision that Satchwell brings to his new role as president of the Australia Indonesia Business Council.
“We’re neighbours, we’re the two largest economies in Southeast Asia, we have great, latent economic complementarity – and yet the business relationship is way underdone,” he says.
“I like to see underdone relationships in business as market opportunities.”
Satchwell, who first encountered Indonesia as a backpacker 35 years ago, is excited by its rapid transformation and potential.
“[Yet] Australia is under investing in Indonesia, relative to its potential and relative to other countries. One of the largest investors is Great Britain,” he says.
With a background as an adviser on infrastructure, resources, trade and investment, Satchwell has not long finished a six month stint with Indonesia’s Ministry of Trade. The idea, made possible by a program under the Asia Pacific Economic Co-operation forum, was to work on economic governance.
Better governance would help pave the way for much closer co-operation as Australia and Indonesia try to make more of the complementary opportunities of economy, demography and geography.
But there is a gulf between the elites who pursue an enthusiastic engagement with Indonesia and the state of public opinion.
Even as Australians travel in record numbers to Bali, popular attitudes to Indonesia here “remain mired in distrust and suspicion,” according to the latest Lowy Institute survey.
In our schools, Indonesian is an endangered language. Despite hints of recovery in student numbers in some universities, the story of Indonesian language study has been one of decline over the last decade. If linguistic and cultural links are weak so, too, the interest of Australian business in Indonesia seems modest when compared with the scale of opportunity.
Last week foreign minister Kevin Rudd issued a “wake-up-to-Indonesia” call to business.
“There is a grave danger that corporate Australia misses the boat,” Mr Rudd said in Jakarta after talks with Indonesia’s new Trade Minister, Gita Wirjawan. “There’s a grave danger for corporate Australia that this passes us by.”
Mr Rudd said Australian business already had given a head start in Indonesia to the South Koreans, Malaysians, Singaporeans and potentially the Chinese, as Jakarta correspondent Peter Alford reported in The Australian last week.
Mr Rudd urged Australia’s top 100 company boards to meet at least once a year in Jakarta “just to open their eyes to the new reality”.
“Frankly, I think they would see the scale of what is happening here,” he said.
That sense of scale was well captured by trade minister Craig Emerson when he addressed a regional business forum in Bali last year.
“It’s worth contemplating for a moment that by 2030, less than 20 years away, the Indonesian economy is set to be in the Top 10, and somewhere between the fifth- and eighth-largest economy in the world,” he said.
“If Indonesia continues to grow at the rate used in the IMF’s latest five-year forecast, its economy will roughly double in size over the next decade.
“This means that from half the size of Australia’s economy just three years ago, Indonesia’s economy will match Australia’s by around 2025.
“If you are contemplating investing in Indonesia, you are making the right decision. Whether you are Indonesian investors or Australian investors, this is the place to be.
“It is a giant of an economy, with the fourth-largest population on earth. Australia’s nearest neighbour; right here on our doorstep.”
All of which amounts to an argument for Australians to take notice of Indonesia when they make choices about education and career.
Satchwell says: “I’ve spoken at schools about this – the future economic potential is such that there is a very strong business case for parents to encourage their children to study Bahasa Indonesia [the Indonesian language]”.
“It’s not just the language skill, it’s also the cultural understanding that you gain through language study”.
He concedes that Australian business often gets by in English.
“But it is a great advantage to have people who can speak the language and therefore can interact informally with the people with whom they’re doing business,” he says.
“As we all know, relationships are everything in business and in particular in Asia.”
Satchwell’s son, Matthew, is one of those who has grasped the Indonesia opportunity.
A graduate in Asian studies and commerce from the University of Western Australia, Matthew spent a semester at Gadjah Mada University in Yogyakarta, taking part in an immersion study program run by the Australian Consortium for In-Country Indonesian Studies.
Now he has an internship in Jakarta as the first foreigner taken on by an Indonesian company.
Satchwell says: “There’s quite a number of young Australians now in Jakarta, working in the law, in banking, in mining, in a whole range of areas.”
The career promise is there but more needs to be done to link up young professionals trained in Asian studies with job opportunities in the region.
This is why Satchwell’s business council has lent its support to a new networking group, theAustralia Indonesia Youth Association, set up by recent graduates of Indonesian studies at the Australian National University.
“We thought we could create a hub for people in the early stages of their career or in their final years of university,” says Fe Donaghue, one of the founders.
“It’s all about being able to connect people with jobs where they can use the skills they gained at university.”
The association staged its first event – a get-together for young professionals – in Jakarta yesterday evening and more than 100 people were expected.
Just as it’s possible to underestimate the difficulty of translating Indonesia expertise into a career, Satchwell acknowledges the risk of offering too rosy a picture of Indonesia’s transformation from military kleptocracy to novice democracy. Many Indonesians complain it is corruption that has been democratised.
“If the average person in the street just shrugged their shoulders and said, well, yeah, that’s part of Indonesia, you’d be worried,” Satchwell says.
He says the newfound freedom of Indonesia’s very robust press – “They have slightly different libel laws to us” – has exposed a lot of corruption and galvanised public condemnation.
“I might sound like a ‘peace in our time’ person but I take some comfort from the reality that the average Indonesian is just sick of corruption – and wants something done.
“Indonesia is on a journey. That said, it’s on a very positive trajectory of change.”
One potential big change for both countries is the Indonesia Australia Comprehensive Economic Partnership, a mouthful of a name to signal that it is no garden variety trade agreement.
In November 2010 prime minister Julia Gillard and president Susilo Bambang Yudhoyono agreed to start negotiations towards IA-CEPA, as it’s styled.
The countries are still in talks about how negotiations might be handled.
Satchwell says the agreement will have three pillars.
First, liberalisation of trade in goods and services, the latter being especially significant for Australian business. Second, freeing up investment.
And third, economic co-operation, involving an attempt to build the capacity of Australia and Indonesia to do business with each other, as well as to do business together into third countries.
There could be work on developing joint supply chains, overcoming market failure and improving economic governance.
(Another example of this attempt by Australia to link overseas aid more closely to sustainable economic activity is represented by the new International Mining for Development Centre at the University of Western Australia. This joint venture involves AusAID. Satchwell is interim director.)
He says IA-CEPA “goes beyond simple two way trade and investment into looking for joint opportunities for business in both countries to work together to maximise the complimentarity of the operating environment in each country and also to develop joint supply chains to other nations”.
Take dairy. “As with Asia more generally, Indonesia is a rapidly growing market for dairy products as people come more wealthy,” Satchwell says.
“Western Australia actually supplies fresh milk into parts of Southeast Asia – I used to drink it in Jakarta.
“There’s a limit to what we can supply but we’re very good at biotechnology, herd management and dairy supply chains.
“Indonesia has got plenty of biomass to feed cows, Australia has got limited land on which we can sustain a competitive dairy industry.
“Working together we can build a market in Indonesia that is supplied both from Australia and Indonesia and then over time, there might be certain diary products that can be supplied into other countries.”
Satchwell sees similar opportunities to draw on respective strengths of the two economies to do business and enlarge markets in beef, mining and major project construction.
Australia also has expertise and services that Indonesia can put to work as it proceeds down the path of development.
“Indonesia has a massive infrastructure deficit,” Satchwell says. “It needs to spend over the next decade something of the order of $US 200 billion on infrastructure of all kinds, be it roads, rail, ports or airports. And it needs to make its infrastructure smarter.
“Australia is well placed to be servicing Indonesian infrastructure needs with expertise in public private partnerships, with expertise in institutional arrangements in operating toll roads, for example, with expertise in planning infrastructure, in design and construction and operation, particularly using smart technologies.”
It makes sense for government leaders such as Rudd to remind Australian business not to overlook the opportunities emerging in the archipelago-nation to our immediate north.
Yet Rudd’s remarks prompted what is probably an unwelcome reminder from Stephen Grenville, an economic consultant who used to work for the old Department of Foreign Affairs.
“While the Minister is urging businesses to act, his department’s travel advisory is telling them not to even set foot in the place,” Dr Grenville says in a post last week for the Lowy Interpreter blog.
“The opening line is: ‘We advise you to reconsider your need to travel to Indonesia, including Bali, at this time due to the very high threat of terrorist attack.’
“Most traveling Australians just ignore the advisory [but] for Australian businesses (or, for that matter, government departments and universities) to ignore the advisory is altogether different.
“If something happened to an employee while on business in Indonesia, the legal consequences for the firm of ignoring the advisory would be very serious indeed. In practice, it is a major non-tariff barrier to trade.”
The other obvious rejoinder to Rudd is that Labor in power has yet to translate the rhetoric of Asian literacy into anything resembling an educational reality.
I am personally excited with what was being shared on the article above, and I think it’s a good move for both countries to joint hands and work together in pushing up the economy in Asia (and this is a great time to do that too). What do you think? Share your thoughts with us, and let me leave you with the statement from the article above.
“Indonesia is on a journey. That said, it’s on a very positive trajectory of change.”