Terrorist bombings, political rifts over Timor Leste's independence and the Corby trial earlier this year have added some unwelcome spice to the Indonesian-Australian relationship, but apparently it's full steam ahead for the two countries' economic relations. "It is business as usual as far as business is concerned. It is outside the sphere of business, and we have to look for ways to get both countries closer to each other again," said Noke Kiroyan, president of the Indonesia-Australia Business Council (IABC).
He said that many Australians still see Indonesia as very important and thus keep coming back and even staying in the country, particularly in the tourism field. According to the IABC, Indonesia, a country with some 220 million people, or around eleven times the population of Australia, remains an important market that cannot be ignored because of its size, proximity and accessibility. There are now around 400 Australian firms active in this country.
Meanwhile, Australia is now the number-two destination for Indonesian students after the United States, and Indonesia is the largest source of foreign students in Australia, while tourism plays a huge role in complementing a relationship built on trade and education. Nevertheless, despite the fact that the two countries are close neighbors, bilateral economic relations are still very limited compared to those between Indonesia and other countries.
Indonesia is ranked as Australia's 16th largest trading partner with bilateral trade worth some A$8 billion (US$6.5 billion) last year. Meanwhile, Investment Coordinating Agency (BKPM) data shows that Australia is the 13th largest source of foreign investment here with investment approvals of $29 million in the first semester of the year.
Noke said that Australia's investments in Indonesia were smaller than other countries as investors from other countries have many oil and gas projects here --some of them huge - which is not the case with Australian investors. Meanwhile, there are more relatively small and medium-sized Australian companies operating in Indonesia.
"There are still many opportunities to increase bilateral trade, considering that the two countries are geographically close and although small in population, Australia has very high GDP per capita," Noke said in an interview with The Jakarta Post. He added that the consumer goods market in Australia was still dominated by products from India, China and Vietnam.
The problem, he said, was that many Indonesians still lacked of knowledge of the Australian market, while on the other hand many Australians have failed to realize the potential of Indonesia's manufacturers. In April this year, President Susilo Bambang Yudhoyono visited Australia to improve relations - a visit that was marked by the issuance of a joint declaration on a "comprehensive partnership".
The partnership is expected to lay the foundations for a free trade agreement (FTA), as well as ease the movement of people between the two countries for business, tourism and education purposes. Separately, IABC vice president Peter G. Fanning said that Australia's relatively small population made the country competitive, especially in the services industry.
As investments in the service industry were usually small, that made Australian investments in Indonesia also look small in dollar terms. He said more large Australian mining and construction firms would be interested in establishing a long-term presence here if the country could ensure legal certainty.
Nevertheless, he noted, business relations between the two countries would continue to flourish if they were supported by good overall bilateral relations, including political relations. "We Australians are aware that everyone will be much more secure if we have strong relationships in the business and political areas. There will be benefits for both sides," he told the Post.
He also said that most ordinary Australians feel the Australian government is a little bit too cautious when it advises Australians to avoid unnecessary travel to Indonesia, because they know terrorist attacks can happen anywhere. "They know that Indonesia is basically a peaceful place. The travel warnings really do not achieve anything positive and they probably go toward achieving what the terrorists want, that is, perhaps they want outside influences to go away," he said.
"The politicians make it out of proportion. Most that live here know that the air we breath, Metrominis and bajaj are more dangerous here than terrorist attacks," said Fanning, who is also the chairman of the International Business Chamber (IBC). In general, Fanning said, Australian businesses, like most Indonesians, had high hopes that the new government of President Susilo would create a more business-friendly investment climate. "Obviously the people have great confidence in the current President, who is gradually improving the investment climate. Investors have confident that the improvement will continue and they are impressed with the amount of action being taken," he said.