Indonesia, an “Untapped Opportunity”

Mar 26th, 2012, in Business & Economy, News, by

Australia Indonesia Business Council logoHead of the Australia Indonesia Business Council tells it like it is about travel warnings, trade and cows.

Earlier this week, the Australian Trade Minister, Dr Craig Emerson, visited Jakarta for talks with his Indonesian counterpart, Mr Gita Wiryawan.

Australian and Indonesian Trade Ministers at a a press conference
Australian and Indonesian Trade Ministers in Jakarta

As part of his coverage of the visit, Andrew Robertson of (the Australian TV channel) ABC interviewed the head of the Australia Indonesia Business Council, Ian Satchwell.

Ian Satchwell, Australia Indonesia Business CouncilMr Satchwell has been living in Jakarta for 35 years. The author appreciated hearing a "voice of reason" with some frank and positive assessments about real life and the business environment in Indonesia, especially from someone with experience and local knowledge - not an "armchair expert".

Below are excerpts of what Mr Satchwell said about some current hot potatoes in Indonesian-Australian relations, and how to improve trade between the two countries:

Travel Warnings

Reconsider your need to travel
The current advice to Australian
tourists about Indonesia

ANDREW ROBERTSON: Tonight, the Department of Foreign Affairs and Trade is still warning Australian tourists not to go to Indonesia, whilst the Trade Minister is in Indonesia with you trying to get business to go to Indonesia. I mean, is that sending conflicting signals to the business community about just how safe it is in Indonesia to do business?

IAN SATCHWELL: I think, on your first point, Australian tourists are cheerily noting the travel advisory and then, if not ignoring it, risk-managing. This year nearly 1 million Australians are expected to visit Indonesia, mostly in Bali, making Australia the third largest source of tourists for Indonesia.

In terms of business, though, the travel advisory is somewhat more problematic because business has a duty of care to its employees and its contractors, and it also has to take out insurance. And the travel advisory - in the way it's currently structured - is something of a blunt instrument that doesn't, to the minds of the Australia Indonesia Business Council and many of our members, properly nuance the real risks that need to be managed when coming to Indonesia.

And quite frankly, the biggest risk is probably getting caught up in the traffic and hit by the proverbial bus rather than some terrorism incident. So, it would be better, it would be more preferable if travel advisories were more nuanced to enable companies to risk manage more thoroughly.

Cows and Neighbourly Perceptions

Indonesians Protest Against Australia Australians Protest Against Live Cattle Exports
Past protests in Indonesia and Australia

AR: Is there a perception in Indonesia that Australia treats Indonesia as almost a second class citizen, and I'm thinking now of last year's public row over the conditions in some Indonesian abattoirs which prompted the Gillard Government to ban Australian beef exports to Indonesia?

IS: Look, the relationship between Australia and Indonesia at the government-to-government level is very, very good, and while Indonesia has been somewhat irritated in the way in which Australia has made decisions that have affected, amongst other things, the price of food stuffs here with the cattle export ban, overall the relationship remains very good.

And surprisingly, Indonesian people - well, maybe not so surprisingly - Indonesian people have very warm feelings towards Australia. Australia's in the top four countries in the minds of Indonesian people as being trustworthy, reliable, having technology and systems that Indonesia can use.

So, I think that's a good platform on which to build much greater business.

The relationship which remains underdone - and quite grossly so - is the business-to-business relationship. And I'm in Jakarta with a delegation of ministers and business people to start to build a much better business-to-business dialogue, that we hope will result in a much stronger economic relationship in the future.

Opportunities for Business and Trade

ANZ in Indonesia
An Australian company...
with an Indonesian subsidiary

AR: Ian, you're a 35-year veteran of Indonesia, and you believe Australia's business relationships with Indonesia are underdone. Why do you believe that?

IS: I think that we had the Asian crisis and a near meltdown of the Indonesian economy back in 1997 and '98. Subsequently, the rise of China caused a lot of Australian businesses to focus on China, and pretty well literally and mentally Australian business people have flown over Indonesia on their way to China.

But I'm pleased to say there is growing recognition of the extraordinary transformation and growth of the Indonesian economy.

AR: Well just on that point, I'm sure most Australians aren't aware that Indonesia's economy is growing about 6.5 per cent a year, and within the next 13 to 15 years it's predicted its economy will be the size of Australia. So what opportunities is Australian business missing out on in Indonesia at the moment?

IS: Well the Indonesian economy, yes, you're right, is growing and indeed it will be quite a bit bigger than Australia within a decade. The Indonesian market of 240 million people heading for 250 million, rapidly becoming wealthier, a lot of people moving into the middle class, is a fantastic consumer market.

So, at that level, a lot of people are looking for increasingly expensive goods from food stuffs through to higher-value manufactured goods - services in particular, sophisticated financial services - and Australia is good at all of those things, so there are a lot of opportunities for Australian business.

As well, Indonesia is a very rich mineral and oil and gas province so Australian companies involved in minerals and oil and gas have also got great prospects, although there are some issues around the mining laws in Indonesia that we've had some publicity on recently.

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13 Comments on “Indonesia, an “Untapped Opportunity””

  1. avatar David says:

    the biggest risk is probably getting caught up in the traffic and hit by the proverbial bus rather than some terrorism incident.

    Yes.. also bag snatchers and pickpockets… and men in Avanzas, my mother in law just got robbed by three men who sprang out of an Avanza at the side of the road and surrounded her, they got her jewellery. She could have screamed and someone would have heard but it’s easy to say these things after the fact.

  2. avatar Oigal says:

    my mother in law just got robbed by three men who sprang out of an Avanza at the side of the road and surrounded her, they got her jewellery. She could have screamed and someone would have heard but it’s easy to say these things after the fact.

    Sorry to hear that David. It has always amazed me that it goes on to such a degree. Yes I know there is a shed load of poverty but petty theft in Indonesia is often a brutal death sentence if the crowd gets hold of you. I would have though the risk – reward profile would suggest its not worth it.

    I don’t suppose she got the number?

    As a side issue, we got robbed a few years back it then cost me another 2 juta, in dunkun fees to ensure the evil doer developed a very nasty facial cancer (so the story goes)

  3. avatar bluemoejoe says:

    As a side issue, we got robbed a few years back it then cost me another 2 juta, in dunkun fees to ensure the evil doer developed a very nasty facial cancer (so the story goes)

    a perfect saying for “sudah jatuh tertimpa durian di kepala ” i believe 😀

  4. avatar Oigal says:

    Ah blue joe are you suggesting magic doesn’t exist…you must be the only Indonesian who doesn’t believe.

  5. avatar bluemoejoe says:

    Ah blue joe are you suggesting magic doesn’t exist…you must be the only Indonesian who doesn’t believe.

    well bro …. living around banten region for the past 33 years …. it’s a daily conversation in the neighbourhoods 😀

    hell , it’s even comanded by the pillars of faith for believings all the magical things ( ghoib ) …. but , practicing the things ?? … i would say no thanks … for the same reason

    P.S : what i really do believes is a 9mm point blanks is a platinum pass to the afterworlds

    and this one:D

  6. avatar David says:

    I don’t suppose she got the number?

    That was the first thing I asked too… no.

  7. avatar erwin says:

    officials of both countries hope the meeting between Indonesia Australia could provide an economic solution in the future …

  8. avatar Oigal says:

    Of course, our friend in the article is being more than a little optimistic. Indonesia continues to fall well behind in the investment stakes with both Africa and other South East Asian nations rating well above Indonesia in the game.

    Dismal infrastructure which is getting worse not better, rampant corruption and unclear regulations continue to create uncertainty in the international community. The creation of a myriad grasping, petty little demigods with little understanding of economics in all regions has severely impacted on new investment.

    The crunch is coming and it will hurt but at least the girls will be wearing longer skirts.

  9. avatar JakartaJaap says:

    I am as one with Oigs here. To see Indonesia as a ‘business opportunity’ requires an almighty leap of faith. The Britchams, Amchams and IABCs of this world continually promote Indonesia despite also continually noting the appalling infrastructure, outrageous corruption, total lack of certainty in law in any aspects of a modern economy – land title, contracts, taxation etc. Why do they do this? One reason is that most of the Britchammers etc are not putting there own cash into ID, other than starting up their consultancies. If they were seriously considering where to plunk, say, their own USD2 bil down for a 25 year project, would they seriously consider ID? I think not.

  10. avatar Oigal says:

    To be fair I am in fact guilty of plagarism, this not my opinion but out of any reputable business organization. The latest being the a survey done on behalf of the Canada Mines Assc which rated Indonesia well below Ghana, the Congo and Botswana.

  11. avatar JakartaJaap says:

    As they should!

  12. avatar berlian biru says:

    I’m not a Britchammer but I have certainly liquidated pretty much all my assets in the UK and relocated them to Indonesia.

    So far, touch wood, that has turned out splendidly, with some pretty damn good returns on investments, way and beyond anything imaginable in the UK over the past five years. Nothing to attract the attentions of serious operators but enough to keep a roof over my family’s head and a decent standard of living.

    The trick of course has been to keep it low key, interact with government officials as little as possible and use cash rather than credit and rely on local people you can trust and know personally while keeping a tight control on funding. Always limit investments to manageable, separate enterprises and limit each of them to what you can afford to lose if it went tits up.

    Admittedly I wouldn’t fancy opening a major enterprise dependent on the whims of government officers, that’s just laying yourself open to extortion.

    What there is a huge wealth of in this country is talent without cash. Many individual intelligent people who are willing to work bloody hard and use their expertise in enterprises but who are stymied by lack of capital or credit. I’ve met up with mechanics, exporters, builders, men and women who can make a profit on the fringes through dint of hard work and their own brains outside hunting grounds of the big battalions. I haven’t had a failure yet.

    I’m not stupid or naive, I know that a crooked look from a jealous competitor or civil servant could cause problems but given the size of each individual enterprise it wouldn’t be worth the while of anyone to bother me and I stay below the radar.

    It should also be emphasized that you really need to stay within the law, difficult though that is at times given legal confusion, almost every time I have heard of an expat getting into difficulties in business here it is because they pushed the envelope too far.

    Having said that I still keep my passport up to date and a mutual fund or two overseas.

    Just in case.

  13. avatar JakartaJaap says:

    BB, a logical approach. All the best.

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