Same actors enter a new set in Australia-Indonesia trade
The recent AIC webinar on the impact of COVID-19 on regional trade examined the current setting and opportunities in the Australia-Indonesia trade relationship, and placed those in the broader context of global and regional trends resulting from the ongoing crisis.
Long-building complementarities between the two nations’ economies continue to develop, with most mentions during the webinar going to education, healthcare and food security. These markets have been challenged by inward looking reactions to the crisis, and a general slow down, but at the same time buoyed by heightened imperatives across those three sectors, fast-tracked digitisation across the board and a newly-ratified Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA).
Dr Stephanie Fahey (CEO, Austrade), Andrew Parker (Partner for Asia Practice at PwC) and James Castle (Founder, CastleAsia) joined the AIC’s Helen Brown for this In Conversation Webinar on Wednesday 13 May. Below are some highlights from the discussion.
An instinct to look inwards and be self-sufficient has been balanced somewhat by Indonesia’s need for high tech and innovative solutions in various sectors, and by Australia’s small size and relative economic dependency on the export of services and technology.
People have put up the barriers, says Dr Fahey, “but we’re also seeing evidence where the barriers are starting to come down. I find those opportunities actually very instructive in terms of the art of the possible.”
From the Australian perspective Andrew Parker notes: “We are a trading nation of just 25 million people and so we’re not going to grow out of this situation that we’re in by looking inwards.”
The bump in the road in trade with China, agreed panelists, should serve as a trigger for seeking opportunities in Indonesia.
Dr Fahey argues that though China is and will remain Australia’s most important trade partner, many of the same opportunities exist in Indonesia:
“The reason we’ve got such a strong trading relationship with China is that we’ve got complementary economies and the same circumstances are now emerging with Indonesia.”
“The challenges that we’re having with China,” Parker says, “in the long run are actually for the good of the Australian economy and Australians.”
“It highlights the need for Australian businesses to look at the opportunity that exists a little closer to home and we’ve been ignoring for 50 or 60 years. That is, this relationship with Indonesia.”
COVID-19 has highlighted many nations’ weaknesses in management of the economy, healthcare, education, social services and more. In all these areas Australia and Indonesia’s joint competitive advantages are clear.
“The two most exciting areas [are] education and healthcare and until recently they’ve been totally closed to foreign investment,” explains James Castle, a 40-year veteran of advising on investment into Indonesia.
“[Lacking] the bandwidth and the human resources to respond in a very aggressive manner,” he reports, the Indonesian government is doing the best it can to keep health and education on track “by bobbing and weaving [amid] a lot of uncertainty”.
The good news, Andrew Parker asserts, is that “the things that we’re really good at are exactly the things that Indonesia will need if it is going to achieve its potential”.
And investment here will only snowball Dr Fahey adds, as “the complementarity and the business relationship will grow as a consequence… not only in export of goods and services, but… co-development and co-creation of some of the solutions”.
Other areas where Dr Fahey sees opportunity is in Australian business “supporting a safe and clean [Indonesian] mining sector” and supporting Indonesia’s understandable increased food security ambitions with our very strong agtech sector.
“The real challenge,” cautioned Castle, “is going to be as Indonesia recovers economically… it’s really going to take a sophisticated effort to keep the door open so these opportunities can take place to the benefit of both countries.”
IA-CEPA will come into effect on 5 July, leaving 99 per cent of Australian exports to Indonesia tariff free, explained Dr Fahey, and putting in place safeguards around data sovereignty, agricultural market access, services, investment and more.
Last year the AIC co-hosted a panel discussion on the agreement.
“In the context of the CEPA agreement,” Castle says, “one of the really important things is the opening up of education and healthcare.”
“If the terms and conditions of the CEPA are applied, I think we can really see great opportunities for Australia: it’s very strong in both these areas. But really, it’s an opportunity for Indonesia.”
“Joko Widodo,” Castle continues, also “has a very comprehensive omnibus reform bill before parliament now… [which] will open up Indonesian more. So let’s hope that that can get through…. Then it’ll be a much easier two-way street.”
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Australia-Indonesia trade has been challenged by inward looking reactions to the crisis, but also buoyed by heightened imperatives, fast-tracked digitisation and #IACEPA. . An overview of our webinar with Dr Stephanie Fahey (@@austradeofficial), Andrew Parker (@pwc_au) and James Castle (Castle Asia) can be found here: https://australiaindonesia.com/trade/same-actors-enter-a-new-set-in-australia-indonesia-trade/
Easing that two-way street even more could be the fact that restrictions keeping millions at home have fast-tracked digitisation of work, education and leisure around the world.
“We’re launching into a digital world that we knew was coming but we didn’t think would come quite as fast…. From my perspective, COVID-19 hasn’t actually pivoted the direction of history. It’s actually accelerated history,” comments Dr Fahey.
A huge shift to online services has been seen in finance, healthcare, education, dining and more. This plays to Australia’s strengths, suggests Dr Fahey, in digital healthcare for example, and there’s also signs that it is spreading to international trade processes.
“Those of us who have been involved in export know that the process is archaic and you need wet signatures on many documents…. That’s starting to change and change very fast.”
Any Indonesia approach must be long-term, agreed panelists, and involve increasing people-to-people contact and understanding.
“It’s got to be a really long-term commitment,” says Andrew Parker, “because that’s what we’ve been guilty of… failing miserably [at in the past].”
Dr Fahey hopes that the onset of in-country university campuses could help to address gaps in the two populations’ mutual understanding.
“My hope is that those [onshore] educational investments will give rise to a more contemporary understanding of Indonesia.”
And you don’t just need long-term if you’re going to Indonesia, advises James Castle, but you need Indonesia if you’re thinking long-term.
“It’s always the question, ‘Where do you want your company to be in five years?’ If you want to be regional or global, then what’s your plan for Indonesia?”