I had a piece published in the Australian Financial Review on the discussion (page eight today, behind a pay wall online), but due to space limitations, there was no room for some of the content.
Here's the full version I wrote.
By Ari Sharp
The Australian corporate sector risks missing out opportunities in Indonesia as it moves toward its long-term place among one of the 10 largest economies in the world, Foreign Minister Kevin Rudd said on a visit to Jakarta.
Mr Rudd, speaking after meeting with the country’s new trade minister, Gita Wirjawan, urged large Australian companies to conduct one board meeting a year in Indonesia so that members could witness the growth in the world’s fourth most populous nation.
The Australian minister praised a trio of significant economic reforms that he said was part of “Indonesia 2.0” and made the country a more attractive destination to foreign investors.
The “landmark” reforms he identified were the introduction of 10-year tax holidays for many foreign investors, the passage by the parliament last month of a land acquisition bill that is expected to speed up the development of infrastructure, and the liberalisation of workplace laws that reduce barriers to the hiring and firing of staff.
The new trade minister, Mr Rudd noted, was a “dynamic figure” who would continue the “radical transformation of the Indonesian economy” instigated by President Susilo Bambang Yudhoyono.
“The winds of change are definitely blowing when it comes to the liberalisation of this economy,” he said.
He noted that companies from several Asian countries, including South Korea, Malaysia and Singapore, had established a firm foothold in Indonesia, but Australian companies had so far failed to take full advantage of its close proximity.
“There is a grave danger that this one passes us by,” Mr Rudd said. “It’s important now for corporate Australia to step up to the plate.”
While Australian companies have long had a presence in the nation’s resources sector, Mr Rudd said Indonesia was becoming an appealing site for investors in the finance and services sectors. Australian banks ANZ and Commonwealth have both established a significant presence in Indonesia, while Rio Tinto has a significant stake in a Papua copper and gold mine.
Indonesia’s economy grew an estimated 6.5 percent last year, and the country’s central bank has forecast growth of 6.3 percent in 2012. While the targets dwarf growth expectations in the West, they are lower than that anticipated by many other countries at a similar point in their development. These figures also represent a reduction from the seven-plus percent growth experienced during the latter period of the Suharto administration.
“This is not a small economy anymore,” he said, noting that Indonesia’s current gross domestic product of $900 billion could surpass that of Australia, which currently stands at about $1.4 trillion, by the end of the decade. He predicted Indonesia would be one of the globe’s 10 largest economies by 2050; the International Monetary Fund currently ranks Indonesia in 17th place globally.
Mr Rudd acknowledged that Australian companies doing business in Indonesia faced some risks, but that those were far outweighed by the potential benefits.
“Life’s an imperfect beast,” he said. “If we wait for nirvana to be produced… then we’ll miss the boat.”
His comments came less than a month after several protesters were killed at the port servicing a mining site in West Nusa Tenggara province operated by Australian gold miner Arc Exploration.
On his two-day visit to Indonesia, Mr Rudd met with ministers for foreign affairs, trade and agriculture.
Mr Rudd and Indonesian Foreign Affairs Minister Marty Natalegawa on Monday announced they had made progress on cooperative efforts to thwart people-smugglers, many of whom use Indonesia as a transit country before heading to Australia. The two said they would share information on the flow of asylum seekers, and that Australia would offer its expertise on detecting and preventing document fraud.
Mr Rudd said he was keen for Wirjawan and the Indonesian Coordinating Minister for the Economy Hatta Rajasa to visit Australia soon to showcase the Indonesian economy to potential Australian investors.