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Indonesia crucial to Western Australia’s future prosperity

Two essential pillars underpin Australia’s prosperity: We are a great trading nation and an attractive place for foreign investment

Stephen Smith (The Jakarta Post)
Perth, Australia
Wed, March 6, 2019

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Indonesia crucial to Western Australia’s future prosperity

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span>Two essential pillars underpin Australia’s prosperity: We are a great trading nation and an attractive place for foreign investment. Since the 1950s, our trade has expanded from wheat, wool and gold to include iron ore, liquefied natural gas, high tech manufactures and world class services.

Our export markets now extend beyond the United Kingdom and Europe to Asia, in particular China, Japan and Korea. Foreign investment has also shifted beyond the UK. Our top ten list now includes the United States, Japan, China and Singapore.

As Western Australia Treasurer Ben Wyatt pointed out in an erudite presentation to a Perth business breakfast last week, these shifts have coincided with the global economic center of gravity moving towards Australia. Between now and 2050, that global center will inexorably move south and west, even closer to Australia.

And most importantly, to Australia’s trade and investment powerhouse, Western Australia. This movement will be caused by India and Indonesia.

By 2050, most predictions see China, India, the US and Indonesia as the top four economies. These same predictions see Australia, now a top 15 economy, struggle to remain in the top 30!

To ensure our prosperity does not suffer, we must grow our trade and investment with India and Indonesia.

Success with only two out of the top four will not be enough. Over the decades, Australia has worked to grow our Indonesian relationship, with success on the political and security front.

Now is the time to build the economic side of the relationship.

That is why the signing today of a free trade agreement between Indonesia and Australia, the Comprehensive Economic Partnership Agreement, is so important. It is a platform to build with Indonesia trade and investment ties on a par with the US and China.

On any measure, our economic relationship with Indonesia — our nearest northern neighbor — is massively under developed.

Irrespective of the fine detail, over which there may be some disagreement, the signing opens the door for Australia to take up the challenge of building a fundamentally improved economic relationship with Indonesia.

Early indications are that there should be positives in it for Australian farmers, our universities and our service providers.

But we must understand the ball is in our court. If we don’t make the effort now, why would Indonesia be interested in Australia when it is the fourth-largest economy in the world?

One immediate step the Commonwealth could take would be to commission a major economic study on Indonesian opportunities for Australian business.

To its credit, the Turnbull government did such a study on the Indian economy, headed by former Department of Foreign Affairs and Trade secretary Peter Varghese.

Not only did this provide a roadmap of opportunities for Australian business, it sent a strategic signal to India that we are serious about growing an economic relationship.

We should do exactly the same for Australian business on Indonesia.

The time has come for Australian business to stop its first response to Indonesia being “it is all too hard”, as if somehow creating resources industries in the remote North West for export to Japan and China where somehow easy!

Western Australia has a great opportunity. We have advantages and prior state efforts we can add to.

We have direct flights to Jakarta, and time zone, flight time and proximity advantages over other Australian states.

Our sister state relationship with East Java, centered on Indonesia’s second-largest economic center Surabaya, is into its second quarter century.

Our state presence in Indonesia was praised in the 1990s as ground breaking. The state government is developing an Asian engagement strategy and has a dedicated minister in that portfolio.

Western Australia has individual success stories which we can learn from. The CBH-Indofood partnership to make noodles in Indonesia helps make Australia one of the largest wheat exporters to Indonesia. Simply Stainless designs commercial kitchens in Osborne Park, manufactures with Indonesian partners in Surabaya and then exports to the world.

If we can get Indonesia right, we bring another world leading economy into our trade and investment network.

If we don’t, we risk Western Australia’s and Australia’s prosperity diminishing for future generations.

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The writer, a professor of public international law at the University of Western Australia, is a member of the Board of the Perth USAsia Centre and a former foreign affairs and trade minister.

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