The Hon. Mark Vaile, MP
The Hon. Mark Vaile, MP
FORMER MINISTER FOR TRADE

Speech

Australian Minister for Trade, Mark Vaile

Jakarta, 16 February 2001
Indonesia Australia Business Council
luncheon

Australia - Strong Trader and Partner for Indonesia

Introduction

Ladies and gentlemen. It is a pleasure to be back in Jakarta again so soon. It is only 6 months since I was last here, to meet with what was then a very new Wahid administration.

On this occasion I am delighted to be accompanied by a very high-level investment mission from Australia. A large percentage of whom are representing companies ranked in the top 100 in Australia. This investment mission to Indonesia is designed to promote closer business links between our two countries and is a direct outcome of the Australia - Indonesia Ministerial forum that was held in Canberra in December last year.

The total market capitalisation of the firms on this mission is in excess of A$80 billion and together they employ some 110,000 people. The level of Australian business interest in this mission is testimony to the good faith and relations that exist between our two nations. If I leave you with only one message today, I would like it to be - that I firmly believe that both our countries can benefit enormously from continued cooperation in trade, business and investment.

Australia as a trading nation

To help to put the Australia-Indonesia relationship into context, I will just touch on some recent economic statistics:

The World Economic Forum's Global Competitiveness Report for 2000 ranked Australia as 12th in the Growth Competitiveness index and 10th in the Current Competitiveness Index. These results compare favourably to 1997 figures, when Australia ranked only 17th in the overall Competitiveness Index.

The Australian Government has placed great emphasis on creating an environment for Australian business to flourish. We have just seen the 14th consecutive quarter of growth at or above 4 per cent, which is the longest period of expansion since the 1960's.

Our domestic economic strength is paralleled internationally, with one in five jobs in Australia dependent on exports. Last year total exports from Australia were up 25% on the previous year to A$142.4 billion. Australia's trade deficit was more than halved, falling from A$16.5 billion in 1999 to A$7.3 billion in 2000.

While Australia's exports continued to grow, so too markets in the Asia Pacific region have shown an impressive recovery. Australia's merchandise exports to East Asia for 2000 grew by 34 per cent, while Australia's merchandise exports to Indonesia increased by close to 35 per cent in the same period.

Australia's strong trade ties with Indonesia

Indonesia is a key trading partner for Australia. As a fellow member of APEC and the World Trade Organisation, Indonesia has shown a commitment to the liberalisation of trade barriers to promote economic growth. As a result, trade between Australia and Indonesia has grown more than five-fold in the ten years from 1988. The economic crisis reversed this trend temporarily, but it is reassuring to see trade flows have now rebounded following the recovery in the Indonesian economy last year. Total two-way trade in goods and services is now approximately A$7 billion annually.

In 2000, Indonesia's merchandise exports to Australia were worth A$2.7 billion. A combination of political, geographic and commercial factors provide a strong foundation for our trade relationship. Both countries continue to cooperate to achieve mutually beneficial outcomes in trade, business and investment.

There is strong complementarity between Australia and Indonesia in bilateral trade. Australia's exports to Indonesia of cotton, wheat, aluminium and livestock are used by Indonesia as components in its manufacturing sector, which produces and sells products like clothing, noodles, and electrical goods, domestically and for export - including back to Australia.

The low cost of Australian inputs provides an important boost to the competitiveness of Indonesian products. This provides employment and export revenues to the Indonesian economy, and assists in the development of Indonesia's manufacturing sector.

Australia's exports of cotton are a prime example. Indonesia imported around A$440 million of Australian cotton in 2000. The Indonesian garment manufacturing industry increases the value of that cotton by eight times or more. Many well-known clothing brands using Australian cotton, like Lacoste and Polo, are made in Indonesia. And Indonesian-made Gloweave shirts have a 30 per cent market share in Australia.

Education is another major component of our two-way trade, with Australia being the major exporter of education services to Indonesia. The good reputation of Australian universities has helped them gain a 35 per cent share of Indonesian students studying overseas.

Extensive investment links

It is a matter of pride for Australia that our businesses were some of the first to build partnerships in Indonesia. Today there are almost 400 Australian companies active in Indonesia. Investment by these firms has driven Australia to become Indonesia's 10th largest foreign investor.

The majority of investment from Australia has been in the areas of mining and financial services, which reflects our own expertise and industry structure. Even in difficult economic times, Australian companies such as P&O, ANZ Bank and Commonwealth Bank have expanded their activities here.

Small and medium size enterprises (SMEs) constitute an important part of the Australian economy. Australian SMEs have also become investors in Indonesia - sharing business and technical expertise with the new generation of Indonesian small business people.

As part of Australia's commitment to promoting investment opportunities in Indonesia, last December the Australian Government assisted the Indonesian Bank Restructuring Agency (IBRA) to showcase its assets to potential Australian investors. The reaction was very positive.

And to pave the way for even greater investment and economic cooperation, Ministers have agreed to a high level trade and investment mission, like the one I am leading this week, to visit Australia and Indonesia in 2001.

Building on our success

There is much we can do to build on our economic success.

At our meeting in Canberra last December, Ministers from Australia and Indonesia focussed on ways in which we can improve commercial opportunities for exporters in both countries. Business and political leaders will meet again in 2001 to further promote business ties, particularly in reducing the barriers to trade and investment.

Indeed, one of the major reasons for the strong trading relationship between Indonesia and Australia has been the firm commitment by both governments to develop closer economic cooperation.

Australia and Indonesia have steadily removed commercial barriers to allow business in both countries to do what they do best: create jobs and income. Indonesia is now pursuing a broad-ranging economic reform program that promises to remove many of the pre-crisis weaknesses and lay the foundations for sustained long-term growth.

As members of the Cairns Group of agriculture exporters, our countries have worked together to bring down barriers to agricultural trade and reduce subsidies, to the benefit of our farmers, food producers and consumers alike.

Australia's Development Cooperation Program has also been right for the times. We acted quickly in the wake of the economic crisis to raise development cooperation with Indonesia - in fact by 22 per cent to $120m. That level has been maintained. A feature has been the rapid provision of high level technical assistance to supporting key economic agencies including the Ministry of Finance, IBRA and Bank Indonesia. The program will continue to focus on supporting Indonesia own efforts to achieving long term sustainable development.

Australia's broader trade agenda

I would like to briefly touch on Australia's broader trade agenda, elements of which are of direct relevance to our bilateral relationship.

Support for a multilateral, rule-based trading system under the WTO continues to be the fundamental basis of Australia's trade policy. Such a system, we believe, offers the best way to deliver a more equitable, open and predictable trading environment for exporters, in Australia and elsewhere.

Australia remains strongly committed to a new market-access focused round of WTO trade negotiations in 2001. We are pressing ahead vigorously with the mandated negotiations on agriculture and services, and encouraging support for further preparatory work in industrial tariffs. Progress in these areas will help build support for a new round.

The support for a new round launch that was given at last years APEC Leaders meeting in Brunei - in which, of course, both Australia and Indonesia participated - was very welcome.

Australia is also pursuing a number of trade initiatives at the regional and bilateral levels, some of which will have an impact on the activities of many of you here today. The most relevant of those, of course, is the agreement last October by ASEAN and CER Ministers to work towards a Closer Economic Partnership (CEP) which will further our economic integration with ASEAN. Separate studies with Japan and Korea to identify ways to strengthen economic relations with Australia are also either under way or proposed.

Australia is open to concluding free trade agreements, such as one currently under negotiation with Singapore, if they would deliver significant market access gains to Australia that cannot be achieved in a similar timeframe elsewhere. FTAs will provide momentum to our wider trade policy objectives in APEC and the WTO, and we would want to see any progress in regional trade liberalisation multilateralised as soon as possible through WTO negotiations.

Conclusion

Ladies and gentlemen, Australia's has strong ties to Indonesia's economy, and to its long-term future.

In 1998, during the economic crisis, Australia played a leading role in international efforts to support the Indonesian economy. That included increasing our bilateral aid by about 22 percent and our preparedness to contribute A$1 billion in second tier financing as part of Indonesia's IMF-supported economic restructuring program.

Business communities in both countries have retained a strong commitment to one another and to the future economic development, despite the many changes in the economic and political landscape of recent years.

This practical long-term commitment, coupled with proximity and natural complementarities of trade, will continue to provide major benefits to the peoples of both countries for many years to come.


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