Indonesia on reform path

Indonesia has turned the bend of Paul Keating’s legendary ‘J curve’ and is improving its attractiveness as a trade destination on the back of recent reforms, according to the regional director of the Western Australia Trade and Investment Office in Indonesia.

Trevor Boughton, who has held the position for the past two years, told a recent forum in Perth that Indonesia presented significant opportunities in terms of setting up in the country, but that further reforms were needed to address business concerns.

“The country has certainly turned the ‘J curve’ and is no longer going backwards,” Mr Boughton told the forum, which was organised by the Australia-Indonesia Business Council and the Department of Industry and Resources.

And while the legal system is not yet “predictable and accountable”, he said the country had come a long way with recent reforms.

Changes to labour laws following the election last October of Indonesian president Susilo Bambang Yudhoyono were among the most noteworthy of these reforms.

“SBY [Susilo Bambang Yudhoyono] has changed the perceptions about what you can get away with up there,” Mr Boughton told the forum.

SBY has also cleared the way for mining and exploration licenses in areas previously inaccessible due to forestry regulations.

There remained considerable scope for reform, however, with a number of inconsistencies and jurisdictions in the legal system making it difficult to do business, Mr Boughton said.

Another concern was a lack of investment in infrastructure.

“There has not been any serious investment in infrastructure in the past five years,” Mr Boughton said.

The skills shortage currently affecting the state was also having an impact on the ability of WA contractors to source more work in Indonesia, with Indonesian businesses starting to look north for these services.

Mr Boughton said WA’s focus on other markets had blinded it to significant opportunities in Indonesia.

There was little spare capacity in Indonesia’s domestic market, he told the forum, and the Indonesians were seeking goods and services in a number of industries, including consumer goods, IT, clothing and footwear, to name a few.

The ‘China effect’ was also having an influence in Indonesia, Mr Boughton said, with Indonesia sourcing many manufactured products from China.

Despite increasingly strong ties between Australia and Indonesia, and the response of the WA business community to the Boxing Day tsunami, Perth had “fallen off the map” from the view held by Indonesians 15 years ago, when it became a sister state to the Indonesian province of East Java.

“Opportunities are not for exporting there so much as in setting up in the country,” Mr Boughton said.

“You have to be there, preferably face to face, but if not, then by telephone or email.”