Economic developments in Indonesia, and more broadly across Asean member countries, represent a tremendous opportunity for WA.
The early months of 2015 proved a difficult time for the relationship between Indonesia and Australia, with the bond between the two countries and neighbours strained over a number of high-profile incidents.
Despite widespread reportage of the issues in dispute, economic relations continued to strengthen during this period.
The past four months, in particular, have been marked by clear signals that both countries want to solidify ties.
A key recent event was the visit by Australian Trade Minister Andrew Robb to Jakarta for the Indonesia-Australia Business Week. This forum was focused on further developing the firm working relationships between the two countries.
Mr Robb also participated in Indonesia-Australia Business Council Conference in Yogyakarta, during which the issue of trade ties was discussed, as well as the potential for further trade between businesses.
Indonesia was just WA’s seventh largest trading partner during 2014. With a population of 250 million, however, the state’s closest northern neighbour represents a significant opportunity for WA trade-oriented businesses, as about half of Indonesia’s population is considered middle class.
Regional trade growth
Last month marked the launch of the ASEAN Economic Community, bringing opportunities for far-off countries to trade and invest in a region with 600 million people.
From WA’s perspective, the Indonesian province of East Java is one region that can be a gateway to trade with the Asean economy.
This year is the 25-year anniversary of sister state relationship between WA and East Java. To commemorate this relationship, the governor of East Java, along with the speaker of provincial parliament and local government, visited Perth on November 15-16.
During the visit, the governor and Mr Barnett signed the re-affirmation of the sister state/ province relationship agreement. In addition, the head of the East Java Investment Board was headline speaker in two investment seminars with local partners.
East Java is one of the most advanced and developed provinces in Indonesia. It has become the capital of eastern Indonesia in sectors such as education, maritime activity and agriculture.
The East Java economy has continued to show strong growth; it has one of the highest GDPs of any of Indonesia’s provinces and has consistently maintained growth rate above the national average.
East Java boasts a number of Indonesia’s leading corporations, and has now become the centre of trade and business in Indonesia (outside Jakarta). For example, WA grain exporter CBH Group has an Indonesian joint venture and operations in Surabaya, the capital of East Java.
The second biggest city in Indonesia after Jakarta, Surabaya is the manufacturing hub of eastern Indonesia. It has a large consumer goods manufacturing sector and produces high quality, value added and ready-to-use goods for at least 130 million Indonesian.
To cater to the high demand, East Java is now developing Java Integrated Industrial and Ports Estate (JIIPE), a massive complex that integrates a deep-sea port, an industrial estate (including iron and steel processing), and a residential estate into one package. This estate is expected to be Indonesia’s biggest industrial estate and will produce, manufacture, and distribute a huge range of goods and materials.
The sister state relationship between WA and East Java presents many opportunities for both regions.
The combination of East Java’s prime location as the hub to Indonesia, even to South-East Asia, and WA’s massive production of agriculture commodities and mining, is what the two states (and the two countries) need to foster their international trade and economy.
WA can profit from low-cost production in East Java to process its commodities and, as a bonus, it can immediately get access to Indonesia and the Asean marketplace.
*The views expressed are those of the author and do not reflect those of any institution.
Vice-consul on economic affairs
Indonesian Consulate General