Debnath Guharoy,
AIBC National President

President's Column

Dear Members and Friends,

First, the good news. Invited by both governments to contribute to the Indonesia Australia Comprehensive Economic Partnership Agreement  -IA CEPA- the bilateral Business Partnership Group has begun its work in real earnest. After a hiatus of three years, discussions restarted  in Perth. The CEPA is far-reaching in scope, beyond the boundaries of the traditional Free Trade Agreement. It is a unique opportunity for two very different neighbours bound by close proximity to produce an agreement worthy of emulation around the world. The cultural and economic differences are a challenge for both the negotiating teams. All the more reason to craft a very special agreement that will take advantage of the complementary nature of the two countries.  The problems of one neighbour are opportunities for the other. The needs of both sides can act as catalysts for sectoral growth, job creation and new wealth.

Since Perth, AIBC has hosted stakeholder consultations supported by BPG colleagues ACCI and AIG. Sponsors have readily offered their facilities to make these consultations possible. For a relatively small community interested in doing business in Indonesia, the response from stakeholders has been most reassuring. We have had lively discussions and written submissions from stakeholders spanning industry associations to individual entrepreneurs, services to education, agriculture to tourism. More gatherings are planned in other capital cities. In tandem, BPG counterparts KADIN, APINDO and IABC have been hosting community consultations in Indonesia. The second bilateral meeting of the BPG was held in Jakarta on June 2, attended by Negotiators from both countries. The third round is slated for Melbourne, June 30. The updated Position Paper of the BPG will be submitted to the Negotiators from both countries no later than July 27.

IA-BPG Meeting in the APINDO offices – Jakarta

Judging by the enthusiasm of the Negotiators from both countries, let’s assume we will have something really special in say 12 months from now. Let’s hope that traders and producers in both countries will take advantage of the preferential terms and exports will surge. That would all be very good news. Now for the bad news. There’s a very big risk that such an agreement will further entrench the transactional nature of our trade ties. Only a change of attitude will take Australian investments in to Indonesia. No CEPA can transform that attitudinal reality all by itself. The evidence is clear all too often. Every time any of our listed companies invest anywhere in Asia, they are punished by both the market and the media alike. Successive governments for decades have thrown money at major universities around the country to help change the national perception of Asia in general and Indonesia in particular. But the results leave much to be desired. Several statistics are travelling in the wrong direction.

Our relationship with our neighbour will not change till hundreds more of our businesses engage. The difference between selling and investing is obvious. It is when partners trust each other, when people appreciate people that real change happens. We need look no further than Japan for a shining example of the power of business to do good. At the end of World War 2, the Japanese were the most hated people in Indonesia. It wasn’t the Emperor but the Toyotas and Hondas of Japan that have made them the most loved, most respected people in Indonesia today. They brought hundreds of their suppliers with them, who in turn forged partnerships. It was business that was transformational in its influence, at the grassroots.

The irony is that we as a community fear the unknown that Indonesia represents, but we are in fact a popular people in that country. We are failing to embrace the goodwill we enjoy. Most of us haven’t recognised the democratic revolution that is still taking place across the waters. The elite, rattled by the first ‘President of the People’, are fighting back. We can make a big difference if we pick our partners wisely but clinging to the past cannot be good for our future. Only a change of our own attitude towards our neighbour will bring about real transformation, as a nation of the 21st century. No CEPA will do that for us.

That change is what we need to focus on. More leaders from across a wider spectrum of business can show the way for hundreds more to follow. That is what your Council is trying to foster, in every way possible.

Indonesia is changing rapidly, across the social, political and economic facets of life. In many ways, the proof of that desire to change is reflected in the latest version of the ever-shrinking Negative List. Compare it to any from the pre-Jokowi era and you’ll see what I mean. The next one isn’t too far away.

More next month.

Warm regards,
Debnath

AIBC Biennial Conference: Perth, November 13-15 2016

Members and Friends, AIBC is holding its 2016 Biennial Conference at the Esplanade Hotel in Perth during the period November 13-15.  We have planned a comprehensive program focussing on pushing the bilateral trade relationship forward.  Prominent leaders from both countries spanning a wide spectrum of policy makers and business builders will contribute to a lively series of discussions.

Further information together with a draft program will be published on the AIBC Website in the coming weeks.

Queensland Update

BKPM Investment Networking Forum - Queensland

The Embassy of the Republic of Indonesia and BKPM were in town recently, promoting the new investment climate in Indonesia as the Negative List continues to shrink. Ambassador Nadjib Riphat Kesoema did the honours, introducing the changing Indonesia of today as well as the cast of speakers to the very full house. BKPM Vice Chairman Himawan Hariyoga drew attention to the numerous opportunities as well as the newly introduced one-stop-shop service provided to investors. AIBC President Debnath Guharoy moderated the session showcasing Australian success stories, exemplified by TelkomTelstra’s CEO Erik Meijer and Austrex’s Managing Director Justin Slaughter. The event also offered two concurrent forums, one focused on Tourism and the other on Infrastructure. Speakers from the Ministry of Tourism and Pelindo III contributed to the discussions.

KPMG Education Industry Forum

The Australia Indonesia Business Council (AIBC) in Queensland in partnership with KPMG Australia held a highly successful Education Industry Forum in Brisbane on Thursday 26th May to discuss opportunities for increased partnerships and cooperation in the education sector between Indonesia and Queensland. We were delighted to have Dr Mardiasmo, Vice Minister for Finance, Republic of Indonesia, and Mr Abdul Wahab Bangkona, Secretary General of the Ministry of Manpower, Republic of Indonesia, to join a panel of experts representing the tertiary, schools and VET sectors in Queensland. Our panellists included:

• David East, Leader and Partner of Transactions and Restructuring, KPMG Indonesia;
   
• Janelle Chapman, Director, TAFE Queensland International;
   
• Dr Jessica Gallagher, Deputy Director (Global Engagement), University of Queensland;
   
• Tony Nutt, Dean of Middle and Senior Schools, Canterbury College

Pictured below and also in attendance at the event were a group of 26 Indonesian teachers and principals from the Ministry of Religious Affairs who are currently attending a DFAT-funded Australian Awards short-course program at Griffith University.

To read the Briefing Paper preapraed by KPMG and AIBC QLD following the Education industry Forum, please click here.
 

Kathleen Turner,
Chairman-Australia Indonesia Business Council (AIBC) QLD
QLDChair@aibc.com.au

Victorian Update

Investment Forum and Networking event with BKPM Chairman, Franky Sibarani.

On Monday May 9, AIBC, in conjunction with The Embassy of Indonesia, The Consulate General of Indonesia in Melbourne and BKPM Australia had the pleasure of hosting an Indonesia Investment Forum in Melbourne with guest speaker BKPM Chairman, Franky Sibarani in an effort to boost investment and increase capital inflows from Australia to Indonesia.

Franky advised the audience, "Australia has fewer investments in Indonesia, despite the fact that it is one of the 20 countries with the biggest outward investment. And among the Asean (Association of Southeast Asian Nations) countries, Indonesia is only listed in third place after Singapore and Malaysia (as Australian investment destinations),".

The BKPM Chairman went on to add "A lack of information regarding investment potential and policies was the main reason Indonesia attracted fewer investments from Australia. "We came here to inform Australian investors that we are now emphasizing a serviceoriented system rather than a permitoriented system".  To read the full Press Release, please click here.

IA-CEPA/BPG FORUM

The Business Partnership Group (BPG), consisting of ACCI, AIG, AIBC and their Indonesian counterparts Apindo, Kadin and IABC, are running forums around Australia giving business an opportunity to provide advice and input on the Indonesia-Australia Comprehensive Economic Partnership (IA-CEPA).  The first BPG forum was held in Perth on 26 April and the next meeting with be in Jakarta on 2 June.

On Thursday 19 May, Corrs Chambers Westgarth held a BPG forum in Melbourne with approximately 30 people in attendance.  James North, from the Free Trade Agreement Division of DFAT, provided an overview of IA-CEPA and confirmed the negotiations are a top priority for both the Australian and Indonesian Trade Ministers.  The last round of negotiations was in May.  The plan is for another round of negotiations every 3 months with the fourth round in Australia in August 2016 and the fifth round in Indonesia in November 2016.  There will be ongoing engagement between trade rounds.

The BPG process will report to the Chief Negotiators before the fourth round.  The AIBC and DFAT also encourage direct submissions from business to be forwarded to: ia-cepa@dfat.gov.au.  DFAT encourages business to be ambitious, but also realistic, as to what can be achieved through the negotiations.

Further updates regarding negotiations and outcomes will be provided in future AIBC Newsletters.

AIBC Victorian Committee Changes

It is with great pleasure that we announce Mr Jared Heath, Special Counsel of Corrs Chambers Westgarth has been appointed as Vice Chairman of the VIC Committee replacing the previous outgoing Vice Chair - Mr Mark Switkowski.  We also welcome new Committee Member - Mr Simon McKenna, Director at PwC.

Murli Thadani
Chairman-Australia Indonesia Business Council (AIBC) VIC
VICChair@aibc.com.au

South Australia Update

Two successful Networking drinks sessions were held on Thursday 17 March and Thursday 12 May at the Franklin Hotel. SA members are encouraged to come along to the next networking drinks to remain current on events and news in SA branch.

SA Trade Delegation to Indonesia: 29 May - 2 June 2016

The AIBC co-hosted the Department of State Development pre-mission briefing held on 12 April.

Our very own Cameron MacDonald presented on behalf of AIBC providing a Chamber and personal perspective of doing business and living with family in Indonesia. The presentation and content were well received and provided much realism to the event. Key point recalled by Chairman was Cameron’s point about ‘It’s not simply a matter of just dumping a product in the market – one has to look at processing efficiencies, place in the value chain, and training, marketing and other value-add’.

Events for remainder of 2016

• Professor Tim Lindsey, chair of the Australia Indonesia Institute, has agreed to speak at an AIBC function later this year – date TBA.
   
• Celebrate the opening of the SA rep office in Jakarta, with an opportunity to meet the new representative – date TBA.
   
• A panel on the food sector and food security in Indonesia – possible topic ‘What Indonesia Wants – Analysis of Indonesia’s food demand to 2050’. We are looking for possible speakers and sponsors – date TBA.
   

Steven Baker,
Chairman-Australia Indonesia Business Council (AIBC) SA
SAChair@aibc.com.au

Western Australia Update

AIBC / KPMG: Investing and Doing Business in Indonesia: An Experienced Insiders View

On Monday, 23rd May, KPMG and AIBC WA welcomed David East, Partner, Head of Transaction Services with PT KPMG, and Brad Rogers, CEO of BIS Industries, who delivered a forum on Investing and Doing Business in Indonesia. These experienced insiders offered guests a range of personal lessons from their time doing business in Indonesia.

The Indonesian investment landscape is changing. According to David, deal opportunities exist in thousands of family owned companies that operate in highly fragmented industries. Therefore, finding the right local Indonesian business partner is vital.

While Indonesia continues to experience some challenges around legal uncertainty and regulatory risk, recent legislative changes offer hope for a brighter future. Human capital shortages also present a major hurdle for foreign investors.  David drew on national statistics that suggested corporate demand for skilled and experienced Indonesian professionals, across various disciplines, is outstripping supply.

When investing in Indonesia, organisations need to have appetite for some risk without being reckless.  By making a long-term commitment; developing the right strategy; conducting appropriate market entry research; and conducting integrity due diligence, then, David suggested, organisations can avoid possible future headaches. As KPMG has over 40 years of experience operating in Indonesia, it is well placed to assist companies and individuals from the start of their investment journey.

Brad Rogers, CEO of BIS Industries, provided a snapshot of the organisation’s expansion into Indonesia. After experiencing significant growth during Western Australia’s mining boom, BIS Industries looked beyond Australia for possible growth opportunities. Understanding and communicating the value proposition that Indonesia offered was important in crafting the business strategy and managing stakeholder expectations. Canvassing and planning for risk was also essential to the organisation’s commitment to Indonesia.

Brad articulated that BIS Industries undertook a deliberate plan to start small in Indonesia. The organisation accepted that mistakes would be made, but by starting small, the organisation could learn and grow from those mistakes. Brad stressed the importance of employing local workers as, put simply, it is good business practice to do so.

As a newcomer to Indonesia, Brad identified some of the risks that BIS Industries needed to consider when entering the country. For example, planning for delays; the location of BIS’ headquarters (i.e. domicile of the business); and regulatory restrictions on certain types of businesses and their capital structures.

By taking the time to research and plan; build relationships with reliable and reputable local business partners; engaging early and utilising the services of government agencies, such as BKPM, WA State Government, and Austrade; and having the right personnel in place, foreign investors can succeed in Indonesia. Starting small, learning from mistakes, then growing is essential.

Following the presentations from David and Brad, audience members asked questions around joint ventures, education, Public-Private-Partnerships, and the Indonesia Australia-Comprehensive Economic Partnership Agreement.

AIBC WA warmly thanks David East and Brad Rogers for sharing their valuable insights.  Special thanks to Matt Forbes from KPMG for his efforts in organising this event.

KPMG’s Investing in Indonesia publication can be found here.

David East’s slides can be found here.

Brad Rogers’ slides can be found here.

Greg Gaunt,
Chairman - Australia Indonesia Business Council (AIBC) WA
WAChair@aibc.com.au

Indoview

Indonesia's Proposed New Mining Law

In his latest article, Bill Sullivan of Christian Teo Purwono & Partners, looks at the recently published draft of Indonesia’s proposed new Mining Law.

"The April Draft Mining Law represents only the first step in the process of enacting a New Mining Law for Indonesia. Nevertheless, the April Draft Mining Law provides a good opportunity to see ESDM’s most recent thinking as to what the New Mining Law should contain as well as how that thinking has evolved over time.

The April Draft Mining Law is very much a 'mixed bag' for the private sector and foreign investors, with some positive aspects as well as, unfortunately, some seriously negative aspects."

To read this article in full, click here.

KADIN Business Support Desk Newsletter

The Indonesian Chamber of Commerce and Industry (KADIN), has released its latest Bulletin on Indonesia Trade & Investment News.

To read this Bulletin, click here.
 

Jokowi's reform efforts are beginning to pay off

JAKARTA It has been a quarter century since a new international airport terminal was built in Indonesia's capital; the need for better facilities is badly straining the city's air transport. Now that bottleneck is about to be eased.

To read the full article, please click here.