Kim Chance offers blunt advice on Indonesia investment

Duncan Graham, Contributor The Jakata Post, Surabaya

Kim Chance offered a blunt message to the Nervous Nellies of Australian business fearful of investing in Indonesia, the perceived land of terror: "Go to Indonesia and learn that it is safe or the competition will cut the ground out from under you," he said.

"Of course there are sharks in Indonesian business -- and crocodiles in Australian business. But they're a minority."

Western Australia's minister for agriculture and food has an unusual approach to the media; he's been a politician for 15 years and a minister for the past six so by now should have mastered the art of doublespeak.

Maybe he guards his words back in his home state where journalists think they have a mortgage on cynicism. But in Indonesia Chance was so upbeat about promoting trade that his edgy minders were constantly trying to insert qualifiers and disclaimers into his enthusiastic predictions.

As he rattled off a list of present and future possibilities -- halal meat exports from Indonesia using cattle imported from Australia, Boer goats into Sumatra, Australian raw stock for steel mills, Indonesian laboratories providing tissue culture services, Indonesia manufacturing parabolic solar collectors, village bio-diesel plants using sunflower seeds, importing windmills to lift deep-well water -- the bureaucrats blanched.

But however difficult the implementation of these plans, any public servant keen to stay on the payroll doesn't gainsay a minister setting out his vision -- even when adding measurably to the workload.

"International relations tend to be over complicated," Chance said.

"I'm here to talk trade but that's not the most important thing. This is about people, about developing good relationships and helping Australians understand more about Indonesia.

"We need to stop considering each other as separate countries. It's far more helpful to take a regional approach. We (in WA) have the raw commodities -- you in Indonesia have the labor and the skills for value adding.

"What sort of opportunities? It's as broad as your imagination. Think of the synergies."

WA is a resource rich, export-dependent state. It produces huge quantities of food -- mainly grains -- and mines vast reserves of minerals, particularly iron, gold, nickel and bauxite, used to make aluminum.

Though it has a population of little more than two million, WA is currently riding an economic boom. There's a huge shortage of skilled labor. Wages are high ensuring that manufacturing can't compete against imports from low-cost workforce countries.

But in the nation next door to the north there's a surplus of labor, and according to Chance, a keenness to use local skills in innovative ways and develop new industries.

Later this year Indonesia will have the chance to showcase its products at the Perth Royal Show, WA's most prestigious annual event, staged for a week in the big state's capital city. (Perth is just over three hours flying time from Denpasar)

Past guest nations at the show have included China, Germany, Japan and Malaysia. East Java, which has a 17-year sister-state relationship with WA, has booked a third of the floor space at the Indonesian stand to push its goods and culture.

Chance was in Indonesia for five days in June to check progress with the Royal Show arrangements and help boost two-way trade.

He's been to Indonesia before and several times to the Middle East, ramping sales of cattle and farm produce and checking end-use arrangements.

In Batu, a hillltown outside Malang in central East Java famous for its floriculture and horticulture, Chance watched the signing of a memorandum of understanding. This was between a local company and Western Potatoes Ltd for the supply of seed potatoes.

Growers based at Nongkojajar on the uplands of the Bromo-Semeru massif have been importing spuds from other WA suppliers for the past decade, boosting yields by two to three times.

"WA is geographically isolated from the Eastern states of Australia (there's a desert in between) so we can maintain high standards of quarantine," said Chance.

"We don't suffer from potato blight, which stops exports from countries like the Netherlands. Consumer demand for potatoes in Indonesia is phenomenal -- it's growing at about 50 percent a year.

"At the moment most of this is going into the snack food market. But in the future potatoes are likely to help provide food security for Indonesians as the margin between rice production and rice consumption narrows.

"In Australia we have expertise in agricultural science, stock genetics, veterinary medicine and animal nutrition. The trade in services follows trade in commodities." (see side bar)

The other rural boom product is milk. As Indonesian consumers move from powdered to long-life UHT (ultra-high temperature) processed milk, the demand for the liquid product is booming.

Many of the high-yield Friesian dairy cattle now being farmed in East Java originally came from WA.

"I'd like to see Indonesian investors getting involved in the Kimberley (north-western Australia) by buying the leasehold of cattle stations (ranches)," he said. "That helps lock in the supply of animals to Indonesia.

Big, growing but unbalanced

Indonesia is Australia's 10th largest export market.

Apart from petroleum products, Australia's major exports to the archipelago include aluminum, live animals, wheat, sugar and cotton.

And there seems to be plenty of demand -- sales of Australian goods to Indonesia jumped 22.6 percent last year.

In return, Indonesia sends Australia large quantities of gold, paper and wood -- including furniture.

But investment is one-sided.

According to the latest figures from the Australian Bureau of Statistics, Australia has AUD$2.6 billion (Rp 182 trillion) invested in Indonesia.

But Indonesians have sunk just one fifth of this sum into business and property in Australia.

And figures show there are more than 400 Australian companies in Indonesia, with most operating out of Jakarta.