Invisible Partnership
    Category: Issues & Ideas By : Sonya Angraini and Jane Natasha Rusli Read : 1371 Date : Tuesday, August 11, 2015 - 21:00:26

    Ahmad Zamroni / Forbes Indonesia

    Being a career diplomat, Paul Grigson was appointed as the Australian ambassador to Indonesia in January this year. He has held a number of senior embassy staff positions, such as senior career officer with the Department of Foreign Affairs and Trade and chief of staff to the Minister for Foreign Affairs. In 2014, he was Australia’s Special Representative to Pakistan and Afghanistan. He has served as the Ambassador to Thailand (2008 – 2010) and Myanmar (2003 – 2004), as well as Deputy Ambassador in Cambodia (1993 – 1995). Paul granted Forbes Indonesia an interview in his residence in July, talking about the relationship between Indonesia and Australia, especially after he was withdrawn from Indonesia in April following the executions of the two Australians who were part of the Bali Nine drug smugglers, Andrew Chan and Myuran Sukumaran. He returned to Jakarta in June.

    What happened after the recent execution? How did you restore the relationship with Indonesia?
    The important element to understand between Indonesia and Australia is that we will have differences in opinion about policy. If there is one thing I can guarantee you is that we will have ups and downs, so it is more important to look at the underpinnings of the relationship. Business links between us are more of a reflection of the state of economy in both countries rather than political differences. Indonesia is an important market for Australia as we are an important market for Indonesia. When you say to me how do I restore the relationship, my answer is actually I don’t think there’s been a break. Many of the connections between us have continued. I am always hesitant to make a judgment about the quality of relationship based on whether we were having an argument about the differences because Indonesia pursues its national interests and Australia will pursue ours.

    So you don’t think the Indonesia and Australia relationship is currently in a critical condition?
    No, I don’t. In a mature relationship, it is important that we are able to have a difference in opinion, without it becoming a measure of how good our relationship is. From my perspective, I spend 95% of my time on positive issues and 5% of my time on problems.

    What is your perspective on Indonesia’s economy?
    The long-term prospects of Indonesia are good. I think it’s a challenge in Indonesia as it is in Australia in terms of regulatory reform and the environment for foreign investment. There’s a lot of work to be done on the way through. The global environment for investment is very competitive and I know your president is very keen on improving the foreign investor environment and that will be very important for higher growth rates.

    In your view, what are the challenges?
    A big issue in any country is business certainty. Business is looking for decisions and the implementation of those decisions in a way that they can understand. That’s the first. The second is the global supply chain. The countries that I think will do best in the future are countries that have worked to insert themselves into the global supply chain. This requires careful thinking about open markets. I think that’s a tough job for any government, but it will be a good focus.

    In terms of investment, how much does Australia have in Indonesia?
    We made about $4 billion investment last year to Indonesia. It is from about 250 companies. It is across a broad range of sectors, mostly in resources and energy, but you see an increasing number of Australian companies in financial services, with ANZ and Commonwealth probably the best known. The investment has expanded into other areas, which provides terrific opportunities for Australia and Indonesia in terms of generating new jobs. There are a lot of big companies here. There is an increased interest in services and investment in both directions, which is interesting since in the past we focused so much on traded goods.

    Are there any new investment plans this year?
    Coca Cola Amatil increased its investment just this year and as did Telstra, in a deal with Telecom. I think the sectors of most interest to Australian companies in the future will be general services, but particularly IT, as well as mining services. There has been a high-end tech-based development around agribusiness in Australia and I think we are going to see some of that flow through Indonesia as well.

    Australia attains many of its resources from Indonesia. How has this helped the development in Australia?
    The trade between Australia and Indonesia has worked to the advantage of both. We have tended to export particular expertise to Indonesia, often around industrial processes. Australians are very efficient miners, they do as little damage to the environment as possible and they obey the law and pay tax.

    What do you think of the overall trade between Australia and Indonesia?
    We do very well in traded goods and services and there is always room for improvement. Property investment is traditionally done very well from Indonesia to Australia, but there are other prospects around agribusiness, biotechnology and renewable energy. The corporate practice in Indonesia has been to invest domestically, but as you get bigger, you need to diversify. We get a lot of investment from Indonesia through Singapore, but I’d like to encourage more direct investment.

    What are the biggest exports from Indonesia to Australia and vice versa?
    From Australia to Indonesia is cattle and wheat. There has been an argument about cattle but in my view, it misses the big picture. Beef consumption in Indonesia is 2.7 kg per head per year, which is very low, compared to global metrics. So there is lots of space for the Indonesian market to grow. Indonesia will never be able to compete with Australia in terms of raising cattle because the key input is land and you need big pieces of land. However, what Indonesia is good at, and probably better than us, is fattening cattle. If you look at it, we are good at one part of the process, while Indonesia is good at another part of it, so why not make money for everybody rather than having continuing debates. We understand the importance of domestic production, but the market is so big that there is space for both imported and domestically produced products. That’s the sort of approach I am trying to encourage.

    For property investment, Australia is revising the regulation on foreign investment. Can you elaborate on this?
    We are a foreign-investment dependent economy. Without it, Australia will not have been able to develop the way it has. So we have always been very welcoming to foreign investment. For agriculture land, for investment over A$15 million, there will be an approval process. The only other change around property investment is that we allow foreign investment in residential property, in new development, and for some cases, in existing development. We introduce a strict enforcement for those rules and an application fee that pays for the processing of them. I don’t think there will be a great downturn in property in Australia. We’ve done very well, our construction industry has done very well out of foreign interest in property in Australia. Our rules are already liberal.

    Australia has been providing scholarships for Indonesian students, especially those from the eastern part of Indonesia. What outcomes do you expect from this?
    I have to say that one of the greatest contributions Indonesia has made to Australia is through education, in terms of the diversity and the quality of students that come to Australia. Indonesian students in Australia do very well. They go to best schools or universities, and they are often very high performance so we get very good quality postgraduates students from Indonesia. These students are very good ambassadors to Indonesia. Indonesian students in Australia are about 17,000 and growing. We see working on education in Australia as an important contribution in improving productivity and competitiveness in Indonesia. From eastern Indonesia, we hope to improve the employability of people. We are going to move over the next couple of years from development assistance in the traditional sense to trying to help Indonesia and Australia to grow economic capacity.

    Tourism is also a big part of the Indonesia and Australia relationship. Is there any specific collaboration in the tourism sector?
    Most Australians, when they look to Indonesia, they go to Bali. However, there has been an increased interest in adventure-style or eco-style tourism. Generally, I think Indonesia has prospects for that. Each year, we look at what we might do in terms of building tourism capacity in Indonesia. In the past, we sent some officials from the tourism ministry to Australia for short courses and we will look on doing that again. We also encourage more Indonesians to think about Australia as a tourist destination. We are seeing some growth in that.