Perhaps Australian businesses have been slow to embrace economic opportunities because they misunderstand the make-up of the Indonesian economy.
Unlike some economies in the region, Indonesia doesn’t rely predominantly on exports for growth, says Benny Tabalujan, an adjunct professor at the Melbourne Business School.
“During the 2008-2009 financial crisis, and even now, the Indonesian economy has been chugging along nicely at 6% growth per year. A lot of this is off local domestic business growth. Indonesia isn’t like Singapore or Hong Kong, which are both very open economies where external shocks make a big impact. So the financial crisis affected it, but nowhere near to the same extent.”
Tabaluhjan says Indonesia has 240 million people, many of whom are rapidly moving into middle-income status. Their domestic demand is fuelling growth.
The reception
Should Australians start doing business in Indonesia, would they be welcome? More than they expect, experts say.
“Australia’s attitudes to Indonesia haven’t changed for 10 years. We’re stuck in a time-warp,” Taylor says. “While surveys show their attitudes to us for the past eight or nine years have been warming, it hasn’t happened here.”
Australia and Indonesia have had a troubled history, and encounters with Indonesia’s legal and political system have often done little to showcase the country.
Both sides certainly have grievances. From Australia’s point of view, recent years have seen Indonesia’s harsh drug laws putting Australians behind bars. A bombing in Bali claimed 88 Australian lives in 2002. And going back further into our history, we are used to seeing Indonesia as the aggressor in East Timor, and as responsible for the murder of the Balibo Five (five Australia-based journalists who were reporting on the conflict) in 1975.
But despite any grievances they might have, Indonesian attitudes towards Australia have thawed significantly. A March Lowy Institute poll found Australia was the fourth most warmly-regarded country, with 62% of respondents saying they regarded Australia warmly. Australia was deemed the second most trusted country to act responsibly the world.
“We are the biggest aid donor to Indonesia, and a recognition of that is reflected in the Lowy Institute poll,” foreign minister Bob Carr said at the time.
However, Tabalujan offers an important caveat.
“Indonesia is a bit like China in the sense that it’s a big place,” he says. “It’s hard to generalise. One part of Indonesia can be quite different to the other parts. How Westerners are viewed is often driven by where and how they operate.”
The challenges
The business relationship between the two countries is warm. “Despite the political lumps and bumps, business with Indonesia seems to carry on,” Taylor says.
“But I’d also say it’s very underdone… When you look at the volume and extent of business between the two on both sides compared to their other trading partners, it’s clear there’s a long way to go.”
Asked why Australia and Indonesia do not have a closer business relationship, Taylor says it’s partly about China.
“We’re overwhelmed, understandably, by China, and a lot of businesses haven’t completely understood the huge emergence of Indonesia as a regional and world economic power in the last few years. Suharto fell 14 years ago. We’ve missed this huge emerging economy on our doorstep, with a big middle class and a huge need for infrastructure [and] services.”
Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.
