New Zealand Embassy Jakarta, Indonesia

Fiona Acheson: Asian giant comes knocking at door

Fiona Acheson, NZTE's trade commissioner for Indonesia, Malaysia and Brunei. Photo credit: blogs.nzte.govt.nz

Blink and you might have missed it, but from this month New Zealand businesses will have greater and easier access to the fourth largest country in the world - and it's practically on our doorstep.

Indonesia completed the domestic procedures required to enter the Asean-Australia-New Zealand Free Trade Agreement (AANZFTA) in November - the last Asean member state to formally agree to implement the agreement. The FTA will come into force on Tuesday.

This comprehensive economic agreement will allow duty/tariff free access to over 90 per cent of New Zealand goods and services by 2015.

With a GDP growth rate of over 6 per cent, Indonesia is on track to rank among the world's top economies by 2050.

The World Bank predicts the size of Indonesia's economy will overtake Mexico, Turkey and South Korea by 2014.

Up to October 2011, New Zealand exports totalled $865 million, making Indonesia our 9th largest export destination, and imports were $628 million.

Indonesia isn't on the radar for many Kiwi exporters - but it should be.

Many people's views on Indonesia don't go beyond Bali, tsunamis and low incomes, but that's not an up-to-date description.

New Zealand isn't on Indonesia's radar either, beyond the traditional icons of cows, sheep and the Lord of the Rings.

Things are changing though, on both sides.

Indonesia's luxury brand malls are testament to the existence of affluent consumer segments. There is a rapidly growing and urbanising middle class keen for protein and consumer goods.

Garuda, Indonesia's national airline, has its sights set on flying direct to New Zealand which will be a game-changer for education, tourism and business exchanges between the two countries. Indonesia is already among the fastest-growing sources of tourists to New Zealand.

The Indonesian Government is also looking for foreign companies doing business there to contribute to the country's economic development particularly through investment, but also through knowledge transfer and capability building.

Indonesia recently released its masterplan for economic development through to 2025, including a goal to improve agricultural productivity (which contributes 12 per cent to GDP). The FTA will help to strengthen New Zealand's agricultural relationship with Indonesia.

A prime aim will be to build on our position as a recognised agriculture and food security partner for Indonesia which has one of the fastest growing food and beverage industries in Southeast Asia, thanks to its strong economic growth and increasing urbanisation.

The supermarket sector is growing at the astonishing rate of about 30 per cent a year and the domestic food industry is valued at more than $25 billion.

There is demand for New Zealand food and beverage products and opportunities exist with value-added products such as convenience foods as relative incomes increase and the distribution and manufacturing of products becomes more sophisticated.

But it's not all about food and beverages. New Zealand companies are participating in engineering and construction, as well as the aviation and airport sector.

The challenge of being an archipelago is driving growth in everything from airport re-development, to pilot training, to the need for aircraft that can land on remote, smaller and less developed runways.

Indonesia has big goals for its geothermal resources aiming to become the world's largest producer in the next few years.

New Zealand enjoys a big reputation in Indonesia (in fact New Zealand is considered the Mecca for geothermal expertise) and there will be substantial investment in geothermal power generation over the next few years.

Technology company Open Cloud has its biggest customer in Telkomsel, Indonesia's largest telco company, and Webco, which makes web offset printing presses for the newspaper industry, is also experiencing strong growth in Indonesia.

There are also opportunities for New Zealand service providers in infrastructure, tourism, education and IT.

While businesses and investors have been focused on China and India in recent decades, Indonesia's strategic location provides unique access to China, India, Southeast Asia and Australia.

Like China and India, Indonesia is described as a different, difficult and complex place to do business, but it's a market where many businesses are succeeding and happy with the profits they're making.

Finding the right local partner is essential, and tenacity is a critical ingredient for success.

And one of the best things about doing business, in or out of Jakarta, is the people.

They're charming, friendly and cultured. Once you have built a relationship you can trust it.

It becomes a friendship, not just a business engagement. The challenge is to put aside some time to explore Indonesia further to better understand if this Southeast Asian giant should become a prime target for your overseas expansion.

Fiona Acheson is NZTE's trade commissioner for Indonesia, Malaysia and Brunei.

 

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