NO BRA TRADE BAR

BTW: What’s free about Free Trade?

On occasional trips to Australia my wife heads to a major no-frills store that sells almost everything.  Here she buys bras that fit, are comfortable, long lasting and cheaper than in her mother country. 
They’re made in Indonesia.

She also stocks up with a brand of Indonesian noodles she won’t buy in her homeland.  She reasons that exporters have to meet Australian quality and content standards, so consumers in Indonesia get second class goods or foods with additives not allowed Down Under.

Sounds daft – but maybe she’s right.  Garden tools bought in Oz are still snipping sharply after their local equivalents – three times more expensive - have rusted away.  

In the Australian store domestic electrical appliances, also from Indonesia, are guaranteed for a year.  If a purchase is crook (defective) it’s speedily swapped,  plus an apology. Try doing that in Indonesia where complainants are considered criminals out to swindle.  

Australian politicians have been crying hallelujah over a new free trade deal, the clumsily titled Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA).

After ten years in the talking the agreement was signed in March.  It’s waiting for the new politicians in the DPR  to uncap their pens and sign away some tariffs.

In reality the underwear and kitchenware now on shelves Down Under didn’t jump excise hoops as none have existed for many years.  So the agreement is no big deal to flexible Indonesian exporters.
They’re the smarties who’ve learned that one size doesn’t fit all markets.

Indonesians want cheap so get cheap.  Australians also want cheap, but with quality that’s enforceable by law.  So the  kettle or toaster on display in Australia may have been built with more care than those on sale in the Republic, though both came from the same factory.

Tariffs are taxes often added for political rather than economic reasons.  Nationalist governments use them to shield slack producers from cheaper imports.  

When you’ve finished enjoying this BTW take a peek in your pantry.  If you’re prone to xenophobia best sit down before reading the small print on the sack:  the Archipelago’s staple food may have come from Thailand or Vietnam where they grow the white grain cheaper than in Java.

Australian cockies (farmers) are highly-mechanized growers of wheat, sugar, rice and other foods in such huge quantities they need to sell overseas.  Importers want the goodies but don’t want to upset farmers or self-sufficiency advocates.

If the IA-CEPA is eventually waved through, we shoppers have a question:  Will prices plummet?  Let’s be optimistic:  the chances are about equal to sea levels dropping and Jakarta air becoming refreshing.  

There are many other outstretched hands to fill  before Indonesians get a taste of Australia – particularly if it’s alcoholic.  Here the issue is religion for Muslims aren’t supposed to booze.  So no free trade here.

A bottle of red or white wine starts below AUD $10 (RP 96,000) in its state of origin.  Jakarta doesn’t want us suffering hangovers and Islamic organizations getting stroppy, so slaps on taxes of up to 140 per cent.

Indonesian exporters face similar imposts, like quarantine and packaging rules. This nation is a mighty producer of tobacco but Canberra doesn’t want citizens getting lung cancer so adds a 70 per cent tax.

Nicotine addicts should not expect  packs below AUD $35 even though the Indonesian product retails for under $2.  If you’re thinking of stuffing  fags in your bags check your credit card limit; only 25 sticks are allowed duty free. A fine reason to quit.

Is the deal being oversold? It’s certainly complex (21 chapters plus annexures and schedules) so not a holiday page-turner. A business organization survey this year found many members unmoved by the FTAs which so excite politicians.

The ABC's business editor Ian Verrender claims FTAs ‘have very little to do with trade, free or otherwise. (They’re) diplomatic agreements, designed to cement relationships and shore up political and defence alliances.

‘The very idea of a free trade agreement is a contradiction. You don't need a complex agreement to trade freely.’

So here’s a holiday tip: To back Indonesian businesses, lift standards and help the nation’s economy, go shop in Australia. Though not for smokes.

 First published in The Jakarta Post 23 November 2019

FTA :BIG SHOW, MANY WORDS, MUCH STILL TO COME

A DONE DEAL - OR A DEAL NOT YET DONE? 

Trying to do business in Java on a Friday is seldom a good idea.

The chantings that Prime Minister Scott Morrison heard mid-morning last Friday were not part of the standard welcome to overseas VIPs, but calling the faithful to prayer. That included Indonesian President Joko ‘Jokowi’ Widodo, much of his Cabinet and most senior bureaucrats.

That Widodo took time to talk to his visitor on the Islamic holy day, when the Asian Games are concluding and campaigning about to start for next April’s presidential election, suggests he sees it’s important to maintain relationships with Australia, even if other politicians are indifferent or openly suspicious.

For the week before Morrison took his first overseas trip as PM, the Australian media ran curtain-raisers claiming a free trade agreement, properly known as the Indonesia Australia Comprehensive Economic Partnership Agreement, or IA-CEPA, was in the bag after an eight-year chase.

Not yet. The document under the PM’s pen was not a ‘trade deal’ as predicted - that may come by year’s end.  It will also have to be ratified by the Indonesian Parliament Dewan Perwakilan Rakyat.

By then all will be engrossed in the upcoming election and in no mood to arouse the anger of protectionists led by Widodo’s rival, Prabowo Subianto, 67.

This will be the former general’s fourth tilt at the presidency and he’s campaigning - much like Donald Trump - on sovereign rights and keeping outsiders outside.

The official release said Widodo and Morrison had ‘successfully concluded negotiations’. A few tid-bits were tossed to the media, like the 500,000 tonnes of ‘feed grains’ getting tariff-free entry; but otherwise it was soft jargon rather than hard facts. 

No surprise for those who read government announcements for a living, and only believe when they can hold the paper up to the light, check the adverbs and lab test the ink.  

Indonesians understand this well. Last month Mohammad Mahfud Mahmodin (known as Mahfud MD), 61, was widely applauded as Widodo’s choice for a running mate.  The popular former judge was waiting in a hotel for the call only to see on TV news another picked just before the close of nominations.

Hustled to the front by advisors, and to the President’s obvious chagrin, was hardline cleric Ma’ruf Amin, 75, ignored by commentators because of his hostility to ‘liberalism’ and lack of political experience.

If Widodo 57, gets a second five-year term in office as expected, there are fears Amin will steer the nation away from its moderate Islam position, impacting business confidence. 

There have been hints the IA-CEPA might include a relaxing of Indonesia’s opaque investor rules. Unless these are accompanied by a massive purge on corruption and rigid enforcement of the rule of law, few corporates will take the risk. 

If and when a real pact is completed between the world’s fourth most heavily populated nation and its few-folks neighbour (the ratio is 11 to one), the show won’t start till 2020.

Morrison’s visit was no earth-shaker, rating only 360 words on page nine of Kompas, the  most prestigious and top-selling national daily. It reported the signing was just a ‘framework for cooperation between the two countries’.

A little pic of the two leaders wandering the Presidential Palace gardens in Bogor lifted the verbiage. Absent were fun shots like those of Malcolm Turnbull and Widodo in 2015 doing a blusukan (freestyle wanderings in a market), an event which did much to set up a somewhat suspect bromance story. 

There was a bigger photo in the other mass-circulation broadsheet Jawa Pos though few words.  This exercise was always about selling our surpluses, with little interest in the Republic’s offerings,   

Australians may eventually start seeing a few more consumer goods from next door, like textiles, kitchen equipment, perhaps even Japanese-brand cars built in Javanese factories. 

Indonesia is also resource rich, exporting oil, coal, gas, gold, copper and other minerals in competition with Australia.  It produces little we don’t already get from China, Thailand  and Vietnam.

Australian universities may be allowed to open campuses in Indonesia if the DPR approves. This is one to watch as local staff who’ve bought their qualifications will fear skilled foreigners threatening their status and jobs.

The Indonesian equivalent of Australia’s energy debate is food security articulated as self-sufficiency. The goal will not be hastened by importing more primary produce from Australia.  Subianto’s isolationist supporters will likely make much hay while this sun shines.

What the Indonesian negotiators really want is access to jobs in Australia through an arrangement like the Seasonal Worker Programme now used by Timor Leste, Papua New Guinea and eight Pacific Island nations.

Workers stay for six months and must get a minimum hourly wage of AUD 18.29, double the daily rate for similar tasks in Indonesia. 

According to the World Bank more than nine million Indonesians work abroad; that’s almost seven per cent of the national labour force, mainly employed in Singapore, Malaysia, Hong Kong, and the Middle East.  

In 2016 they sent around USD 9 billion back to relatives in Indonesia.  Villages supplying overseas workers boast double-storey houses with cars in driveways.

Adding Australia would boost the economy and benefit short-staffed employers; Indonesian workers are keen and obliging - as all who’ve stayed in Bali hotels know well.

However Canberra, always fearful of a flood, and aware this could become an election issue, is unlikely to agree.  To appease it’s offering training programmes.

So: Some important signatures, but not yet a done deal.

(The full Widodo-Morrison statement here: https://dfat.gov.au/geo/indonesia/Pages/joint-declaration-comprehensive-strategic-partnership-between-the-commonwealth-of-australia-and-republic-of-indonesia.aspx )

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First published in Pearls and Irritations, 3 September 2018.  See: http://johnmenadue.com/duncan-graham-a-done-deal-or-a-deal-not-yet-done/

IF ONLY RHETORIC LED TO RESULTS

No-deal neighbours

The end-of-year deadline to conclude the Australia-Indonesia free trade talks has come and gone.  Now the ambition is ‘early next year’ according to Trade Minister Enggartiasto Lukita.  That will clash with the lead up to the 2019 Presidential election when parochial concerns will be more pressing than the contentious issue of concluding business with the folks next door.

It’s a pity Donald Trump didn’t lend his talents to the negotiations. The self-appointed master deal maker might have come up with the ‘most tremendously exciting best agreement ever, wonderful and big.’

But even with the hyperbolic American leader’s skills any Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) would have been revealed as fractured once Air Force One had left the tarmac.

To say that negotiating the IA-CEPA was always going to be difficult is several fathoms below understatement so applause for those who tried hard.

Their reasoning was sound even if their understanding of the subtleties of Indonesian thinking and culture was flawed.  Two countries right alongside each other.  One has a growing population and shrinking farmland, the other has ample space and massive supplies of grain, beef and milk.

‘Partners in Prosperity’ sang the Australian Chamber of Commerce and Industry but few Indonesians joined the chorus.  They need imports but buy reluctantly.  Apart from the shame of having to rely on outsiders to supply the daily needs of the world’s fourth largest nation, Indonesians fear that buying essentials from afar will diminish their jingoistic claim to be an international independent power.

Kutukan means curse, now a relic word in English but throbbing in Indonesia where it’s regularly used, even in the mainstream media. It explains why things expected to come to pass fail despite propitious signs.  

The IA-CEPA was doomed largely because Australia wanted the agreement more than its neighbour, even though President Joko ‘Jokowi’ Widodo was reported to be keen to have all documents signed by year’s end. The Javanese are skilled in telling foreigners what they want to hear, while Australians have been naive to think ‘yes’ always means what it says.

Indonesia is gripped by nationalism and its sibling protectionism. So is Australia: In April and in the midst of the negotiations Canberra slapped a tariff on A4 paper imports from Indonesia (and other countries) after the sole manufacturer alleged dumping.  The company is called Australian Paper, but it’s owned by the Nippon Paper Group.

Australia also got greedy assuming that proximity gave an unassailable edge.  Indonesia is now importing wheat from the Black Sea at USD 100 a tonne less than the Fremantle price, and bringing in buffalo meat from India.

There have been other neon signs flashing caution. Talks started in 2010, hibernated when the two countries were quarreling over capital punishment, then woke last year.

While Jokowi was apparently agreeing with Prime Minister Malcolm Turnbull about urgency during a visit to Sydney in early 2017, back in Jakarta he was talking about ‘food sovereignity’.

The rhetoric is at odds with reality; even staples like salt and rice (Indonesia used to be an exporter) are now being elevated from bulk carriers into silos at Tanjung Priok (Jakarta) and Tanjung Perak (Surabaya). Source nations include Thailand and Vietnam.

The IA-CEPA negotiators kept smiling in public, sometimes overdoing the grins when they called a media conference in September to announce minor gains that had already been trumpeted in February.

The language also failed to connect: Turnbull spoke of a ‘high quality’ agreement while Indonesia’s lead negotiator Deddy Saleh chose the adjective ‘good’.

Australian universities want to open campuses in the archipelago - an ambition that frightens Indonesian educators who fear students will migrate to quality teaching.

What Indonesia really wants Australia can’t deliver - massive capital investments to keep Jokowi’s infrastructure projects moving. Australia is not within coo-ee of China and Japan in supplying materials and loans.  

Australians also rightly fear much would be lost in a country noted for corruption and bureaucratic quagmires, and where the rule of law can be elusive.

Australians are bound by rules that don’t always bother other traders.  It’s illegal for Aussies to bribe public officials anywhere.

The World Bank lists New Zealand as the number one country for doing business (Indonesia ranks 72^nd) so it’s no surprise Australian investors head across the Tasman Sea rather than the much narrower Arafura Sea.  

The other demand has been for jobs in Australia for nurses, maids and construction crews - extending the Republic’s people exports beyond Hong Kong, Singapore and Malaysia.  

Indonesian workers are often multi-skilled, willing and prepared to live in remote areas, but few have good English or understand Australia’s rigid health and safety laws. Bali holidaymakers would have seen bare-head labourers wearing thongs scrambling up bamboo scaffolding and across work sites littered with hazards.

The work culture obstacles could be overcome with intensive training, but selling this idea in Australian states with high unemployment would generate a political firestorm. Australians will probably go to the polls in late 2018 or early 2019.

If trade talks restart next year there’s little chance much energy will be applied.  Indonesia will continue to buy primary produce from Down Under, though only if it can’t get cheaper from elsewhere, and Australian traders will still complain about tariffs and other imposts suddenly levied.  

This market potential is everything its boosters claim - expanding and close.  What they don’t say is that it’s damnably difficult to achieve when the two sides have different expectations, agendas and cultures.

(First published in Strategic Review 22 January 2018:  http://sr-indonesia.com/web-exclusives/view/no-deal-neighbors

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THE FANTASY THAT KEEPS GOING

Dumping a free trade deal           

                                                     

For the past two years Australian exporters’ prospects have been jollied along by forecasts of a looming free trade agreement with their giant northern neighbor.

Once in place grain carriers and beef boats would sail past unconcerned customs officials and into the increasingly hungry ports of the world’s fourth largest nation; Indonesian vegetable and mineral oils will head Down Under to a similar welcome. 

Prefacing this nirvana have been big show-and-sell missions to the Archipelago, ministerial handshake photo-ops and glowing statements implying negotiations are running briskly and on the same page.

So all being well the Indonesia-Australia Comprehensive Economic Partnership Agreement (CEPA) should be signed before 2018 dawns. 

However all is not well and that sunrise now seems remote.

The possibilities have been eclipsed - not by nationalist Indonesians fearing floods of foreign goods, but by parochial politics in Australia.

Late last month [april] the Federal Government abruptly announced dumping duties on Indonesian copy paper imports.

“The impact of the decision is potentially lethal,” Australia-Indonesia Business Council President Debneth Guharoy told members. 

“It flies in the face of the visiting President’s pointed request in Sydney for a fair go on paper and palm oil. (In February Indonesian President Joko ‘Jokowi’ Widodo promoted the CEPA in Australia.)

“We unilaterally decide to turn the (asylum seeker) boats around, stop the exports of live cattle, raise hell over the death penalty and now rollback their paper. Each and every time, we expect the Indonesians to bow to our self-promoted higher standards, our much-touted lofty principles.

“Those of us who have lived in, worked in or frequently travel to Asia cringe at the disdain with which these proclamations are treated by our neighbors.”

Indonesia Institute President Ross Taylor, a former national vice-president of the AIBC, warned that the problem should be “handled with subtlety”.

“Otherwise we run the risk of this tariff issue becoming a catalyst - for those who are anti-free trade - to have the CEPA stall or collapse,” he told Strategic Review.  “That would be a great disappointment.

“Getting an agreement was always going to be a tough task - Indonesia is really focused on the need for big infrastructure projects that can be funded by North Asian countries.

“However it can be done with goodwill and considered perseverance by both sides. The decision by Australian officials to impose the tariff at this time was less than helpful; Mr Guharoy is right in that regard and we share his concern, as would Indonesia.”

The head of Indonesia's negotiation team was reported by Fairfax Media claiming the duties would affect discussions.

“We explained to Australia that it (the dumping accusation) is not true, but they insisted just to protect their industry,” Deddy Saleh was quoted as saying.

“So it means there is unfairness. How can we conduct negotiations when we know that our counterpart is not fair? Negotiation takes mutual trust from both sides.”

The duties will please supporters of trade barriers; they argue free trade agreements are an easy way to avoid developing complex policies to stimulate local yields and build food self-sufficiency.  Instead FTAs favor efficient producers like Australian wheatgrowers who can swamp local markets and put poor farmers out of business

 ‘Dumping’ means an exporter is selling goods overseas below the homeland price. 

Apart from deliberate attempts to weaken rivals through trade wars, there are two main reasons for dumping: A manufacturer has a surplus it can’t shift at home, or its products are being subsidised by government for local political reasons, such as keeping an unprofitable factory running to save jobs.

The upset started when a private company in Victoria complained to the independent Australian Anti-Dumping Commission that paper manufacturers in Indonesia (and some other countries) were undercutting local prices and threatening profits and jobs.  The Commission agreed and told the government.

Despite Australian Paper’s nationalistic name the company is owned by Nippon Paper Industries of Japan.

Its two mills are in Gippsland, a rural area 160 kilometers east of Melbourne.  AP is the biggest employer with around 1,300 on the payroll.  It makes about 600,000 tonnes of paper products a year and much is exported.

The unemployment rate in Gippsland is 9.42 per cent against the national average of 5.7 per cent, according to Australian Bureau of Statistics figures.

To stop interest in trade with Indonesia flagging after the latest setback the AIBC has asked National Development Planning Minister Dr Bambang Brodjonegoro to help buoy the disheartened.

“For the first time ever, a ranking Indonesian Minister will visit five of our capital cities (in June) on a whistle-stop tour,” said Guharoy who claims Indonesia could be the fifth largest economy by 2050 with Australia then ranking 32.

“The mission is to talk about Indonesia's economic outlook, the opportunities they present and against that backdrop, encourage Australian enterprises to engage.”

The AIBC has been pushing local businesses to recognise openings in the Indonesian market with 250 million consumers and a growth rate of more than five per cent compared with Australia’s 2.4 per cent.

Indonesia is Australia’s 12th largest trade partner, mainly importing wheat, beef and sugar, and selling oil and some manufactured goods.  Total two-way business is worth about US $11.4 billion.

An AIBC delegation will appear before a Parliamentary Inquiry on the Trading Relationship with Indonesia in Canberra this month.  [may]  “We have an unintelligent relationship with our large neighbour and it does warrant examination,” said Gutharoy. “But I'm not so sure that the politicians will welcome the candor.”

Australia’s dumping duties are likely to be appealed to the Geneva-based World Trade Organisation, a body not known for swift decision-making. Unless the Indonesians ignore Australian protectionism and abandon their own, a free trade deal is unlikely anytime soon.

First published in Strategic Review, 26 May 2017 - http://www.sr-indonesia.com/web-exclusives/view/dumping-a-free-trade-deal

INDONESIA'S FICKLE FREE TRADER

A ballad of free trade                                                            

During his visit last year to the United States President Joko ‘Jokowi’ Widodo suddenly started singing enthusiasm for multinational Free Trade Agreements.

He told American businesses that Indonesia had an ‘open economy’ with a large and hungry population so intended to join the Trans-Pacific Partnership.  He’d been persuaded that this would also seduce foreign investors.

The TPP had taken years to orchestrate.  Twelve nations representing around 40 per cent of the world’s GDP had agreed to join. Jokowi thought a place in the choir alongside Malaysia, Singapore and other neighbors was a smart idea, although the Archipelago has long chanted protectionism.

In the following months nervous political and economic advisers composed a revised songsheet.  By February this year the President was humming a different tune in a lower key.

During another US trip he released his new TPP album – Fading Love. The lyrics included ‘caution is of the utmost importance … everything must be calculated for the sake of national interests. It’s all still in process.'

In a backing track the then Trade Minister Thomas Lembong chorused that his leader’s original enthusiasm was ‘to improve our economy and create jobs’.

FTA opponents disagree; they claim agreements favor efficient producers like Australian wheatgrowers and Chinese steelmakers, but can damage importing nations.  They get lower prices but at the cost of local jobs.  Slack businesses demand compensation or fail. 

Indonesia’s State Owned Enterprises, known for poor management, lack of competitiveness and allegedly as ‘wet areas’ (where corrupt politicians and bureaucrats can prosper) feel threatened by FTAs

Some of this is now academic as US President-elect Donald Trump says he’ll rip up all TPP negotiations authorized by President Barack Obama.

This gets Jokowi off the hook on which he’d hung himself last year.  But then came another twist.

Before abruptly changing his mind about visiting Canberra this month, allegedly because of violent demonstrations in Jakarta, the President told journalists of plans for his official three-day agenda Down Under.

Top was trade and sealing the Indonesia Australia - Comprehensive Economic Partnership Agreement by the end of 2017.  Another surprise – discussions on this deal only restarted in March after stalling for three years because political tensions were high.

Harvard-educated Lembong, a former investment banker who now chairs the Investment Coordinating Board (BPKM), has the task of meeting the deadline. He’ll get no opposition from Australia.

Trade Minister Steve Ciobo says signing the agreement will be his ‘most significant priority’ while the Indonesia-Australia Business Partnership Group has pledged enthusiastic support

Small wonder; Indonesia’s expanding middle class market is tipped to reach 140 million consumers with tastes for beef and bread by the end of this decade provided trade barriers don’t rise.

In its paper Two Neighbors: Partners in Prosperity the Group said trade and investment is underperforming. ‘Given the proximity and size of the Indonesian and Australian economies … there are vast untapped areas of complementarity (sic) and potential.’

According to Australia’s Department of Foreign Affairs and Trade, the Republic is the island continent’s 12th largest trade partner, mainly importing wheat, beef and sugar.

Indonesia sells oil and some manufactured goods.  Total two-way trade is worth about AUD $15 billion (US $11.4 billion). One trade agreement is already in place embracing Australia, New Zealand and ASEAN nations, including Indonesia.

 Why the Jokonomics flip-flop?  Eve Warburton of the Australian National University has written in the latest Bulletin of Indonesian Economic Studies:

‘The president’s leadership style and decision-making process are unpredictable. Jokowi surrounds himself with very different kinds of economic thinkers. At times he embraces the ideas of pro-market advisors, but then pursues statist-nationalist policies endorsed by his personal partisans.’

Free trade sounds like a fine idea – nations sell to and buy from each other in an open market without tariffs, taxes and other impediments. There are compounding factors in play, like subsidies and dumping of surplus goods, but goo deals can satisfy customers wanting low prices.

Those consumers are also workers.  If their employers turn off lathes because they can’t compete against Chinese low-cost sweatshops they get grumpy.  In democracies that anger can threaten politicians, as Hillary Clinton knows well.

FTAs are particularly sensitive in agriculture. Food security is a political issue in Indonesia where a proverb says ‘a meal without rice is not a meal’. Annual personal consumption of around 114 kilograms can no longer be met by local farmers. 

So stocks of the nation’s staple carbohydrate held by state agency Bulog (the Bureau of Logistics) are being topped up with imports from Thailand.  

Production in the Kingdom is largely mechanised with combines and bulk-load trucks moving the crop from paddy to mill.  In Indonesia the rural scene is more Middle Ages with workers cutting and threshing by hand, then carting by bike.

If these laborers lost their jobs through a FTA they’d face limited alternative employment. According to the World Bank 70 per cent of Indonesia’s poor (earning less that US $2 a day), live in the countryside.

FTA at the vegie roots level

Ibu Wasita has little interest in international agreements but her suppliers, who are mainly her friends, could be victims.  She currently sells two types of carrots from her vegetable stall in Malang’s Oro-Oro Dowo traditional market.

The cheaper, uneven ones cost Rp 8,000 (US $0.60) a kilogram. They were grown in Batu on the cooler flanks of Mount Welirang.

The other carrots are evenly graded, clean and trimmed of leaves. They are packed in plastic and cost almost twice as much.  They come from China and appeal to choosy buyers.

Also from Batu are apples.  Just one variety, Manalagi for Rp 20,000 (US $1.50) a kilo.  They are blemished and to modern palates more billiard balls than Eve’s offering.  But in the supermarkets there’s a wide choice of plump, quality fruit – from China, the US and New Zealand.

The prices are higher but the polished apples roll off the shelves into high-end shoppers’ trolleys.  Should FTAs get signed with Australia and other countries prices will tumble – but Indonesian farmers’ incomes will shrink if they don’t change their production and marketing practices.

Batu is Central East Java’s vegetable garden.  It’s also a weekend escape for the well-off, so a hotel and entertainment park construction boom is underway.  For every 10,000 square meters flooded with concrete there’s one hectare less to grow food. 

It’s a pattern across Java as the national population is tipped to rise from the present 260 million to more than 320 million by 2050.

Australian pens are poised to sign an agreement.  However Lembong – dubbed by the Australian media as an ‘apostle of liberalisation’ - will find it near impossible to persuade Indonesian politicians to ink any document seen as threatening jobs.

First published in Strategic Review 14 November 2016.  See/sr-indonesia.com/web-exclusives/view/a-ballad-of-free-trade

JOKOWI GOES WALKABOUT

Stepping carefully Down Under

After two years in office Indonesian President Joko ‘Jokowi’ Widodo has an Australian visit scheduled for November. Outcomes and hopes may not sync.  Duncan Graham reports:

Jokowi’s door knock comes a year after new Prime Minister Malcolm Turnbull’s invite when the men spent a half day together in Jakarta.  That speed date was billed as a relationships ‘reset’ after drug smugglers Andrew Chan and Myuran Sukumaran were executed in April, 2015. Australia was outraged and ambassadors recalled.

Jokowi was urged to rapidly ride the goodwill wave that followed Turnbull’s unseating of Tony Abbott.  The former PM had been on the nose in Indonesia for coupling Australia’s 2004 Indian Ocean tsunami aid with appeals to end the death penalty.

The President ignored the advice.  Turnbull’s popularity rapidly waned.  In July he called an election but plans went awry.

His conservative government now holds office by a whisker. A rise in right-wing bigotry has let the Islamophobic One Nation Party into the Senate, and the mining-dependent economy has slumped.

Then Indonesians learned they’re unloved.  An Australia-Indonesia Centre survey showed 47 percent of Australians view their northern neighbor unfavourably – preferring folk from almost anywhere else in Asia - even repressive China.

On the ledger’s other side 87 per cent of Indonesians had positive views of Australia, mostly gleaned from the media for few visit; here’s another matter to address as visa rules and costs are travel deterrents.

When announcing Jokowi’s first State visit Down Under, Foreign Minister Retno Marsudi promoted the nebulous STD formula - Security, Trade, and Defence – as reason enough for chats.

Free trade is top of the menu, but unlikely to yield as Indonesia is deeply protectionist. More Australian investment depends on Indonesia establishing the rule of law and crushing corruption.

Marsudi said the President’s trip would ‘enhance economic cooperation’.  Also in bold type: Counter-terrorism, cyber crime and people smuggling plus fish and beef issues.  All necessary – and insufficient. 

‘Bi-lateral ties’ feature so commonly in these pronouncements that every male delegate should wear one; female negotiators could model ‘close-knit relationships’ which are forever ‘warm’.

Jokowi’s attendance at the 2014 G20 Brisbane summit was not a State visit.  This time he may include Sydney where his eldest son, businessman Gibran Rakabuming Raka, 28, had some tertiary education.

The President is expected to address the Federal Parliament in Canberra but he’s neither an orator in his own tongue nor a competent English speaker.  He won’t eclipse his predecessor Susilo Bambang Yudhoyono’s stirring speech in 2012 labelled ‘transformative’ by hardnose political commentators.

The euphoria didn’t last. A year later international media revealed that Australian spies had been bugging the phones of SBY and his wife Ani.  Abbott refused to apologise.

There’ll be more official announcements as Jokowi’s schedules are sharpened, maybe a few cultural exchanges and some flavoursome clichés.  Turnbull has already matched Marsudi’s rhetoric with statements about ‘deep and broad-ranging’ partnerships.

So far nothing to indicate any lasting intellectual engagement to dilute the distrust exposed by the AIC poll.  Indonesian language and culture studies, which should be the foundation for better understanding, are dropping off the curriculum despite academic protests.

Earlier this year Australian National University Professor Frank Bongiorno wrote of Australian leaders’ ideas about Asia.  He said many have ‘a narrower vision of relations with Asia … As in the past, the temptation is to try to bend Asia to the economic and political purposes of the present’.

Some issues won’t bend to fit the Australian agenda.   Seaweed farmers in the eastern islands want Jokowi to scrap the 1997 treaty between Indonesia and Australia on the Timor Sea Exclusive Economic Zone.

The farmers are suing for damages allegedly caused by the Montara 30,000 barrel oil spill which polluted the Timor Sea after a 2009 drill rig blowout.

The treaty, signed when dictator General Soeharto held power, is also under attack by Timor Leste.  The former Indonesian province wants the document reworked to give a greater share of undersea resources. The parties have been before the UN Conciliation Commission.

Should the mild-mannered Javanese leader speak up Australia is likely to use the ‘legal processes underway’ excuse to dodge debate.

Less easy to avoid is Indonesia’s treatment of Papuan dissidents which concerns human rights advocates.  It’s also rattling Pacific nations which see a Melanesian bond with indigenous Papuans.  

Vanuatu and Solomon Islands raised their worries at a UN Human Rights Council session in June.  They were slapped down by Indonesian delegates using their standard ‘sovereign rights’ argument against outside involvement in domestic issues.

Australia’s official position has long been non-interference and recognition of Indonesia’s ‘Unitary State’, but NGOs don’t do the diplomatic waltz.  

Allegations of civilians abused by heavy-handed military don’t get much airplay in Indonesia; but they do in Australia where church groups and activists back self-determination for what they call West Papua.

The issue of almost 14,000 asylum seekers stranded in the archipelago en-route to Australia when the smugglers’ boats were stopped may also get an airing. Australia wants a ‘regional solution’ but Indonesians say that’s NATO – No Action, Talk Only.

Indonesia’s harsh treatment of gays is another issue which might rile protestors.

Although no Australians are currently on death row, abhorrence of capital punishment is widespread and likely to be raised in demonstrations. Security will minimise direct Presidential embarrassment, but accompanying journalists will not ignore placard wavers.

The shriller the statements, the more Indonesians will be inflamed as nationalism sweeps the nation. After the executions of Chan and Sukumaran The Courier Mail ran a front page mock up of a smiling Jokowi showing a bloody hand. 

Anything similar this time could result in the President cancelling his walkabout and staying home where the electorate still loves its leader.

But all this could be drowned by an event far from Australian-Indonesian relations.  Although official dates for Jokowi’s visit have yet to be announced insiders say it’s currently scheduled to start around 10 November. The Canberra Parliament then rises for an 11-day break.

By then the media typhoon will be swirling around results of the US Presidential election leaving space for little else.

##

(First filed on 18 October.  An edited version was published in Strategic Review on 4 November when more details of the President's trip were known.)

FTA = FUTURE TALKS ASSURED

When trade worlds collide          

                                        

The street peddlers who hawk kitchenware, garden plants and sweet pastries have no Javanese word for ‘disposable income’.  But they can sniff money, which is not too difficult when the carports are full.

Twenty-five years ago during the Asian boom, Sawojajar was just another ricefield on the outskirts of Malang, the ancient Indonesian hilltown - population one million.  Developers slapped asphalt on the richest volcanic soil in the world and knocked up crude terrace housing. They flogged two-bed homes at 20 per cent interest to young couples who’d broken with tradition: both worked.

The buyers represented another new demographic with no easy translation: Upwardly mobile.

Change accelerated when their ambitious offspring headed for the city’s 28 tertiary institutions. Previous generations had rarely gone beyond high school. Now the kids are in the workforce; they’ve moved from two wheels to four and park the babes with the oldies while working long shifts.

So extra storeys have been added and individual designs smothered sameness. Other tastes are changing: Three new boutique bakeries sell to locals who once ate only rice. The supermarket stocks yoghurt and iced coffee – unknown last year.

Enlarge by 60 million and this is the much-hyped ‘emerging middle-class’ whose accounts Australia is desperate to open but has yet to find the passwords.  The exceptions are grains (competing with Russia), milk powder, meat (now also from India) and a few niche foods.

Last year former Trade Minister Andrew Robb led the “biggest ever” delegation of 360 hungry traders to Java, all keen to partner.

Nine months later there are few births to announce. Australia-Indonesia Business Council President Debnath Guharoy, a man who has been more hard-nosed than most in his assessments of the hurdles, tried to be upbeat:

“While the feedback (from delegation) participants was very positive, there is no formal survey to back up any claims,” he told this writer.

“Robb's visit stirred Australia's lacklustre involvement with Indonesia … and more of our exporters are engaged.  New entrants from our non-traditional sectors are exploring investment opportunities … ranging from electricity to e-commerce, shipbuilding to tourism.

“Perth's Oropesa signed an MOU in Palembang to develop a new port in the Special Economic Zone. Others are looking at similar opportunities in the infrastructure arena.

“Existing investors … are adding hundreds of millions in dollars to their current operations across the country. Good news, getting better.”

But is it?  ‘Engaged’, ‘exploring’, ‘looking’ are euphemisms for failure.  Businesses that nail major deals usually trumpet success to investors – but the orchestra has been curiously mute. 

There are many reasons but two harsh facts remain deeply embedded: Our neighbors are protectionist and we are free traders.

The second is Indonesian pride and fear.

The nation of 250 million desperately wants to be seen as a big guy on the world stage.  But when it has to import rice (it was once a major exporter), the dream of self-sufficiency fades to black.

While reluctantly offloading containers, Indonesia dreads reliance on its Western neighbor for food and energy, worried the archipelago could be economically drowned and its farmers ruined.  This is Indonesia’s version of our asylum seeker nightmare and just as politically potent.

Last year Guharoy told the media that Australia was unpopular in Indonesia because it didn’t consult, citing the sudden halt in live beef exports back in 2011.

But Indonesia isn’t popular in Australia  because it takes a fickle approach to trade, one moment dropping harbor booms against imports, the next lifting  them when stocks fall and domestic prices rise.

Seeking stability Australia still publicly reckons a Comprehensive Economic Partnership Agreement is possible.  Negotiations collapsed three years ago but were cranked up again in March.

Till this month the signs were sunny.  Trade Minister Thomas Lembong, 45, was a Harvard-educated urbane banker who knew how to talk business in a language all understood.

He visited Australia, said an agreement was on its way and seemed to charm all he met.  Though not back in the Republic. The Australian effused he was an ‘apostle of liberalisation’ which was probably the kiss of death in a legislature and bureaucracy favouring tariff and tolls above competition. 

Lembong also failed to keep food prices down (an impossible task in an ill-disciplined and corrupt nation) so was flicked sideways.  He lasted just 11 months, his protectionist predecessor Rachmat Gobel, four weeks less.

News of Lembong’s replacement by Enggartiasto Lukita, 64, brought this scathing attack from The Jakarta Post’s managing editor Rendi Witular:   

“A veteran politician with a questionable past and no slight expertise in both domestic and international commerce (who) crawled up the national ladder” through property deals.  He was a member of the “graft-ridden budget committee.”

Witular added: “For the first time in more than a decade, Indonesia has a trade minister with no international business network and who lacks the eloquence in English to sway his international counterparts during trade negotiations.”

Lukita’s opposite number is also a newcomer.  Steve Ciobo replaced Robb (who retired from politics) in the new government and almost immediately headed to Jakarta waving a ‘position paper’ called Two Neighbours: Partners in Prosperity.

The jargon proposes more people-to-people links because “there are vast, untapped areas of complementarity.” There’s no Javanese word for that either.

No counterpart document has come from the Indonesians. A similar paper was produced earlier this decade with no discernible result.

Ciobo, a lawyer and Liberal politician for the past 15 years, came out of the meeting with Lukita saying nothing of value other than he had nothing to say.  

Despite the changes in personnel Indonesia and Australia continue to claim they want a free trade deal by the end of 2017. By then there’ll be a new minister in Jakarta with another ideology, and headlines from Canberra will be shouting: Trade Deal Soon.

Meanwhile back in Sawojajar no-one has time for reports or gala dinners. They just get in and meet the needs.

 (First published in New Mandala 12 August 2016 - see: http://www.newmandala.org/trade-worlds-collide/