Press Conference, Jakarta Foreign Correspondents' Club

Subjects: Australia-Indonesia relationship, beef quotas, live cattle trade, language training, mining, Doha Round, small business.

Transcript, E&OE

23 March 2012

MC: Thank you very much Minister for your opening remarks. It's time for our Q&A session. I believe we have lots of time, so anyone who would like to ask the Minister a question can. As always, we do give first priority to journalists. And we're going to do that with Karishma, the vice-president from the BBC. The rules are: please state your name and where you're from. We'll start with Karishma and we'll go with our new colleague there and then the lady there.

JOURNALIST: Thank you very much Minister for your speech today. I'm Karishma from the BBC. My first question refers to a line in your speech: "Australia is perfectly placed," I think you said, "to take advantage of the growing consumption from the Indonesian middle class." Bearing that in mind, how successful have you been in trying to raise the import quotas of beef for Australian producers and companies during your stay here in Indonesia?

CRAIG EMERSON: If I could preface my answer to your question with this observation: that the purpose of our visit isn't primarily to achieve a particular import quota figure or so on. It's to build understanding and, on that basis, to develop a more predictable set of arrangements for the future. When we were here, I think it was announced yesterday that the quota for the second quarter would be 125,000 head of live cattle. And we think that there is a prospect of that continuing to rise through the year, notwithstanding the total quota that has been announced. But we didn't come here to have a long discussion about whether it would be 125,000 or 140,000. What we're seeking to do is to develop a closer understanding of the opportunities between our two countries. I also used in the speech the very familiar notion that it's not a zero sum game. It's a positive sum game. It's Gita Wirjawan who has this aspiration of increasing Indonesian beef consumption from two kilos to 20 kilos. Now that would be a 10-fold increase in the industry, which is almost beyond the imagination of both Indonesia and Australia. So we're really here to talk about those dimensions and how to open up those opportunities and to work with our friends in Indonesia on capacity-building and to create this sense that this is a big, rapidly expanding market. And because it is, as important as next quarter's quota is, we really want to develop those sorts of understandings and chart a course so that we can be in a position to meet those increases in demand.

JOURNALIST: Can I ask a follow-up? Do you get the sense from the Indonesian Government that they are as keen to see Australia participate in the increased demand from Indonesia given that the restrictions in quotas came quite soon after the suspension of cattle exports? Do you think also there's any link between those two decisions?

EMERSON: I think the limits on quotas actually began earlier than that. I think 2009 was the year of a very large intake and we know the Indonesian Government is very interested in the idea of self-sufficiency in production. So the quotas have been restricted since that time and have pre-dated the suspension of live cattle exports. But there is certainly not only an appreciation within the Indonesian government but the Government's saying to us this story of rapidly increasing demand and the sense that we will be partners in meeting that through increased supply. Now, not everyone has a uniform view about this — just as in every government there won't be a uniform view — but certainly the discussions that we've had not only yesterday but earlier, indicate that key members of the Indonesian Government not only understand but are advocating a future which involves very big increases in consumption, which means it has to be met through domestic production, increasing productivity — which we are keen to help on through capacity building — and realistically, there'll be imports and the prospects are for more imports. But not out of a fixed level of consumption but out of a strongly expanding level of consumption.

MC: OK, gentleman…I keep forgetting your name … Sydney Morning Herald.

JOURNALIST: Michael Bachelard, Sydney Morning Herald and The Age.

MC: He's new here, that's why I forgot.

JOURNALIST: Dr Emerson, you gave us a talk today with a lot of the kind of the neo-liberal trade philosophies that we've grown to know and love in Australia …

EMERSON: I'm not sure that's a compliment.

JOURNALIST: … in which you referred to Australia growing out of the foolish belief that Australia is better off buying and selling to each other.

EMERSON: I what? Sorry?

JOURNALIST: You used the line that Australia had grown out of the foolish belief which Australia had that we're better off buying and selling to each other.

EMERSON: That's right.

JOURNALIST: At the same time, we're seeing Indonesia talking about self-sufficiency in cattle and putting quotas on imports; we see them putting restrictions on mining ownership and wanting to be more self-sufficient in mining ownership, in smelting capacity; restricting the export of raw materials and also other restrictions that have come into place recently, particularly on fruit importation. Are you concerned that as you try and build this trading relationship with this large and growing economy, that it's actually trying to close itself off to grow its internal market? And are you optimistic that the future that you paint can be achieved under those political circumstances?

EMERSON: Thanks and obviously it's a very good question. My belief is that over the last couple of decades, Indonesia has followed a similar path to Australia. And that is, it has opened its economy up. It is moving in the direction of an open and competitive economy. But that won't happen in a linear way. There will be periods in which the Indonesian authorities reflect on the benefits that may flow from that approach compared with sometimes looking at what they might want to do to spread the benefits of the mining expansion to more Indonesians. Now, I understand that. I understand the idea of saying, 'well, we want more Indonesians to participate in growth'. This is very much what we're talking about in smallholder cattle development. I think the challenge is to ensure that those attitudes, which are fully understandable, are still compatible with the concept of an open, competitive economy. Now I think they can be. I just don't think it will be a linear progression. There will be situations and times where the Indonesian authorities pause and say 'what's in it not only for some of the large corporations in Indonesia, or what's in it for the Indonesian people?'. I understand that. But as you've rightly pointed out, I'm more of the open, competitive economy type guy and I think that's ultimately the path that Indonesia will continue down. It's a path that it should continue down, but I certainly do understand the sentiment that as in Australia with our mining boom, we want to share the benefits of the mining boom. We're doing that through the Minerals Resource Rent Tax and then using that to lower the company tax rate and to provide small business tax breaks and superannuation increases for 8.4 million Australians. Now, you could argue that that's some sort of government involvement. It is. It is government involvement, but it is still consistent with an open, competitive economy and with ensuring that the broader population benefit from that growth.

JOURNALIST: Just a quick follow-up. Have you had any conversations on those specific issues: fruit and mining and how they affect Australian companies since you've been here?

EMERSON: Yes, we have. And I just want to be prudent here to answer in the affirmative, but I don't want to use this venue to kind of elaborate on those discussions. Obviously, we've registered our views about these matters and my attitude in all of these things is to get a result, not just get a headline. And that's what I'm after: a result, a proper understanding, and I'm reluctant to stand here in front of you today and just seek a headline out of it. What we want is to be able to continue working with our Indonesian friends because my attitude towards Indonesia is this: that our level of economic cooperation is here; our potential is there, and probably in no part of the region is the gap between the actual and the potential greater than in Indonesia. So, I see that as a really positive opportunity. And what we want to do through the sorts of delegation visits that we've had over the last little while is to make sure that we can develop those understandings to make those opportunities realities.

JOURNALIST: Thank you. I obviously am here for a headline.

EMERSON: I know! I worked that out.

MC: Surprised the press corps didn't walk out! Helen Brown

EMERSON: It's your job to try to get one out of me and my job to try and stop it.

JOURNALIST: Unfortunately, yes.

JOURNALIST: Helen Brown, Australian Broadcasting Corporation and Australia Network. Minister we've had a lot of trade delegations travelling to Indonesia from many parts of the world.

EMERSON: Not as good as this one.

JOURNALIST: They all come here wanting to do business, and they're all very keen to learn about Indonesia. And the message that they're consistently given by Gita Wirjawan, for instance, is that 'we also want you to invest in this country. We don't want you to just sell us your products; we want you to put some investments into skills and technology'. So I'm just wondering, with the trade delegation that you've brought with you, did discussions reach that level? And are the business people of Australia willing to invest that way? Are they willing to go the extra step and send knowledge and skills to Indonesia?

EMERSON: Well, you're right and that was the consistent theme of our discussions over the last little while. Similarly, this delegation didn't occur out of the blue. It was conceived in Bali in November of last year out of several discussions I've had with Gita. And he's investment coordinator as well, so you can see where he's coming from. But what Gita is reflecting is the attitude of the Australian Government in terms of our own economic integration into the Asian region that began with the 1980s. It was then that we realised yes, there were great opportunities for selling bulk cargoes. Buying and selling. We came up with this radical idea: let's buy and sell with several billion instead, of back then, 19 million people; that's why we've created the open, competitive economy. But economic integration with the Asian region in the Asian Century was always going to be more than digging stuff up and loading it on to bulk vessels and selling it to China, Japan, Korea, Indonesia. And that theme is very strong in our visit. So to answer your question: in respect of cattle breeding and investing in the cattle industry here, I can't speak for the private sector other than that they understand that that's very much what Gita and the Indonesian Government are on about. I think that we should combine trade with investment rather than trade or investment. But that does mean proper economic integration and capacity-building, which comes from government — we announced $20 million to smallholder animal husbandry techniques, and indeed from our own cattle industry which has pretty much unsurpassed expertise. Then we go to the banking sector: the ANZ and Westpac aren't seeking to buy and sell bonds; they're seeking to look at the possibility of investing further. ANZ has been here for many years. Westpac was here until about 1992, something like that, and are having a fresh look. So that's investment. That is economic integration. And that will be our constant theme to businesses back in Australia. If we're going to make this work, make a commitment to Indonesia. And it's a commitment that goes beyond trade but investment and, where we can, through private sector capacity-building, which does involve technology transfer.

MC: Ok, thank you. Andrew, and I believe this lady over here. Did you have a question? Someone over there did.

JOURNALIST: Andrew James from Bloomberg. Just following up on Helen's question: how confident would you be encouraging Australian companies to invest in a country where there isn't a very transparent legal system?

EMERSON: Well, I think we should reflect on history. And that is that Indonesia from my point of view has come a long way in a short period of time. And not every country has a completely mature legal system. That has never stopped other countries from seeking to trade and invest. And I think that progress has been very strong in Indonesia. And I know that at the top levels of government, Indonesian authorities are very keen on making the whole investment climate more predictable, more transparent. And we understand and appreciate that. But I'll go back by using a case study: ANZ Bank has been here for 25 years — in that order — 20 years. Well, they've made a go of it; in fact they say they're doing very, very well in Indonesia. And that's the value of this flagship operation. When other companies who are now becoming more and more alert through, at least in part our own Asian Century White Paper exercise, to what we see as a Government the opportunities in this region, there is great reassurance when they see other companies that have been here for 20 years. They say, 'well, they've met all their obligations; they're doing well'. And I think that gives a lot of confidence — a lot of confidence. There's 400 companies — Australian companies — here in Indonesia, so something must be working pretty well. We can always improve and we'll always work together with our friends in Indonesia on improving. But I think enormous strides have been made in the last couple of decades.

MC: Ok, we're going to go to this table for a couple of questions.

AUDIENCE: Hi, I'm Ida Sudoyo, former journalist not a journalist but I've got three not so little Australians. I lived in Australia, West Australia, for 12 years and two and a half of that was in Port Hedland with Newmont Mining. So I believe that actually Australians have a lot to offer Indonesia in terms of mining and how to regulate and everything; it's just that the Indonesian Government itself, as the previous gentleman said, sometimes cannot make up its mind about what regulations to make. So we are in a learning process. The other thing is about the cattle: is it possible to tie up the cattle industry to education? For instance, when you have a cattle project you tie it with education like, for instance, teaching English to the farmers and things like that? Look into innovative ways of … for companies to do their CSR as part of the CSR maybe and part of an education plan vis-a-vis the Government, Australian Government. And also we need help in educating and providing milk. How to do that, because we per capita in 2010 we only drink two tablespoons of milk a day. How can we increase that, especially for children? I mean if the adults drink two tablespoons I don't know how many tea spoons the children drink per day. And that has an effect on the well-being and nutrition of coming generations. So we need help with that, actually. Thank you.

EMERSON: Ok, taking them each in turn. Mining services are an economic part of our economic relationship. Because of the history of mining in Australia, we have very high levels of expertise, as you know in mining, and we do seek to deploy that in Indonesia and we do. We also have direct investment in Indonesia. And in terms of mining laws, of course more predictability is better than less predictability. There's no doubt about that. But I'll simply say I understand the desire of Indonesia to make sure it gets a good return from mining investments, just as the companies need to get a good return from mining investments. And it's finding its way, seeking to do that. We have had something to say to the Indonesian authorities about approaches in that area. In education, I must say I haven't thought about in the cattle breeding area — of us, through the companies, working on educating Indonesians to, say, speak English. I do know that we do that through our official development assistance, and no doubt this $20 million reaching 75,000 small holders will in effect involve some of that. But this relates to your third point, while consumption of milk is low, so is production at this stage. And we were having discussions last night at His Excellency's house about the average production of milk by cows in Indonesia, and it's about half or maybe less than that of the average daily production of cows in Australia. And these are relatively simple improvements that can be made and that's why, I know I use this sort of symbolism, but there are quite simple things that can be done to lift our whole level of economic co-operation. From down here up to this very high potential. And I can't see another country in our region where that gap is greater. And I see that gap as an opportunity. And that's why we're here. And that's why we're having these sorts of conversations. I think we can do really great things together in the coming decades, including in the areas that you mentioned.

MC: Ok thank you. The gentlemen there, then we're going to back to Ari and this gentlemen there.

AUDIENCE: Shannon Smith from Icon international, a PR company. As we sit here today there are queues lining up outside Hoyts cinemas in Sydney for the premier of The Raid, an Indonesian film and one of the most anticipated internationally in years. It just made me wonder when Indonesian audiences might next be queuing to watch an Australian film as successful. I had two questions: the first was that Professor David Hill has just given the Australian Government his review of the teaching of Indonesian language in Australian universities. And the future is fairly bleak. I just wondered whether your counterparts in Indonesia have raised any concerns about this important contribution to people-to-people linkages. And secondly, one of the keys to developing trade and business is to have young Australians coming here and gaining experience. But experience to date is that the working holiday visa is extremely difficult to obtain. I just wondered whether the movement of business people and young working holidaymakers has been part of your discussions.

EMERSON: Okay, we should start advertising the film Red Dog here in Indonesia. Really great laconic, and maybe iconic, film for Australia and I think Indonesians would like it a lot. Set in, it might even be Port Hedland. There you go! You two have been having a chat. Set in Port Hedland in the 1970s; it's a lot of fun; it gives great insights into Australian bush culture if you like. On Indonesian language, you're right. I'm dismayed at the level of teaching of Indonesian language in Australia. I think this Asia Insights had a look at this a little while ago, and they're supported by ANZ Bank and the number of Australians studying Indonesian language is low. And we certainly want to look at ways through this Asian Century White Paper exercise to increase that. It's not a difficult language, Bahasa, and we need to, I think, do a lot more in that area. It's easy for Governments to say it, but we can't force people to do it. What we can do is try to get the incentives right for people to study Bahasa in Australia at both school and university levels. And I think this is one of the live questions for the White Paper exercise. We do often get questions along that line: so what's the Government going to do about it? Sometimes that answer is more difficult than the question. But I think we need to look at the incentives for people to study Bahasa and other languages that are spoken in our region. Finally, on visas: again, very much up the alley of the Asian Century White Paper. I'm not just shovelling everything into it; I'm just saying that the whole issue of working holiday visas, the ease of getting visas all of that, they're very, very much live questions. Because if you talk as we have in the last 24 hours to senior members of the Indonesian Government, how many of them have studied in Australia, how many of their children have studied in Australia or are still studying in Australia. And as superb as His Excellency the Ambassador is, we have through those processes — through those opportunities — ambassadors for both our countries in both our countries; champions for the Australia-Indonesia relationship. And I have a very strong view that we need to build on that, just as those decisions were made with great foresight in the '80s and 1990s to ensure that we invited each other to each other's countries to study. But we need to make sure that that is vibrant and expanding in the future.

MC: Okay Ari, this gentleman over here, then Haslem. Sorry, I'm pointing all over the room.

JOURNALIST: Minister, Ari Sharp, I'm a freelance journalist from Australia. The perennial question of the past couple of years: is the Doha trade round completely and utterly dead? Do you see any signs of hope when you talk to fellow Trade Ministers like Minister Gita yesterday? Is it on the agenda at all? Is it a concern? Or are we kind of moving into a kind of post-Doha phase where we have less focus on those global trade pacts and have more focus on regional trade pacts like it is the case in ASEAN or bilateral trade pacts? And is that now the focus that we're moving to more in trade?

EMERSON: Australia remains a committed multilateralist on trade. We think the greatest benefits from trade happen or can happen in the multilateral arena. But it is true that the sense of purpose in Geneva is low. And we will continue, nevertheless, unrelentingly, to push for progress in the Doha Round. Prime Minister Gillard and I have worked on the concept of new pathways to the mountain top of the completion of the Doha Round, because the pathway that's been trodden has encountered a big logjam. And there are two alternatives: one is to keep pushing against that logjam for the next decade or so, hoping that it will all break apart. And the other is to still commit to the mountain top but find a new pathway. That's what we're doing. The one area where there is real momentum is in services, where we have, rather controversially, advocated a plurilateral agreement on services. So that's not all 153 countries, though they would all be welcome. All welcome. But if we're confronted with this situation where countries are seeking to veto progress in each and every area, then maybe we need fewer countries. Make the progress and have the other countries then say, 'maybe we ought to get on board'. So that's what we're doing. It's provided for under the World Trade Organization rules for services, and Australia's chairing it. We're seeking to do the same thing — and I lament this — in an area called trade facilitation. Now, this is just streamlining customs procedures, making life easier for importers and exporters — 44 per cent of the estimated benefits of the Doha Round are in this area. And we have sought to revive the negotiations, which are not vexed, they are not controversial. But because there's this cross-trading, where countries say, 'we won't do trade facilitation unless we get something on manufactured tariffs' — it's blocked. So we thought we had revived that by going to Geneva in December. And the latest reports are that there's very little interest in it. So I've written to my counterparts around the world just before I left Australia to say, 'come on; you know this is ridiculous!' This is just ridiculous! Why would you deprive some of the poorest countries on earth, the developing countries on earth, of 44 per cent of the benefits of the Doha Round because you want something in some unrelated area? So, frankly, I'm pretty pissed off about that!

MC: That's your headline!

EMERSON: In terms of regional negotiations, yes the ASEAN-Australia-New Zealand Free Trade Agreement is a gold standard agreement. It's a ripper. It's really good. We want to build on top of that through the Comprehensive Economic Partnership Agreement with Indonesia and go further. We're seeking to do the same thing with Malaysia, by the way. I think that you can do both. But we're not going to take our eye off Geneva, either, even though they're the world's greatest pessimists over there. We've just got to cheer them up and get them going.

MC: Okay. This gentlemen here, then we'll go to Haslem.

AUDIENCE: [Inaudible] European Union delegation in Jakarta: Thank you Minister also for your comments on the WTO. My question is on the bilateral negotiations regarding the CEPA between Indonesia and Australia. Just ahead of your visit there was a study published by Indonesia regarding the negative effects of the FTAs with China, Japan and Korea. My question is: did you discuss this study when you met with Minister Gita, and how do you perceive that the process of you bilateral negotiations are being affected by such a study ?

EMERSON: We didn't, because we've already committed to making this agreement a Comprehensive Economic Partnership Agreement; not simply a conventional free trade agreement, which is, as you know, as we discussed in the speech and in comments afterwards, buying and selling goods and services to each other. This needs to be an agreement that reaches into all of the different parts of Indonesia, or as far as we can possibly reach, and spread the benefits of that agreement. That's the very strong message. That has been coming from Indonesia since the Prime Minister and the President first launched this concept back in November of 2010: that the value of this is in ensuring the little guys are beneficiaries. That means little companies, small businesses, and rural landholders. Now, we will do our best. We can't reach every Indonesian, but we'll reach as many as we can through this. But I think it probably is a reflection — I hadn't seen the study and I wasn't aware of it — but it probably is a reflection of the Indonesian Government looking back at the conventional FTA and thinking 'we need to make sure that the little guys benefit from this whether they're small businesses or rural landholders'.

AUDIENCE: Good afternoon, I'm Haslem Preeston. I'm chairman of the British Chamber of Commerce. I was actually born in Melbourne but please don't tell the British Embassy that. Actually, just a quick comment on this gentleman's comment about The Raid earlier on: it's an Indonesian film but actually directed by a Welshman.

What sometimes worries me about the tone of the debate about Indonesia in the UK is its concentration on issues of human rights and terrorism etcetera. And I'm wondering how you are seeking to elevate that quality of that sort of debate in Australia and focus on the trade opportunities and what's the progress you've made there? And the second thing is about SMEs. What are you actively doing to help Australian SMEs bridge that gap and come out here to Indonesia when often they're lacking in the capacity and also the understanding and the knowledge of this region? Thank you.

EMERSON: Again, I think that's a very relevant observation. Maybe the time of year or the time of man — that's a line from Woodstock. The point here is there'll always be issues that we discuss with Indonesia that come along from time to time. Always will be. There will be next year and the year after and there have been in the past. But I think we have entered into a new era with Australia -Indonesian relationships of warmth at Minister-to-Minister level, leader level. And if you look at how our business communities work with each other, it's great collaboration and friendship. And I think that means that the future is a brilliant future involving Australia and Indonesia. And we don't have to continually look down but look up to the horizon, and just see the wonderful opportunities that are available there for us. So, maybe as it is my incurable optimism, but I think we've entered an era that is a great era for our countries, and that should be the basis of the relationships between countries, in my view. It doesn't mean that we ignore issues that come up from time to time. But they need to be seen in that broader very positive context. You say you're from Britain. Europe is struggling and this is a fantastic region. And I think people are really looking to this region, to an economy that's growing at 5 per cent per annum, to a democracy, to a country that's reaching out to other countries offering friendship. We should accept that. We should accept that friendship. On SMEs, I was really more talking about, realistically, our larger businesses coming to Indonesia and supporting small and medium-sized businesses in Indonesia. We will have some real innovators in the small and medium enterprise area. Just as we did — I took a delegation of 100 businesses to China and most of them were small. But it's incredible the ingenuity and the creativity that they have, all in the services economy: architects and logistics businesses, design, film and television. And I say, 'what are you guys doing here?' And they say 'we've been here for a while and we're going great guns'. And all of this happens under the radar. So you can have small business and medium enterprises operating here and spreading knowledge and transferring technology. But the bulk of that, I think, still would be done by our larger corporations which are represented here in our delegation today.

MC: Thank you. Unfortunately, it is two o'clock so we're going to have to wrap up our session by thanking the Minister for Trade, Dr Emerson, for joining us today.

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