•    HOME   
•    NEWS   
•    BUSINESS   
•    INTERNATIONAL   
•    TECH   
•    SPORTS   
•    LIFE & TIMES   
•    OPINION   
•    MY JAKARTA   
•    BLOGS   

China has been well known as a trading nation for many years and has had a long commercial relationship with Indonesia.

Recently, the Chinese-Indonesian trading relationship has shifted up a gear. The Asean China Free Trade Agreement (ACFTA), which came into effect on Jan. 1, has created conditions for the Asean countries and China to take their trading relationships to a whole new level.

Although some sections of the Indonesian business community see an influx of cheaper Chinese goods as a threat, ACFTA has given opportunities for business to drive more economic growth.

In order to capitalize on the opportunities the Indonesian government has put a lot of effort into improving regulations and the overall business climate, including developing infrastructure.

Two of China’s great business advantages are its massive population and its great number of small and medium-sized businesses spread throughout the country. The Chinese government puts a lot of effort into developing the country’s business potential to support national growth. China also wants to eventually surpass the US as the world’s number one economic power and one of its strategies to help it do this is to enhance its links with other Asian economies

In Indonesia, the government is also trying to boost economic growth. The government is seeking to improve both economic and physical infrastructure to help it achieve its aims. It is seeking to reform key institutions such as the Attorney General’s Office, the Supreme Court and the National Police and further develop its infrastructure, Finance Minister Sri Mulyani Indrawati said earlier this month during a seminar held by Citigroup. All of the government’s hard work seems to be paying off with economic indicators improving day by day.

Indonesia’s gross domestic product rose by 4.5 percent in 2009, making it one of the better-performing economies in the world. Some analysts are confident that the country’s economy can grow by between 5.5 percent and 6 percent this year.

Indonesia is likely to see inflation of 5.5 percent to 5.7 percent this year, near the upper end of the central bank’s forecast, Sri Mulyani said. “Inflationary pressure is expected to rise to 5.5 percent to 5.7 percent, in line with an increase in commodity prices on international markets and an increase in global demand in line with the global recovery,” she said. Accelerating economic growth this year should also provide momentum to push ahead with further economic reforms, Sri Mulyani said.

Under President Susilo Bambang Yudhoyono’s government, Indonesia is trying to create the conditions to drive stronger economic growth. Indonesia is seeking to harness the potential of its industrial sector as well as its large number of micro, small, and medium-sized enterprises.

The government is also trying to encourage business to engage more with international partners to expand their businesses and grow the overall economy.

ACFTA presents an excellent opportunity for both China and Indonesia to further their economic growth ambitions. The two countries economies are complementary. China can produce very low-cost goods due to low wage rates, high productivity and economies of scale. Meanwhile, Indonesia is wealthy in raw materials and occupies a strategic geographic position. But it still needs to better develop its economic infrastructure to take advantage of its strengths.

Businesses need access to large amounts of finance when trading internationally and they need to be able to access this finance quickly. Some banks have these types of products to support global trading. For large scale businesses, these include letters of credit for both importers and exporters — a service that larger business have been using for years.

For micro, small, and medium-sized enterprises, banks offer remittance services, which are more suited to smaller scale businesses. Remittances originally evolved so that students and laborers, studying or living overseas, could send and receive money internationally. However, remittances can also benefit small businesses.

Remittances have the advantage of allowing businesses to transfer money very quickly. Most banks provide a one day remittance service. If you send money in the morning, the person receiving the money will get it in the afternoon on the same day. If the amount being transferred is small, remittances are a good and low-risk option for businesses. Most banks allow customers to makes remittances over Web-based systems or via direct transfers between bank accounts.

Businesses should make sure they are aware of all opportunities to expand their businesses and reach new markets. Then they will be able to fully take advantage of the new opportunities that the ACFTA presents. They should put the negativity about the agreement behind them and try to drive forward Indonesia economic growth.