Indonesia, Australia sign partnership in bid to boost trade, services

JAKARTA (Reuters) - Indonesia and Australia on Monday signed an economic partnership agreement aimed at stepping up trade and investment between them in areas ranging from cattle to education and cars to wheat.

Indonesia's Trade Minister Enggartiasto Lukita and Australia's Minister of Trade, Tourism and Investment Simon Birmingham sign an economic partnership agreement aimed at boosting trade and investment during a ceremony in Jakarta, Indonesia, March 4, 2019. REUTERS/Willy Kurniawan

Though neighbors, the two countries are not top trade partners and the deal has been welcomed by Australian farmers looking to ship more agricultural commodities into Southeast Asia’s biggest economy, as well as by Indonesian companies producing footwear and textiles.

In Jakarta, Indonesian Trade Minister Enggartiasto Lukita and Australian Trade Minister Simon Birmingham signed the deal following completion of talks that started early in the decade and occasionally were stalled by diplomatic tension.

Following Monday’s signing, the two governments “will work on an expedited ratification process toward the entry into force of the agreement”, a joint statement said.

The Indonesia-Australia Comprehensive Economic Partnership Agreement (CEPA) will eliminate all Australian tariffs on imports from Indonesia, while 94 percent of Indonesian tariffs will be gradually removed, it said.

Lukita said he hoped the agreement will be ratified before the end of this year.

Negotiations were concluded in August and the deal had been due to be signed by the end of 2018, but diplomatic friction over Middle East policy delayed the signing.

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Australia’s recognition of West Jerusalem as Israel’s capital strained relations with Indonesia, which is the world’s biggest Muslim-majority country and supports a two-state solution to the Israel-Palestinian dispute.

The trade deal “is a good step forward for the important bilateral relationship between these G20 nations, which has too often suffered because of political rows,” said Ben Bland, director of the Southeast Asia project at the Lowy Institute in Sydney.


Monday’s joint statement cited Indonesia statistics saying that their two-way trade totaled $8.6 billion in 2018. Australia has said Indonesia is its 13th largest trade partner.

Rosan Roeslani, chairman of the Indonesian Chamber of Commerce and Industry (KADIN), said he expected his country’s textile and footwear industries to benefit the most from the agreement.

The CEPA covers not just free trade in goods, but also services such as opening up investment in Indonesia’s university sector to allow up to 67 percent foreign ownership once a so-called negative investment list - showing what areas foreigners cannot enter - is revised.

The deal should also open up ownership in Indonesia of hotels, power plants and companies providing mining services, according to the Australian foreign ministry’s website.

Under the agreement, Australia will be able to export to Indonesia 575,000 head of cattle in the first year of the deal duty free, it said. At present, there is a 5 percent duty.

Indonesia is already the largest buyer of Australian wheat, purchasing A$950 million in 2017-2018, while beef exports were around A$800 million last year and sugar exports $181 million.

Andrew Weidemann, a grain farmer in the Australian state of Victoria, said the agreement was a rare bight spot for an industry crushed by prolonged drought on the east coast.

“It’s a win-win for Australian grain and Australian farmers in general and the economy,” said Weidemann.

Additional reporting by Fanny Potkin and Colin Packham in SYDNEY; Writing by Ed Davies; Editing by Richard Borsuk