Indonesia and Australia go for comprehensive deal

Friday, 20 February 2009 

Australia wants a better investment climate and Indonesia wants assistance with its own production capacity. The two countries have now agreed that both items, along with trade liberalization, would go into the economic agreement that they are working on.

The trade ministers of the two countries concluded on Thursday another round of their meeting
to set up a bilateral free trade agreement (FTA), which they said would be built into the FTA
that will be signed later this month between the Association of Southeast Asian Nations (ASEAN) and Australia and New Zealand in Thailand.

During their joint press conference, Minister Mari Pangestu of Indonesia underlined the importance of capacity building.

She called it a key component of the future agreement to ensure that the benefits of a better investment climate would also accrue to the recipient country.

She specifically mentioned Indonesia’s agriculture sector as one potential area where Australia could help in return for the opening up of the dairy and beef sectors to Australian investors.

Her Australian counterpart Simon Crean underlined the importance of creating the right environment for Australian investors.

“Investment is the new trade,” he said, pointing at the fact that investment could lead to better access to the global supply chain as well as to markets.

Indonesia is Australia’s fourth largest trading partner in ASEAN, a rank that prompted Crean to describe a trade relationship that is “underdone”

Two-way trade in 2007/8 reached A$10.3 billion, according to Australian official figures.
Australian investment in Indonesia was valued at A$3.4 billion at the end of 2007.

Neither minister was willing to put a time frame on when the comprehensive economic agreement would be signed, in spite of the numerous meetings they have had in the past year.

Crean however agreed that moving toward more free trade would be the best course to lift countries out of the current economic risis. “Protectionism only invites retaliatory action.”

Addressing concerns at home about the possible negative impact on Indonesia’s own industry, Mari said the two countries have agreed to put the sensitive sectors as the last to be liberalized under the free trade agreement.

Indonesia’s dairy and beef sector, she said, would only be liberalized between 2017 and 2020.
The meeting to discuss the bilateral free trade agreement also involved the business community from both sides.

The trade meeting preceded the Australia-Indonesia Conference which was opened later on Thursday evening by Prime Minister Kevin Rudd.

A total of 120 people, 60 from each side, are taking part in the conference which winds up Saturday. (The Jakarta Post)