Indonesia, Australia sign long-awaited trade deal

Vehicles on a road in Jakarta. Greater access to the Australian market is expected to spur Indonesia's automotive industry.
Vehicles on a road in Jakarta. Greater access to the Australian market is expected to spur Indonesia's automotive industry.PHOTO: EPA-EFE

JAKARTA (AFP) - Indonesia and Australia on Monday (March 4) signed a long-awaited trade deal  after months of diplomatic tension over Canberra's contentious plan to move its embassy to Jerusalem.

Indonesian trade minister Enggartiasto Lukita and his Australian counterpart Simon Birmingham wrapped up the multi-billion-dollar agreement in Jakarta, some nine years after negotiations first started.

The pact will include improved access for Australian cattle and sheep farmers to Indonesia's 260 million people, while Australian universities, health providers and miners will also benefit from easier entry to South-east Asia's biggest economy.

Greater access to the Australian market is expected to spur Indonesia's automotive and textile industries, and boost exports of timber, electronics and medicinal goods.

Bilateral trade was worth US$11.7 billion (S$15.8 billion) in 2017.

Both ministers touted the deal as indicative of deepening ties between the two countries, which have occasionally butted heads on foreign policy issues, including Australia’s hardline policy on asylum seekers. 

Birmingham said the deal marked a “new chapter of cooperation” between the two neighbours. 

“The signing of the Indonesia-Australia Comprehensive Economic Partnership Agreement brings our two nations closer together than ever before,” Birmingham told reporters. 

Lukita said the signing had the potential to transform the economy of both countries. “Today is definitely the brightest moment on of the Indonesia-Australia relationship,” he said.

The deal has been in negotiations since 2010 and was expected to be signed before the end of last year but it stalled when Prime Minister Scott Morrison proposed the relocation of Australia's embassy to Jerusalem.

Morrison first floated the shift in October, ahead of a critical by-election in a Sydney suburb with a sizeable Jewish population. Indonesia, the world's most populous Muslim nation, was angered by the proposal.

 
 
 

Both Israel and the Palestinians claim Jerusalem as their capital. Most nations have avoided moving embassies there to prevent inflaming peace talks on the city's final status - until Trump unilaterally moved the US embassy early last year.

In December, Morrison formally recognised west Jerusalem as the capital of Israel, but said the contentious embassy shift from Tel Aviv will not occur until a peace settlement is achieved.

He stood by his decision despite outcry from neighbouring Muslim countries, while Indonesia in response simply said it had noted the decision.

The agreement will eventually see the elimination of all Australian trade tariffs, while 94 per cent of Indonesian duties will be gradually eliminated.  

Australian investment in Indonesia totalled US$597 million in 2018, but that is expected to increase under the new deal, which also included provisions for greater protection of foreign direct investment.  

“Indonesia is a good market for Australia because of the large population (and) the increasing movement of the middle class,” economist Kresnayana Yahya, from Surabaya’s ITS university, told AFP.  

The less developed eastern reaches of Indonesia could significantly benefit from Australian investment, he added.  

The trade deal also comes just ahead of national polls in which Indonesian President Joko Widodo is pushing his economic record in the battle for re-election.