Indonesia, Australia sign trade deal after months of tension

JAKARTA • Indonesia and Australia yesterday signed a long-awaited trade deal after months of diplomatic tension over Canberra's contentious plan to move its Israeli 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 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 its exports of timber, electronics and medicinal goods.

Bilateral trade was worth US$11.7 billion (S$15.8 billion) in 2017, but Indonesia is only Australia's 13th-largest trading partner and the economic relationship has been viewed as underdone.

Both ministers touted the deal as indicative of deepening ties between the two countries, which have occasionally butted heads on foreign policy issues.

"The signing of the Indonesia-Australia Comprehensive Economic Partnership Agreement brings our two nations closer together than ever before," Mr Birmingham said.

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 benefit from easier entry to South-east Asia's biggest economy.

Mr Enggartiasto said the signing had the potential to transform the economy of both countries, adding: "Today is definitely the brightest moment of the Indonesia-Australia relationship."

The deal has been in negotiation 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 in Israel from Tel Aviv to Jerusalem.

Mr Morrison first floated the shift last 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 their embassies there to prevent inflaming peace talks on the city's final status - until President Donald Trump unilaterally moved the US embassy early last year.

Last December, Mr Morrison formally recognised West Jerusalem as the capital of Israel, but said the embassy shift from Tel Aviv will not occur until a peace settlement is achieved. Indonesia in response simply said it had noted the decision.

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

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on March 05, 2019, with the headline 'Indonesia, Australia sign trade deal after months of tension'. Print Edition | Subscribe