Indonesia and Australia to study possibility of free trade agreement

Andi Haswidi, The Jakarta Post, Jakarta

Following a recommendation from a joint expert group consisting of prominent business figures and academics from Indonesia and Australia, the two countries appear likely to now conduct a feasibility study on a free trade agreement (FTA).

"We have accepted the recommendation by the expert group that Indonesia and Australia should conduct a feasibility study on a bilateral agreement, which will now be considered by our leaders," Australian Trade Minister Warren Truss said during the seventh Indonesia-Australia ministerial meeting here Monday.

Indonesia and Australia have been holding annual meetings of their trade ministers since 2000, with the last taking place in Canberra in 2006.

According to Truss, the feasibility study could take up to two years, which would then be followed by negotiations between delegations from the two countries before a final agreement could eventually be signed.

Also addressing the press Monday, Indonesian Trade Minister Mari Elka Pangestu explained that the joint expert group from the two countries had been studying trade and investment issues between Indonesia and Australia since last year, and concluded that it now was the right time to conduct a feasibility study into an FTA.

The members of the expert group from the Australia side are Rio Tinto managing director Charlie Lenegan, Chambers Westgarth CEO & partner John Denton, Thiess executive general manager Ray Wilson and Lowy Institute program director Mark Thirlwell.

The Indonesian members are former Bank of Indonesia governor Sudrajad Djiwandono, Indonesia-Australia Business Council president Noke Kiroyan, former PT Indofood director Philip Purnama, and the chairman of the University of Indonesia's Institute for Economic and Social Research (LPEM-UI), Chatib Basri.

Noke Kiroyan told The Jakarta Post that other recommendations that would be submitted to the leaders included the possibility of Indonesian professionals working in Australia on the back of increasing demand in that country for manpower in such sectors as hospitality, mining and construction.

"We also recommended capacity-building programs, especially as regards product labeling and quarantine regulations so that Indonesian exporters can keep abreast of the standards applied in the Australian market," Noke said.

Truss said that although bilateral trade between the two countries remained robust at US$10.4 billion in 2006, Indonesia was still lagging behind its regional peers, despite its geographical proximity and huge potential.

"We held this ministerial meeting to break down existing barriers hampering further growth in trade and investment between the two countries," Truss said.

While in Jakarta, Minister Truss and an accompanying business delegation will meet Coordinating Minister for the Economy Boediono, Finance Minister Sri Mulyani Indrawati, Minister for State Enterprises Sofyan Djalil, and Agriculture Minister Anton Apriyantono.

Speaking to the Post later Monday, Truss said that a number of Australian companies had identified new business opportunities in Indonesia. However, he did say that some other Australian investors, "big ones", were still in a "wait and see" mode.

"It is important for investors to be confident about their investment here, that it will be secure and profitable. Investment capital is very mobile. So, those who wish to host it should provide the right regulatory environment and business climate."
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