Indonesia and Australia yesterday signed a long-awaited trade deal after months of diplomatic tension over Canberra’s contentious plan to move its embassy in Israel to Jerusalem.
Indonesian Minister of Trade Enggartiasto Lukita and Australian Minister of Trade Simon Birmingham wrapped up the multibillion-dollar agreement in Jakarta, about nine years after negotiations started.
The pact would include improved access for Australian cattle and sheep farmers to Indonesia’s 260 million people, while Australian universities, health providers and miners would also benefit from easier entry to Southeast 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 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, including Australia’s hardline policy on asylum seekers.
The deal has been in negotiation since 2010 and was expected to be signed before the end of last year, but it stalled when Australian Prime Minister Scott Morrison in October proposed the relocation of Australia’s embassy to Jerusalem.
In December, Morrison formally recognized west Jerusalem as the capital of Israel, but said that the contentious embassy shift from Tel Aviv will not occur until a peace settlement is achieved.
Morrison stood by his decision, despite outcry from neighboring Muslim countries. Indonesia in response simply said it had noted the decision.
The agreement would eventually see the elimination of all Australian trade tariffs, while 94 percent of Indonesian duties would be gradually eliminated.
Australian investment in Indonesia totaled US$597 million last year, 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,” said economist Kresnayana Yahya, from Surabaya’s ITS university.
The less developed eastern reaches of Indonesia could significantly benefit from Australian investment, he added.
The trade deal also came just ahead of national polls in which Indonesian President Joko Widodo is pushing his economic record in the battle for re-election.
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