Australia’s new Prime Minister, Scott Morrison, is set for his first foray into foreign trade partnerships as he meets with his Indonesian counterpart, Joko Widodo, tomorrow to negotiate an economic pact.
The meeting should herald in a new free trade agreement that strengthens ties and increases the flow of goods between the Asia Pacific neighbors.
Morrison is hoping to capitalize on the good relationship with Indonesia cemented by his predecessor Malcolm Turnbull as he rounds off his first full week in office with a visit to Jakarta.
Arrmantha Nasir, the Indonesian Foreign Ministry Spokesperson, said that this is a “win-win” situation for both countries and that Indonesia is delighted that the meeting is taking place “because everywhere else in the world, we are seeing a rise in protectionism.”
East Asia and Pacific Affairs Director Edi Yusuf confirmed that both countries hope to ratify the Indonesia Australia Comprehensive Economic Partnership Agreement (CEPA).
Yusuf said that CEPA will cover more than just trade and will also allow for cooperation on services, rules and investments as well as intellectual property.
One major change that CEPA will enable concerns Indonesia’s universities, which currently cannot allow any form of foreign investment. Under the new pact, Australian backers can bid for up to 67% ownership of an Indonesian university, which will provide welcome funding for higher education.
Meanwhile, the Indonesia Trade Ministry’s Director General of International Trade Negotiations, Imam Pambagyo, was effusive in his praise of negotiators on both sides, hailing the fact that they did their work “expeditiously.”
Pambagyo said that it is encouraging that “many gaps have been closed” between the two countries, and it also seemed as though any disagreements left on the table “look quite possible to be closed as well.”
This agreement has been under discussion for a while, as the idea first surfaced back in 2012. However, due to a range of political and global changes on both sides, it took until last year to reach a scheduled date of completion. Although 2017 was to be the finish line, the agreement is now set to come into force later this year once all the legal documents are in place.
Although some key details of CEPA have not yet come to light, rumors of benefits to the agricultural sector are already in force, including potential changes to the current rules for exporting Australian cattle to Indonesia.
Although Australia and Indonesia are neighbors, there is not a great deal of trade between the two at present, which CEPA should change. Data from the International Monetary Fund (IMF) shows that last year, Australia was only the 14th-highest buyer of Indonesian goods, while Indonesia came in at tenth place for taking in Australian exports.
Two-way trading figures between the nations came to $8.5bn last year, with a $3.5bn deficit on Indonesia’s side.
Securing free trade agreements has become a clear priority for Joko’s government, as the Indonesian rupiah is dropping in value. Heralding in agreements with close neighbors should be a good start, and with more guaranteed exports and imports on the table, Indonesia’s economy is likely to find more stability and growth.
Alongside the CEPA, Joko and Morrison also expect to sign other pacts. These will involve cooperation on transportation, cyber technology and sharing creative approaches to improving the economic outlook.