Indonesia, Southeast Asia's largest economy, and Australia pledged Friday to help accelerate a negotiation to secure a free-trade agreement (FTA) between the Association of Southeast Asian Nation (ASEAN), Australia and New Zealand (AANZ-FTA).
Visiting Australian Prime Minister Kevin Rudd said the agreement was needed in order to forge and maintain mutual business relationships, and to pave the way for more investment in both countries.
"It is not always easy doing business across international boundaries, so our job in the government is to make it as easy as possible to do business by bringing down barriers to trade," Rudd said in his speech before business people grouped in the Indonesia Australia Business Council.
Indonesian Trade Minister Mari Elka Pangestu said there were still some "sensitive" issues hampering the negotiation, including arrangements for the food and dairy sector, with Indonesia specifically concerned about local beef and milk producers.
The country's beef and milk producers are mostly comprised of small- and medium-scale businesses, and are in need of protection against imports from big industry players, primarily from Australia and New Zealand.
"Our counter requests for Australia are to scrap import duties for textiles, footwear and spare parts because the Australian market is promising," she said.
The AANZ-FTA negotiation, initiated in 2005, are expected to be completed this year.
Aside from Indonesia, ASEAN members include Singapore, Malaysia, Thailand, the Philippines, Brunei Darussalam, Vietnam, Cambodia, Laos and Myanmar.
Rudd said should the outcome of the AANZ-FTA be achieved, the two nations could move on to a bilateral free-trade negotiation.
"I hope the feasibility study into an FTA between Australia and Indonesia will show that there are great gains to be made if we open up our economies more to each other."
In August 2007, Australia and Indonesia commenced a joint study to examine the potential impact of an FTA on Australia and Indonesia, including implications for economic growth, trade, investment, commercial linkages, competitiveness and capacity building.
"The study is expected to finish this year. My counterpart and I have also talked many times on the potencies and challenges of the FTA," Mari said.
According to the Indonesian Trade Ministry, total bilateral trade between Indonesia and Australia reached US$6.4 billion last year with Indonesia exporting $3.4 billion and importing $3 billion in goods.
In the January-February period this year, total bilateral trade reached $1.08 billion, up from $959 million in the same period last year.
Australia is Indonesia's eighth-largest destination country for exports and seventh-largest for imports. Australia is also Indonesia's 10th largest investor in Indonesia.
Chairman of the Indonesian Chamber of Commerce and Industry (Kadin) M.S. Hidayat said there were three Australian firms proposing to take part in Indonesia's infrastructure projects.
"The companies showed the proposals to Kadin, and said they're interested to invest in airport facilities, including in Jakarta's Soekarno-Hatta and Bali's Ngurah Rai airports," he said, adding that the investments might amount to hundreds of millions of dollars.