Indonesia-Australia free trade agreement to be signed soon

14:54 | 29/08/2018 Global Economy

Australia could have a free trade agreement with Indonesia in place as soon as this week with Scott Morrison expected to head to Jakarta on his first overseas visit as prime minister.

Prime Minister Scott Morrison and Trade Minister Simon Birmingham are expected in Jakarta this week

Malcolm Turnbull had been expected to travel to Indonesia, Malaysia, Thailand and Vietnam but last week's leadership challenge in Canberra has cut short the itinerary to include only Jakarta for meetings with Indonesian president Joko Widodo.

Any in-principle agreement on long-stalled negotiations, launched in 2010 and revived in March 2016, could provide a significant foreign policy announcement for Mr Morrison's first week in office and help continue the strong relationship Mr Turnbull established with the Indonesian leader.

Both countries face elections next year and, in March, President Widodo said he would push to sign the agreement as soon as possible.

The Australian government wants a deal to secure the opening of new markets and opportunities for businesses, primary producers, service providers and investors.

Protectionist forces in Indonesia have slowed the agreement, with market access on goods, services and investment among final matters to be agreed on.

The country is not an active trade negotiator and makes most of its agreements through the Association of South-East Asian Nations, with the 2008 bilateral agreement with Japan one exception.

New Trade Minister Simon Birmingham could join Mr Morrison for the visit, while Foreign Minister Marise Payne confirmed on Monday she would represent Australia at the upcoming Pacific Islands Forum in Nauru.

Lowy Institute non-resident fellow Matthew Busch said Mr Morrison's early visit to Jakarta was a welcome move.

"If they're going to announce something that is tangible and more than just a commitment to finalise at a later date ... there are details and a clear and credible process to getting it done, it is definitely a good thing," he said.

"Australia only wins when it is on good terms with Indonesia. If they reach an agreement that Indonesia's leaders, and specifically Joko Widodo, are happy with that will be a good thing."

Mr Busch said Mr Turnbull's relationship with his Indonesian counterpart had significantly improved relations, describing the change from Tony Abbott as like "night and day".

"Joko Widodo and Tony Abbott did not go together very well, and Tony Abbott did not go very well in Indonesia, period.

"It would be nice to see meaningful access for Australian investment in terms of some sectors where there's a great deal of interest from Australia, including education and health.

"Agricultural goods like sugar and live cattle are two very big examples of where in the past even supposed market liberalisation has been delivered, I would say it has been a bit of a false dawn in terms of how regulated and how much state intervention takes place in Indonesia."

Australia Indonesia Business Council president Phillip Turtle said the detail of the deal was critical.

"We are hopeful it will have enough substance to it that businesses in both countries will be able to take advantage of the opportunities which emerge."

Australia's two-way trade with Indonesia was worth US$16.4 billion in 2016-17, making the country Australia's 13th-largest trade partner.

Agricultural products including wheat, live animals and sugar are among key exports, with two-way trade in services was valued at $5.3 billion, while education is Australia's key services export to Indonesia, valued at US$802 million.

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