Indonesia, Australia agree to resume stalled economic cooperation dialog

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Sydney_Opera_HouseThe governments of Indonesia and Australia will reactivate talks on the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) and target making the bilateral trade agreement happen by year-end.

“Indonesia and Australia will ensure that IA-CEPA runs comprehensively and produces maximum results in the trading of goods and services, as well as investment and economic cooperation to balance benefits to the two parties,” Indonesian Trade Minister Thomas Lembong said recently, as quoted by Antara News.

Thomas and Australian Trade and Investment Minister Steven Ciobo said bilateral trade and investment can be further developed because the two countries complement each other economically and are geographically near each other.

Despite being neighbors, separated by the Indian Ocean and Timor Sea, trade activities between Indonesia and Australia are relatively small, according to a report by Indonesia-Investments. Two-way trade was worth nearly US$8.5 billion in 2015, down 19.8% year-on-year from $10.6 billion in the preceding year. Australia enjoys a trade surplus of $1.1 billion over Southeast Asia’s largest economy.

For comparison, in 2015, Indonesia’s two-way trade with the United States was worth $23.8 billion, with Singapore $30.6 billion, and with China $44.5 billion.

The two officials also expressed satisfaction with the results of the initial identification of areas for cooperation carried out by the negotiating teams, including on meat and cattle, expertise, financial services, professional services, processed foods, food and drugs standards, agriculture, designs, infrastructure, and education.

“The result of the initial identification reiterates the importance of IA-CEPA and other projects that may be made through future deals,” Thomas said.

Thomas and Ciobo have instructed officials concerned to work based on this initial identification so that a final understanding can be achieved before the year ends.

In a joint statement, they also announced the reactivation of the Indonesia-Australia Business Partnership Group. This group will renew reports and recommendations regarding the bilateral free trade agreement and present these at the next round of negotiations in May 2016 in Indonesia.

The decision to resume talks in two months’ time was taken after the two executives met in Canberra, Australia on March 16. Previously, talks about the IA-CEPA were put on hold amid a period of severe diplomatic tensions between the two nations over the “2013 spy scandal,” the execution of two Australian citizens in Indonesia, the cattle trade impasse, and the tough policies of Australia for asylum seekers.

Australian live-cattle exporters objected strongly when the Indonesian government implemented barriers to cattle imports from the country in mid-2015, slashing total cattle imports by 80%, in a bid to enhance the self-sufficiency of the country. However, it led to soaring local beef prices and good gains for the so-called “beef mafia,” referring to certain groups that deliberately hold on to the beef supply in order to raise prices.

Although the Indonesian government has allowed more live cattle imports, it remains an issue between the two economies.

The 2013 spying scandal occurred in 2013 when allegations were made that the Australian Signals Directorate attempted to monitor activity on the mobile phones of then President Susilo Bambang Yudhoyono, his wife, and several senior government officials.

Another major diplomatic fallout occurred when, despite Australia requesting for clemency, Indonesia executed in May 2015 two Australian citizens who were allegedly members of the so-called “Bali Nine” drug trafficking ring.

Photo: Kazuhisa Togo