Australia and Indonesia Strengthen the Trade and Investment Relationship

Australia and Indonesia made further progress in strengthening the bilateral trade and investment relationship during the 25 June Trade Ministers’ Meeting in Jakarta. This annual meeting was established in August 2000 to cement closer commercial links between the two countries. The last meeting took place in Canberra in August 2006.

My discussions with my Indonesian counterpart, Dr Mari Pangestu, focused on the progress made under the Australia‑Indonesia Trade and Investment Framework (TIF), signed by Mr Vaile and Dr Pangestu in September 2005.

The TIF provides a significant vehicle for furthering bilateral trade and investment ties with Indonesia. Under the TIF, leading Australian and Indonesian business representatives took part in a Policy Dialogue, discussing practical issues relating to the bilateral investment climate. An Experts Group provided recommendations to Ministers on ways to broaden the commercial relationship.

During the Policy Dialogue, Australian business leaders expressed their strong interest in increased participation in the development of Indonesia’s resources and infrastructure sectors, and discussed ways to improve further Indonesia’s investment environment.

Australia and Indonesia are already cooperating closely to produce a high-quality ASEAN‑Australia‑New Zealand Free Trade Agreement. I welcome the report of the TIF Experts Group, including the recommendation that Australia and Indonesia undertake a feasibility study for a bilateral free trade agreement. This recommendation will now be considered by our leaders.

Although the bilateral trade relationship remains robust, with two‑way trade totalling A$10.4 billion in 2006, Dr Pangestu and I recognise there is scope to build on this in key sectors.

I raised with Dr Pangestu a number of market access issues of ongoing Australian industry concern, particularly relating to the horticulture and meat sectors. We also discussed cooperation to ensure Australia’s quarantine and food standards are better understood by Indonesian exporters.

I reiterated Australia’s continued support in assisting Indonesia’s economic reform efforts by facilitating business‑to‑business contacts, and through ongoing capacity building and technical development activities in areas such as fiscal policy, tax administration, debt management and trade policy.

I was delighted with the high level of business participation in today’s meetings, including by members of the senior Australian business delegation that have accompanied me to Indonesia. The delegation comprises 35 Chief Executive Officers and senior business delegates from a wide range of Australian industry sectors interested in expanding their presence in Indonesia.

Australian commercial engagement with Indonesia remains strong and I very much welcome news of a number of new joint business opportunities. These include:

Leighton Asia (Southern) has been awarded two new mining projects in Indonesia worth a total of almost USD700 million; a six-year USD610 million contract for the provision of mining services at the Wahana coal mine in South Kalimantan for PT Wahana Baratama Mining and a USD70 million coal mining project with PT Multi Harapan at its mine near Samarinda, in East Kalimantan;
Laing O’Rourke, with joint venture Partners PT LOR Indonesia and PT Petrosea tbk., in alliance with PT Indominco Mandiri, were awarded the design, procurement, engineering, construction and commissioning of works for the expansion of the Bontang coal export terminal in Kalimantan from its current capacity of 8.5 million tonnes per annum to an ultimate capacity of 18.5 million tonnes per annum;
Australia’s Accor Premiere Vacation Club (APVC), a leader in Australasia’s timeshare industry, is expanding its high-quality tourism infrastructure in Indonesia, with the development of an exclusive points-based Club Properties timeshare resort in Nusa Dua, Bali;
Airservices Australia, which manages more than 4 million flights per annum carrying some 47 million passengers, is building its partnership activities with the Indonesian Government, with a multi-million dollar bilateral navigation deal;
Arrow Energy, Australia’s leading independent Coal Bed Methane (CBM) company, is developing four (4) multi-million dollar CBM projects in South Sumatra and Kalimantan, helping Indonesia secure its gas needs;
Cheetham Salt, a wholly-owned subsidiary of Ridley Corporation Limited, Australia’s largest producer and refiner of salt,is establishing a new refining facility at Cigading Port which will increase capacity to 900,000 tonnes;
Commonwealth Bank of Australia (CBA)’s Indonesian banking subsidiary, PT Bank Commonwealth (PTBC), is currently acquiring Surabaya-based regional bank, Bank ANK, a move that reinforces CBA’s strategic goal of better servicing Indonesia’s rapidly-growing retail and SME sectors;
Newcrest Mining Limited, an independent Australia-based publicly-listed mining company with operating mines in Australia and at Gosowong on Halmahera Island in Indonesia, is seeking to expand its operating presence beyond Halmahera;
Santos is Australia’s largest producer of domestic natural gas, including coal seam gas, and one of the most active oil and gas explorers in Indonesia, with production at Maleo, and soon to be at Oyong, both in East Java;
Rio Tinto, a worldwide, leading diversified mining company, is continuing negotiations with the Indonesian Government to develop its USD 2 billion Sulawesi Nickel Project; and
SAI Global, as a leading provider - worldwide and in Indonesia - of business information and compliance and assurance services, is linking Indonesian business-government services into the global economy.

Total Australian investment in Indonesia had reached A$2.6 billion at end December 2005, a 7.2 per cent increase on the previous year, making Indonesia Australia’s 15^th largest market for investment abroad. Indonesian investment in Australia had reached A$487 million in 2005.

Trade between Australia and Indonesia has grown steadily in recent years, with current annual two-way trade worth about A$10.4 billion.

Indonesia currently enjoys a merchandise trade surplus with Australia of A$135 million, with major exports to Australia including crude petroleum, non-monetary gold, paper and wood.

Indonesia’s major imports from Australia include wheat, sugar, crude petroleum, education services, aluminium, cotton and live animals.

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