New pact signals deeper trade ties

Despite Indonesia being Australia’s closest northern neighbour, the trade and investment relationship between the two counties is relatively undeveloped and presents significant opportunities for future growth.

Earlier this year, a new chapter of economic partnership was established with the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA- CEPA). The agreement was designed to rectify the gap in Indonesia-Australia economic relations and endeavours

to reinforce Australia’s strengths to build opportunities in Indonesia, as well as enable Indonesia to tap into economic prospects in Australia.

Indonesia is a significant player in the global mining scene and is predicted to become the world’s fourth largest economy by 2050, behind China, India and the United States.

The Australia Indonesia Business Council (AIBC) is the peak non-profit business association involved with the promotion and facilitation of trade and investment between Australia and Indonesia. It played an important role in the development of the IA-CEPA, which aims to deepen the economic cooperation between Australia and Indonesia.

Speaking to National Mining Chronicle, AIBC National President Phil Turtle said Australia should embrace Indonesia as a key trading partner.

“There are a number of opportunities for our industries to collaborate and recent co-investments in Australian mining ventures by Indonesian mining interests are a testament to this,” he said.

On track to become an economic powerhouse, Indonesia’s scale and prospectivity has attracted foreign interest across a number of global industries.

“When looking at Indonesia and Australia, some might suggest our industries are natural competitors, as both countries are blessed with an abundance of natural resources the world demands,” Mr Turtle said.

“Despite this, there are a number of opportunities for our industries to collaborate.”

Australian mining equipment, technology and services (METS) companies are industry leaders in quality and innovation and a valuable asset for Australian miners, according to Mr Turtle.

“We already see a number of Australian mining and METS businesses active and successful in Indonesia, and the emergence of IA-CEPA will hopefully encourage further activity,” he said.

“In the realm of the METS sector there is much Australian businesses can offer, along with best-practice CSR, environmental management, community engagement and mine rehabilitation.

“Australia also enjoys a highly regarded regulatory environment which can be shared with our neighbours to help them reap the maximum bene t and maintain a sustainable minerals industry for many years to come.”

Analysis by the Perth USAsia Centre revealed that in 2016 Australia-Indonesia economic ties only accounted for 2.8 and 2 per cent of each other’s two-way trade respectively.

Even Russia, which was the subject of economic sanctions by some G20 members during 2016, had deeper trade relations with several of those countries with sanctions in place than the relationship between Australia and Indonesia.

Mr Turtle believed the IA-CEPA would help deepen economic cooperation between Australia and Indonesia, and add to the prosperity and security of both countries.

“With reduction in two-way tariffs the flow of a wide range of products in both directions will be enhanced,” he said.

“The agreement itself will also be a trigger for many businesses which have perhaps not seriously considered Indonesia, to take a closer look at our near neighbour.”

As one of the fastest growing economies in the world with the fourth largest population, Indonesia produces significant levels of coal, copper, gold, tin and nickel.

The AIBC has been a strong advocate for co-investments and joint initiatives to allow Australian and Indonesian businesses to partner to jointly exploit opportunities within regional and global supply chains.

Mr Turtle said he believed this was where the greatest opportunity lay.

“Ultimately, Australia is a relatively modest market for Indonesia,” he said.

“It is in Australia’s interest to be a part of this growth, or risk being left behind.”

Image: AIBC National President Phil Turtle.

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