More than eight years. Five Prime Ministers. A mining construction boom long gone.

A lot has changed in Australia from when the ball first began to roll on talk of a bilateral trade agreement with Indonesia in November 2010 and when an agreement was finally signed in March this year.

Neighbours and strong trading partners – the value of goods and services traded annually between the two nations stood at $16.78 billion in 2017 – it makes sense for an agreement be struck. But the Australia-Indonesia economic relationship has always been complicated and a middle ground is traditionally hard to find.

That Julia Gillard was the sitting Prime Minister when negotiations on the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) began speaks not only to the Australian domestic political turmoil which stole headlines through the best part of the last decade, but also to the challenges and complexity of such agreements and the ideological distance between the governments of the island continent and the archipelago nation that is its immediate neighbour to the north.

These are enough to fill an article in their own right. The latest saga – talk of an Australian embassy move in Israel derailing the agreement on the back of religious undertones – took more than its fair share of newspaper editorial space. Economic implications aside, it is not really a topic for a mining publication.

The reality of it all is despite the hold-ups the agreement is now signed, and early indications would suggest the wait was worth it – particularly for those in Australia’s mining equipment, technology and services (METS) sector.

Under the terms of the new agreement, Australia can own up to 67 per cent of contract mining services and mine site preparation services in Indonesia. Indonesia is among Australia’s largest METS export markets.

Current settings which allow majority Australian-owned companies to supply mining services are locked in. Mineral and energy exports to Indonesia remain largely duty-free as per the ASEAN-Australia-New Zealand Free Trade Agreement signed in 2009.

“The greatest opportunities under the agreement relate to Australia’s METS sector,” Minerals Council of Australia Chief Executive Tania Constable told National Mining Chronicle.

“At least 140 Australian-based METS companies export equipment, products or technology to the Indonesian market, including at least 40 ASX-listed companies.

“Indonesia’s commitments provide ongoing certainty for Australia’s METS  rms. Our world-leading METS sector, which already has a significant presence in Indonesia, accounting for $1.6 billion in exports in 2017-18, will bene t further.”

Ms Constable said METS firms doing business in Indonesia ranged from big miners offering whole-of-mine services to niche firms with individual service solutions.

Also beneficial to mining in both nations is the inclusion of a skills exchange which will allow up to 200 Indonesians per year to access training opportunities in Australia.

While it is not an inclusion specific to mining, University of New South Wales J. W. Nevile Fellow Economist Tim Harcourt told National Mining Chronicle he expected the exchange program to appeal to mine service providers.

“Mining is a bit underdone between Indonesia and Australia and this should help a little bit,” he said.

“One thing that has really mattered to companies like Orica is the ability to train people in Australia and then bring them back with the skills – this should really help.

“When you look at export volumes and values and the number of companies operating, Indonesia is pretty underdone considering its size and proximity to Australia – people say it’s high return but high risk as well.”

The potential high return is only expected to increase into the future – Indonesia’s economy is growing at a rate of knots and the forward forecasts present significant opportunities should Australian mining capitalise on the opportunities created through the IA-CEPA.

Ms Constable said with Indonesia expected to become the world’s fourth-largest economy by 2050, the finalisation of the agreement would help power mining jobs well into the 21st century.

“Indonesia is one of Australia’s closest neighbours and will use increasing amounts of minerals as its appetite for energy and infrastructure continues to grow,” she said.

“The IA-CEPA will deliver further opportunities for Australia’s resources industry in meeting that future energy and minerals demand from Indonesia.

“For example, it is expected metallurgical coal demand will triple across South-east Asia in the next five years, particularly to support cement production as steel blast furnaces continue to open across Indonesia.”

While the benefits are plentiful, the Minerals Council said an opportunity to loosen foreign ownership restrictions on mining projects had been missed.

“It is unfortunate the IA-CEPA did not relax Indonesia’s barriers to foreign investment in mining projects, which are generally the greatest impediment to the mining sector looking to engage in Indonesia,” Ms Constable said.

Mr Harcourt said he was not surprised Indonesia had left the restrictions untouched, particularly with an election on the horizon at time of signing.

“Foreign investment is a very hard sell in Indonesia sometimes,” Mr Harcourt said. “People do rally against foreign interests for political purposes – even Chinese- Indonesians who are third generation are rallied against in political elections even though they’re long-standing Indonesian citizens. It’s an issue.

“Keeping foreign interests out of the mining sector is actually probably a negative for Indonesia – Australian companies have a reputation for improving health and safety and environmental protection standards wherever they go in the world.”

The deal may be eight years deep, but time – more time – will tell what happens.

Image: Tim Harcourt