Indonesia President Joko Widodo comes bearing free-trade gifts

Indonesian President Joko Widodo is set to come bearing a free-trade gift when he lands in Australia this weekend.

Prime Minister Scott Morrison and wife Jenny visit President Joko Widodo and First Lady Iriana Joko Widodo at the Presidential Palace last October. Picture: Adam Taylor

Indonesian President Joko Widodo is set to come bearing gifts when he lands in Australia this weekend with the long-awaited Indonesia-Australia free trade agreement tipped to pass its final hurdle in parliament this week.

Jokowi, as he is known, is due to arrive in Australia with a large trade delegation on Saturday for a state visit during which he will address a joint session of parliament — the first time an Indonesian leader has done so in a decade.

The Indonesia Australia Comprehensive Free Trade Agreement, known as the IACEPA, was approved by Canberra last year but stalled in Jakarta over objections from some MPs that the deal disproportionately benefits Australia.

But the bill was expected to get the green light from a parliamentary trade committee late on Tuesday night, clearing the way for it to be rubber-stamped by the lower house by Thursday.

Trade committee member and MP Achmad Baidowi told The Australian he was optimistic the bill would be passed this week and come into force as early as April.

“The sooner it is ratified the sooner we can see it bringing benefits for Indonesia. A strong trade relationship between Australia and Indonesia will be very good because they are our Asia-Pacific neighbours,” Mr Baidowi said.

“Inshallah (God willing), on Thursday it will go through parliament.”

The economic benefits of the deal for both sides could be substantial, though will be most immediately felt by Australian agricultural exporters, such as beef cattle and vegetable producers, through the reduction or elimination of tariffs and other trade restrictions on 99 per cent of Australian goods into the Indonesian market.

Indonesia is set to remove a 5 per cent tariff and offer duty-free access for 575,000 cattle in the first year, rising in each subsequent year.

All remaining tariffs on Indonesian products into Australia, including textiles, coffee and palm oil, will be eliminated and 200 Indonesians a year will be given six-month work training opportunities in Australia. The number of working-holiday visas available to Indonesians will also rise from 1000 to 4100 a year.

In addition, the agreement allows for Australian-owned healthcare providers, mining services, architectural and engineering companies, universities and vocational training institutions to majority-own and operate businesses inside Indonesia with a view to opening up Australia’s labour market to Indonesian workers.

Australian tourism investors will be allowed 100 per cent ownership in Indonesia of high-end resorts and hotels to help Jokowi realise his ambition to establish 10 “new Balis” — international tourist destinations — in Indonesia.

Greater access to the Australian market is expected to spur Indonesia’s automotive and textile industries, and boost exports of timber, electronic and medicinal goods.   

Indonesia is also hoping the IA-CEPA will boost Australia’s direct investment in the country, which stands at around $11bn.

The agreement is underpinned by the so-called Powerhouse Concept, a hothouse program of investment and development projects using skills, raw products and labour from both countries to develop products for third-country markets.

Neither side has been willing to put a value on the IA-CEPA, which will provide only modest gains in the short term but for Indonesia the optics are as important as the detail, signalling to the global market that the traditionally protectionist country is opening up.

For Australia, it is as much about building a broad foundation of links that can stabilise and strengthen one of its most important, but volatile, diplomatic relationships, as it is about better market access.