Business is pressing the Australian and Indonesian governments to sign a bilateral trade deal by pushing ahead with plans for the agreement despite diplomatic tensions over Australia’s Israel embassy review.
Bluescope Steel executive vice-president Gerry Tidd said on Monday that the stalemated trade deal could add $10 million to $15 million a year in revenue for his company and give its board the confidence to step up its investment in Indonesia.
He said Bluescope could invest as much as $1 billion in south-east Asia over 5-10 years and Indonesia could expect to receive 40 per cent of that if the conditions were right.
Indonesian businesswoman Shinta Widjaja Kamdani said the two peak Indonesian business groups were moving ahead with promoting the Indonesia-Australia Comprehensive Economic Partnership Agreement to members despite the diplomatic hold-up.
“We actually really need this IA-CEPA,” she said, noting how Indonesian exports to Australia had now fallen below those from its emerging regional competitor, Vietnam.
She warned that the Indonesian and Australian currencies had already suffered from the US-China trade tensions and suggested this may become worse now that protectionist Democrats had more power in the US Congress.
They were speaking at the annual conference of the Australia Indonesia Business Council on the Gold Coast where former trade minister and local member Steve Ciobo described the Indonesian agreement as the “most exciting” trade deal he had been involved in in his old job.
Mr Ciobo, now Minister for Defence Support since the dumping of former prime minister Malcolm Turnbull, warmly endorsed Mr Turnbull’s role in the Indonesian trade negotiation.
He said Mr Turnbull had shown “tremendous vision” in developing a close relationship with Indonesian President Joko Widodo to revive the long-running trade negotiations.
‘They had a clear vision’
“They had a clear vision of where they wanted to take the relationship,” said Mr Ciobo, despite having voted against Mr Turnbull in the leadership showdown. Mr Turnbull last week specifically identified Mr Ciobo as part of the ministerial group that pushed him out of the prime minister’s job.
Referring obliquely to Australia’s high trade dependence on China, Mr Ciobo said the Indonesian deal was the most important part of a shift away from having too many eggs in one basket, which he had been pursuing.
Mr Ciobo spoke fondly of his high-profile old job as trade, tourism and investment minister in the frankest comments he has made since the ministerial changes that saw him shifted to the junior defence role.
He said the opportunity for digital business cooperation between the two countries was still little understood and urged Australian digital entrepreneurs to take advantage of low-cost skilled technology workers in Indonesia to develop new products.
Indonesian investment minister Tom Lembong told the conference he could not guarantee the trade agreement would be signed this week in Singapore – which had been expected – but he said it would definitely be signed. However other speakers said they were still worried about the parliamentary ratification process after the formal signing.
Role in building boom
But in further evidence of business planning for the agreement, Mr Lembong said he had been involved in discussions with Bluescope about how some of its new building products could play a role in a building boom that he predicted was about to occur in his country.
Federal Labor frontbencher Andrew Leigh told the conference that Labor’s recently announced plans to introduce a tougher domestic competition policy regime in Australia would force businesses to invest overseas.
Addressing concerns about lack of Australian investment in Indonesia, Mr Leigh, Labor’s shadow assistant treasurer, said trade agreements were not enough to increase Australian business activity in Asia and other domestic reforms were needed as well.
He said limited competition in the Australian banking sector made it hard to justify overseas investments because profits were so good and easy to make at home.
“Getting competition right domestically will also have that spin-off [encouraging offshore investment] as well,” Mr Leigh said.
Mr Leigh also said that despite the enthusiasm for the Australia-Indonesia trade deal and benefits from other recent Australian bilateral trade deals in Asia, the biggest gains would come from multi-country deals.
He said Labor would make reform of the World Trade Organisation a key part of its Asian trade strategy.