UTS Voice
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The leaders of Indonesia and Japan signed a free trade pact in Jakarta that will eliminate well over 90 per cent of tariffs in trade between the two nations that last year was worth $27.2 billion. Under the Economic Partnership Agreement, which is expected to be implemented early next year, Japan will secure much-needed energy supplies while Indonesia will receive unprecedented capacity-building assistance to help raise production standards so its goods meet Japan’s strict import criteria. Some 80 per cent of Japanese tariffs will be removed as soon as the pact is implemented, with another l0 percent being reduced over the next decade. Indonesia will eliminate 58 per cent of its tariffs immediately upon implementation and another 35 per cent over the next 10 years.
Japanese and Indonesian businesses signed energy deals worth $4.3 billion, to build power stations and develop coal resources and gas fields. Under the later, Japan’s Mitsubishi, Indonesia’s state oil company Pertamina and Medco Energi of Indonesia will develop a 2 million-tonnes-per-year gas field in central Indonesia, with all the gas produced will be exported to Japan until 2025. Japan, which has no energy resources, imports 20 per cent of its energy needs from Indonesia. It is increasingly concerned about Indonesian plans to divert gas currently earmarked for export to the domestic market and so is using the EPA to secure long-term supplies.
Rice, a politically sensitive commodity in both countries, has not been included in the deal, which is Indonesia’s first and Japan’s eighth.In 2006 Indonesian exports to Japan totalled $21.7 billion, more than half of which was coal, gas and other energy resources. Trade in the other direction was $5.5 billion. Fahmi ldris, lndonesia’s industry minister, said 26 Japanese companies have said they would soon invest $557 million as a direct result of the EPA. However, business people warn that Indonesia needs to significantly improve its investment climate to reap optimal benefits from the deal. ‘A good system and strong human resources are not enough to secure the success of the EPA,” said Yasuo Hayashi, head of the Japan External Trade Organisation. Hilmi Panigoro, head of Medco, said Indonesia’s business-unfriendly labour legislation was “the main stumbling block” for potential foreign investors.
National News
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