Trade deal will allow more Australian ownership, investment in Indonesia

Out-Law News | 04 Mar 2019 | 11:44 am | 1 min. read

Indonesia and Australia have signed an economic partnership agreement that will reduce tariffs on goods moving between the countries and reduce controls on Australian investment and business ownership in Indonesia.

The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) relaxes foreign ownership requirements for energy and infrastructure companies, amongst others. Greater levels of Australian ownership will be permitted in contract mining services and mine site preparation services; most construction-related work; some energy activities, and in relation to some transport infrastructure.

The Indonesia-Australia Business Partnership Group (IA BPG), a body made up of Indonesian and Australian business groups to inform IA-CEPA negotiations, had called for the opening up of all classes of infrastructure to foreign investments. It also said that the Indonesian and Australian governments should create a joint public private partnerships (PPP) centre, and establish mechanisms for government-to-government agreement to aid particular infrastructure projects.

Trade and investment expert Jessica Callista of Bahar, the Indonesian partner firm of Pinsent Masons, the law firm behind Out-Law.com, said: "Indonesia and Australia have been partners through the ASEAN Australia New Zealand Free Trade Agreement (AANZFTA), and this bilateral agreement indicates that both countries expect to create a stronger relationship. It is clearly a step forward."

"We believe the signing of IA CEPA will spark interests and excitement from both countries, and we are looking forward to a deeper partnership on a PPP centre, which is what Indonesia needs, especially for high quality design, structuring and documentation of projects," said Callista.

The deal has been welcomed by industry groups including the Australian Chamber of Commerce and Industry, the Australia Indonesia Business Council, and the Minerals Council of Australia.

Negotiation of the IA-CEPA concluded in August but signing was delayed due to diplomatic tensions between Australia and Indonesia over Middle East policy.