ENGGARTIASTO LUKITA: I'll speak first, Steve, if I may, in Bahasa. We have just met and I… our meeting, our relationship is so close and this is the 17th time we have communicated. Seventeen times, I just remind them. And we both have had not only formal but also informal conversations via phone and we also agree, “seven 24”, so we are in contact any time, especially now we want to get the agreement on CEPA [Comprehensive Economic Partnership Agreement] completed this year. The meeting was so positive that we… the CEPA agreement can be signed by our two country’s leaders by the end of this year at the latest.
The Indonesia - Australia CEPA has been run for eight rounds, and the ninth round will be held in Bali, Indonesia from 2-6 October, and the 10th will be November 13 to 17, also in Indonesia. And if needed, we agreed that the one in November could be the latest one. Actually, there is still the last round from 18 to 22 December in Australia. But if it’s possible, the last round [will be] in November. But we are trying to do our best.
We discussed issues of investment negotiations, market access, to form an Indonesia-Australia powerhouse, to enter third country markets, and some other barriers to the negotiation process. We agree and I have also expressed the need for a win-win agreement, and see this negotiated agreement as a complete package, which also includes economic cooperation and capacity building. This is very important, especially in the context of the establishment of the powerhouse, so the products are made based on the principle of a supply chain between the two countries in order to enter third country markets, including advanced countries which apply high standards.
As part of a confidence building measure, both of us agreed on a decrease of raw sugar import tariffs by Indonesia to 5% and the elimination of import tariffs to 0% by Australia for pesticides and herbicides. The reduction and elimination of tariffs will be conducted simultaneously, at the same time after the domestic process is completed in the near future. I would like to explain that the 5% import tariff on raw sugar means that it has a similar tariff as Thailand. So it will be more competitive [unclear]. The reduction and abolition of tariffs is conducted within the framework of the ASEAN-Australia-New Zealand FTA so the MFN is not applied to all countries, but only for participants in the ASEAN-Australia-New Zealand FTA.
Once again I would like to say that this is important for Indonesia because we eliminate our dependence; the raw materials will come from not only one country but various countries. The amount of imports is still the same, it’s just we take them from everywhere. And we also get zero tariffs on herbicides and pesticides. Our meeting also discussed other aspects of the development of investment and trade, part of the agreement that will be agreed upon, Indonesia-Australia CEPA. You also have a media statement in your hands, a release issued by both of us. Steve, we would like to invite you to give the [inaudible], thank you.
STEVEN CIOBO: Well, Minister Lukita, thank you very much. To the assembled media, it’s a pleasure to be here with you. I’d like to pick up on a number of points that Minister Lukita made. He made reference to the fact that this is the seventeenth time that he and I have met. When Minister Lukita was last in Australia, he had the opportunity to meet with my wife, and at that stage I think we’d met fourteen times. And he said I’ve seen your husband fourteen times since July last year. And my wife remarked that that was more often than she’d seen me.
So, it speaks to the nature of our great, good relationship and it also I think is an example of the strength of the Indonesia-Australia relationship as well. Certainly, I know from Australia’s perspective, and I believe from the frequent conversations between President Widodo and Prime Minister Turnbull, that Indonesia and Australia are both very committed to building stronger trade and investment links. And we know through stronger trade-investment links that our two countries will continue to come closer together; the people-to-people links will flourish; and we will see, as a consequence, that both Indonesia and Australia are in a stronger position.
It is, exactly as Minister Lukita said, an example of the kind of win-win partnership that we believe we can achieve through the Indonesia-Australia Comprehensive Economic Partnership Agreement, or IA-CEPA. Certainly Minister Lukita and I not only have each other’s mobile telephone numbers so we can speak regularly and text each other, but we’re also personally invested in trying to conclude this deal. And I’m sure it was a great surprise to our Chief Negotiators that we’ve agreed this morning to try and conclude it by November, so we’ve made their workload harder, but don’t feel too sorry for them because the next negotiations are in Bali. So, hopefully, that’ll be an opportunity for them to move to the final stages of concluding what will be a high-quality deal between Indonesia and Australia.
In terms of the early outcomes that Minister Lukita and I are speaking to this morning, this is an example of what we’re open to achieve together. The announcement today is a very concrete example of the win-win outcomes that we both believe can be achieved under IA-CEPA. The fact that Indonesian exports, in terms of pesticides and herbicides, will be able to come into Australia with zero tariff, which means that they will be cheaper to come to Australia, is a win for Indonesia in terms of exports, but it’s also a terrific win for Australia. The reason it’s a win for Australia is because it means that our import costs, that is, how much our farmers and others pay, will go down.
The flip side of that coin, or the other side of this announcement, is with respect to raw sugar tariffs here in Indonesia. By reducing the tariff on Australian raw sugar, again, it’s a win-win outcome. It’s a win for Australia, because it will make our sugar more price-competitive, and of course, it’s a win for Indonesia. A win because, now for your sugar, it’ll be a more competitive marketplace between Australia and Thailand, and that’s good news for Indonesian food manufacturers because they’ll be able to get better prices in a more competitive marketplace, but it’s also a win for Indonesia as well because, again, like Australia with herbicides and pesticides, it means that there’ll be cheaper business inputs for Indonesian food manufacturers. And I have no doubt, Minister Lukita, that in time that will feed through to hopefully cheaper prices for consumers as well, as those cost savings are passed through the food chain.
So, I really just want to say that I think we’ve done some really good work here. President Widodo and Prime Minister Turnbull are both very committed to concluding a good deal between Indonesia and Australia. We are such near neighbours; we are both invested in the success of our region; we work alongside each other in broader regional discussions, around for example, the Regional Comprehensive Economic Partnership. We’re both committed to opening up more investment in each other’s countries knowing that investment will help to drive economic growth, investment will help to drive jobs, and investment will mean that the prosperity of both Indonesia and Australia continues to improve.
So, with those few remarks I’m happy to take any questions, or over to you Minister Lukita.
JOURNALIST: When President Jokowi visited Sydney in February the announcement between him and the Prime Minister Malcolm Turnbull was that Indonesia had agreed to lower sugar tariffs from eight per cent to five per cent and Australia would cut tariffs for pesticides and herbicides, so they announced that then. Has today’s announcement – has that gone further from what was announced by the President and the Prime Minister in February?
ENGGARTIASTO LUKITA: Yes.
JOURNALIST: Are you able to elaborate a bit about what is new out of today’s announcement please?
STEVEN CIOBO: So, I think this announcement is our domestic mechanisms are in place now to give effect to what was agreed between leaders. So, in other words, the tariff reductions are there.
JOURNALIST: So, it’s a technical breakthrough, if you like, on how to achieve what was announced back in February?
STEVEN CIOBO: This is the completion of the announcement. So we had the announcement, and we’ve got now the completion of the announcement.
JOURNALIST: Hi, Samantha Hawley from the Australian Broadcasting Corporation. Can I just ask, how low will the tariffs be on the sugar, and how is it an equal trade if the tariffs are removed completely on the pesticides, but not completely on the sugar?
STEVEN CIOBO: Well, for starters I’d reject the assertion of your question. The suggestion that you’ve got to have movement there, and an equal amount of movement on this side, is a false premise. That’s obviously not how trade deals are done and in fact I reject entirely that that’s in any way a meaningful measure of what’s achieved. I spoke to why this is a good deal, and I’ve already, through my comments, spoken to why this is a win-win outcome, that’s good for the Australian agricultural sector, good for Indonesia’s food manufacturing sector, and that’s just on the sugar side. On the pesticide side, it’s good for Indonesia’s manufacturing sector and it’s good for Australia’s agricultural sector because it means cheaper input costs for our ag sector. So that’s the basis upon which we both know this is a good deal.
JOURNALIST: How big is the export of Indonesian pesticides and herbicides to Australia after the decrease of the entrance fee [inaudible]? Also, how big is the import of Australian raw sugar to Indonesia after the decrease in the tariff from 8% to 5%?
ENGGARTIASTO LUKITA: The amount of our raw sugar import is fixed. Only now, the choice is shared between Thailand and Australia, so it will definitely be more competitive. And one thing – Australian products are good. With the same tariff, it will help us, so we do not depend on one country. And it will not disrupt our total importation. So in our trade balance, the imports remain the same. Only, some will switch from Thailand to Australia. How much? It depends; we will leave it to the market, and it also depends on businesspeople.
Herbicides and pesticides were not large, but that was because of the tariff barriers. With this zero tariff it will definitely increase. How much the increase is, I will invite businesspeople to see. We just implemented it, certainly it will gradually increase.
JOURNALIST: Indonesia’s chief trade negotiator has said that both sides would need to compromise in order for a deal to be reached. So I’m wondering whether both of you could say what areas you would like the other country to compromise on.
ENGGARTIASTO LUKITA: The negotiation must [involve compromise]. You cannot say that this is for Indonesia or, on the other side, just for the sake of Australia. This is for both sides. So, both of the negotiators have to compromise and it will depend [on] Indonesia and Australia, both countries. And if they [are] facing difficulty then Minister Steve Ciobo [can] direct call, [and] vice versa, I’ll do the same thing. Even in only one word, so I can call.
JOURNALIST: Are there any specific areas that you could tell us where you would like to see Australia compromise?
ENGGARTIASTO LUKITA: No, let them finalise, then I will make the announcement. With the full understanding, that this is for both countries, there is no… and we fully understand that this is for the benefit of Australia and also for the benefit of Indonesia, just exactly like Minister Steve Ciobo explained that lowering tariffs for raw sugar and herbicides and pesticides is for the benefit of both countries, for the industry itself. And also Steve asked me to see the other tariffs and then for the other products from Australia. It’s basically for the benefit, not only for Australia, but also for our countries for the producers since we also export to other countries.
STEVEN CIOBO: As you know, I don’t provide a sector-by-sector analysis of negotiations. Clearly, though, negotiation by virtue of the definition of the word means that there is compromise on both sides. What we want is a very good quality deal, a comprehensive deal that reflects the wishes of President Widodo and Prime Minister Turnbull. What I will say is that there are some very obvious areas where we can work together for the good of both countries. Indonesia has a desire to help create a powerhouse economy. Indonesia has certain sectors where there’s a desire from President Widodo to drive a reform process and for Indonesia to be a strong competitive player in the region. Clearly, Australia can play a role in that. I mean, clearly there’s opportunity for Australia to collaborate with Indonesia and for our two countries to work together as part of supply chains for the benefit of each other’s respective positions, and also to become, together, a stronger influence in terms of regional trade.
So that is the objective. That is the focus of the discussions that we’re having. Fundamentally, there are many complementarities that exist between Australia and Indonesia. We know, for example, that there are opportunities around vocational education and training where it aligns with Indonesia’s leadership’s ideal to drive a lifting of overall capacity among the Indonesian population, and of course Australia is recognised around the world as having a vocational education and training sector and a regulation of that sector that is world class. So I just cite those as examples of where we can achieve win-win outcomes.
JOURNALIST: I am from Metro TV – I would like to ask both of you – you said that both of you have committed to open up more investment. I would like to ask what kind of investment and where, specifically?
ENGGARTIASTO LUKITA: After the CEPA.
JOURNALIST: And then what kind of investment?
ENGGARTIASTO LUKITA: Many things. OK, please, Steve.
STEVEN CIOBO: Well, again, so we want IA-CEPA to be a vehicle that will help to drive investment. Indonesia’s economy is growing, Indonesia’s economic strength will continue to go from strength to strength. Indonesia’s influence will continue to grow through the region. Australia has a lot of expertise, especially with respect to infrastructure. We have expertise around the financing of infrastructure, design, construction, maintenance and management of infrastructure and I know that President Widodo has a very strong infrastructure plan for Indonesia. There’s many examples of Indonesian Government speaking to investment opportunities, looking for partnerships, and I believe we can use IA-CEPA as a vehicle to help drive those partnerships around investment.
JOURNALIST: I’m Lenova from RRI. I’d like to clarify [inaudible] that you mentioned. What does it look like exactly, what is the scheme, and what the position between Indonesia and Australia will look like, when will it be finalised, is it going to be after the IA-CEPA is finished or what?
JOURNALIST: Ribka, Sir, from the Jakarta Post. The question is for Mr Enggartiasto, when will the 5% tariff for sugar and 0% for herbicides and pesticides be applied, because it has been announced several times before. And for herbicide and pesticide exports, how many parties play roles? How many companies and what are the companies [in this sector]? … For Mr Ciobo, what are other goods that you see that Indonesia still impose high tariffs or complicated non-tariff barriers to Indonesia? Thank you.
STEVEN CIOBO: As I said earlier, I don’t provide a sector-by-sector breakdown. Clearly, there are opportunities for us to be able to provide, where there’s a market, more competitively-priced goods than other competitive nations in the region.
If I look at, for example, skim milk powder, just to make one. Australia exports skim milk powder to Indonesia. There’s a tariff in place. If we were able to reduce that tariff, the consequence would be that skim milk powder would potentially be cheaper here in Indonesia. The reason that’s important is because Indonesia uses that skim milk powder to make sweetened condensed milk, which Indonesia then exports. That speaks to the types of regional supply chains where we can achieve win-win outcomes. We can have growth in Indonesian exports of condensed milk because it becomes cheaper, which makes Indonesia more competitive in the region, and that might mean, for example, that there’s more demand for that skim milk powder from Australia. Or indeed, from other places, but it’s the kind of outcome that speaks to the opportunity about achieving outcomes that are good for Australia and good for Indonesia.
ENGGARTIASTO LUKITA: Yes, just to recap, Australia imports herbicides and pesticides for about – if I’m not mistaken – USD 400 million, meanwhile Indonesia exported there for just USD 23,000. With the decreased tariff fee, we hope that we can increase our market share. And maybe because we have just a small number of products therefore they’re still open to that. About the powerhouse, we will make the details later. The [new] tariff will apply soon, as I said that this is our internal process and Australia is ready, so we can apply the herbicide and pesticide. We also said that the process is being delivered and will take for only about two weeks. Yes [the process is being delivered] to Ministry of Law and Human Rights.
JOURNALIST: I just wanted to clarify on the skim milk, has that deal been done or is that an example of the sorts of things that are being negotiated?
STEVEN CIOBO: An example.
JOURNALIST: An example of what’s been negotiated?
STEVEN CIOBO: An example of a supply chain that could help benefit the region.
JOURNALIST: OK, but a deal hasn’t been reached yet?
STEVEN CIOBO: No, but we’re still negotiating and hopefully we’ll conclude a comprehensive high quality deal by the year.
ENGGARTIASTO LUKITA: Yes, we are facing the same problems... all media, the Australian media pushing you, and Indonesian media pushing me. That’s… we have the same problem.
OK, thank you.
Thank you very much. I’d like to invite Minister Steve Ciobo… I was surprised when I saw the news that he dined in a warung. I said, usually ministers dine in restaurants, but he picked a warung. When I asked why, he said he enjoyed it. Now, I want to invite him to eat seafood, but not in a warung; it can be chaotic, people might drag us to ask for photos. We will eat seafood together at Kelapa Gading, where the President has been, too.
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