Nabiha Shahab, Jakarta – Indonesia and Japan inked a wide-ranging free trade pact Monday during a visit by Japanese Prime Minister Shinzo Abe, who is on the first stop of a three-nation tour through Asia.
Abe and Indonesian President Susilo Bambang Yudhoyono signed the deal, which has been under negotiation for more than two years and is Japan's eighth such agreement, after the pair held closed-door bilateral talks.
The Indonesia-Japan Economic Partnership Agreement will see reductions to zero for more than 90 percent of Japan's tariffs on 9,275 items, worth some 99 percent of the value of exports there from Southeast Asia's largest economy.
The cuts are significant as Japan is Indonesia's biggest trading partner and one of its biggest investors. Japan has also offered a broad package of technical and other assistance as part of the deal.
Around 80 percent of the Japanese tariffs will be eliminated as soon as the pact is implemented, while the remaining 10 percent are to be reduced to zero within three to 10 years.
Meanwhile around 93 percent of Indonesia's 11,163 tariffs, or 92 percent of the value of Japanese exports to Indonesia, will be reduced.
Around 58 percent of the tariffs will become zero when the pact comes into force, while the remainder – tariffs already low or on items where there is little trade – will gradually be reduced to zero within three to 10 years.
The deal also calls for the two nations to strengthen their cooperation on energy and mineral resource security, a key issue for energy-hungry Japan.
Indonesia is Japan's biggest liquefied natural gas (LNG) supplier but it has warned it cannot guarantee a renewal of contracts beyond 2010-2011 due to growing domestic demand.
Indonesia's exports to Japan were worth 21.7 billion dollars in 2006, more than half of which was fuels such as LNG and coal. Imports from Japan stood at 5.5 billion dollars over the same period, mostly machinery and manufactured goods.
The deal also provides for cooperation in facilitating trade by simplifying customs procedures, coordination in energy sector investment, working together to protect intellectual property rights, and eliminating anti-competitive activity.
Both sides will also establish a scheme where nurses and careworkers will be permitted to work as expatriates, a document from the Japanese embassy here said.
Japan's first free trade agreement was with Singapore, and it took effect in late 2002. It has since agreed to deals with Chile, Malaysia, Mexico, the Philippines and Thailand, while negotiations are ongoing with South Korea and the 10-nation Association of Southeast Asian Nations (ASEAN) as a whole.
Later on Monday the visiting prime minister will meet with Vice President Yusuf Kalla before addressing a Japan-Indonesian business forum and making a policy speech on ASEAN. Indonesia hosts the regional body's secretariat.
Around 1,000 Japanese companies operate in Indonesia, employing some 200,000 people.
The prime minister, accompanied by his wife Akie Abe, officials and a large delegation of Japanese businessmen, will meet with Indonesians who have studied in Japan and lay a wreath at the Hero Cemetery in Jakarta on Tuesday.
Abe will then head to India and Malaysia. Abe's Indonesia visit reciprocates a trip to Tokyo last November by Yudhoyono.