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Trade and investment climate needs improvement: New Zealand

Jakarta Post, Indonesia

Trade and investment climate needs improvement: New Zealand

By Linda Yulisman, The Jakarta Post, Jakarta

6 February 2012

New Zealand expects Indonesia to improve its trade and investment climate to allow both countries to reap greater benefits from a recently implemented free trade agreement (FTA) among the Association of Southeast Asian Nations (ASEAN), Australia and New Zealand.

New Zealand Ambassador to ASEAN David Taylor said several trade and investment rules in Indonesia still hampered New Zealand’s business community from further pursuing opportunities in Indonesia.

For example, the Indonesian government decision in December to issue a regulation to reduce entrance ports for fruit and vegetable imports from eight to four starting this March had created new challenges for New Zealand exporters, he said.

The four ports permitted to receive horticulture imports are Belawan in Medan, Soekarno-Hatta Airport in Jakarta, Tanjung Perak Seaport in Surabaya and Soekarno-Hatta Seaport in Makassar.

Taylor also claimed the Indonesian decision to set a beef import quota had also been a blow to New Zealand’s beef industry, resulting in a significant decline in beef exports to Indonesia from the country over the past few years.

“We’d like to see a more realistic and higher beef quota due to the large demand for beef in Indonesia,” he told The Jakarta Post in a recent interview.

“We would also like to see more engagement in advancing trade policy changes here,” he added.

Taylor expected that bilateral trade between New Zealand and Indonesia could triple by 2020 following the implementation of the free trade agreement.

“That is a very ambitious target, but with the free trade agreement and the ease of doing business now, there are major opportunities for Indonesia and New Zealand,” he said.

According to Indonesian Trade Ministry data, bilateral trade reached US$1.01 billion during the January-November period last year, with Indonesian exports to New Zealand reaching $343.33 million and imports reaching $671.58 million.

The FTA deal was inked on Feb. 27, 2009, in Phetchaburi, Thailand, , but it was fully implemented on Jan. 10 with Indonesia becoming the last party to ratify the pact.

Based on the tariff commitments, Indonesia should remove 90 percent of 10,000 tariffs listed in the normal track following its entry into force. The products include live animals, fruit, vegetables, meat, fish, milk, cheese, eggs, pharmaceuticals and wood and paper products.

Tariffs for goods on sensitive lists, such as beef and dairy products, will later be removed by 2020.

In the area of investment, Taylor explained, the Horticulture Law restricting foreign ownership in the sector which applied according to retroactive principle, sent a difficult signal for Indonesian business partners.

“When people are looking to invest, they want certainty and confidence to ensure that investments can be long term. Such a policy sends signals that make people wonder whether it will be safe to invest long term,” he said.

According to Taylor, Indonesia’s fast growing economy and its recently-upgraded investment grade has boosted confidence among overseas investors, including from New Zealand. The country’s business people are keen to seek investment opportunities in various sectors, such as agriculture, horticulture, construction and engineering, energy and environmental services.