September 06, 2008

Japan and Indonesia signs free trade agreement

It is reported that Japan and Indonesia have signed a trade agreement on August 20th 2007 to eliminate tariffs on more than 90% of the goods bought and sold between the two countries. Mr Shinzo Abe prime minister of Japan and Mr Susilo Bambang Yudhoyono president of Indonesia signed the comprehensive economy partnership agreement, which has been under negotiation since mid 2005.

The trade agreement is a modified free trade deal that sees Japan offer extra benefits to partners beyond simple tariff cuts. It was the 8th such accord signed by Japan and Indonesia's first. It is to go into effect in 2008 after the Jakarta government obtains parliamentary approval and establishes rules for the pact by the end of 2007.

The agreement lifts tariffs on about 96% of Japan's exports to Indonesia and on 93% of Indonesian exports to Japan mostly coal and liquefied natural gas. Under the pact, Indonesia is to scrap a 15% tariff on Japanese steel used by its automotive, electronics and heavy machinery industries.

Japan is Indonesia's biggest trading partner and its largest purchaser of natural gas. Indonesia's exports to Japan were worth USD 21.7 billion in 2006 while imports from Japan stood at USD 5.5 billion in 2006. Around 1,000 Japanese companies operate in Indonesia.