Indonesia, Japan ink free trade pact

JAKARTA (AFP) - Indonesia and Japan inked a wide-ranging free trade pact Monday during a visit by Japanese Prime Minister Shinzo Abe, as the two nations also committed to work jointly on energy and climate change issues.

Abe and Indonesian President Susilo Bambang Yudhoyono signed the trade deal, which was under negotiation for more than two years, after holding closed-door bilateral talks on the first day of the Japanese premier's swing through three Asian nations.

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.

In a separate statement, the two countries agreed to strengthen cooperation on energy and mineral resource security, a key issue for energy-hungry Japan.

In the statement, Abe underlined that the stable supply of LNG in particular would be the foundation for cooperation.

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.

"They didn't talk about additional arrangements beyond a certain year but we completely share the same sense of cooperation in this field... for more years to come we will continue in this way," Mitsuo Sakaba, a Japanese foreign ministry official told reporters.

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.

Both nations also committed to participate in a new framework on climate change to supersede the Kyoto Protocol, saying they want to see global emissions cut by half from the current level by 2050.

The free trade agreement is Japan's eighth. Its first with Singapore took effect in late 2002 and it has since agreed to deals with Chile, Malaysia, Mexico, the Philippines and Thailand. Negotiations are ongoing with South Korea and the 10-nation Association of Southeast Asian Nations (ASEAN) as a whole.

The visiting prime minister also met Monday with Vice President Yusuf Kalla and addressed a Japan-Indonesian business forum.
Around 1,000 Japanese companies operate in Indonesia, employing up to 280,000 people.

Abe is later Monday due to make a policy speech on ASEAN. Indonesia hosts the regional body's secretariat.

The prime minister, accompanied by his wife Akie Abe, officials and a delegation of around 200 Japanese businesspeople, will lay a wreath at the Hero Cemetery in Jakarta on Tuesday before heading to India and then Malaysia.