T

he geographical proximity and improved political relations between Indonesia and Australia have not been enough to boost bilateral trade and investment to the maximum potential due to tariff and non-tariff barriers, strict quarantine policies, as well as uncertainty and even distrust between the nations’ businesses.

Indonesia, the world’s largest producer and exporter of palm oil, for example, has not been able to crack the Australian market, which instead imports 90 percent of its palm oil from Malaysia. Indonesia is behind even Singapore in palm oil exports to Australia.

Despite being the largest archipelagic country in the world, Indonesia’s fish export to Australia is small, ranking third after Vietnam and Thailand.

“There must be something wrong here,” said Indonesian Ambassador to Australia Primo Alui Joelianto during the Indonesia Australia Business Council (IABC) meeting in Kuta, Bali, on Saturday.

Primo noted that Indonesia’s exports accounted for only 2.5 percent of Australia’s imports, as compared to Singapore, which accounted for 5.1 percent and Thailand with 5.2 percent.

Primo identified a couple of possible reasons for why Indonesia had failed to break into Australia’s market, citing tariff and non-tariff barriers, and Australia’s stringent quarantines and dumping investigations into Indonesian products.

Legislator Ian Siagian from the Indonesian Democratic Party of Struggle concurred and added that Australia’s seemingly tough quarantine policies had prevented Indonesia’s exports of tropical fruits to the country.

“If Thai fruits, Philippine fruits and even Pakistani mangoes can enter Australia, why not Indonesian mangoes and bananas?” Siagian said.

Responding to Siagian’s concerns, Australian Trade Minister Craig Emerson said that he would find out what had happened with Indonesian mangoes and banana, but reiterated that Australia’s quarantine policies were fair and professional, and that political leaders like himself could not interfere.

Speaking at the same IABC forum, Emerson noted that to boost trade between the two countries, there was no other way but to bring down the existing border barriers.

He revealed that the Australian and Indonesian chambers of commerce and industries had been tasked with working together to identify impediments to trade, and that they would report their findings in the first quarter of 2012.

The two governments have agreed to start negotiations on the Indonesian-Australia Comprehensive Economic Partnership Agreement (CEPA), which would bring down tariffs and non-tariff barriers.

Under the CEPA, 99 percent of Indonesian products will have free access to the Australian market. Likewise, 92 percent of Australian products will have free access to the Indonesian market, and the remainder will face tariffs of no more than 5 percent.

Bilateral trade between the two countries reached US$8.3 billion last year, up from $6.7 billion in 2009, with Indonesia exporting $4.2 billion worth of products to Australia and importing $4.1 billion in goods from Australia.

According to the Australian government, 400 Australian businesses currently operate in Indonesia in fields ranging from mining and agriculture to education. Australia’s total investment in Indonesia was A$4.7 billion (US$4.5 billion) in 2009, while Indonesia’s investment in Australia stood at A$339 million in 2009.

Indonesian Trade Minister Gita Wiryawan said the current bilateral trade figure of US$8.3 billion was just too small for the two countries with combined gross domestic products of US$3 trillion.

“In the context of $3 trillion economies, it’s peanuts. We have to do more,” Gita said. “$50 billion is a good number. That’s the number we should be aiming for.”

Ian Satchwell, president of Australia Indonesia Business Council (AIBC), said if both governments were able to complete negotiations on the CEPA on time, it would help businesses in both countries to boost trade and investment.

Satchwell noted that bilateral trade would be boosted if barriers were brought down because there was little competition between Australian and Indonesian products, whereas the two economies complemented one another.

“We should make the most of the complementaries between our countries,” Satchwell said.