I

ndonesia says it is considering halting its ongoing talks on a bilateral economic pact with Australia as tensions escalate between the two governments following reports of the continent spying on the archipelago.

'€œWhen neighboring countries lose trust in each other, it is very hard to cooperate in any context, including the economic sector,'€ Trade Minister Gita Wirjawan said on Wednesday on the sidelines of the Indonesia-Netherlands Business Forum.

'€œWe may need to suspend the talks and ensure a degree of calm in our communication,'€ he said, referring to negotiations of the comprehensive economic partnership agreement (CEPA), which is aimed at boosting bilateral trade.

Indonesia and Australia recently concluded the second round of talks on the CEPA that began last year.

Both countries are seeking a higher degree of liberalization in trade and investment from what is covered under the ASEAN-Australia-New Zealand free trade agreement (AANZFTA), which has been in force for two years.

Separately, Indonesia is also engaging Australia in consolidating the free trade areas (FTAs) that ASEAN has with five major trading partners '€” China, India, Japan, New Zealand and South Korea.

However, relations between both countries turned sour following the recent revelation regarding Australia'€™s surveillance activities in Indonesia, specifically the wiretapping of cell phones belonging to President Susilo Bambang Yudhoyono, the First Lady and senior Cabinet ministers.

On Wednesday, Yudhoyono halted a few joint projects pertaining to defense and intelligence, including military efforts to prevent boat people from passing to Australia via the archipelago.

In another trade issue, Gita said that Indonesia would not immediately stop importing live cattle and beef from Australia, as it needed to keep sufficient meat supplies in the domestic market and to curb prices to push down inflation.

In the long run, however, the government was considering sourcing cattle from other countries, he added.

Australia, along with New Zealand, has for decades been Indonesia'€™s key source of beef and live cattle imports.

In July, the government boosted live cattle imports from the country by 25,000 head through year-end.

The House of Representatives has deliberated an amendment to the 2009 Animal Husbandry and Animal Health Law, which currently adopts a country-based approach instead of a zone-based approach.

Under the rule, Indonesia can only source meat from a country completely free from certain diseases, such as foot and mouth disease.

'€œIf that can be decided soon, we will have the freedom to import from any suppliers,'€ Gita said, citing alternatives like Brazil and India.

A senior economist with the Centre for Strategic and International Studies (CSIS), Titik Anas, said the ongoing row between Indonesia and Australia would not significantly affect economic relations, particularly trade and investment, as long as both governments refrained from intervening in the business sector.

However, a measure such as halting food imports would result in disrupting trade, she said.

'€œThis would incur retaliation by the Australians, thereby affecting Indonesian exports as well,'€ she said.

Titik added that in terms of the beef trade, it would be necessary for Indonesia to shift its dependence upon Australia to new suppliers, as well as relax its import permits for qualified importers, as long as they fulfilled the requirements pertaining to food safety and quarantining.