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Indonesia eyes preferential trade agreement to boost trade with SA

From Business Day
Oct 19, 2012

AMID its push to diversify exports, Indonesia expects to seal a preferential trade agreement with South Africa, one of the fastest-growing markets in Africa.
Indonesia planned to conduct a preliminary study to assess areas of mutual needs in both countries and focus on those that would benefit the most from increased trade, the Indonesian trade minister, Gita Wirjawan, said in Jakarta this week.
"We have to clearly identify what we can offer each other and find out what is hampering trade on these products, then determine our moves. This is the necessary process to prepare for an agreement," Mr Gita said after a second joint trade committee meeting which discussed, among other things, market access and sectoral co-operation.
The study was due to begin next year with completion set for six months to a year thereafter, he said.
Trade between Indonesia and South Africa expanded 78.93% last year to $2.14bn from a year earlier. Indonesia’s exports rose 111% last year to $1.43bn, while imports surged 36.62% to $705m.
South Africa ranks 23rd as an export destination for Indonesian firms. Indonesia exports palm oil and its derivatives, rubber, vehicles and paper, while importing chemical wood pulp, ferrous waste and scrap, sugar cane, sweeteners and cotton.
The trade ministry’s international trade co-operation director-general, Iman Pambagyo, said the preferential trade agreement was needed to gain wider market access for local goods because, at present, local manufacturers were struggling with South Africa’s high import tariffs of more than 10%.
Indonesian manufacturers said that sometimes the import tariff stood at 35%, making their products far less competitive in the South African market.
South Africa’s Trade and Industry Minister Rob Davies said that before accepting Indonesia’s invitation to sign a preferential trade agreement, his country would need to consult other members of the South African Customs Union (Sacu), such as Botswana and Swaziland.
"So, we cannot commit to such an agreement already," he said, but he added that South Africa was also planning to assess complementarity between the two countries next year.
Mr Davies acknowledged that Indonesia was one of the world’s most dynamic markets with huge potential, which South Africa identified as a key destination for export diversification and investment.
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