John Key seeks trade boost from Indonesia trip

  • 17/07/2016
John Key (File)
John Key (File)

It's our closest Asian neighbour and home to 250 million people - but holidaying in Bali aside, New Zealand's relationship with Indonesia doesn't attract the level of attention that it probably deserves.

In a bid to change that, Prime Minister John Key and Trade Minister Todd McClay will touch down in Indonesia's capital Jakarta later on Sunday for a whirlwind two-day visit aimed at boosting links between the two countries.

Indonesia is projected to be the world's seventh largest economy by 2030, and its young population and expanding consumer class means there should be plenty of trade opportunities for New Zealand to cash in on.

David Capie, director of Victoria University's Centre for Strategic Studies, says the size of Indonesia's population, its economy and its role in driving regional cooperation make it an important player.

"Maybe the bigger mystery is why, when you think about how big it is and how important Indonesia is to Australia, it's been hard for New Zealand to make it a top-tier relationship," he told NZ Newswire.

Some of that could be down to the fact a lot of New Zealand's foreign policy has been based around trade and the trading relationship between the two countries hasn't been great, Dr Capie said.

"If you think that Indonesia has 250m people, but buys much less from New Zealand than Thailand which has 60m, you know something's out of whack.

"Indonesia has a large and growing middle class. It struggles in terms of food security, so it should be a bigger market for high quality New Zealand food."

One of the stumbling blocks has been Indonesia's import restrictions on beef and horticultural products.

Since 2010 there's been an 80 percent decline in New Zealand's beef exports to Indonesia, with the accumulated impact for the sector now estimated between $500 million and $1 billion.

The Government is waiting for the outcome of a World Trade Organisation case it took challenging Indonesia's trade barriers, but Mr McClay said that hasn't stopped New Zealand looking for opportunities in other areas.

Two-way trade is worth about $1.6b a year, making Indonesia New Zealand's 13th largest trading partner, and the aviation, education and renewable energy sectors have all been identified as potential areas for growth.

Despite the push for diversification, Mr McClay acknowledges New Zealand's trade staples - agricultural and horticultural products - are still a priority.

"The sale of high quality food and high quality proteins remains an important part of New Zealand's trade makeup, and we'll continue to push that with Indonesia and with other countries," he said.

Mr Key meets with Indonesian President Joko Widodo on Monday. He'll also be attending a number of business and trade-focused events.

The Prime Minister last visited Indonesia in 2012. He has previously met with Mr Widodo on the sidelines of the East Asia Summit meetings in 2014 and 2015.