Indonesia and United Arab Emirates reach trade deal

ABU DHABI, July 1 (Reuters) – Indonesia and the United Arab Emirates signed a free trade agreement on Friday, strengthening economic ties between Southeast Asia’s largest economy and major oil-producing Gulf states.

The deal, reached during Indonesian President Joko Widodo’s visit to Abu Dhabi, will eliminate or significantly reduce tariffs on most goods traded between Muslim countries.

The UAE Ministry of Economy said Indonesian palm oil, food, fashion and UAE petrochemicals, rubber products, plastics and steel would benefit from the reduction or elimination of tariffs.

Indonesia’s trade ministry said the agreement includes chapters on services, investment, intellectual property and mutual recognition of each other’s halal certification.

The text of the agreement, which has yet to be released, still requires ratification by both countries, which is largely procedural in the authoritarian UAE but could take months in democratic Indonesia.

According to the Economic Complexity Observatory, Indonesia’s main exports to the UAE are palm oil, jewellery and precious metals, while the UAE’s exports to Indonesia are mainly LPG and non-crude oil, iron and non-alloy steel.

The oil-rich UAE has forged closer trade ties with Indonesia as part of its ambition to double its economy to $816 billion by the end of the century, in part because of a free trade agreement.

This year it signed similar deals with India and Israel.

The UAE Economy Minister Abdullah bin Touk told reporters that the deal with Indonesia could boost bilateral non-oil trade to $10 billion within five years from about $3 billion last year.

Indonesian Trade Minister Zulkifli Hasan said Jakarta expects the UAE to make more investment in Indonesia following the agreement, which he said would boost exports to the Middle East and elsewhere.

A country of around 10 million people, the UAE is a major trade hub for the Middle East and Africa, Asia and parts of Europe.

The UAE will benefit from greater access to the Indonesian market of more than 270 million people as it diversifies its trade links and seeks to create jobs for its one million citizens.

The government estimates that the trade agreement will create 55,000 high-skilled jobs in the UAE by 2030, UAE Minister of State for Foreign Trade Tani Al Zeyoudi told Reuters.

“By 2030, our GDP will increase by about $4.6 billion. By 2030, exports will increase by $3.2 billion and imports by $2.6 billion,” he said in an interview.

The UAE is in bilateral free trade talks with at least a dozen other countries, including Australia and South Korea.

“We are almost done with Colombia. It will be signed in the next few weeks,” Al Zeyoudi said, adding that Turkey could reach an agreement by the end of the year.

Reporting by Alexander Cornwell in Abu Dhabi and Bernadette Christina in Jakarta Writing by Alexander Cornwell; Editing by Toby Chopra and Jonathan Oatis

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