Home / Politics / News /  India, Indonesia sign 18 preliminary trade pacts

New Delhi: India and Indonesia have signed 18 preliminary economic pacts or memoranda of understanding (MoUs) worth more than $15 billion (Rs68,250 crore) as two of Asia’s fastest growing economies sought to forge deeper ties during a visit by Indonesian President Susilo Bambang Yudhoyono to India.

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The two countries, whose bilateral trade amounts to $12 billion, set a trade target of $25 billion by 2015. They also announced the launch of negotiations to conclude an Indonesia-India Comprehensive Economic Cooperation Agreement (CECA) to reduce tariffs on goods and services.

At the government level, India and Indonesia signed 11 pacts, including an agreement to increase air connectivity between the two countries, an extradition treaty and a mutual legal assistance treaty to boost security cooperation.

Indonesian industry minister M.S. Hidayat said the economic MoUs would help his country sharpen its competitive edge.

“Since we began to implement the Asean-China free trade agreement (signed in 2002), we have (a) little problem with Chinese commodities. China is flooding Indonesia with exports, anything and everything to Indonesia. So now, to strengthen (Indonesian) competitiveness, one of the strategies is to join with India. That is my strategy," Hidayat said, adding that Indian firms were welcome in Indonesia.

With the 18 pacts signed on Tuesday, India has become the second largest investor in Indonesia, commerce minister Anand Sharma said.

Indian companies that signed the MoUs include Tata Power Co. Ltd, the Adani Group, Bharat Heavy Electricals Ltd and the GVK group.

For India, one of the world’s fastest growing emerging economies that has been scouring the international market for resources and new sources of energy to power its growth, closer ties with Indonesia hold great promise, Yudhoyono said in a speech to Indian industry. He highlighted the complementarities between the two economies, noting India’s expertise in engineering and information technology and Indonesia’s abundant natural resources—including “the largest natural gas reserve in the Asia-Pacific region...and abundant mineral resources".

Panggah Susanto, director general, ministry of industry in the Indonesian government, told reporters that “several of the MoUs facilitate the import of coal from Indonesia to India, both for the steel industry and the power industry". He did not give any figures on the amount of coal that would be imported under the deals. India has been looking for high-quality coal to fuel its thermal plants, and is setting up nuclear power plants to augment power production.

Former foreign secretary Lalit Mansingh said India’s energy needs were “so massive that we need coal-fired thermal plants and nuclear energy for electricity generation. Our own coal is of poor quality and that is why we need to import coal from countries like Indonesia and Australia." India has 256 billion tonnes of coal reserves, of which around 455 million tonnes per annum is mined. The country currently imports around 40mt of coal.

Demand is expected to reach about 2 billion tonnes a year by 2031-32, about five times the current rate of extraction, with the maximum demand coming from the power sector.

On the political front, both countries agreed to have meetings between their top leaders, besides institutionalizing dialogue at the levels of trade and defence ministers, a joint statement said.

Yudhoyono, on his second visit to the country as president, is the chief guest at India’s 62nd Republic Day celebrations to be held on Wednesday. His earlier visit was in 2005, when ties between the strategically located South-East Asian nation and India were raised to the level of a “strategic partnership".

Indonesia’s first president Sukarno was the chief guest at India’s first Republic Day celebrations on 26 January 1950.

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