Indonesia and Japan reach free trade deal

JAKARTA, June 25 (Reuters) Indonesia and Japan have reached a deal on a free trade pact, which could be implemented early next year, Jakarta's trade minister said today.

Mari Pangestu said that under the agreement 90 percent of all the tariffs that had been negotiated would be cut to zero -- including automotive materials, textiles and textile products, as well as on shrimp.

''The negotiation has been completed. The chief negotiators signed the EPA on Friday night,'' Pangestu told a news conference, referring to an Economic Partnership Agreement, which includes elements of free trade.

The trade minister said that both countries now needed to adjust their own legal system so that the pact could be signed by heads of state before the end of the year and then ratified.

''If the whole process is completed this year, the EPA will be implemented early next year,'' Pangestu said.

She said under the pact Indonesia had agreed to cut import tariffs on specific steel grades used in the automotive industry to zero percent.

But she did not say how much Japan would open its market for Indonesian automotive products.

Indonesia is a homebase for automotive production for many Japanese automotive manufacturers such as Daihatsu Motor Corp.

, Toyota Motor Corp. and Nissan.

Pangestu said coffee, an important export to Japan, was also included, but did not specify the tariff level.

Satoru Satoh, deputy chief of mission at the Japanese embassy in Jakarta, said earlier this month that Tokyo hoped to sign the pact when Prim Minister Shinzo Abe visited Jakarta in August.

Japanese officials have said the EPA aims to end tariffs on about 93 per cent of the goods Japan imports from Indonesia, such as industrial products, fruit and shrimps, within seven years after it is signed.

Japan imported goods from Indonesia worth about 2.3 trillion yen (18.60 billion dollar) in 2005.

It is Indonesia's biggest customer for exports and ranks second among Indonesia's sources for imports, according to US Central Intelligence Agency data.

About 90 per cent of the goods Indonesia imports from Japan, such as electronics products, cars, machinery and certain kinds of steel products, will become duty-free.

Indonesia imported about 8.65 billion dollar of goods from Japan in 2005, Japanese government data showed.

REUTERS SKB PM1754