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Liberal leadership chaos could jeopardise landmark Australia-Indonesia free trade deal

Posted by On 12:16 AM

Liberal leadership chaos could jeopardise landmark Australia-Indonesia free trade deal

Email Liberal leadership chaos could jeopardise landmark Australia-Indonesia free trade deal

Updated August 24, 2018 16:26:23

Malcolm Turnbull shakes hands with Indonesian President Joko Widodo. Photo: Malcolm Turnbull was due to meet Indonesian President Joko Widodo next week. (AAP: Lauren Farrow) Related Story: Trade deal with Indonesia 'very close' despite setbacks Related Story: Indonesia and Australia push to seal 'win, win' trade deal as deadline looms Relat ed Story: November deadline set for Indonesia-Australia trade deal Map: Indonesia

The leadership turmoil in Canberra could delay a landmark free trade deal between Australia and Indonesia.

Key points:

  • Scott Morrison is highly unlikely to travel to Jakarta next week
  • Officials will now need to negotiate a new strategy for making the announcement
  • The delay could be exacerbated if Trade Minister Steve Ciobo takes a new position

The ABC has been told the two nations are on the brink of signing an agreement, after years of negotiations.

But in a clear display of how the leadership contest is rippling through Australian foreign policy and Government decision making, the final timetable for agreement and signatures is now deeply uncertain.

Malcolm Turnbull was due to travel to Indonesia next week as part of a trip through South-East Asia and the P acific.

Officials felt they could resolve lingering disagreements on the agreement by then, and were planning for Mr Turnbull and Indonesian leader Joko Widodo to announce during the visit that the two nations had struck a deal.

The two leaders would not have signed the actual document, but declared that agreement had been reached, offering them a chance to laud a new era in the relationship.

Both nations are planning a signing ceremony sometime in September or October.

But the leadership uncertainty in Australia has thrown those plans into chaos, frustrating those who have been working on the deal.

Officials say incoming Prime Minister Scott Morrison is highly unlikely to travel to Jakarta only one week after taking the reins of Government.

That means Australian and Indonesian officials will now need to negotiate a new strategy for making the announcement and publicly inking the deal.

The delay could be exacerbated if the current Trade Mini ster Steve Ciobo takes a new position in the Morrison Government.

Australian Trade Minister Steven Ciobo smiles at his Indonesian counterpart Enggartiasto Lukita. Photo: Australian Trade Minister Steven Ciobo met with his counterpart Enggartiasto Lukita in Jakarta last September. (Twitter: Steven Ciobo)

Aaron Connelly from the Lowy Institute said the deadlock on the free trade deal was "finally broken by the collapse of the Turkish lira earlier this month, which put pressure on the [Indonesian] rupiah".

But he said Indonesia would now be keen to announce the deal as soon as possible in order to burnish its credentials with international markets, and would be unhappy if there was a significant delay.

"The concern in Jakarta now is whether a delay in signing the agreement, as a result of the leadership spill, will put further pressure on the rupiah," he said.

"Bank Indonesia is already spending billions in reserves to defend its position.

"[It's] not clear how long it can hold that line."

Mr Turnbull has previously declared that a "high quality" free trade agreement could transform the strategic relationship between Australia and Indonesia and boost economic ties.

But the Government has been forced to narrow the scope and ambition of the deal because of strong protectionist sentiments in Indonesia.

Both countries have previously promised an agreement was imminent, but they've already missed a deadline to finalise it by the end of last year.

Officials have been keen to stress this delay won't kill the agreement, and they remain confident it will be announced â€" and then signed â€" before too long.

'Not serious about foreign policy'

Josh Frydenberg and Scott Morrison walk down a corridor Photo: The Liberal Party's new leaders: Scott Morrison (R) and Josh Frydenberg. (ABC News: Matt Roberts)

This is not the only disruption to Australia's foreign policy agenda in the wake of the leadership spill.

Diplomats had also lined up a series of meetings for Mr Turnbull with political leaders in Vietnam, Malaysia and Thailand. Those meetings will now have to be abandoned.

The Lowy Institute's Euan Graham said while there was an element of bad luck in the timing, that will be seen as, "a signal that Australian politicians just aren't that serious about foreign policy".

"The most damaging aspect is that C anberra's party-political bubble is so caught up in domestic chicanery that the foreign policy costs don't even seem to register," Mr Graham said.

It is also not yet clear who will represent Australia at the Pacific Islands Forum (PIF) in Nauru in early September.

It is possible Mr Morrison will attend, but analysts predict he will probably ask another minister to attend while he focuses on shaping his domestic political agenda.

That would irritate some Pacific island leaders who would take it as a sign of Australian indifference to the region.

"Downgraded representation at the PIF would be especially damaging, given that the point of Canberra's 'step up' in the Pacific is all about demonstrating momentum behind Australia's renewed commitment to the region, and to counter perceptions that it has lost influence there," Mr Graham said.

"Australia is again the butt of jokes about being the least stable democracy in the South Pacific … with each successive leadership spill, this gets harder to laugh off."

Topics: foreign-affairs, government-and-politics, trade, international-aid-and-trade, business-economics-and-finance, indonesia, asia, australia

First posted August 24, 2018 11:01:47

Contact Stephen Dziedzic

Source: Google News Network: Liputan 24 English | Berita 24 English | Warta 24 English | Netizen 24 Indonesia

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