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Economy

China and Indonesia to boost trade amid global protectionism

Jakarta to increase palm oil exports as EU contemplates ban

Chinese Premier Li Keqiang, left, and Indonesian President Joko Widodo met at the presidential palace in Bogor, West Java, on May 7.   © Reuters

BOGOR, Indonesia -- Indonesia and China have agreed to boost economic ties amid the trade stand-off between Beijing and Washington and growing protectionism elsewhere.

China has agreed to buy more Indonesian palm oil as the European Union contemplates restricting imports of the commodity on environmental grounds.

The commitment was made during a meeting between Chinese Premier Li Keqiang and Indonesian President Joko Widodo on Monday.

Beijing agreed to increase its imports of crude palm oil from the Southeast Asian country by at least 500,000 tons this year. The total figure for 2017 was 3.7 million tons.

"Exports of palm oil to China can be increased immediately," Li said at a joint news conference at the presidential palace in Bogor, West Java province. "We have taken into account Indonesia's [need] for economic growth and to improve the welfare of farmers."

China's annual demand for palm oil is estimated at 5 million tons and the country is Indonesia's second largest export destination for the commodity after India.

Indonesia and Malaysia account for over 80% of the global supply of palm oil, which is used in everything from cooking oils to cosmetics. Around 15% of those exports currently go to the EU.

In January, members of the European Parliament voted in favor of a ban on the use of palm oil in biofuels by 2021, while in April 2017, they proposed that the bloc phase out the use of vegetable oils liked to deforestation by 2020.

Malaysia has threatened to derail free trade talks between the EU and the Association of Southeast Asian Nations, while Indonesia has begun seeking out new markets and increasing its exports to existing ones.

Jakarta also wants to gain access to the Chinese market for other commodities, such as edible birds' nests, coffee and cocoa, as well as fresh tropical fruit such as mangosteen, dragonfruit and snakefruit.

In exchange, Beijing has requested Jakarta ease restrictions on imports of mandarins and relax administrative procedures for Chinese investment in the archipelago.

"We have emphasized that Chinese companies must [prioritize] employing Indonesian workers and creating jobs in Indonesia," said Li, in an apprent response to Indonesian public concern over an influx of Chinese workers that would allegedly threaten local jobs.

Indonesian State Enterprise Minister Rini Soemarno told reporters separately that the meeting also covered Indonesia's first high-speed railway project. Work on the Chinese-backed project has been delayed due to a number of issues.

Beijing, she said, is now committed to supporting land acquisitions for the 142-kilometer rail track, which have been a major hindrance to the project and deterred the China Development Bank from disbursing the loans needed to take construction forward.

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