Indonesian markets open to NZ

Indonesia is set to become one of New Zealand's 10 fastest-growing trade corridors. Photo / Thinkstock

Indonesia's participation in the ASEAN-Australia-New Zealand Free Trade Agreement (FTA) presents opportunities for local importers and exporters, HSBC says.

The bank said Indonesia, which will become part of the FTA today, is set to become one of New Zealand's 10 fastest-growing trade corridors.

"With Indonesia on our back doorstep, the country is far closer to New Zealand than some of our larger trading partners including China, the USA, Japan and the UK," the bank said.

"When this is coupled with the fact that Indonesia's GDP growth is forecast to be 6.1 per cent in 2012 and 6.5 per cent in 2013, this is an opportunity that Kiwi businesses, particularly those in the food and agriculture sector, cannot ignore," the bank said.

Cath Henry, head of global payments at HSBC New Zealand, said trade with Indonesia was set to grow at an annualised rate of more than 7 per cent, and by 2025 at an annualised rate over 5 per cent.

"The fact that Indonesia is set to join the ASEAN-Australia-New Zealand Free Trade Agreement suggests that trade growth could increase even further," Henry said.

New Zealand's top exports to Indonesia include milk powder, cream, frozen meat, malt extracts, butter, cheese, fish, and, interestingly, chemical wood pulp and ferrous waste and scrap.

Indonesia's biggest export to New Zealand is crude oil.

HSBC expects to see strong economic growth from Indonesia, sustained by domestic demand being fuelled by factors such as demographics, rising incomes and urbanisation, Henry said.

But trade with Indonesia can be difficult, because the Indonesian rupiah is a restricted currency which can't be remitted outside of the country. In addition, the documentation required to support payments can be challenging, she said.

HSBC has a bullish view of New Zealand's trade prospects in general.

In a report released late last year, the bank said New Zealand's trade over the next 15 years looks set to grow by 83 per cent, outperforming world trade growth.

As it stands, Australia is New Zealand's largest trading partner, followed by China.