Pakistan, Indonesia set to sign multiple deals, explore free trade agreement

Pakistan and Indonesia are expected to sign over 10 memoranda of understanding (MoUs) and agreements during the upcoming visit of Indonesian President Prabowo Subianto to Islamabad.

The anticipated visit of the Indonesian president, originally scheduled for late January, has been postponed and is expected to be rescheduled soon. Both sides will likely finalise cooperation in education, healthcare, IT, tourism, energy, food security, and military relations during the visit.

The Express Tribune reported, citing sources, that discussions are also underway to advance a free trade agreement (FTA) aimed at strengthening bilateral trade ties.

Pakistan is looking to enhance trade in processed food, pharmaceuticals, IT services, and halal meat, while Indonesia sees opportunities in consumer electronics, auto parts, and processed palm-based products. 

A key area of potential collaboration is Indonesia’s electric vehicle (EV) industry. The country produces nearly half of the world’s refined nickel and two-thirds of its mined nickel, making it a crucial player in the global EV supply chain. 

With a strong focus on expanding markets in Asia and Central Asia, Indonesia aims to secure partnerships in lithium battery production and EV manufacturing. A joint venture in lithium batteries could provide mutual benefits. 

Indonesia remains one of Pakistan’s top trading partners and the largest economy in Southeast Asia. In 2023, Pakistan’s exports to Indonesia totaled approximately $328.16 million, whereas Indonesia’s exports to Pakistan stood at around $3.03 billion.

Pakistan could benefit from Indonesia’s stable and diversified macroeconomy by fostering collaboration in various sectors, including textiles, Islamic fashion, Islamic banking, engineering, biodiesel, renewables, digitalisation, e-commerce, and biotech. 

Additionally, Indonesia’s palm oil industry presents opportunities for Pakistan, which heavily relies on imports for edible oil. With edible oil being Pakistan’s second-largest import expenditure after petroleum, experts propose that both countries work together to develop local palm oil plantations. 

Pakistan currently imports over 90% of its edible oil requirements, and efforts to cultivate palm trees along Sindh and Balochistan’s coastal belt could reduce this dependency.