Indonesia says hopes Britain stays in EU, looks for trade deal

BRUSSELS (Reuters) - The European Union has agreed to start free trade talks with Indonesia, EU Commission President Jean-Claude Juncker said on Thursday, as the growth-hungry bloc presses for improved economic ties with Asian countries.

Juncker said he and EU Trade Commissioner Cecilia Malmstrom made progress on Wednesday in discussions with Indonesian President Joko Widodo.

"We have concluded yesterday... preparatory discussions for a comprehensive economic partnership agreement and that's good news both for Indonesia and the European Union," Juncker told a joint news conference on Thursday.

The comprehensive economic partnership (CEPA), envisaged since 2011, would liberalise trade in goods and services and open up investment and procurement markets with the largest economy in the Association of South East Asia Nations (ASEAN).

The EU has reached free trade deals with Singapore, Vietnam and South Korea as it seeks to sign deals with the 10-member ASEAN on a country-by-country basis, a strategy that is strongly supported by Britain.

Widodo said he hoped Britain, which holds a referendum on EU membership on June 23, would remain part of the bloc. He also met British premier David Cameron this week.

Just as the United States has sought to shift its focus to Asia, the EU is also trying for a trade deal with Japan and is in talks to deepen investment ties with China, potentially a precursor to a free-trade accord.

Widido said a free trade deal would be in line with Indonesia's policy to make its economy more open and competitive.

Indonesia mainly exports agricultural products, fuel, minerals, textiles and semi-manufactured goods to the 28-member bloc.

The EU's main exports to Indonesia are high-tech machinery, transport equipment, manufacturing goods, chemicals and processed foods.

Trade in goods between the parties was some 24 billion euros (£19 billion) in 2014, compared with some 180 billion between the European Union and ASEAN as a whole.

The European Union had initially sought to negotiate a free trade deal with the entire ASEAN bloc, but broke off talks in 2009, launching separate negotiations instead.

It is set to hold a first round of talks with the Philippines in the first half of this year.

(Additional reporting by Julia Fioretti, Robin Emmott, Robert-Jan Bartunek, Philip Blenkinsop; editing by John Stonestreet)

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