Australian business is being urged to seize an historic opportunity for building world-beating joint ventures in Indonesia as both countries are forced to reset their global competitiveness after the end of the commodities boom and the slowdown in China.
A new economic analysis shows that the two countries are entering a period where for the first time they will share joint competitive advantages to produce world quality exports which will potentially pave the way for much greater cross-border investment. 
The study, to be released on Tuesday, comes as a more than 300-member business mission is set to arrive in Jakarta in the biggest push to deepen relations with Indonesia since the $1 billion post tsunami aid program under John Howard.
"Shifts in relative comparative advantages between the two economies indicate that Australian and Indonesian firms are increasingly partners, not competitors, in any regional trade," the study says.
"The challenge is urgent: Indonesia cannot cascade up value chains and avoid the middle-income trap if skills are not addressed; and Australia needs to address its high wage base."
The study has been written by economists from the ANZ Banking Group and PwC for the Australia Indonesia Centre at Monash University to provide a new economic framework for the meetings between Australian and Indonesian companies later this week.
It will be launched by trade minister Andrew Robb at the annual conference of the Indonesia Australian Business Council in Yogyakarta on Tuesday and follows last week's visit by Prime Minister Malcolm Turnbull where he sought to focus on prospects for greater business ties.

New sources of growth needed
Former Indonesian trade minister Mari Pangestu says in an introduction to the report that the global production (or value) chains which have been central to Asia's modern growth are fragmenting which will force middle-sized economies like Australia and Indonesia to look beyond their traditional strengths as resources producers to find new sources of growth.
She says: "Given complementarities and proximity between Indonesia and Australia, serious consideration should be given to the possibilities for joint development of comparative advantage to face the challenges ahead."
The study has identified textile production, food processing, logistics and animal products as four key industries where the two countries have had global competitive strength but could reap bigger benefits from pooling their respective expertise and resources.
For example, it says Australian designers and technological capacity, along with the use of wool, could transform the Indonesian mostly cotton textile industry by making it more efficient and improving its access to world markets.
In logistics, Australian expertise could be used to train Indonesians in the skills needed to build transport networks for a rapidly expanding middle-class population, to make ports more efficient in processing new exports from Indonesia and to help Indonesia export its gas via the networks already developed by Australia.
In animal products, the report examines greater Indonesian processing of Australian wool for textiles of third country use, more predictable import rules to allow more joint production and processing of beef and use of Australian food export expertise to boost Indonesian exports.
The authors argue that the region is moving into a second phase of the Asian Century Asia where investment is shifting from the slower growing and less competitive industrialised north-east Asia to the south, particularly to south-east Asia.
At the same time the structural decline in resources prices is forcing commodities exporters like Australia and Indonesia to look for new sources of growth.
And the emergence of a new common market due to south-east Asia's formal economic integration is creating competition to create new manufacturing and processing hubs in populous counties like Indonesia and Vietnam to meet domestic consumption and replace China as a manufacturer.
Whereas Australia and Indonesia have largely been competing commodities exporters in the past, they now have a historic opportunity to take advantage of proximity and create comparative advantages from joint production.
"Global supply chains are being competitively transformed as nations jockey to gain advantages by harnessing rapid shifts in technology, systems and services. With these global and regional issues in focus, this study puts the case that Indonesia and Australia have much to gain by responding quickly and that in doing so both economies can succeed together," it says.
It argues that while Indonesia has long been nervous about being flooded with Australian exports such as beef and Australia has been unnerved about opening its labour market to Indonesians, the two counties needs to see how closer integration of their economies can bring mutual benefits.
"Economic co-operation is required to develop cross-border integrated industries and value chains in both goods and services that use the comparative advantages of each economy to supply domestic and third markets.
"These can be achieved by a variety of steps that can help both economies tap into larger regional and global value chains," the report says.