Indonesian President Joko Widodo has heard first-hand the challenges Australian businesses face in investing in his country.

Mr Widodo met Australian business chief executives — from the pharmaceutical, mining, tourist and service industries — in Sydney on Saturday to learn about the investment barriers.

He urged them to consider investments outside traditional locations such as Bali.

Head of Indonesia’s Investment Coordinating Board Thomas Lembong said red tape needed to be removed in both countries and expressed confidence a trade deal could be finalised this year.

“We are confident that we will be able to complete the comprehensive economic partnership agreement with Australia this year,” he said.

“Of course, in the time remaining both sides want to make it as impactful and ambitious as possible.”

Meanwhile, Justice Minister Michael Keenan said the Government needed to build its economic ties with Indonesia.

“We are underdone on that front, and there’s a lot more that we can do. The Indonesian economy continues to grow very fast. It’s an enormous population,” he said.

“It’s a great opportunity for Australia, and we want to make sure that Australians can take advantage of that.”

Earlier this year, Army Chief Angus Campbell issued an apology to his Indonesian counterpart after material perceived to be insulting Indonesia’s state ideology had been found at a Perth special forces base.

Mr Keenan said there was no rift between the two countries.

We don’t need to smooth over the relationship. It’s never been stronger.”

“I was up in Indonesia a month ago. The relationship, the cooperation between Australia and Indonesia is at its peak at the moment.”

Private dinner with Turnbull

Mr Widodo will meet with Prime Minister Malcolm Turnbull on Sunday for talks on a possible free trade deal, with terrorism and security issues also on the agenda.

Mr Widodo’s like and respect for Australian Prime Minister Malcolm Turnbull is believed to have assisted the recovery of the bilateral relationship after successive lows linked to boat turn-backs, the cattle trade and the spying scandal.

Indonesian President Joko Widodo and his wife Iriana are met by officials in a wet Sydney. Photo: AAP

Indonesian Foreign Ministry spokesman Arrmanatha Nasir made a point of revealing there would be no formal dinner normally held with a state visit, rather there would be a more casual affair between the two leaders.

“Prime Minister Turnbull invited President Jokowi for a private dinner — so only the President and his wife and the Prime Minister and his wife,” he said.

Negotiations over a free trade deal between the two nations will dominate talks.

Indonesia is not among Australia’s top 10 trading partners, despite its trajectory of growth meaning it could be in the top six economies in the world by 2030.

Mr Widodo has been seen to have an eye more prominently focused on countries to Indonesia’s north rather than south, but his commitment to visit Australia is seen as a positive sign for the relationship.

Tensions over the South China Sea will also be discussed, along with the possibility of joint Navy patrols in the area.

The talks will also concentrate on the risk of foreign fighters returning from Iraq and Syria. Mr Widodo will highlight the success of Indonesia’s so-called soft approach to de-radicalising extremists.

Indonesia still does not have laws against supporting the Islamic State group — more than a year after a terrorist attack in the centre of the capital, Jakarta.

Mr Widodo has been battling the rise of a hardline approach to Islam in Indonesia, with mass street protests against Jakarta’s Christian Governor, known as “Ahok”, and a blasphemy trial against him seen as a test for moderate Islam in Indonesia.

– ABC