Indonesia and China agreed to lift import duty on cocoa and chili powder, in a bid to increase trade volume of the two countries, a leading newspaper reported Saturday.

Indonesia will reduce import tariff on chili powder from China from ten percent to zero percent and China will decrease import duty on cocoa from Indonesia from 15 percent to zero percent, the Kompas daily report says.

The removal of the import duty was agreed upon in the Memorandum of Understanding signed by Indonesian minister of trade,Mari Elka Pangestu, and her Chinese counterpart, Bo Xilai, during a meeting in Nusa Dua, Bali, on Friday.

The agreement was signed as part of the framework of the Joint Commission on Economic, Trade and Technical Cooperation between Indonesia and China.

"Since long time we have struggled to obtain import duty of zero percent on cocoa export to China, we offer zero percent import tariff on chili powder from China," said Indonesian Trade Minister Pangestu.

Separately, Director General of International Trade Cooperationof the Trade Minister Herry Soetanto said the policy will kick off in January next year.

Indonesia is the world's third largest cocoa producing country after the Ivory Coast and Ghana in Africa. The value of Indonesian cocoa exports to China increased from 10.9 million U.S. dollars in 2004 to 16 million U.S. dollars in 2005.

Editor: Yan