Getting Australian universities into Indonesia could help transform a large but low-educated workforce into one of the world's biggest economies, the nation's finance minister says.
Sri Mulyani Indrawati said Indonesia had seen huge growth in the services sector since the turn of the century, but education levels were holding the country back.
Indonesia has a workforce of more than 125 million, but 60 per cent have not been educated past early high school.
Dr Mulyani said there were a lot of hurdles to getting Australian universities into Indonesia, but there was a need to improve education levels.
"It is actually important and it can transform (the education sector)," she told an audience at the Australian National University in Canberra on Monday.
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A free-trade deal between Australia and Indonesia is close to being signed, containing provisions allowing Australian universities to operate in the country.
"By law it's very difficult for us to open a foreign university in Indonesia," Dr Mulyani said.
She said Indonesia would create economic zones where foreign universities can invest and set up campuses.
Dr Mulyani dodged questions about whether Australia's potential move of its Israel embassy to Jerusalem could damage or delay the free-trade deal.
On the United States and China's trade war, Dr Mulyani said it had the capacity to hurt some downstream suppliers.
But she looked to the deal the US signed with Mexico and Canada as an example of how the US can be pragmatic when it needs to be.
Australia and Indonesia are close neighbours and two of the world's top 20 economies, but neither is in each other's top 10 list of trading partners.
