Indonesia was upset at New Zealand due to unequal conditions in an ongoing free trade negotiation, which the Asian country felt would compromise its beef and dairy industries.
New Zealand wanted Indonesia to eliminate import duties for beef and dairy products, covered by 12 tariff lines by 2020, while in exchange offered 10 doctoral scholarships, according to Sondang Anggraini from the Trade Ministry.
Another offer was financial assistance for three years to improve the skills of Indonesians working in the beef and dairy sectors, including veterinarians, Sondang said.
Sondang said the offers were rejected as scholarships were not among Indonesia's priorities and the amount of the financial assistance was insignificant.
Beef and dairy products are currently subject to import tariffs of about 5 percent.
Analysts said the duty elimination would bankrupt the domestic meat and dairy producers as they were still in a developing stage and required protection from imports.
There were also labour issues in the negotiations that Indonesia was displeased at, therefore there would not be any good reason to seal the trade deal unless the problems are resolved, said Guntur Witjaksono, director of the Manpower and Transmigration Ministry's international cooperation centre.
New Zealand is the second largest meat supplier to Indonesia, exporting 7,942 tonnes of meat to the Asian country in the first two quarters of 2008.
Indonesia imported a total of 64,000 tonnes of meat and carcasses from New Zealand last year.
The negotiation is part of an auxiliary deal under the planned free trade agreement between ASEAN and Australia and New Zealand, agreed upon on August 28, and which will be officially signed by year-end.