On 4 March 2019, Indonesia and Australia signed the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA). Indonesia, which is expected to be the world’s fifth-largest economy by 2030, was Australia’s 13th largest trading partner in 2018.
The purpose of IA-CEPA is to reduce non-tariff barriers to trade and increase investment between the two countries. The newly signed agreement would allow 99% of Australia’s exports to enter Indonesia duty free or with significantly improved preferential arrangements by 2020. Indonesia will guarantee automatic issue of import permits for key products such as live cattle, frozen beef, sheep meat, feed grains, rolled steel coil, citrus products, carrots and potatoes. All Indonesia’s exports will enter Australia duty free.
Market access outcomes on services and investment will provide increased certainty to Australian businesses and services suppliers in the Indonesian market, including guaranteed levels of Australian ownership. Indonesia will not be able to limit the level of Australian ownership – or require that ownership be divested – below the percentages agreed (with limited exceptions).
The IA-CEPA builds on commitments under the existing free trade agreement, the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA). Further steps are required to to bring IA-CEPA into force. For Australia, this will include tabling the text of the agreement in Parliament and an inquiry by the Joint Standing Committee on Treaties (JSCOT).
The Indonesian Chamber of Commerce and Industry (KADIN) predicts that textile and footwear industries in Indonesia will benefit most. In turn, Australia will be able to see an increase of wheat, fruits, vegetables, dairy and cattle export. Beyond free trade in goods, IA-CEPA would also open up the service industry in Indonesia, such as education, mining, power plant, hospital, telecommunications, tourism, construction, wastewater, transport and power plant, with possible Australian ownership up to 100%.
(Source: Reuters; Department of Foreign Affairs and Trade, Australia)