Indonesia Ratifies Agreement with European Free Trade Association, Agrees to Enhanced Trade with UK

Apr 2021

Indonesia is moving forward with its first trade agreement with European countries, namely Iceland, Norway, Liechtenstein, and Switzerland, as the Indonesian Parliament has agreed to ratify the Indonesia – European Free Trade Association (EFTA) Comprehensive Economic Partnership Agreement (IE-CEPA). According to Indonesia’s Trade Minister Muhammad Lutfi, the Agreement, once implemented, will open Indonesia to new markets and investors, increase overall export, and boost small and medium enterprises (SMEs) participation in global value chains.

In the area of trade in goods, the Agreement will provide access for major export products to Indonesia, from fish and marine products, agricultural and food industry products such as cheese, chocolate, and coffee, to industrial and technical products, machinery, and watches, chemicals, and pharmaceuticals. Merchandise trade between the EFTA States and Indonesia amounted to EUR 1.2 billion (USD 1.4 billion) in 2020. The EFTA States exported goods worth EUR 647 million (USD 777.6 million), with some of the leading exports being electrical machinery (15%), mechanical appliances (11%), organic chemicals (9%), and pharmaceutical products (8.5%). EFTA imported goods were worth EUR 521 million (USD 626.2 million) in 2020, with footwear as the most significant import (22%), followed by woven and clothing accessories (13%) and electrical machinery (9%).

In addition to trade in goods, the IE-CEPA will also stimulate trade in services, e.g., for energy-related services, telecommunication services, the financial industry, or access for maintenance personnel and provide an enhanced framework for trans-border investment. The Agreement is expected to help Indonesia attract more investment from the EFTA countries and the broader European market.

In another development, Indonesia and the United Kingdom have agreed to improve trade and investment cooperation to boost economic recovery in the post-pandemic period. At the 3rd Indonesia-UK Partnership Forum, the two countries expressed a shared commitment to the upcoming signing of the Memorandum of Understanding (MoU) on the Joint Economic and Trade Committee (JETCO), which will deepen bilateral trade and address market barriers in areas such as renewable and green energy, and food and drink and agricultural commodities.

(Sources: The European Free Trade Association (EFTA); The Jakarta Post; Jakarta Globe)

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