Accelerating The IEU-CEPA Agreement Increases Indonesia's Export Opportunities To The European Union

Coordinating Minister for Economic Affairs Airlangga Hartarto (Ministry of Coordinator for Economic Affairs)

JAKARTA - Indonesia is entering a strategic phase in strengthening economic relations with the European Union (EU) through the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) agreement.

Meanwhile, the economic relationship between Indonesia and the EU continues to show a positive trend with a trade value of 30.1 billion US dollars in 2024 and the trade balance between the two parties remains a surplus for Indonesia, with a significant increase from 2.5 billion US dollars in 2023 to 4.5 billion US dollars in 2024.

Coordinating Minister for Economic Affairs Airlangga Hartarto said that in a meeting with the European Union Commissioner for Trade and Economic Security Maro

The process of negotiating the substance of the IEU-CEPA has entered the last stage, and almost all the substance has been agreed upon. That is from the results of yesterday's meeting in Europe, in Brussels. As of today, I have received confirmation from Commissioner Maros regarding the results of the meeting resummation which they have also agreed on. Therefore, we are waiting for the two leaders, President Prabowo and President of the European Union, to announce together," said Airlangga in his statement, Sunday, June 15.

Airlangga said that in the future when the Commissioner of Maros comes to Indonesia in September 2025, there will already be minutes or memorandums that can be signed and from there the process will be continued legally, where this requires ratification from 27 EU Member States and also in Indonesia.

For information, there are several main commodities that dominate Indonesia's exports to the EU, namely palm oil and its derivatives, copper ore, fatty acids (oleochemicals), footwear products, coconut mangers, steel iron, brown fat and copra, as well as rubber and machine-based products.

In 2024, the EU contributed 6.5 percent or about 17.35 billion US dollars from Indonesia's total exports of 264.70 billion US dollars.

In addition, in the period 2021 to 2024, Indonesia's export performance to the EU shows that the dynamic trend reflected in Indonesia's export value to the EU experiencing the highest increase in 2022 with an export value of 21.53 billion US dollars, but decreased in the following year, before rising slightly to 17.35 billion US dollars in 2024.

The European Union is ready to reach the best agreement on Indonesia's interests in the renewable energy sector, the development of electric vehicles, footwear products and clothing, palm oil and fishery. Regarding exports of fishery products, the Indonesian Government also asked the EU to provide similar preferences to other partner countries. Therefore, the EU is willing to open more market access for superior Indonesian products such as palm oil, shoes, textiles, and canned fish (mainly tuna).

"To maximize these benefits, Indonesia needs to ensure the readiness of the domestic industry, strengthen the export support ecosystem, and harmonize cross-sectoral policies," he explained.

Airlangga said that the study conducted by CSIS (2021) and the Sustainability Impact Assessment by the European Commission (2020) strengthened optimism for the economic benefits of the IEU-CEPA for Indonesia and it was projected that Indonesia's GDP would grow by 0.19 percent, with additional national income reaching USD2.8 billion US dollars, and Indonesia's exports potentially increasing by 57.76 percent in the next three years.

"So if our exports increase by 50 percent, it is equivalent to Vietnam or Malaysia this year. If this is what we encourage with the IEU-CEPA, the leading tariffs (commercial exports), which can now be 8-12 percent, can go down to 0 percent," he said.

He hopes that in the future the implementation of the IEU-CEPA will open up great opportunities to increase the competitiveness of Indonesian products in the European market because both parties do not yet have the Free Trade Agreement (FTA) mechanism.

"As a comparison, the experience of other Asian countries that have already entered into a free trade agreement with the European Union, such as Vietnam and Singapore, has had a significant positive impact on their export performance," Airlangga concluded.