As the Indonesia – European Union (I-EU) CEPA negotiations are well underway, a comprehensive study to advise how to utilize the maximum potential of this agreement is very timely. This study was developed in close collaboration with BAPPENAS and the Ministry of Trade, to ensure alignment of views and ownership of the final product. Extensive consultations with other government stakeholders and the Indonesian private sector have also been held to gather their views and assess their priorities. This work was conducted in partnership with the Jakarta-based Centre for Strategic and International Studies (CSIS).
Some interesting findings have emerged:
- Complementarity between the European Union and Indonesia has been stagnant over the past few years. Sectors with major compatibility are manufacturing, machinery and transportation equipment, chemicals, mineral fuels, lubricants and related materials, and commodities.
- Indonesia’s biggest export potential products vis a vis the EU is coffee.
- Indonesia's best export diversification potential in the EU comes from data processing machines, computer data storage units, given the high demand from the EU.
- The presence of sports footwear as one of Indonesia’s top five products in the EU with an 8 percent market share is an important sign of the revival of Indonesia’s manufacturing industry.
- Indonesia’s travel services sector has recorded a consistent surplus year after year and peaked at over EUR 1 billion in 2018. Meanwhile, communication and other services remain low in terms of trade, thus representing important potential for domestic service providers and EU partners.
- Indonesia shows a higher Services Trade Restrictiveness Index (STRI) compared to other OECD countries. The STRI measures barriers that affect trade in services. Sound recording, rail transport and air transport are the three sectors with the lowest restrictions. However, their scores are still higher than average. Distribution and legal services have the highest STRI scores.
The IEU-CEPA is expected to be the most progressive and comprehensive agreement for Indonesia. The Government of Indonesia hopes that this agreement will not only expand market access and increase Indonesia’s exports to EU countries, but also encourage improvement in the business and investment climate in Indonesia.
ARISE+ Indonesia is supporting the Government of Indonesia to develop a comprehensive study that will assess the impact of the I-EU CEPA on trade, economic and social indicators.
In spite of certain constraints due to the COVID-19 pandemic which slowed down the data collection process from stakeholders the researchers have been able to advance quite significantly. Completion is now expected by the end of the year and extensive dissemination is due early next year.
