Indonesia and Australia have agreed to implement the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) on July 5, according to the Indonesian Trade Ministry.
Indonesia ratified the partnership agreement in late February.“In a virtual meeting with my counterpart, [Australian Trade, Tourism and Investment] Minister Simon Birmingham, we agreed to implement the IA-CEPA as soon as possible because it is important for the two countries to help with post-COVID-19 recovery,” Trade Minister Agus Suparmanto said as quoted in a statement on Friday.
Under the agreement, Indonesian exports to Australia will get zero tariffs. Likewise, most of Australia’s exports, including live male cattle, frozen beef, dairy products, and sugar, may enter Indonesia without any duties. The Trade Ministry expects the export of some Indonesian products to Australia, such as automotive products, timber, textiles, electronics, and communication tools, to increase despite recording a US$3.2 billion trade deficit last year.
The pandemic, which has infected over 3.7 million people worldwide and at least 13,100 people in Indonesia, is slowing not only trade but also investment between countries.
Foreign direct investment (FDI) to Indonesia declined 9.2 percent year-on-year to Rp 98 trillion ($6.5 billion) in the first quarter of the year, according to data released on April 20 by the Investment Coordinating Board (BKPM).
Despite relying heavily on household spending to grow the economy, Indonesia seeks to attract more investment from Australia through the IA-CEPA, especially in higher education, vocational education, healthcare, construction, energy, mining, and tourism sectors.
In the first quarter of the year, foreign investment from Australia reached $86 million with 321 projects, according to BKPM data.
“We hope businesses, including small and medium enterprises, from both countries, can reap the benefits from the IA-CEPA to spur trade and investment between the two countries,” Agus said.
The ministry’s international trade cooperation director-general, Imam Pambagyo, said Indonesia was preparing ministerial regulations on tariffs and the issuance of certificates of origin, in addition to providing state institutions with updates on the latest developments of the agreement.