Indonesia sees the benefits of improving its trade relations with Europe through the establishment of the Indonesia-European Union (EU) Comprehensive Economic Partnership Agreement (CEPA). By being a part of this, Trade Minister for Indonesia Thomas Lembong believes it will lead to “modernization” of current trade regulations in Indonesia and it has thus become “the current top priority” of the government. Hopefully an agreement between Indonesia and the EU will be reached by late 2017. Following that the next move will be becoming a member of the Trans-Pacific Partnership as well as the European Free Trade Association (TPP and EFTA).
Given that Indonesia is the largest economy in the Southeast Asia region, if this CEPA membership goes ahead, it will not only strengthen its investment climate, but this will have a trickle down affect into the entire region. By emancipating government appropriation and diminishing trade barriers, various major commodities will be given “great potential.”
While there has already been free trade cooperation agreements between the EU and Indonesia since 2011 with Susilo Bambang Yudhoyono’s administration, the CEPA will further formalize these and lead to a relaxing of barriers, furthering trade between the regions. It has thus been decided that CEPA membership is a higher priority than the TPP once. Further, if trade commitment is not enhanced between the EU and Indonesia, this will negatively impact the competitive edge Indonesia has, making Malaysia and Vietnam more attractive options for FDI. As things stand, Vietnam already has free access to take part in the US and EU export markets.
So these official agreements have to be made, and soon, if Indonesia wants to remain a key player in East-West markets.