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House Approves Indonesia – Australia’s CEPA

Indonesian House of Representatives approved the bill to ratify the Indonesia - Australia Comprehensive Economic Partnership Agreement (IA-CEPA) on Thursday' meeting - Photo by President Office

JAKARTA (TheInsiderStories) – Indonesian House of Representatives approved the bill to ratify the Indonesia – Australia Comprehensive Economic Partnership Agreement (IA-CEPA) on Thursday’ meeting. Last year, both countries has signed the deal to finalize the pact in this month and will be signed on March.   

The Minister of trade, Agus Suparmanto said in an official statement released on Wednesday, based on a letter from the chairperson of parliament to President Joko Widodo on Dec. 13, 2019, it was decided that the ratification of the IA-CEPA would be carried out through a law.

The head of state had submitted IA-CEPA bill to the parliament on Jan. 24, 2020. He stated, “A comprehensive economic partnership agreement is one way to respond to the challenges of the global economic conditions.”

He believes that the IA-CEPA, which was signed on March 4, 2019, can benefit Indonesia by increasing the competitiveness of Indonesia’ human, industrial and service sectors. Then increase market access of goods and services from Indonesia to Australia, considering that Indonesian and Australian products are generally complementary.

Australia, said Suparmanto, has potential source of investment for Indonesia, especially in the extractive sector, agriculture, infrastructure, finance, health, transportation, also food and beverage. Through IA-CEPA, he continued, Australia will remove the tariff lines of all Indonesian export products entering their market to zero percent when implemented.

Some Indonesian products that have the potential to increase exports to Australia include automotive, tires, wood, furniture, plywood, pipes, LCD/LED monitors, textiles and garments, footwear, fisheries, butter, cocoa, carpets, and plastics.

While in terms of value, Indonesia’ biggest export potential to Australia lies in the automotive sector, both conventional cars and electric cars, which is a driving trend going forward. In this case, the IA-CEPA was also encouraged by the export of Indonesia’s electric and hybrid vehicles at zero percent tariffs and using the ease of a letter of origin.

While from the service sector, the IA-CEPA will also have a positive impact in the form of improving service sector achievements. The highest increase in the service sector prognosis will occur in the transportation sector, particularly air transportation and construction.

The minister also revealed that Indonesia and Australia will collaborate in making an ‘Economic Powerhouse’. This collaboration is a collaboration of economic forces by maximizing supply chains to drive productivity, competitiveness, and increase Indonesia’ exports to third and global markets.

Both also can contribute more to global trade chains to supply the world’s needs. Indonesia can become a center of the processing industry to produce value-added processed products if supported by easy access to cheap and quality raw materials and helpers from Australia.

Australia is Indonesia’ ninth largest trading partner in 2018 with a total trade value of US$8.53 billion, of which Indonesia’ exports to Australia reached $2.80 billion. 

by Linda Silaen, Email: linda.silaen@theinsiderstories.com