Indonesia - Australia CEPA covering US$18 billion agriculture, education and health will be activated will kick in on July, said the trade minister on Thursday (05/07) - Photo by President Office

JAKARTA (TheInsiderStories) – President Joko Widodo and Prime Minister Scott Morrison will signs the Indonesia – Australia Comprehensive Economic Partnership Agreement (IA-CEPA) on Monday (02/10). The signing was delayed after the premier said that Australia was considering moving its embassy from Tel Aviv to Jerusalem in Israel in 2018.

“I look forward to working even more closely with the president on our shared commitments and challenges across trade and investment, defense and security, counter-terrorism and people-smuggling, maritime issues and education,” said Morrison as reported by Australian Review. 

Indonesian goods will be subject to zero tariffs when entering Australia, while tariffs on 94 percent of Australian goods imported to Indonesia will be eliminated gradually. Both countries already enjoy bilateral trade worth $17.8 billion. The deal is considered important as Australia diversifies its economy and moves away from a heavy reliance on China.

According to Indonesian foreign minister, Retno Marsudi, Widodo will begin the agenda at the parliament building by holding a tête-à-tête meeting with Morrison. Then, the head of state will attend the Annual Leader’s Meeting between the two country and will also witnesses the signing of two memorandum of understanding.

“First is the Plan of Action Comprehensive Strategic Partnership in 2020 – 2024 and the cooperation in the field of transportation,” she said on Feb. 8, 2020.

Earlier, minister of trade, Agus Suparmanto has said the president 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 and has been approved by the parliament on Feb. 6.

He believes that the pact, 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’ 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.

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