Indonesia to Ink Two Free Trade Agreements This Year

The Indonesian Government has made substantial progress on its trade deal negotiations with several Asia Pacific partners in the past week. Indonesian Trade Minister Enggartiasto Lukita and Australian Trade Minister Simon Birmingham both confirmed last week that the two governments are set to sign the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) in March. Negotiations on this deal first began in 2010 and were finalized in August last year.

The multibillion-dollar agreement, upon entry into force, is expected to benefit Indonesia’s automotive and textile sectors, as well as to give Australian agricultural producers, educational institutions, and health-care providers greater market access. This recent development on the Indonesian trade front is significant in that the deal was previously considered almost derailed after the Morrison government raised the possibility of relocating Australia’s Israeli embassy from Tel Aviv to Jerusalem last October, which sparked outrage in Muslim-majority Indonesia and put the two countries’ relations to the test. In a later compromise made in December 2018, the Australian government said it is not moving its embassy until a peace deal is reached, but went ahead with recognizing West Jerusalem as Israel's capital.

Meanwhile, negotiations for the Indonesia-Korea Comprehensive Economic Partnership Agreement (IK-CEPA) were resumed last week after a five-year halt. First initiated in 2012, the talks took a hiatus in early 2014 due to disagreements on several issues, including the investment provisions, between the two sides. Talks officially resumed following a joint announcement made by Minister Lukita and his South Korean counterpart Hyun Chong Kim at the 2019 Indonesia-Korea Business Forum held in Jakarta on February 12. The two ministers expressed their determination to try to finalize the deal by November of this year. In 2018, total trade value between the two countries reached US$20 billion, and the deal could reportedly raise that figure by 50 per cent to US$30 billion in the next three years by boosting Indonesia’s natural resource exports as well as sales of Korea’s chemical and construction products in a large Indonesian market currently dominated by Chinese and Japanese competitors.