Indonesia: Economic opportunities arise with Indonesia-European Free Trade Association Comprehensive Economic Agreement

In brief

On 7 May 2021, Indonesia ratified a Comprehensive Economic Partnership Agreement (CEPA) with the European Free Trade Association (EFTA), which consists of Switzerland, Norway, Liechtenstein and Iceland.

In Indonesia, CEPA was introduced to accelerate the economic recovery from the effects of the pandemic and enhance comprehensive economic cooperation between Indonesia and the EFTA. CEPA is expected to stimulate trade in services, e.g., for energy-related services, telecommunication services, financial services and access for maintenance personnel1. So Indonesia and the EFTA would gain benefits in the form of market access for goods, services, investment, economic cooperation and trade facilitation.


Contents

CEPA Overview

The ratification of CEPA under Law Number 1 of 2021 on Ratification of CEPA Between Indonesia and EFTA ("Law 1/2021") is expected to provide certainty in the implementation of CEPA; this will also grant EFTA exclusive access to Indonesia's market.

Investment

Article 4.3 of CEPA recognizes the importance of Parties cooperating to promote investment as a means to achieve economic growth and development. The cooperation of the parties may cover the following actions2:

  • Identifying investment opportunities and activities to promote investment abroad, in particular partnerships between small and medium sized enterprises
  • Exchanging information on investment regulations
  • Furthering of an investment climate conducive to increased investment flows

Trade in goods and services

Under Article 2.2 paragraph 1 of CEPA, each party is obliged to apply import duties on goods originating from another party in accordance with the agreement. Chapter 3 regulates trade in services. Article 3.2 provides that the supply of a service includes the production, distribution, marketing, sale and delivery of a service. The service of a party means a service that is supplied in one or both of the following ways:

  • Originating from the territory of a party, or in the case of maritime transport, by a vessel registered under the domestic laws and regulations of a party, or by a person that supplies the service through the operation of a vessel or its use in whole or in part
  • Through commercial presence or presence of individual service suppliers of a party

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1 https://www.efta.int/Free-Trade/news/EFTA-Indonesia-Comprehensive-Economic-Partnership-Agreement-enters-force-526266

2 Article 4.3 IE-EFTA CEPA

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