PURSUING SUSTAINABLE COOPERATION: INDONESIA – EFTA CEPA (IE-CEPA)
Writer: Hendra Manurung (Hendra Manurung is currently pursuing a doctoral degree in international relations at Padjadjaran University, Bandung)
The European Free Trade Association or EFTA is an inter-governmental organization established to promote free trade and economic integration for the benefit of its member countries (Switzerland, Norway, Liechtenstein, and Iceland) and their partner countries.
Indonesia and the EFTA Comprehensive Economic Partnership Agreement (IE-CEPA) is a comprehensive trade agreement due to both markets access inclusiveness, trade and investment facilitation, and capacity building cooperation.
IE-CEPA signed on 16 December 2018 in Jakarta. It is expected that through the Comprehensive Economic Partnership Agreement signed by Indonesia and the European Free Trade Association will bring many mutual benefits for both sides in the future.
The IE-CEPA agreement itself suppose will boost market access to EFTA for fishery products, industry such as textiles, furniture, bicycles, electronics, and auto tires, and agriculture including coffee and palm oil.
The Ministry of Trade of Indonesia also held a Roadshow for the Indonesian Trade Agreement with EFTA countries related to the Comprehensive Economic Partnership Agreement that was completed in Makassar, South Sulawesi (http://ditjenppi.kemendag.go.id/, 26/9/2019).
For Indonesia, the European Free Trade Association (EFTA) considered as the 23rd group of non-oil and gas export destination countries and the 25th largest country of origin for non-oil and gas imports.
After going through nine complex stages that took almost 8 years, began in January 2011 to Nov. 23, 2018, finally conclude. The IE-CEPA negotiations were finally declared substantively completed by the negotiators through Joint Announcement at a meeting in Denpasar, Bali from October 29 to November 1, 2018.
Thereafter, with the signing of the IE-CEPA, a new milestone in bilateral relations between Indonesia and the EFTA countries has begun. This is due to a number of benefits that Indonesia and EFTA will get, through the IE-CEPA agreement which was declared in Geneva, Switzerland on 23 November 2018.
The IE-CEPA Agreement benefits for Indonesia are enormous due to Indonesia’s market access expansion to EFTA countries and accelerating the competitiveness quality of Indonesian products.
The cooperation between the five countries, involving Indonesia, Switzerland, Iceland, Norway, and Liechtenstein will not harm each other. In fact, there are many benefits that can be obtained, particularly with the zero-tariff policy which is applied to almost 99 percent of Indonesian products exports to EFTA countries.
The Indonesian Ministry of Foreign Affairs virtually is intensifying discussions on the ratification of the Indonesian Agreement – the European Free Trade Association (EFTA) Comprehensive Economic Partnership Agreement (IE-CEPA) in the Tourism Services Sector in October 22, 2020 (kemlu.go.id, 27 Oct. 2020).
In the goods sector, Indonesia benefits from almost 99 percent zero tariffs. Even so, this was done in stages with various deadlines.
In detail, there were also tariff eliminations on 6,333 tariff posts or about 90 percent of the total Norwegian tariff posts. This figure covers 99.75 percent of the value of Norwegian imports from Indonesia.
Tariff elimination also occurred at 8,100 tariff posts in Iceland or around 94.28 percent of the total existing tariff posts. This figure covers 99.94 percent of Iceland’s import value from Indonesia.
There is also the elimination of tariffs on 7,042 tariff posts in Switzerland or about 81.74 percent. This figure covers 99.65 percent of the Swiss import value from Indonesia.
Indonesian export products that receive preferential rates include palm oil, fish, gold, footwear, coffee, toys, and textiles. There is also furniture, electrical equipment, machinery, bicycles, and tires.
Profits in the service trade sector also vary. Starting from the cross border where Indonesian citizens will get information and education from a distance. Indonesia can also increase the growth of e-commerce in the country and for the needs of exports abroad by optimally utilizing digital platforms.
On the consumption abroad section, the Indonesian tourism sector benefits from an increase in the number of tourists from EFTA member countries. Not to mention, the increase in capital flows from EFTA member countries to Indonesia will boost the pace of infrastructure development.
For the commercial presence, it will be increasing capacity building for generating Indonesian human resources quality through the presence of EFTA experts. An increase in the number of Indonesian workers also will be sent to EFTA countries.
Indonesian workforce certification will also be recognized by EFTA countries. Open market access for workers openly is accessible in the category of Intra Corporate Trainee, Trainee, Contract Service Supplier, Independent Professional, and Young Professional.
Indonesian product opportunities in the EFTA market are also promising and challenging. The results of the analysis of Indonesia’s potential exports with the EFTA countries (ITC, 2018) highlighted that these products with the greatest export potential from Indonesia to Switzerland are jewelry from precious metals, coffee, and footwear.
Additionally, Indonesia has the highest supply capacity for palm oil. On the other hand, the product with the strongest potential demand in Switzerland is immunology.
Products with the greatest export potential from Indonesia to Norway are nickel matte, sports footwear, and coffee. Indonesia also has the highest supply capacity for seats of cane, osier & similar products, while the product with the strongest potential demand in Norway is nickel matte.
Products with the greatest export potential from Indonesia to Iceland are shrimp, crude coconut oil, and coffee. Indonesia also has the highest supply capacity for palm oil & fractions, while motorized vehicles to transport people are the product with the strongest potential demand in Iceland.
On the investment side, this cooperation is profitable. IE-CEPA is expected to create an open, stable, and predictable business climate for investors. Increased investment will open wider opportunities for the business world, creating jobs that will improve people’s social welfare gradually.
Investments from developed countries will also have a positive impact in terms of technology and knowledge transfer, so as to increase the competitiveness of domestic commodity products and services in the international market.
The investment sectors offered by Indonesia to EFTA through IE-CEPA include fisheries, agriculture, and manufacturing of food products, textiles, chemicals, pharmaceuticals, and domestic renewable energy development.
For consumers, the elimination of these tariffs will certainly make the price of goods cheaper and of higher quality. Product choices are increasingly diverse.
Moreover, domestic business actors will also benefit more from the import duties for imports of capital goods and raw materials.
Trade facilitation commitments are also included in the IE-CEPA agreement, which will make trade regulations and customs procedures simpler and more transparent.
To conclude, with the lower prices of domestic raw materials, production costs can be reduced optimally, thereby increasing the competitiveness of various Indonesian exporting products and services abroad. (Hendra Manurung is currently pursuing a doctoral in international relations at Padjadjaran University, Bandung)