August 4, 2025 | 05:24 pm
TEMPO.CO, Jakarta - The Indonesian Chamber of Commerce and Industry (Kadin) is confident that the trade deal between Indonesia and the European Union will boost the net export figures to the region.
President Prabowo Subianto inked the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) during a meeting with EU leaders in Brussels on Sunday, July 13, 2025.
Kadin's Vice Chair for Trade and Foreign Affairs, Pahala Mansury, views the deal as an opportunity to expand Indonesia's export market. He believes this agreement could serve as an alternative to reduce export dependence on a single country.
"This agreement will broaden Indonesia's product access to the European market and bolster Indonesia's position in the global supply chain," Pahala said during a discussion organized by the Kadin Institute in South Jakarta on Monday, August 4, 2025.
Pahala explained that Indonesia's current main export destinations are China, the European Union, and the United States. But Indonesia depends too much on the Chinese market, while access improvements are much needed for the European and American markets.
According to Pahala, these two regions have great potential with a combined population of over 700 million people. He hopes the IEU-CEPA deal could bolster net exports for the country's gross domestic product.
Indonesia also struck a deal with the U.S., lowering Trump's tariffs to 19 percent and setting a zero-percent policy on several U.S. goods entering the country. "And these tariffs are lower compared to some competing countries," he said.
Both the IEU-CEPA and the tariff deal with the U.S. not only opening market access but also creating investment opportunities for Indonesia.
The IEU-CEPA is also considered a strategic opportunity for Indonesian exports. Citing Antara's report on June 16, 2025, the government estimates 50 percent export growth within three years of full implementation of the EU deal.
Coordinating Minister for Economic Affairs Airlangga Hartarto claims the IEU-CEPA deal could catapult Indonesia's exports to compete with neighboring countries such as Vietnam and Malaysia. These two countries have already signed trade agreements with the European Union.
One of the key benefits of the IEU-CEPA is the exemption of import duties for around 80 percent of Indonesia's export products. Key products such as textiles, fishery, footwear, automotive, and crude palm oil (CPO) will enjoy nearly zero percent tariffs.
A crucial point in the negotiations was the reacceptance of Indonesian palm oil, which was previously excluded by the European Union due to environmental issues. Now, Indonesian palm oil is included in the IEU-CEPA with the classifications of food grade and fuel.
Another key focus is the automotive sector, with the indonesian government pushing for incentives and relaxations to enable domestically manufactured vehicles, including electric vehicles, to compete in the European market.
As reported by Antara, the IEU-CEPA creates a healthier trade and investment ecosystem. The agreement covers 24 key elements, from trade in goods and services, investment, intellectual property rights, sanitary and phytosanitary (SPS) standards, digital trade, and energy to government procurement.
The IEU-CEPA is expected to broaden Indonesia's foreign direct investments from Europe. In 2023, the European Union was the 8th largest investor in Indonesia, with US$2.33 billion, but it dropped to US$1.1 billion in 2024.
"The government aims to finalize the IEU-CEPA paperwork by September 2025. The full implementation is planned for the first quarter of 2027, after the ratification process by the 27 EU member countries is completed," said Airlangga.
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