The Indonesia-Australia Comprehensive Economic Partnership Agreement, also known as IA-CEPA or Indonesia-Australia CEPA, has finally come into effect on July 5, 2020. The Indonesian government signed and ratified this agreement in February 2020.
According to the Trade Ministry of Indonesia, IA-CEPA can help Indonesia come out of COVID-19 by maintaining the trade momentum and enhancing the country’s trade competitiveness.
Indonesia has always been an ideal market for Australian goods and services exporters, and the market has been growing even more rapidly in recent years.
Between 2018 and 2019, the bilateral trade of goods and services between two nations was recorded at US$12.4 billion (~A$17.8 billion), making Indonesia the 13th largest Australia’s trading partner.
What is Indonesia-Australia CEPA About?
The Indonesia-Australia CEPA was signed for the purpose to open up more investments in Indonesia and boost bilateral trade amounted to US$7.8 billion last year in 2019.
The agreement will eliminate a majority of trade tariffs between Indonesia and Australia: 94% of Indonesian tariffs will be removed and all Australian tariffs on Indonesian imports will be waived.
IA-CEPA gives businesses in Indonesia and Australia the opportunity to diversify and expand their trade and economic partnership.
Furthermore, the agreement will support both countries’ shared interests, enabling the partnership to promote a secure and flourishing Southeast Asian region.
Indonesia-Australia CEPA: Scope of Agreement
In the agreement, Indonesia aims to increase its textile, automotive, and electronics exports, while Australia hopes to augment its iron ore, wheat, and dairy exports.
The scope of the agreement also covers the following:
1. Australian business can now have the majority shareholding in the following sectors:
- Construction services
- Education: university education and vocational training (Monash University has already announced the approval of its campus in Jakarta)
- Professional services: architectural, urban planning, engineering, and surveying
- Wastewater management
- Energy sectors: electrical power installation and construction, geothermal plants, oil and gas platform construction, and power plants with more than 10 MW
- Mining services: contract mining and mine site preparation
- Transport: railways, highways, tunnel concessions, bridges
- Tourism: majority ownership of three, four, and five-star hotels, restaurants, cafes and bars, tourism consultancy, and tour operators (There will be huge and plenty opportunities in Bali – the tourist paradise)
- Healthcare: large hospitals, pathology, paramedic, and dental specialist services
2. Almost all goods exported to Indonesia or Australia will have zero or decreased tariffs.
3. Both countries will permit their citizens with tertiary level education to obtain experience of six months in each other’s market. Initially, this will apply to those in these fields: mining, finance and insurance, healthcare, engineering, infrastructure development, and information and telecommunications.
4. Indonesia will automatically issue import permits to Australian businesses for the following products:
- Feed grains
- Citrus fruits
- Carrots and potatoes
- Frozen beef
- Sheep meat
- Live cattle
How Australia can Benefit
Although the Australian livestock industry faced a steep decline since 2014, it is believed that the Indonesia-Australia CEPA will give the biggest push to the Australian livestock industry and thus boosting the country’s revenue.
Indonesia is Australia’s largest customer for live cattle with 675,000 live cattle imports in 2019, which is approximately half of Indonesia’s cattle requirements.
Consult with Cekindo
By taking advantage of the Indonesia-Australia CEPA, Cekindo delivers high-performance outcomes and reduces costs when you start a business in Indonesia.
Our team of specialists is devoted to providing you with the best industry methodologies and streamlined processes with a long history of successful results.
Cekindo has also extended our capabilities to deliver cost-effective, robust, and scalable solutions for clients from all over the world.
Learn how you can reap the benefits of Indonesia-Australia CEPA through Cekindo stress-free business advisory services in Indonesia. Fill in the form below.