Indonesia and the European Union on Tuesday finalised their negotiations on a comprehensive economic partnership agreement after nine years of talks, aimed at boosting trade and investment.
The agreement will remove import duties on 98.5% of EU goods exported to Indonesia and simplify procedures for entry for EU products including cars and food products such as milk powder, cheeses, meats, chocolates and bakery items, the EU said.
For the EU, the deal will result in savings of 600 million euros ($707.40 million) of duties averaging 10% a year on EU exports.
Indonesian goods will enjoy zero tariffs in 90% of the EU market upon implementation, the Indonesian economic ministry said, which should boost shipments for palm oil, coffee, textile and clothing and other products.
Indonesia's Coordinating Minister for Economic Affairs Airlangga Hartarto said he is aiming for the pact to enter into force on January 1, 2027.
"As we look ahead for the next stage, the legal scrubbing, translation, ratification, we reaffirm the determination to bring this (agreement) into force at the earliest opportunities," Airlangga said at a signing ceremony in Bali.
Trade between Indonesia and the EU is expected to double in the first five years of implementation, Indonesia said.
In 2024, trade between the two parties was $30.1 billion, according to Indonesia's economic ministry.
"We are looking forward for a supply chain between Indonesia and Europe including for critical minerals, renewable energies, innovation, as well as for investment," Airlangga said.
Indonesia is in talks with European automakers on partnerships in battery and electric vehicle production in the Southeast Asian country, Airlangga told reporters.
EU Trade Commissioner Maros Sefcovic said in Bali the agreement would bolster investment into Indonesia by European companies and help diversify the supply chain, particularly for critical minerals, which Indonesia has in abundance.
In a separate statement, European Commission President Ursula von der Leyen said the agreement would help to provide "a stable and predictable supply of critical minerals, notably nickel and cobalt."
The Chairman of the Indonesian Palm Oil Association (GAPKI) Eddy Martono said the deal would remove tariff barriers to the EU, a major buyer of palm oil.
However, non-tariff barriers, including the EU Deforestation Regulation (EUDR), remain a hurdle for the industry, he said in a text message to Reuters.
Indonesia is the world's biggest palm oil producer and the EUDR requires its growers to provide documentation proving shipments did not come from areas deforested after 2020.
"There is still homework to be done, namely the EUDR which must also be resolved immediately because it will be implemented later this year," he said, which could reduce the effectiveness of the trade agreement.
($1 = 0.8482 euros)
