Micro Business

IA-CEPA Stimulates Economic Cooperation between Indonesia and Australia

Australia has for many years established good relations with Indonesia. Many Australian tourists visit tourist destinations in Indonesia and vice versa. This is also seen in terms of economic relations between Indonesia and Australia. Furthermore, to strengthen relations as well as improve the economy in both countries, Indonesia and Australia agreed to form an agreement in the form of IA-CEPA.

Not without reason, the formation of the IA-CEPA agreement shows that Indonesia has a lucrative market potential for Australian investors, and vice versa. After going through a long negotiation process, the IA-CEPA has now been officially implemented. This economic cooperation agreement between Indonesia and Australia includes several things that are certainly expected to strengthen the country’s economic axis.

What is IA-CEPA?

The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) is a form of cooperation between Indonesia and Australia. Cooperation in the economic field is poured into an agreement to make the two countries as Economic Powerhouses. This agreement has been signed by the two countries in March 2019 and has gone through the ratification process.

IA-CEPA was first ratified by Australia on November 26, 2019, followed by Indonesia which ratified the agreement. Then on February 28, 2020, this ratification was followed up with the issuance of Law no. 1 of 2020 concerning the Ratification of the Comprehensive Economic Partnership Agreement between Indonesia and Australia.

After undergoing a 10-month ratification process, the Minister of Trade of the Republic of Indonesia Agus Suparmanto and the Minister of Trade, Investment, and Tourism of Australia Simon Birmingham agreed to implement the IA-CEPA on 5 July 2020. Agus Suparmanto also said that through his virtual meeting with Simon Birmingham, they agreed that the implementation of the IA-CEPA is important to be carried out as soon as possible to help restore the economy after the COVID-19 pandemic in both countries.

What policies are included in the IA-CEPA? This bilateral agreement covers import-export trade, employment, telecommunications, investment, and electronic trade. Examples are 0% customs tariffs for product exports to Australia, vocational education, and internship programs to improve the quality of human resources in Indonesia.

Opportunity to increase investment flow

The IA-CEPA agreement is expected to further facilitate investment activities, both for investors from Indonesia who want to expand and Australian investors who are interested in investing in Indonesian companies. So far, Indonesia has been ranked 12th as an Australian investment destination. The establishment of the IA-CEPA is expected to be an impetus for Indonesia to jump into the top 10 investment destination countries for Australia.

The IA-CEPA is a protection and investment facility for investors in these two countries, especially in the infrastructure, energy, tourism, food processing, higher education, and technology development sectors. The implementation of the IA-CEPA in July is a breath of fresh air for the level of investment in Indonesia which has decreased due to the COVID-19 pandemic.

Indonesia’s focus on IA-CEPA

Before the IA-CEPA was officially enacted, Indonesia had prepared technical implementations so that in the future the implementation of the IA-CEPA can run smoothly and minimize possible obstacles. This was revealed by Iman Pambagyo as the Director General of International Trade Negotiations who helped draft regulations for reducing tariffs and issuing certificates of origin (SKA). Socialization regarding the IA-CEPA is also being carried out at all levels of the Customs Office and Certificate of Origin Issuing Agencies and local governments.

By eliminating customs tariffs, IA-CEPA can be a catalyst for increasing exports of Indonesian products to the Australian market, such as automotive, textile, wood, rubber, electronics, machinery, food and beverage products, as well as the development of creative industries. Outside of trade, Australia also provides 200 internship visas in a variety of priority sectors, from education to information technology.

IA-CEPA is a bridge between Indonesia and Australia, where the two countries can take advantage of each other’s advantages to increase productivity and minimize operational costs. For example in the food and beverage sector, Indonesia can use food ingredients imported from Australia at a more affordable price and these processed products can be resold at competitive prices in Australia.

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