Study on the Impact of an EU-Indonesia CEPA

  • Yose Rizal Damuri
  • Raymond Atje
  • Audrey Soedjito

Abstract

A Comprehensive Economic Partnership Agreement between the European Union (EU) and Indonesia would improve the economic relations between these economies, while creating benefits for both. To start, such a CEPA would allow members of the European Union to gain access to the large and growing Indonesian market – and in particular, its diverse services sector. A CEPA would also create opportunities for European businesses to utilize Indonesia's human resources as tools for future investments and economic activities. Meanwhile, the benefits of this agreement to the Indonesian economy would be even more substantial. Since Indonesia will “graduate” from the EU's Generalized System of Preference (GSP) program, the elimination of preferential tari!s through the CEPA would allow Indonesian exporters to maintain European market access for their products. Furthermore, the CEPA would serve as a catalyst to increase direct investment to Indonesia firstly through increased trade between Indonesia and the EU, which in turn would promote greater flows of investment between their economies, and secondly through the inclusion of investment provisions within the agreement, which would improve the predictability and transparency of Indonesia's investment regime. Such a services agreement would also allow Indonesian consumers and industries to enjoy first class, high quality capital goods and services, and required as prerequisites for successful economic development. In short, although several challenges will have to be overcome in order to create such an agreement, the implementation of a CEPA would create a win-win solution for both parties.

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Publisher

Centre for Strategic and International Studies

The Centre for Strategic and International Studies (CSIS) is a non-profit organization based in I... more