Indonesia: economic opportunities present themselves with the Indonesia-European Free Trade Association squeeze economic agreement


In short

On May 7, 2021, Indonesia ratified a Comprehensive Economic Partnership Agreement (CEPA) with the European Free Trade Association (EFTA), which includes Switzerland, Norway, Liechtenstein and Iceland.

In Indonesia, CEPA was introduced to accelerate economic recovery from the effects of the pandemic and strengthen overall economic cooperation between Indonesia and EFTA. CEPA should stimulate trade in services, for example for energy-related services, telecommunications services, financial services and access for maintenance personnel1. Thus, Indonesia and EFTA would receive advantages in the form of market access for goods, services, investment, economic cooperation and trade facilitation.


The ratification of CEPA under the Act No. 1 of 2021 on the ratification of CEPA between Indonesia and EFTA (“Law 1/2021“) Should provide certainty in the implementation of CEPA; this will also grant EFTA exclusive access to the Indonesian market.

Investment

Section 4.3 of CEPA recognizes the importance of the cooperation of the Parties in promoting investment as a means of achieving economic growth and development. The cooperation of the parties may relate to the following actions2:

  • Identify investment opportunities and activities to promote investment abroad, in particular partnerships between small and medium enterprises
  • Exchange information on investment regulations
  • Foster an investment climate conducive to increased investment flows

Trade in goods and services

Under Article 2.2 (1) of CEPA, each party is required to apply import duties on goods originating in another party in accordance with the agreement. Chapter 3 regulates trade in services. Article 3.2 states that the provision of a service includes the production, distribution, marketing, sale and delivery of a service. A party’s service means a service that is provided in one or both of the following ways:

  • Originating in the territory of a Party, or in the case of maritime transport, by a ship registered under the internal laws and regulations of a Party, or by a person providing the service through the operation of a ship or its use in whole or in part
  • By commercial presence or the presence of individual service providers of a party

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1 https://www.efta.int/Free-Trade/news/EFTA-Indonesia-Comprehensive-Economic-Partnership-Agreement-enters-force-526266

2 Article 4.3 EI-EFTA CEPA

This post was published by the law firm HHP (Hadiputranto, Hadinoto & Partners), a member firm of Baker McKenzie International, a global law firm with member law firms worldwide. In accordance with common terminology used in professional service organizations, a reference to an “partner” means a person who is a partner or the equivalent in such a law firm. Likewise, the reference to an “office” means an office of such a law firm. This may be termed a “lawyer advertisement” requiring notice in some jurisdictions. Past results do not guarantee a similar result. “


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