Jakarta. Aside from a shift in presidency, the year 2024 has witnessed quite a progress in Indonesia’s attempt to boost its exports. Southeast Asia’s largest economy has managed to move the needle in some of its trade deal negotiations, although some talks remained sluggish.

In early January, then-Trade Minister Zulkifli Hasan said that Indonesia was looking to wrap up some free trade agreement (FTA) negotiations. He mentioned the bilateral comprehensive economic partnership agreement (CEPA) with Canada. Luckily, Indonesia managed to cross this one out on its to-do list before the year ended.

A similar trade pact with the European Union (EU) has long been sitting on Indonesia’s to-do list for over 8 years. Although both sides had been engaging in some discussions, Indonesia’s CEPA with the 27-membered bloc still failed to take shape. As the year draws to a close, the following is a roundup on Indonesia’s international trade deal negotiations throughout 2024.

Easing Trade Barriers with Canada

Indonesia ended the year with a bang. Earlier this month, Canadian Trade Minister Mary Ng visited Jakarta to ink the substantive conclusion of the Indonesia-Canada CEPA negotiations. It took the two G-20 economies about three years to conclude the FTA that would ease a huge chunk of trade barriers. The official signing is set to take place next year. They are also planning to implement the CEPA by 2026. Their respective lawmakers will have to pass the deal into law first before it can enter into force.

Official figures show bilateral trade hit $2.9 billion in January-October 2024, up from almost $2.8 billion recorded in the same period the previous year. But Indonesia is importing more than it is exporting to Canada. Even so, Indonesia’s deficit with Canada had dropped from $799 million to $574 million as of end-October. Trade Minister Budi Santoso said that the CEPA could facilitate Indonesian palm oil and paper products in penetrating the Canadian market. Jakarta is also banking on this FTA to have a more balanced trade with Ottawa. The deal will grant Canada-bound Indonesian goods a trade liberalization of up to 90.5 percent of the tariff posts.

The Indonesia-Canada CEPA will facilitate investments in sectors such as mining, manufacturing, and agriculture. The government reported that foreign direct investment (FDI) inflows from Canada had totaled $357.4 million in the first nine months of this year. The Canadian money flowed into 614 projects.

Indonesia-EU CEPA Postponed Again

In 2016, Indonesia and the EU started negotiating an FTA that could facilitate market access. Years have passed, Indonesia-EU ties faced some obstacles. In 2019, the EU sued Indonesia at the World Trade Organization (WTO) over Jakarta’s decision to stop exporting unprocessed nickel ores. The EU also added salt to the wound after it decided to restrict entry of foreign-grown palm oil into its market with the bloc’s anti-deforestation regulation EUDR. Senior minister Airlangga Hartarto even accused the EU of imposing “regulatory imperialism” with the law that would force Indonesian palm oil farmers to prove their products are grown on deforestation-free lands. EU Ambassador to Indonesia Denis Chaibi, however, denied that the EUDR drama had caused a setback to the CEPA negotiations.

When the year began, the Indonesian government had its heart set on concluding the EU CEPA talks in 2024. But as time passed by, it turned out there was still much work to be done. Both sides held its 19th round of negotiations in Bogor in July. A report on the said meeting wrote that they saw “fruitful discussions” on market access for goods, state-owned enterprises, as well as trade in services, to name a few. However, the talks “remained inconclusive” on key outstanding issues, including export and import restrictions, as well as investment conditions.

Indonesian businesses are waiting for this overdue deal to come into effect. Indonesian Employers Association (Apindo) estimates reveal that the Southeast Asian country can lose $1.6 billion in exports to the European bloc without the CEPA. Indonesia reported that its trade with the EU totaled nearly $30.8 billion in 2023. Jakarta at the time enjoyed a $2.5 billion surplus. 

CPTPP: Following in UK’s Footsteps

The government had been dropping hints that it was eyeing the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) to expand Indonesia’s access to non-traditional markets such as Latin America. Fast forward to September, Indonesia sent an official letter to the CPTPP to request for admission -- just a month before Former President Joko "Jokowi" Widodo retired. His successor Prabowo Subianto said his government would continue with the work for Indonesia to secure the membership. Early government estimates claimed that Indonesia’s exports could soar by 19 percent if Jakarta were to join the CPTPP. The trade pact will eliminate most tariffs between its members over time.

The CPTPP is an FTA in force between Canada, Australia, Chile, Japan, Mexico, New Zealand, Peru, as well as some ASEAN members Brunei, Malaysia, Singapore, and Vietnam. The UK has just become the bloc’s first non-founding member. With London now part of the club, the CPTPP now accounts for 15 percent of the world’s gross domestic product (GDP). Indonesia has already earned the newcomer UK’s backing for its CPTPP candidacy. Canada even called Indonesia a “good candidate” to the CPTPP. The Indonesian government does not really set a deadline of its CPTPP accession. However, Trade Minister Budi not long ago told reporters that Indonesia was looking to join “as soon as possible”.

More Doors to Non-Traditional Markets

For Indonesia, the CPTPP is not its only road to trading beyond its usual partners.

In mid-March, Jakarta officially started its negotiations for a preferential trade agreement (PTA) with Sri Lanka. Unlike CEPAs, a PTA typically reduces or eliminates tariffs on selected goods. Indonesia is hoping that the pact can open the door for palm oil exports. In 2021, Sri Lanka banned palm oil imports. Jokowi previously had nudged his Sri Lankan counterpart Ranil Wickremesinghe into lifting the ban. Bilateral trade figures are still in the hundreds-million mark, reaching $366.1 million in January-October 2024. Jakarta’s exports reached $319.2 million.

Indonesia even aims to sign the PTA with Sri Lanka by next March, hoping that one year of negotiations should be enough.

Upgrades are also underway to the already-in-force trade deals. In mid-2024, Indonesia began talks with Chile to have more areas of cooperation under their bilateral CEPA pact. The deal, which gradually eliminated tariffs for over 7,000 Indonesian items exported to Chile, already came to effect in 2019. Government estimates put Indonesia-Chile trade to almost double from $275.8 million in 2019 to $486 million in 2023. Indonesian exports to Santiago last year also reached $312.6 million. Both economies are currently negotiating to have the CEPA to encompass the digital economy, critical minerals, and investment. 

It is still too early to tell how this critical mineral partnership under the enhanced CEPA will be like. But Indonesia boasts an abundant source of minerals ranging from nickel to bauxites. Chile, on the other hand, has the world’s largest reserves of lithium -- a battery production mainstay ingredient that Indonesia lacks. Chile’s lithium reserves amount to 9.3 million metric tons, according to a 2024 report by the US Geological Survey. Seasoned businesswoman Shinta Kamdani even once told reporters that Chile could potentially power up Indonesia’s dream of becoming a global EV battery producer. 

ASEAN, China Getting Closer

ASEAN -- of which Indonesia is a member of -- is making some strides trade-wise. The Southeast Asian bloc announced in October that it had substantially finished the upgrades to its existing trade pact with China. ASEAN and Beijing have set sights on signing the upgraded deal next year.  The enhanced pact will introduce digital and green economies, among others, as its new areas of cooperation. Indonesian businesses may also benefit from greater transparency and certainty especially during supply chain disruptions once the upgraded deal is in place. 

The Chinese government reported that its trade with ASEAN had reached $911.7 billion last year. ASEAN data shows the bloc's overall trade in goods hit around $3.5 trillion in 2023. About $480.7 billion came from Indonesia, coming in fifth place after Malaysia ($578.1 billion) and Thailand ($574.3 billion).

What to Expect in 2025

China to this day remains the largest contributor to Indonesia’s trade deficit, standing at $9.9 billion in January-November 2024. US President-Elect Donald Trump has threatened to impose massive tariff hikes on Chinese goods. If the American businessman-turned-politician goes ahead with the plan, it goes without saying that China-made goods will look for other export destinations. Indonesia, which is already grappling with floods of Chinese goods, is no exception.

But 2025 does not look so grim. Indonesia will likely sign its trade pact with Peru in the first half of 2024. There is also a trade deal with the Russian-led Eurasian Economic Union (EAEU) incoming. But the fate of the Indonesia-EU CEPA will really put Prabowo and his government’s economic diplomacy to the test. Indonesia also must not forget to put its existing trade deals to good use. The country is already part of the world’s largest trade deal: Regional Comprehensive Economic Partnership (RCEP), which makes up 30 percent of the global GDP.

Indonesia has been recording a surplus for 55 consecutive months since May 2020. Its trade surplus topped $4.4 billion last month. But if it wants to maintain the surplus, the country will of course have to widen the gap between its imports and exports. Only time will tell whether Indonesia will be able to keep up its years-long surplus streak in 2025.