Jakarta. Indonesia will likely lose billions of American dollars in exports if it cannot close the overdue deal with the European Union, according to the country’s business association.

Jakarta has been trying to secure the Indonesia-EU Comprehensive Economic Partnership Agreement (CEPA) that is expected to loosen trade restrictions. Negotiations have already taken place since 2016. Indonesia hopes to finish the negotiations as soon as possible, but the government admitted to have struggled to keep up with the EU’s increasing demands. There is also a possibility that the talks might go on until President-Elect Prabowo Subianto’s government which will start this October. 

Shinta Kamdani, the chairwoman of the Indonesian Employers Association (Apindo), said that the lack of the trade pact could affect the attractiveness of Indonesian goods in the European market.

“Without Indonesia-EU CEPA, Indonesia can lose $1.6 billion in exports to the EU. The trade loss is equivalent to around 12 percent of Indonesia’s total exports to the EU. In the long run, we might even lose our trade surplus with the EU,” Shinta told reporters in Jakarta on Friday.

Shinta fears that the pact’s absence can take a toll on Indonesia’s labor-intensive sectors, including the layoff-struck textile industry. Indonesian garment and footwear businesses might also struggle to compete with Vietnamese goods as Hanoi already has a free trade agreement with the European bloc. 

“These industries are already struggling because of the decline in export demand. They have to compete with products from other countries, particularly Vietnam,” Shinta said. 

Government data showed Indonesia-EU trade amounted to $30.77 billion throughout 2023. Indonesia at the time enjoyed a $2.5 billion surplus. This further extended the positive trade balance trend in the Indonesia-EU trade over the past five years with the surplus totaling around $23.95 billion.

Postponed Talks Not A Restart Button

Umar Hadi, a senior official at the Foreign Affairs Ministry, told the same presser that the lack of a CEPA does not mean zero trade.

“We are still trading with one another even with unfinished CEPA negotiations. The trade pact is only to make our products become more competitive in Europe and vice versa,” Umar said.

The diplomat also refused to make speculations on whether the negotiations could get pushed back to Prabowo’s administration, saying that Indonesia would remain committed to closing the deal. But even if the negotiations do continue after Prabowo takes office, it does not mean that the negotiators would be back to square one again. 

“There should be no problem about continuing the negotiations [if the talks do get pushed back]. It is still the same [trade agreement] document,” Umar said.

Trade Minister Zulkifli Hasan admitted Thursday that negotiations could get more challenging under Prabowo’s government, according to media reports. Prabowo reportedly plans to impose the B50 palm oil-infused biodiesel mandate after he assumes office. The B50 refers to the policy of increasing the palm oil blend in Indonesia’s biodiesel to 50 percent. The higher the palm oil blend, the more likely that Indonesia would allocate its Europe-bound crude palm oil (CPO) to the B50 program -- thus potentially setting another obstacle to the CEPA talks. 

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