Jakarta. The trade pact between Indonesia and the European Union (EU) is set for entry into force at the beginning of 2027, as their senior officials inked the accord’s substantive conclusion on Tuesday. 

EU Trade Commissioner Maroš Šefčovič had flown to the Indonesian tourist haven of Bali in hopes of closing the deal. The same goes for senior minister Airlangga Hartarto. Shortly after the signing, Airlangga said that the much-anticipated Indonesia-EU Comprehensive Economic Partnership Agreement (CEPA) could come into effect as early as 2027.

“We look ahead to the next stage, [namely] the legal scrubbing, translation, and ratification. We reaffirm the determination to bring the CEPA into force at the earliest opportunity. The target should be Jan. 1, 2027,” Airlangga said. 

Under the pact, both sides have agreed to eliminate over 98 percent of their tariffs when trading with one another. The import duty elimination will start at 90.4 percent for Europe-bound Indonesian goods before it expands in stages. According to Airlangga, the CEPA could catapult exports by Indonesia’s labor-intensive industries, including footwear and textile producers.

Indonesian palm oil -- which has put the bilateral ties to the test over deforestation concerns -- is expected to benefit from the trade pact. A press statement issued by the EU wrote that the accord could set a platform for cooperation, dialogue, and trade facilitation on an array of commerce-related environmental and climate issues, including in the palm oil sector. Airlangga previously claimed that Europe would allow 1 million tons of Indonesian crude palm oil enter its market duty-free each year. Any imports exceeding the quota will be subject to a 3 percent tariff.

Meanwhile, the bloc is banking on the pact to boost Indonesians’ appetite for its agrifood products, even calling the CEPA a “major win” for European farmers. The CEPA will remove tariffs on European dairy products, meats, fruits, vegetables, as well as a wide range of processed foods.

Indonesia is set to be the third ASEAN member to strike a trade agreement with the EU after Singapore and Vietnam. According to Šefčovič’s estimates, goods trade totaled 27 billion euros ($31.9 billion) last year, with Indonesia enjoying a surplus. The 27-member grouping, however, had a lead in services trade, which amounted to almost 9 billion euros. Europe is also expecting that some of its companies will be more keen on investing in Indonesia’s strategic sectors such as electric vehicles, electronics, and pharmaceuticals, following the agreement.

“By the end of 2023, European investment stocks in Indonesia exceeded 25 billion euros. … Our agreement will foster even greater investment flows,” Šefčovič said.

The texts will now go through legal revision and translation to all EU official languages. The European Commission will submit the document to the Council for signature. Once adopted by the council, both sides can sign the agreement before it goes to their respective parliaments to be passed into law. Once the ratification is complete, the CEPA will come into effect.

The signing came after European Commission President Ursula von der Leyen and Indonesian leader Prabowo Subianto reached a political agreement to expedite the trade pact in July. Official negotiations kicked off in 2016, but the sluggish talks finally gained speed after both sides eyed diversifying their exports following the US reciprocal tariff salvo.