Indonesia–Australia Comprehensive Economic Partnership Agreement (IA-CEPA)

July 5, 2020 marked the implementation of the free trade agreement between Indonesia and Australia, a documented agreement which had an incredibly long gestation period.  It had its genesis during the visit of Susilo Bambang Yudhoyono [SBY], President of Indonesia, to Australia in March 2010 when he requested that we do not refer to it as a free trade agreement, but as an economic partnership, hence the name became the Indonesia–Australia Comprehensive Economic Partnership Agreement (IA-CEPA).  This partnership was the first FTA in which the private sector had an input, as previously the agreements were designed and discussed by the relevant government bodies, but on this occasion, the Australian Chamber of Commerce and Industry and the Indonesian Kadin took a significant role.

The document reflects the wishes of SBY in that it is much more than a free trade arrangement.

The agreement contains clauses on bilateral free trade, investments, skills training visas, investor arbitration, e-commerce, and intellectual property protection. Indonesia, under the agreement, will remove tariffs from nearly all Australian products exported to Indonesia while all Indonesian products exported to Australia will be free of tariffs.  Australian firms would be permitted to hold a majority stake in Indonesian telecommunications, transport, health and energy firms. Additionally, the number of work holiday visas issued to Indonesians annually would be increased from 1,000 to 4,100 (later to 5,000 by 2026), and Australian universities would be permitted to open Indonesian campuses.  [https://en.wikipedia.org/wiki/Indonesia%E2%80%93Australia_Comprehensive_Economic_Partnership_Agreement]

When one reflects on the gestation period, it is reasonably surprising that the Agreement actually reached such a glorious conclusion, as there were enough low points and impediments to derail the process, so it is a credit to the participants that a successful conclusion was reached.

Now the difficult period begins.

Indonesia and Australia have had a tumultuous relationship for decades, but we suspect that the perseverance of the Indonesian people will ensure that the relationship reaches the heights which SBY envisaged all those years ago.

When one reviews the path which the Indonesians have trodden it is not difficult to envisage a spectacular result. Indonesia was subject to a very restrictive occupation by the Netherlands for over 300 years, and thereafter 20 years of control by Sukarno, the popular but ineffective President who led the country to independence from the Netherlands, followed by a 30 year presidency by Suharto who was an effective leader but lost direction in his later years.  Democracy is now entrenched, in a country located on 8500 islands, with a population of 268 million comprising over 300 ethnic groups with independent languages, and the fact that it still exists is testament to the perseverance of the people.

Recent history particularly since independence indicates that the IA CEPA will be of significant benefit to both countries, but it will need hard work from both parties to achieve its objectives.

Glen Robinson

Councillor, Australian Institute of International Affairs NSW
Director – Asia Advisory, AFG Venture Group