Indonesia Picks CEPA Over FTA in Landmark EU Deal to Expand Investment and Green Cooperation
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JAKARTA, Investortrust.id — Indonesia has officially concluded negotiations for a comprehensive economic agreement with the European Union, opting for a broader pact that extends beyond tariffs to include collaboration on renewable energy, investment, and capacity building.
The final step of the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) was marked by an exchange of letters between Indonesian officials and the European Commission, symbolizing a high-level political consensus to accelerate the deal’s finalization.
The exchange was conducted by Coordinating Minister for Economic Affairs Airlangga Hartarto and European Commission Trade Commissioner Maroš Šefčovič in Belgium on Sunday, July 13.
In remarks delivered in Paris, Airlangga explained that Indonesia deliberately chose a CEPA framework rather than a standard Free Trade Agreement (FTA), citing CEPA's wider scope. While an FTA typically focuses on tariff and non-tariff measures, CEPA allows room for broader cooperation.
“CEPA includes elements such as renewable energy, capacity building, and non-tariff trade collaboration,” said Airlangga on Wednesday, July 16.
The government expects the agreement to unlock stronger foreign direct investment (FDI) flows from the EU into Indonesia. Although he did not provide a target value, Airlangga emphasized his hope that European investments would move up from their current standing among Indonesia’s top ten sources of FDI to the top five.
“At present, they are in the top ten, but of course it depends on each EU member state's engagement,” he said.
The majority of FDI currently entering Indonesia comes from Asian countries. Airlangga noted that Singapore, China, and Japan rank as the top three investors.
He also underscored that trade and investment go hand in hand.
“Investment follows trade. When trade increases, so does investment,” he said, adding that the agreement could help Indonesia become one of the EU’s “like-minded countries,” meaning it shares similar investment and regulatory environments that are conducive to long-term economic cooperation.