The ratification of IUAE–CEPA (the Comprehensive Economic Partnership Agreement) between Indonesia and the United Arab Emirates (UAE), will be discussed soon, to further boost Indonesian exports to emerging markets.

Jakarta (Indonesia Window) – To boost exports to Africa, the Middle East, Central Asia, and Eastern Europe, the Indonesian government and the House of Representatives have agreed to discuss ratification of the Comprehensive Economic Partnership Agreement (CEPA) between Indonesia and the United Arab Emirates (UAE) or the IUAE– CEPA.

The Indonesian government and the House have also agreed to discuss the ratification of IUAE-CEPA mechanism again in the form of a draft law or a presidential regulation, the Indonesian Ministry of Trade said in an official statement here on Tuesday.

According to the ministry, Indonesian Minister of Trade Zulkifli Hasan made the discussion on the ratification of IUAE-CEPA during a working meeting with the House here on Monday (Oct. 3).

Minister Zulkifli Hasan appreciated the results of the meeting and hoped that the IUAE-CEPA would further encourage Indonesian exports to emerging markets.

"Through this IUAE-CEPA, our jewelry, agricultural products, and products of our small and medium enterprises (SMEs) would be able to penetrate Africa, the Middle East, Central Asia, and Eastern Europe," Zulkifli said.

The IUAE–CEPA is expected to benefit Indonesia because the PEA will become Indonesia's hub to reach huge new markets, the minister explained.

He pointed out that that apart from having the potential to make the UAE a hub to reach a wider market, the IUAE-CEPA will also be useful in increasing Indonesia's exports to the UAE itself.

Commodities that can be exported include crude palm oil (CPO) and its derivatives, processed foods, textiles, paper, steel, and manufactured products.

"The IUAE-CEPA is predicted to increase Indonesia's exports to the UAE by an average of 7.7 percent per year, with a predicted export value in 2030 of 4.2 billion US dollars," the minister noted.

Commitments in the IUAE–CEPA include the elimination and reduction of tariffs for 99.6 percent of Indonesia's exports to the UAE; an increase in Indonesia's service exports to the UAE by six percent; and enhancement of bilateral economic cooperation.

Economic cooperation includes the field of Islamic economics which comprises cooperation to strengthen mutual recognition of halal certification, SMEs, digital economy, and joint research; and investment cooperation which includes information exchange, identification of investment potential and promotional activities, partnerships with SMEs, encouragement for a conducive investment climate, and investment facilitation through sovereign wealth funds.

"The digital economy arrangement in this agreement is projected to contribute to an increase in Indonesia's gross domestic product by four percent," the minister added.

The UAE is also an important partner in developing SMEs, he said, adding that the Ministry of Trade has a target to encourage more than 30 million SMEs to join the digital trading ecosystem by 2023, so that business actors can benefit greatly from the implementation of this agreement.

According to the minister, Indonesia also needs to take advantage of the UAE as a strategic partner to reach the halal market to 57 countries of the Organization of Islamic Cooperation (OIC) which cover 1.47 billion Muslim populations.

Halal is an Arabic word, meaning what is allowed under Islamic law.

The trade minister said this is considering the potential of the world halal industry market which is projected to reach 11.2 trillion U.S. dollars by 2028.

He hoped that the Indonesian House of Representatives can immediately ratify the IUAE-CEPA to show Indonesia's commitment to strengthening trade agreements with partner countries.

“The UAE has already ratified the IUAE–CEPA. Therefore, we hope that the ratification of the IUAE-CEPA by Indonesia can be carried out before the upcoming meeting of the President of Indonesia and the President of the UAE in Solo (a city in Central Java) which is scheduled for November 17, 2022, he said.

Meanwhile, a House member, Mohamad Hekal, said that the IUAE-CEPA will be used to improve Indonesia's trade balance with the UAE which is still in deficit, and show the Indonesian government's efforts to open new markets.

“The UAE is an important trading partner for Indonesia in the Middle East region. Currently, Indonesia is still in a trade deficit with the UAE. Of course we want to improve all trade dealings with the UAE. The IUAE–CEPA is also an effort by the Indonesian government to increase or open new markets, explore new trading partners,” Hekal said.

In 2021, Indonesia's exports to the UAE reached 1.9 billion U.S. dollars, an increase of 52 percent from those in 2020 with the main export product of jewelry worth 281.2 million dollars.

Meanwhile, the value of Indonesia's imports from the UAE reached 2.1 billion dollars with the main import product of semi-finished iron valued at 209.3 million dollars.

Regarding investment, the UAE is Indonesia's 34th largest source of investment with a value of 16.1 million dollars in 2021 from 77 projects.

Overall in the 2017–2021 period, the UAE’s investment in Indonesia amounted to 568 projects covering food crops, hotels and restaurants, the food industry, and the petrochemical industry.

Reporting by Indonesia Window