Indonesian-Australian Comprehensive Economic Partnership Agreement (IA-CEPA) to begin

The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) will come into effect today. It was ratified by Indonesia’s parliament in February.

A key component of the IA-CEPA is a sweeping free-trade agreement (FTA) that will eliminate nearly all tariffs on bilateral trade between the two countries. Non-trade ties will also be strengthened by clauses that allow Australian firms to hold a majority stake in Indonesian transportation, telecommunications and energy companies and Australian universities to establish campuses in Indonesia.

While the elimination of tariffs on Australian imports will certainly benefit Indonesian automotive producers, which source raw materials and unfinished parts from abroad, the FTA is expected to provide the greatest boost to the Australian livestock industry, which has shrunk significantly since 2014.

The FTA will allow Australian cattle exporters to take advantage of growing demand in Indonesia, which already imports around half of the country’s cattle requirements. While pushback is inevitable from Indonesia’s local livestock industry, expect the Indonesian government to make few concessions. In addition to growing trade, education and investment ties between the two countries, the agreement will likely provide the Australian livestock industry with a significant boost in revenue as the countries look to emerge from the COVID-19 pandemic. Expect the FTA to translate to a prominent surge in cattle exports during Ramadan next year, when demand in Indonesia is traditionally high.

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