I-EU CEPA talks end, but deal won’t take effect before 2027
The Jakarta Post - 17 June 2025
I-EU CEPA talks end, but deal won’t take effect before 2027
By Ruth Dea Juwita
Indonesia aims to seal a free trade deal with the European Union after the two sides completed their latest round of negotiations, the government said, but the pact is not yet set in stone and is unlikely to take hold before 2027.
The final legal text and legal scrubbing of the Indonesia-EU Comprehensive Economic Partnership Agreement (IEU-CEPA) is anticipated to conclude by September, with President Prabowo Subianto and European Commission President Ursula von der Leyen expected to sign the deal in the same month.
Ratification, however, would take much longer, especially in Europe, said Djatmiko Bris Witjaksono, director general of international trade negotiations at the Trade Ministry.
“The EU requires far more time than Indonesia due to its internal procedures,” Djatmiko told a press conference on Friday.
Each of the EU’s 27 member states must complete a legal review, translate the document into their local language and push it through to domestic ratification, a process that could stretch into the second quarter of 2026.
Indonesia’s own ratification process could take 10 to 12 months, pending House approval, he added, so the signing is currently scheduled for the second or third quarter of 2026.
“The most ambitious scenario would see the agreement come into force by the end of next year, but realistically, we are looking at early 2027,” the director general said.
Once in effect, the IEU-CEPA is expected to boost Indonesia’s exports to the EU by as much as 50 percent over three years.
Indonesia’s economy could see a boost of 0.04 percentage points from I-EU CEPA, driven by higher industrial productivity, which the government projected could lift total output to US$824.56 billion, according to data from the Office of the Coordinating Economic Minister.
Foreign direct investment from the EU is expected to rise 0.42 percent, particularly in sectors such as electric vehicles, renewable energy, semiconductors, information and communication technology, pharmaceuticals and downstream mineral processing.
Coordinating Economic Minister Airlangga Hartarto said on Friday that one of Jakarta’s wins was the EU’s recognition of palm oil as a legitimate commodity under the I-EU CEPA.
Minister Airlangga said the product would be split into two categories, namely food and fuel, with the latter often facing stricter scrutiny in EU markets, but he did not detail any further.
“Fuel has been our biggest hurdle so far, but in that category, Indonesia has already developed B40 and is moving toward B50, so we’re now able to absorb much of it domestically,” Airlangga said, referring to Indonesia’s effort to increase the share of palm oil-based fuel in biodiesel from 40 percent to 50 percent.
The pact would also encompass a chapter on trade and sustainability, he added, including a section addressing the impact of the EU’s deforestation regulation (EUDR), which had long been a sticking point for EU-bound palm oil shipments from Indonia, the world’s largest producer and exporter of the commodity.
Eddy Martono, chairman of the Indonesian Palm Oil Association (Gapki), told The Jakarta Post on Monday that palm oil exports to the EU would still face nontariff barriers, including the EUDR and the EU’s Renewable Energy Directive (RED) II.
“The IEU-CEPA mainly addresses tariffs, so it won’t automatically boost Indonesia’s palm oil and derivative exports to the EU,” he said, adding that there would be separate bilateral talks to resolve issues related to the EUDR.
The EU last month classified Indonesia as “standard-risk” rather than “high risk” for deforestation under its EUDR, which Trade Minister Budi Santoso interpreted as a “softening” of Brussels’ stance amid the I-EU CEPA negotiations.
IEU-CEPA spans 21 areas of cooperation, including trade in goods and services, investment, customs procedures, small- and medium-sized enterprises, digital trade and government procurement.
Labor-intensive products such as textiles and garments, which are currently subject to EU import tariffs of 8–12 percent, will receive duty-free access under the agreement, putting Indonesia on equal footing with Vietnam, which already enjoys EU trade preferences.
Airlangga said the agreement would also include a chapter on trade and sustainable growth, which “covers palm oil, and we’ve pushed for stronger mitigation measures on the EUDR”.
Hasran, a researcher at the Center for Indonesian Policy Studies (CIPS), said fast-tracking the deal would not be easy for either side but added that the substance was already locked in, even if the signing was still a way off.
“Since its inception nine years ago, the I-EU CEPA was designed to open new markets; not to navigate global trade tensions or geopolitical shocks like US tariffs or the war,” he told the Post on Tuesday.
“Besides, Indonesia has already secured what it is after: market access for palm oil and lower import tariffs for key exports.”
Businesses, while hoping for quicker implementation, understood that finalizing the agreement would take time, especially given the complexity of ratification across the EU’s 27 member states, said Indonesian Employers Association (Apindo) chairwoman Shinta Kamdani on Monday.
But the delay had not dulled enthusiasm, she said, as companies were already working with EU partners to align production and supply chains ahead of the pact’s entry into force.
“In today’s uncertain geopolitical landscape, the I-EU CEPA brings fresh optimism. We want swift implementation, but not at the expense of legal soundness,” she told the Post.
The EU is Indonesia’s fifth-largest trading partner, with bilateral trade amounting to $30.1 billion in 2024. Indonesia posted a trade surplus of $4.5 billion last year, up from $2.5 billion in 2023.
