In order to reduce trade barriers and boost economic growth, Australia and Indonesia came into the “Indonesia-Australia Comprehensive Economic Partnership Agreement” (IA-CEPA) on July 5.
The agreement will open up new opportunities for Australian and Indonesian businesses, primary producers, service providers and investors.
“The mutual benefits from this Agreement are critical. Australia wants not only a stronger Australia but also a stronger Indonesia. By reducing trade barriers, we can grow both of our economies and by encouraging trade and investment in areas of high potential for Indonesia, we can build greater capacity for its continued successful development,” the Australian government said in a statement.
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 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 also allow Australian cattle exporters to take advantage of growing demand in Indonesia, which already imports around half of the country’s cattle requirements.
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.