IA-CEPA: Entry into force creates new trade and investment opportunities

By Michael Dean, Regional Trade Agreements Division, DFAT

3 July 2020: The Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) will build on bilateral commitments made by both countries under the ASEAN-Australia-New Zealand Free Trade Area to deliver new and diversified goods and services trading opportunities for Australian businesses when it enters into force on 5 July 2020.  

New goods export opportunities

Under IA-CEPA over 99 per cent of Australia goods exports (by value) to Indonesia will enter duty free or under improved preferential arrangements.  To cite one example, IA-CEPA outcomes for vegetables include a 20 per cent tariff on carrots being cut immediately upon entry into force to 10 per cent for 5,000 tonnes per year, with progressive tariff reductions down to zero per cent for all carrots after 15 years.

New services export opportunities and Skills Package

Australian service suppliers benefit under IA-CEPA from new export opportunities in sectors such as education, tourism, aged care, professional services and mining services. As part of the IA-CEPA, Australia and Indonesia have agreed to a skills development package of outcomes that will help build people-to-people links and increase the Indonesia literacy of Australian business – leading to deeper and broader relationships and opportunities for both Indonesia and Australia (table 1 provides more information on the IA-CEPA Skills Package).

Table 1: IA-CEPA Skills Package

With respect to vocational education, IA-CEPA:

  • guarantees that Australian suppliers can own 67 per cent of investments in the Indonesian work training vocational education and training sector
  • will provide certainty for Australian providers that they can establish a work training business anywhere in Indonesia and that the requirements for Australian trainers are accepted in Indonesia
  • delivers Australian training providers a guarantee that they can offer all Australian Qualifications Framework qualifications and Indonesian Qualifications Framework qualifications levels 1-5 in subject matters.

Upon entry into force of IA-CEPA, a Memorandum of Understanding on the Indonesia-Australia Skills Development Exchange Pilot Project will

  • apply to the following sectors: financial and insurance services; mining, engineering and related technical services; and, information media and telecommunications services.
  • start with up to 100 exchanges in each direction in the first year, rising to 500 exchanges in the fifth year. Under the pilot program the Indonesian Government has simplified the approval process for sponsor organisations in Indonesia.

Work and Holiday visas for Indonesians will expand to 4,100 places per annum on entry into force of IA-CEPA and will be stepped up each year to 5,000 by the 6th year.

A Memorandum of Understanding between Australia and Indonesia will focus on skills development through a pilot program on workplace-based training. The pilot:

  • will allow up to 200 Indonesians per year to receive workplace skills training in Australia.
  • participants must be sponsored by an approved organisation in Australia and may undertake workplace-based training in Australia for up to six months in the following sectors: education, tourism, telecommunications, infrastructure development, health, energy, mining, financial services and information communication and technology.

Sources of more information

To help businesses take advantage of IA-CEPA after 5 July, the FTA Portal has been updated to reflect commitments in IA-CEPA. A guide has also been made available on the DFAT website to help businesses take advantage of IA-CEPA tariff reductions. IA-CEPA information, including the guide and an email address to be used by people with IA-CEPA queries, can be found here: https://dfat.gov.au/fta/iacepa