Indonesia-Chile CEPA to Come into Effect in August 2019
On 11 June 2019, Indonesian Trade Minister Enggartiasto Lukita met Chilean Vice-Minister of Trade Rodrigo Yanez Benitez to exchange an instrument of ratification of the Indonesia-Chile Comprehensive Economic Partnership Agreement (IC-CEPA). The IC-CEPA, Indonesia’s first trade agreement with a Latin American country, is set to come into effect on 10 August 2019.
Indonesian Trade Minister Lukita said he is optimistic that total trade between both countries can double in the next couple of years, from USD $274.1 million in 2018. Lukita added that total trade between Indonesia and Chile in 2018 did not reflect the “true potential of both countries”.
It is interesting to note that total trade between Indonesia and Chile has fallen rapidly in recent years, from USD $419.4 million in 2014 to USD $274.1 million in 2018. However, as Indonesian imports from Chile tumbled at a much faster pace than Indonesian exports to the Latin American country, Indonesia now has the upper hand in the countries’ trade relations. In 2014 Indonesia posted a USD $63.6 million trade deficit with Chile. However, the balance swung into a surplus (for Indonesia) starting from 2016 (see table below).
The signing of the IC-CEPA is an effort of the Indonesian government to boost exports to non-traditional trade partners. The challenging international environment – characterized by rapidly slowing economic growth in China, sluggish growth in the European Union and Japan as well as the tariff war between the United States and China – has caused Indonesian exports to its traditional key export destinations to decline heavily, thus resulting in an alarmingly widening overall trade deficit for Southeast Asia's largest economy.
Indonesia-Chile Trade:
| 2014 | 2015 | 2016 | 2017 | 2018 | |
| Total Trade (in USD million) |
419.4 | 321.2 | 227.2 | 278.4 | 274.1 |
| Export from Indonesia (in USD million) |
177.9 | 147.4 | 143.8 | 158.5 | 159.0 |
| Import into Indonesia (in USD million) |
241.5 | 173.8 | 83.3 | 119.9 | 115.1 |
| Trade Balance (in USD million) |
63.6 | 26.5 | 60.5 | 38.6 | 43.9 |
Source: Indonesian Trade Ministry
This article discusses the following:
• Details of the Indonesia-Chile Comprehensive Economic Partnership Agreement
• Which opportunities are presented by the IC-CEPA?
• Reactions (from stakeholders) to this trade deal
Read the full article in the June 2019 edition of our monthly research report. You can purchase the report by sending an email to info@indonesia-investments.com or a WhatsApp message to the following number: +62(0)8788.410.6944
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