Jakarta. Indonesia-Korea Comprehensive Economic Partnership Agreement, commonly shortened as IK-CEPA, has finally entered into force, thus paving the way for Indonesia to export more of its goods.
The IK-CEPA eliminates 11,267 or 95.5 percent of the South Korean tariff posts. This would represent 97.3 percent of the value of what South Korea imported from Indonesia. Under this agreement, Indonesia agreed to remove 9,954 or 92 percent of its tariff posts in the trade of goods.
The trade deal is also set to open up wider market access for Indonesian goods such as bikes, motor vehicles and their accessories, processed fish products, socks, and snakeskin fruit (salak).
“IK-CEPA shows the commitment of both countries to strengthen their economic ties amid a challenging global economic situation in the past few years,” Trade Minister Zulkifli Hasan said.
The Trade Ministry has issued a ministerial regulation on the rules of origin, namely the criteria determining the source of the products that would be shipped to South Korea under the IK-CEPA. Exporters have to specify whether their goods are entirely homegrown in the exporting country. The same regulation also laid down the details of the certificate of origin, which the exporter has to fill out to enjoy the preferential tariff treatment under the IK-CEPA.
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According to Budi Santoso, the director general for foreign trade at the Trade Ministry, South Korea has great potential for Indonesian non-oil and gas exports.
“IK-CEPA will strengthen Indonesia’s economy, make it more competitive, open and attractive for South Korean investors, by making Indonesia as a production hub to penetrate into the regional and global markets,” Budi said.
Budi said the preferential tariff treatment could help Indonesian businesses lower production costs, hence enabling their products to be more competitive.
Both countries inked the IK-CEPA on Dec. 2020 in Seoul.
Under the IK-CEPA, both countries open up more than 100 service sub-sectors with 49 percent to 100 percent foreign ownership. IK-CEPA will also facilitate the movements of intra-corporate transferees, business visitors, and independent professionals, according to the Trade Ministry.
The trade deal is expected to attract South Korean investment to Indonesia. Trade Ministry reported that South Korea had shown interest in investing in Indonesia in sectors such as automotive, metal, chemicals, and renewable energy.
Indonesia posted a trade surplus of $712.3 million with South Korea in Jan-Oct. 2022. Bilateral trade stood at $20.58 billion during the first ten months of 2022, up by 40.36 percent from $14.66 billion during the same period last year. Indonesia exported $10.65 billion worth of goods to South Korea between Jan. and Oct. 2022, while importing about $9.93 billion in South Korean goods, data showed