Indonesia’s International Free Trade Agreements

Indonesia has signed a number of free trade agreements as an independent market as well as a member of the Association of Southeast Asian Nations (ASEAN). These trade agreements provide Indonesian consumers and businesses with improved market access for goods and services, new technologies, and investment opportunities.

List of Indonesia's Free Trade Agreements

FTAs as an independent market

Indonesia-Japan Economic Partnership Agreement

The Indonesia-Japan Economic Partnership Agreement (IJEPA) removes tariffs for 90 percent of goods, particularly for agricultural and industrial products that Japan exports to Indonesia, as well as for Indonesian agricultural products that are exported to Japan.

Indonesia-Korea Comprehensive Economic Partnership

The Indonesia-Korea Comprehensive Economic Partnership (IK-CEPA) eliminates 95 percent of Indonesia’s tariffs on exports to South Korea and 92 percent of South Korean tariffs on exports to Indonesia. The agreement boosts Indonesia’s fisheries and agriculture sectors while also strengthening South Korea’s automotive and industrial sectors.

Indonesia-Australia Comprehensive Economic Partnership Agreement

Indonesia and Australia allow their citizens with tertiary levels of education to gain work experience in each other’s market. This applies to finance, mining, healthcare, infrastructure development, and engineering, among others. The agreement provides greater market access for agricultural products and livestock for both countries.

Indonesia-European Free Trade Association Comprehensive Economic Partnership

The Indonesia-European Free Trade Association (EFTA) Comprehensive Economic Partnership (IECEPA) eliminates tariffs for the majority of merchandise traded between Indonesia and the EFTA states. The EFTA states include Iceland, Liechtenstein, Norway, and Switzerland.

The RCEP Advantage – Trade Opportunities In Indonesia

The Regional Comprehensive Economic Partnership

The RCEP is estimated to cover 30 percent of the global GDP of US$25.8 trillion and comprises 30 percent of the world’s population. The RCEP sets to eliminate 92 percent of tariffs on goods traded among its 15 members. For Indonesia, the RCEP could boost the country’s trade surplus by US$979 million, more than double the current trade surplus of US$383 million by 2040.

FTAs as a member of the Association of Southeast Asian Nations (ASEAN).

ASEAN Trade in Goods Agreement

The ASEAN Trade in Goods Agreement (ATIGA) was established to consolidate and streamline all the provisions under the Common Effective Preferential Tariff for ASEAN Free Trade Agreement (CEPT-AFTA). To ensure the free flow of goods in ASEAN, the ATIGA comprises elements such as tariff liberalization, trade facilitation, and removing non-tariff barriers.

ASEAN-Australia-New Zealand Free Trade Area

The ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) eliminates 90 percent of goods traded between ASEAN, Australia, and New Zealand. The FTA covers approximately a population of 653 million and over US$4.3 trillion.

ASEAN-China Free Trade Area

Through the ASEAN-China Free Trade Area (ACFTA), China has consistently ranked as ASEAN’s largest investor over the last decade, with total trade of over US$731 billion in 2020.

The FTA reduced tariffs on more than 7,000 product categories — or 90 percent of imports — to zero by 2010.

ASEAN-India Free Trade Area

The signing of the ASEAN-India Trade Area (AIFTA) agreement paved the way for the creation of one of the world’s largest free trade area markets, creating opportunities for over 1.9 billion people in ASEAN and India with a combined GDP of US$4.8 trillion. The agreement set off tariff liberalization on over 90 percent of products.

ASEAN-Japan Comprehensive Economic Partnership

The ASEAN–Japan Comprehensive Economic Partnership (AJCEP) covers trade in services, goods, investments, and economic cooperation. The FTA eliminates taxes on 87 percent of all tariff lines and adds a dispute resolution system. It also allows for back-to-back shipment of goods between member countries, third-party invoicing of goods, and ASEAN cumulation.

Indonesia’s Double Taxation Avoidance Agreements network

Indonesia has signed 71 DTAAs. These agreements ensure the elimination of double taxation on income earned from the taxpayer’s country of residence and Indonesia in the form of reduced withholding tax rates on dividends, interests, and royalties and withholding tax exemptions on services fees. Foreign investors should seek the help of registered tax advisors to better understand how they can benefit from this network.