Indonesia and Australia Ratify IA-CEPA Agreement

Written by: Ayman Falak Medina, ASEAN Briefing, Dezan Shira & Associates

Posted: 24th February 2020 08:28

On February 10, 2020, Indonesia and Australia ratified the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA).

The framework of the IA-CEPA is based on five principles: enhancing economic and development partnership, connecting people through social, arts, and cultural collaboration, maritime cooperation, and contributing to the prosperity and stability of the Indo-Pacific region.

Two-way trade between Indonesia and Australia reached US$11 billion in 2018. This is dwarfed by China’s total trade value with both countries (US$27 billion and US$180 billion) in the same year.

The IA-CEPA thus presents untapped opportunities to diversify and deepen the economic partnership, particularly as Indonesia is predicted to be the world’s fifth-largest economy by 2030.

Foreign investors should seek the help of registered legal advisors to help them better understand.

Key features of the IA-CEPA

Additionally, Indonesia and Australia have agreed to a skills development package, which includes a skills exchange program and technical assistance to improve institutional capacity building.

Services and investment

The increased market access for services and investments laid out in the agreement will mean Australian companies can enjoy majority ownership of businesses in specific sectors in Indonesia.
The sectors include:

Skills package

Indonesia and Australia will allow people with tertiary level education to gain six months of experience in each other’s markets. This will initially apply to those in the field of finance and insurance, mining, healthcare, infrastructure development, engineering, and information and telecommunications. The aim of this program is to help businesses develop the capabilities of their staff as well as promote cultural awareness.

Australia will also increase the number of work and holiday visas for Indonesians from 1,000 to 4,100 per year. This will eventually reach to 5,000 within six years.

Vocational education

Australian businesses can own a majority share in investments in the vocational education and training sector. The subjects open are:

Agricultural products and livestock

The IA-CEPA will improve market access for goods from both countries by easing technical barriers to trade. Nearly all goods exported to each other’s markets will be duty-free or have reduced tariffs. Further, Indonesia will also automatically issue import permits for products such as:

Electric vehicles

The IA-CEPA will open doors for Indonesian exports of electric and hybrid cars as they will be subject to very liberal rules of origin requirements.

Protecting investors and investments

The IA-CEPA includes an Investor-State Dispute Settlement (ISDS) chapter, which protects investors by providing access to an independent arbitral tribunal to solve disputes. Other safeguards to protect investors include:

Facilitating electronic trade

Both countries are to assist small and medium-sized enterprises (SMEs) to facilitate trade through the use of e-commerce platforms. The IA-CEPA contains a commitment to protecting personal information during online transactions, developing regulations that foster e-commerce, and developing cybersecurity capacity.
Furthermore, Indonesia and Australia have agreed that businesses will not be required to store data locally – including through cloud computing – within a country. This chapter is advantageous for Australian businesses as Indonesia’s recently introduced law on e-commerce obligates online marketplaces to store their data in Indonesian data centers.

Exporting software

Software developers from both countries will not have to surrender valuable source codes as a condition for the import or distribution of software.

This article was first published by ASEAN Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in ChinaHong KongVietnam, Singapore, India, and Russia. Readers may write info@dezshira.com for more support.

                                                                                                            

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