Negotiations for a free-trade agreement between Indonesia and the EU, which will pave the way for greater opportunities for the textile and garment sectors, are entering a final phase, says the head of Indonesia’s textile industry association.
“Negotiations are entering the sixth round. We expected the agreement will be completed by the end of the year or early 2019,” Ade Sudrajat, chairman of the Indonesian Textile Association (Asosiasi Pertekstilan Indonesia – API), tells WTiN.com.
“This is encouraging news because foreign investors are preparing to enter Indonesia in anticipation of the deal,” he says, explaining that businesses from South Korea, Taiwan and China are planning to invest in new garment manufacturing plants as well as in the development of new products such as micro-polyester fabric for sports apparel.
Currently, Indonesian textile exports to the EU are subject to import duties of up to 30%.
Sudrajat says issues surrounding the textile and garment sector have largely been ironed out, including a gradual tariff reduction to zero, to be achieved in two years, though there are still sticking points in other areas, such as agriculture.
The EU is Indonesia’s second-largest market for textiles and garments after China, according to the association. API predicts that exports to the EU will double once a free trade agreement is agreed.
The EU accounted for about 15% of Indonesian textile and garment exports in 2016, according figures provided by API. For now, the United States remains the biggest export destination, at 32%.
Iman Pambagyo, one of the negotiators for the Comprehensive Economic Partnership Agreement (CEPA) with the EU, says he hopes the talks will be completed in the first semester of 2019. “After that there will be a legal study to make it a legal document,” he told katadata.co.id, a business news website, earlier this month.
“CEPA between Indonesia and the EU will be the most modern free trade agreement that we have entered into because it covers issues that we have never negotiated before,” he was quoted as saying.
He said new areas include government procurement, the role of state-owned enterprises and a special focus on energy and raw materials.
“We see this agreement as one that is modern, comprehensive and mutually beneficial,” Pambagyo said.
Sritex, Indonesia's largest integrated textile and garment company, says it hopes CEPA will result in the elimination of tariffs for textile and garment products. Currently over half of the company’s exports are to Asian countries, while the EU accounts for 19%, says Sritex corporate secretary, Welly Salam.
“We are optimistic our thread and textile exports to the EU will increase once CEPA comes into force,” says Salam.
Indonesia is the sixth country in the ASEAN (Association of Southeast Asian Nations) region to start negotiations for a bilateral Free Trade Agreement (FTA) with the EU, after Singapore (2010), Malaysia (2010), Vietnam (2012), Thailand (2013) and the Philippines (2015). Bilateral free trade agreements between the EU and ASEAN countries “will serve as building blocks towards a future EU-ASEAN agreement, which remains the EU's ultimate objective,” according to a statement from the European Commission.
