Indonesian officials have said they are hopeful of increasing the country’s exports to the Middle East after the signing of a new wide-ranging economic pact with the UAE.
Indonesia’s Trade Minister Zulfikli Hasan and UAE Economy Minister Abdullah bin Touq Al-Marri signed the Comprehensive Economic Partnership Agreement in Abu Dhabi on 1st July, after talks aimed at eliminating tariffs and boosting investment between the 2 countries were launched in September 2021.
Bilateral trade volume reached almost $4 billion in 2021, according to data from Indonesia’s Trade Ministry, showcasing an increase of nearly 38% from the previous year, when it was worth $2.9 billion.
The agreement is Indonesia’s 1st with a Gulf country and the UAE’s 1st with a Southeast Asian nation.
The new pact is expected to rise Indonesian exports to the UAE by 54%, or about $844 million, over the next 10 years after the deal comes into force, as the pact erases about 94% of existing tariffs. Indonesia’s main exports to the UAE include jewellery, palm oil, and motorized vehicles.
“This agreement will be Indonesia’s entryway to the UAE, which is a hub to increase exports to non-traditional export destinations in the Gulf, Middle East,” Hasan said in a statement issued on 1st July.
The pact also includes chapters on tourism, intellectual property rights, and mutual recognition of each country’s halal certification.
Full text of the deal was not immediately published, and the agreement still needs to be ratified by Indonesia’s House of Representatives, which could take several months. Indonesia has signed similar deals with Australia in 2019 and South Korea in 2020.
Indonesian President Joko Widodo, who witnessed the signing with UAE President Sheikh Mohamed bin Zayed Al-Nahyan as part of the former’s visit to Abu Dhabi, also expressed appreciation of the two countries’ improving relations.
“Amid the challenging situation that we face now, we continue to work together to boost relations between our 2 countries,” Widodo said, as quoted in a statement issued by his office on Friday.
Diana Dewi, chairwoman of the Indonesian Chamber of Commerce and Industry’s chapter in Jakarta, said the new deal could be helpful for Indonesian business players.
“This agreement will be an entry point for Indonesian businesses to increase exports to the UAE,” Dewi told Arab News.
“UAE is also a hub to enter the European market,” she added.
The wide-ranging agreement could bring new prospects for Indonesia, Bhima Yudhistira, president of the Jakarta-based Center of Economic and Law Studies, told Arab News.
“(The) UAE is an important export hub to the Middle East and North Africa. The UAE’s developments in the automotive sector are quite prospective and would require spare parts and components from Indonesia,” Yudhistira said.
But it also offers new challenges for Southeast Asia’s largest economy, he added.
“It’s a challenge to break through the UAE market with regards to the quality and product competition because the UAE market is a high-income group.”