Paving the way for enhanced trade between the Gulf Cooperation Council (GCC) countries and Southeast Asia, the United Arab Emirates and Indonesia recently entered into a comprehensive economic partnership agreement (CEPA).

The pact, which is the first between any Gulf Country and Indonesia, and vice versa, was signed by Indonesia’s Trade Minister Zulfikli Hasan and the Minister of the UAE Ministry of Economy Abdullah bin Touq Al-Marri in the presence of UAE President Sheikh Mohamed bin Zayed Al-Nahyan and his Indonesian counterpart Joko Widodo.

Elimination of trade barriers

Though the exact contours of the comprehensive deal are not available as the procedure takes time, the accord will largely bolster the prospects of Indonesian businesses in the Middle East, as a new route will be carved out for them to enter the UAE, besides eliminating tariffs and boosting investment between the two countries. It also covers tourism, intellectual property rights, and mutual recognition of each country’s halal certification, digital trade, customs procedures, small and medium-sized enterprises and origin of goods provisions among others.

The UAE Ministry of Economy said Indonesian palm oil, food products, fashion wear and Emirati petrochemicals, rubber products, plastics and steel would benefit from reduced or eliminated tariffs.

“The signing of the Comprehensive Economic Partnership Agreement between the UAE and Indonesia, in the presence of President Joko Widodo, builds on the long-standing ties between our two nations and heralds the beginning of a new era of increased trade, investment, and economic cooperation,” President Sheikh Mohamed said on Twitter.”

Growing bilateral commerce

Indonesia, Southeast Asia's largest economy, currently exports palm oil, jewelry, precious metals, cellular phone equipment, television apparatus, and motor vehicles among others to the UAE. The UAE exports petroleum gases, iron and non‑alloy steel, and non‑crude oils to Indonesia. The bilateral trade in goods between Indonesia and the UAE reached $4 billion in 2021, according to Indonesian trade ministry data. Indonesia’s main exports to the UAE are palm oil, jewelry and precious metals, while Emirati exports to Indonesia are mostly petroleum gases and non-crude oils, iron, and non-alloy steel, according to the Observatory of Economic Complexity.

The Economy Minister has said the deal with Indonesia could increase bilateral non-oil trade to $10 billion within five years, up from around $3 billion last year. To double its economy to $816 billion by the end of the decade, the UAE this year forged closer trade ties with India and Israel too by signing similar free trade agreements with them.

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