Indonesia aims to seal EU free trade agreement in 2026, official says
Indonesia and the EU have been in discussions on the agreement for about nine years, and are aiming to sign and ratify it by next year, Djatmiko told reporters, adding it could come into effect by late 2026 or early 2027.
The EU has committed to provide market access to priority Indonesian products such as palm oil, textiles, footwear and seafood, Djatmiko said.
Indonesia and the EU have previously clashed on tougher EU trade rules for products with potential links to deforestation, which could have an impact on shipments of Indonesian palm oil.
In turn, Indonesia has also pledged to increase market access for agricultural and manufactured goods from the EU, Djatmiko said.
EU ambassador to Indonesia Denis Chaibi said negotiations are ongoing and "substance will determine timing."
The main benefits of the free trade deal for Indonesia include increased foreign direct investment from the EU in sectors like renewables, semiconductors, and mineral derivatives, a presentation slide presented by Djatmiko showed.
The deal could increase exports by 5.4%, according to an internal benefit analysis, but senior economic minister Airlangga Hartarto said this was a conservative estimate and he targets a 50% increase in three years.
In 2024, the EU invested $1.1 billion in Indonesia, a drop of more than 50% from the previous year.
Indonesia's exports to the EU last year were worth $17.3 billion, while imports from the EU were worth $12.8 billion, Indonesian government data showed.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
2 days ago
- Reuters
Brazil in talks with Canada to revive Mercosur trade deal
BRASILIA/MONTEVIDEO, Aug 15 (Reuters) - Brazil is engaged in a "constructive dialogue" with Canada to resume negotiations for a free trade agreement between South America's Mercosur bloc and Ottawa, the Brazilian Foreign Trade Secretary said. Canadian officials are due to visit Brazil in late August, according to Tatiana Prazeres, Brazil's Foreign Trade Secretary, who shared details of the visit in a written response to Reuters this week. Canada signaled renewed interest in restarting talks with Mercosur last month, as part of a broader push to diversify trade away from the United States amid uncertainty caused by tariffs imposed by U.S. President Donald Trump. Sources from both Canada and Brazil told Reuters that Canada's International Trade Minister, Maninder Sidhu, is expected to travel to Brasilia on August 25. Mercosur, which includes Brazil, Argentina, Uruguay and Paraguay, with Bolivia in the process of becoming a full member, is a major exporter of beef, soybeans and minerals. Sidhu's visit "will be an opportunity to assess the conditions for a possible relaunching of negotiations," Prazeres said, although no formal date has been set to restart them, she added. Talks have been stalled since 2021 as South American countries focussed on local issues such as elections, before Trump's radical policy shifts reset the trade agenda. Two senior diplomatic sources said formal negotiations could resume in late September or early October. Bilateral trade between the U.S. and Canada totaled $727 billion last year while Canada's trade with Brazil - the biggest Mercosur economy - reached $9.1 billion, with Brazil posting a $3.5 billion surplus. One source monitoring developments said both sides view the Mercosur-Canada agreement as relatively obstacle-free and expect negotiations to take about a year. Prazeres said any formal restart of negotiations, including setting a timetable for talks, would depend on internal coordination within Mercosur. "Mercosur is willing to evaluate the next steps," she said. Uruguay's Foreign Ministry told Reuters that "no new steps" had been taken regarding Mercosur-Canada talks, but confirmed the agreement remains on the bloc's agenda. Argentina's Foreign Ministry declined to comment.
Reuters
2 days ago
- Reuters
Indonesia unveils 2026 budget with lower deficit, targets fiscal balance within three years
JAKARTA, Aug 15 (Reuters) - Indonesian President Prabowo Subianto on Friday proposed a $234 billion budget for 2026, forecasting a deficit of 2.48% of GDP, while pledging to eliminate the shortfall and achieve a balanced budget within three years. The 2026 budget, which targets annual GDP growth of 5.4%, seeks to ensure Southeast Asia's largest economy is "strong, independent and prosperous", Prabowo told parliament in delivering his administration's first budget. Prabowo took office in October with a 2025 budget prepared by his predecessor. Parliament typically takes about a month to review budget proposals. Investors are closely watching Prabowo's fiscal policy due to his potentially costly election promises and past remarks indicating willingness to take on more debt to spur growth of 8% during his term. "We want to reduce this deficit to as small as possible and it is my hope that one day, in 2027 or 2028, I will stand before this assembly to convey we have succeeded in having a state budget with no deficit," he said. This year's fiscal deficit forecast is 2.78% of GDP. The 3,786.5 trillion rupiah ($234.39 billion) budget unveiled for 2026 is 7.3% higher than the latest estimate for 2025 spending. Prabowo's revenue target is 3,147.7 trillion rupiah, about 9.8% higher than this year's projection. The proposal is based on inflation at 2.5% and the rupiah trading at an average 16,500 per dollar next year. Maybank Indonesia economist Myrdal Gunarto described the budget as structurally prudent, but said that President Prabowo had not clarified how the projected surge in revenue would be realised. GDP growth of 5.4% is above average for the past five years. "This target assumes aggressive growth in investment and exports" against a backdrop of geopolitical uncertainties, said Josua Pardede, an economist at Bank Permata. Prabowo promised to fully implement his flagship free meals programme for 82.9 million children and pregnant women, which he said would cost 335 trillion rupiah ($20.74 billion) and had reached 20 million people so far. He allotted 171 trillion rupiah for the programme this year. Defence spending would rise by 37% to 335.3 trillion rupiah in 2026, according to the budget document. Prabowo emphasised the need to modernise Indonesia's military hardware and highlighting the country's deposits of rare earths that are critical to modern defence technologies. Prabowo also announced his ambition to transition entirely to renewable energy within the next decade - or sooner - marking a shift away from coal and other fossil fuels that Indonesia relies on for more than half of its power. A 402.4 trillion rupiah budget is proposed for energy resilience, including subsidies and incentives for renewables, finance minister Sri Mulyani Indrawati told a press conference. Prabowo budgeted a 25% drop in cash transfers to provincial and local governments to 650 trillion rupiah, a possible move to create fiscal space. To fund the budget gap, the administration will encourage "creative financing" to boost the role of new sovereign wealth fund Danantara and the private sector, he said, without elaborating. He made no mention of his predecessor's project to move the capital from Jakarta to Borneo island, but its continued construction was included in the budget proposal document.
Reuters
2 days ago
- Reuters
Indonesia will not introduce new taxes in 2026, finance minister says
JAKARTA, Aug 15 (Reuters) - Indonesia will not introduce any new tax in 2026 to support its tax revenue target and the government will instead rely on internal reforms to increase revenue, Finance Minister Sri Mulyani Indrawati said on Friday. Indonesia's President Prabowo Subianto on Friday proposed to parliament a $234 billion budget, targeting a 9.8% increase in revenue.
