[Asia Economy Reporter Hyunwoo Lee] The Indonesian parliament ratified the Comprehensive Economic Partnership Agreement (CEPA) between South Korea and Indonesia after one year and eight months. It also passed the ratification of the Regional Comprehensive Economic Partnership (RCEP), the world's largest free trade agreement (FTA).
On the 30th, the Indonesian parliament held a plenary session and announced that it had processed the ratification consent for the Korea-Indonesia CEPA. The two countries had previously agreed on the CEPA in December 2020. Indonesian President Joko Widodo held a summit with President Yoon Suk-yeol during his visit to Korea in July and agreed on the need for the swift implementation of CEPA.
The South Korean National Assembly had already completed CEPA ratification in June last year. Once both countries notify each other in writing that domestic procedures have been completed, the agreement will officially take effect 60 days later. Although the two countries have partially opened their markets through the Korea-ASEAN FTA, the level of tariff elimination is expected to increase once CEPA is implemented.
According to the Ministry of Trade, Industry and Energy, upon CEPA's enforcement, South Korea will eliminate tariffs on 95.8% of all items, and Indonesia will eliminate tariffs on 94.8%. Based on import value from 2017 to 2018, South Korea will abolish tariffs on 97.4%, and Indonesia on 97.6% of imports.
Indonesia will remove tariffs on steel products for automotive steel sheets (5?15%), automotive springs (5%), mechanical parts such as bearings (5%), and clothing (5%) imported from South Korea. Tariffs on transmissions, sunroofs (5%), and precision chemical products (5%) will also be eliminated immediately or within five years.
The Korea International Trade Association expects that companies exporting plastic and rubber products and automotive parts, which have large export volumes to Indonesia, will benefit. On the other hand, South Korea will eliminate tariffs immediately or within five years on bunker C oil (3?5%), precision chemical raw materials (5%), raw sugar (3%), and beer (15%). Sensitive sectors such as agriculture, fisheries, and forestry products will maintain the current level of market openness.
Meanwhile, the Indonesian parliament also ratified the RCEP agreement on the same day. RCEP is a multilateral trade agreement involving 15 countries: the 10 ASEAN countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) and 5 non-ASEAN countries (Australia, China, Japan, South Korea, and New Zealand). It is the world's largest FTA, accounting for one-third of global GDP, population, and trade volume.
With Indonesia's ratification, only the Philippines among the 15 countries has yet to obtain parliamentary approval. Myanmar has deposited its ratification instrument, but due to the military coup and the military's control of the government, there is controversy over whether the agreement's enforcement will be recognized.
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