The Indonesia-European Union Comprehensive Economic Partnership Agreement (I-EU CEPA): Opportunity to Accelerate Green and Digital Transformation in Indonesia

Abstract

The Indonesia-European Union Comprehensive Economic Partnership Agreement (I-EU CEPA) is a pivotal opportunity
to enhance Indonesia’s economic competitiveness and address key challenges in green and digital transformation. Despite both parties being signifcant economic players in the G20, bilateral trade has not yet reached its full potential. The I-EU CEPA aims to expand market access, eliminate tariffs, and improve Indonesia’s participation in global value chains by enhancing trade relations with the EU. It will also encourage regulatory reforms in environmental and digital governance, aligning Indonesia with international standards and promoting sustainable development. However, the complex negotiation process is challenged by divergent domestic policies, geopolitical tensions, and the need to align with EU sustainability standards.
This article argues that Indonesia can mitigate negative externalities while fostering innovation and competitiveness by integrating more comprehensive and enforceable environmental and digital provisions based on international guidelines and benchmarks. This effort also aligns with Indonesia’s ambition to be an OECD member and join CP-TPP. Finally, the I-EU CEPA’s conclusion and successful implementation could transform Indonesia’s economic landscape, providing a robust framework for sustainable growth, investment, and cooperation between Indonesia and the EU.