Japan and Indonesia have reached an agreement to remove trade barriers and enhance cooperation across various sectors, as announced by Indonesia's Foreign Minister Retno Marsudi.
This development follows a bilateral meeting between Japanese Prime Minister Fumio Kishida and Indonesian President Joko Widodo in Tokyo on December 16, 2023, during which the two leaders discussed ways to strengthen their economic ties and collaboration.
The agreement is part of an amendment to the Indonesia-Japan Economic Partnership Agreement (IJEPA), a bilateral trade and investment treaty established in 2007. The objective of this amendment is to foster a mutually beneficial economic partnership by further facilitating trade and economic cooperation between Japan and Indonesia. The finalized version of the amended IJEPA is expected to be signed in the first quarter of 2024.
Under the amended agreement, Japan will lift tariffs on processed Indonesian fishery products, while both nations will expand access to each other's banking sectors.
Currently, there are nearly 2,000 Japanese companies operating in Indonesia, employing approximately 7.2 million Indonesian workers. These companies contribute significantly to Indonesia's GDP and exports, making up about 8.5 percent of GDP and nearly 25 percent of exports.
Apart from addressing trade barriers, the bilateral discussions also saw Japan committing to various infrastructure projects in Indonesia through Official Development Assistance (ODA). These projects aim to further enhance economic cooperation and development between the two countries.
The amended IJEPA will involve tariff reductions and eliminations on various traded goods. Japan will reduce tariffs on 114 new items and expand tariff allocation quotas for bananas and lightweight pineapples. Additionally, products like yellowfin tuna, canned bonito, canned tuna, bonito flakes, and fruit juices will be added to the list of items subject to tariff elimination. Indonesia, on the other hand, will eliminate or reduce tariffs on 19 Japanese goods, including automobiles, steel, steel products, and rice flour.
The amended agreement will also include a dedicated chapter on digital trade, promoting digital commerce between the two nations while ensuring the protection of cross-border information transfers and prohibiting restrictions on computer-related equipment installation.
Beyond trade adjustments, Japan has pledged to invest in critical infrastructure projects in Indonesia, including transportation infrastructure and energy and environmental initiatives. This includes the construction of the East-West Mass Rapid Transit (MRT) line in Jakarta, which is expected to begin in August 2024, and the development of the Patimban Deep Sea Port in West Java. The leaders also discussed energy transition projects, with a focus on renewable energy and environmental initiatives.
This strengthened economic partnership and collaboration between Japan and Indonesia showcase the importance of fostering strong trade relationships and working together on infrastructure and environmental projects for mutual benefit.
