“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 co-operation,” President Sheikh Mohamed said on Twitter.
Following the signing of the agreement, bilateral non-oil trade is expected to jump from about $3 billion currently to $10 billion in the next five years, Minister of Economy Abdulla bin Touq said in a media briefing on Friday.
The Cepa deal is “very comprehensive”, Dr Thani Al Zeyoudi, UAE’s Minister of State for Foreign Trade, told The National on the sidelines of the event in Abu Dhabi.
The two countries eliminated or will gradually reduce the tariff for almost 99 per cent of “most of the commodities we’ve been trading in the last three years”, Dr Zeyoudi said.
Bilateral trade has already been growing. Non-oil trade between the two countries reached $900 million by the end of the first quarter of 2022 — up 44 per cent compared to the same period last year, he said.
“It means there is a momentum of this growth happening and with Cepa, we are going to accelerate this growth and are hoping to hit $10bn in bilateral [non-oil] trade,” he said.
The agreement is expected to be implemented in the fourth quarter of this year, Mr Al Zeyoudi said.
“We did the proper and excellent governance for dispute settlements and all those matters that could [be a] hurdle or be a barrier for trade between both the nations,” he said.
There will be a special committee for investments which will look after the investments and “ensure they are talking to right stakeholders from both parties”, Mr Al Zeyoudi added.
Overall, the new agreement will add about 0.87 per cent to the UAE’s gross domestic product by 2030, which is equivalent to $4.67bn, and help in boosting the UAE’s exports as well as imports, Mr bin Touq said.
It is also expected to create 50,000 new direct and indirect jobs in the UAE by 2030.
There is “more to come, this is a start to look at more agreements, more investments and more appetite as well for businesses to start investing in both nations and start co-operation”, he said.
The Cepa agreement covers trade in goods and services, investment, intellectual property rights, Islamic economics, customs procedures and trade facilitation, economic co-operation, small and medium enterprises, digital commerce, as well as legal requirements and institutional issues, Indonesia's trade ministry said in a statement.
It is expected to boost Indonesia's exports to the UAE by $844.4m, or 53.9 per cent, in the next 10 years, the ministry said.
Indonesia's imports from the UAE are also projected to rise by $307.3m, or about 18.26 per cent.
“This can be used to reduce trade deficit with the UAE,” it said.
The agreement is Indonesia's first such trade agreement with a country in the Gulf region.
“This shows that the UAE is an important partner for Indonesia, so it is hoped that this co-operation can continue to be improved in the future,” the ministry said.
The latest deal marks the UAE's third Cepa, after it signed a similar pact with Israel in May and with India in February.
Indonesia is on track to be among the fastest growing Asian economies this year. The International Monetary Fund expects Indonesia’s economy to 5.6 per cent and 6 per cent in 2023.
The country's economy returned to growth in 2021 after contracting by 2.1 per cent in 2020 at the height of the Covid-19 pandemic.
Several other preliminary agreements were also signed between the two countries on Friday across sectors, including defence, health care and education.
Emirati-Indonesian relations have grown significantly in recent years, especially after Sheikh Mohamed's visit to Indonesia in 2019.
During Mr Widodo's visit to the UAE in November 2021, government and private sector entities signed deals worth billions of dollars in sectors including energy, aviation, financial services, artificial intelligence, agriculture and defence.
Agreements valued at about $10bn have been signed with Indonesia’s sovereign wealth fund alone, including DP World's deal to develop the country's ports over a period of up to 30 years.
Etihad Credit Insurance, the UAE’s federal export credit agency, signed an agreement with state-owned reinsurance services provider Indonesia Re to improve funding access to SMEs and mid-cap companies to boost exports.
Indonesia also plans conduct a joint study with the UAE to explore the possibility of setting up a joint venture with the Emirates Global Aluminium.
Several Emirati companies are already working on projects in Indonesia.
In 2020, Adnoc signed a preliminary agreement with Indonesia’s Pertamina and Chandra Asri to explore the possibility of developing a crude-to-petrochemicals complex in Indonesia.
Abu Dhabi’s clean energy company Masdar also signed a power-purchase agreement with Indonesia’s state electricity company Perusahaan Listrik Negara to develop the country’s first floating solar photovoltaic plant.
In March, the UAE invested $10bn with the Indonesia Investment Authority to spend on infrastructure and tourism projects in the country.
The UAE, the Arab world’s second-biggest economy, has made a strong recovery from the coronavirus-induced economic slowdown and has maintained strong trade momentum despite pandemic-related uncertainty.
Exports are projected to expand at an average annual rate of more than 6 per cent to Dh1.1 trillion by 2030, as the country continues to diversify its economy away from oil, Standard Chartered said in a report.