By Binsal Abdulkader
ABU DHABI, 1st July, 2022 (WAM) -- The Comprehensive Economic Partnership Agreement (CEPA) signed between Indonesia and the UAE on Friday will bring economic prosperity to a large section of Indonesian population, a top Indonesian diplomat told the Emirates News Agency (WAM).
"The Small and Medium Enterprises (SMEs) in agriculture sector, and many industries that use petrochemicals, which employ a large number of people, will be the immediate beneficiaries of this CEPA. Increased business and new opportunities for SMEs will translate into economic prosperity for their employees and open up new job prospects as well," said Husin Bagis, the Indonesian Ambassador to the UAE.
Prosperity for Indonesians, food security for UAE
Detailing the potential boost to SMEs in agriculture sector, he pointed out in an exclusive interview with WAM that Indonesia is one of the largest producers and exporters of crude palm oil (CPO) and rubber. However, Indonesian CPO and rubber exports to the UAE currently constitute a small market share only, but the reduced or zero import tariff under the CEPA is expected to boost their exports to the UAE, Bagis noted.
The CPO companies in Indonesia produce one million tonnes of oil a year. "If the UAE increases its imports of CPO up to at least 200,000 tonnes, those companies will increase their production. Then, Increased exports mean palm oil and rubber-based SMEs will have enhanced income that will translate into better wages and new job opportunities for people, especially in rural economies in Indonesia," he explained.
The UAE will be able to further process the imported "cheaper CPO" to enhance its food security and reexport to other countries, opening up new business opportunities, the diplomat said.
UAE petrochemicals - another boost to Indonesian SMEs
The CEPA is expected to boost imports of petrochemicals from the UAE to Indonesia, which will benefit a large number of Indonesian SMEs that use plastic in their business for many purposes, the envoy revealed.
Of the total imports from the UAE to Indonesia, 70 percent constitute oil and gas; and of the remaining 30 percent, a huge chunk is petrochemicals, a main ingredient of plastic products. Other imports are dates, steel and aluminium etc., Bagis noted.
Indonesia imports around two million tonnes of petrochemicals annually from the global market. "Still the share of UAE petrochemicals in Indonesian market is very small - less than 100,000 tonnes - because of the existing 15 to 20 percent import duty. We want to buy at least 500,000 tonnes of petrochemicals from the UAE. Now, under the CEPA we will make it zero tariff, which will help achieve this goal, making it cheaper in Indonesia and benefiting the SMS using plastics," the ambassador explained.
This will be a win-win situation for both countries, he added.
Redirecting reexports from third countries
Currently many Indonesian products reach the UAE market through reexports from third countries that have already signed Free Trade Agreement (FTA) with the UAE, he said. Citing gold jewellery as an example, the diplomat said a small amount of Indonesian jewellery is directly exported to the UAE because of the existing import tariff.
"Our annual export of gold jewellery is to the tune of around US$300 million to the UAE market that is worth more than a couple of billion dollars. This means there is a huge potential for us to further enhance the exports," he pointed out.
However, a large amount of Indonesian gold jewellery reaches the UAE through third countries. Reduced or zero tariff under the CEPA will change this situation, bringing economic benefit to both countries, the envoy said.
President's fourth visit
Indonesia-UAE CEPA was signed in the presence of President His Highness Sheikh Mohamed bin Zayed Al Nahyan and Indonesian President Joko Widodo.
This is Widodo's fourth visit to the UAE since he became the president, and third visit within eight months as he was in Abu Dhabi in May 2022 and November 2021, [the very first visit was in 2015], which reflects the close relationship between both countries.
As WAM reported earlier, Indonesia is one among the ten countries with which the UAE wants to expand its economic and trade relations as part of the Emirates' 'Projects of the 50' initiative. The UAE had announced in March 2021 that it will invest US$10 billion with the Indonesia's sovereign wealth fund - Indonesia Investment Authority [IIA], in implementation of the directives of President His Highness Sheikh Mohamed bin Zayed Al Nahyan.