Compared to Korea-ASEAN FTA, 11.9%p further opening up the market... rapid effectuation is required
An analysis said that Korean companies dealing with plastics, auto parts, and steel would benefit greatly when the Korea-Indonesia Comprehensive Economic Partnership Agreement (CEPA) goes into effect.
According to a report titled, “Impact of Korea-Indonesia CEPA Conclusion” issued by the Institute for International Trade (President: Choi Yong-min) of the Korea International Trade Association on February 3rd, under the Korea-Indonesia CEPA signed on December 18th last year, Indonesia decided to eliminate tariffs on 92.1 percent of the entire imported items which takes up 93.5 percent of the total imports in 2019. Compared to the Korea's existing free trade agreement with the Association of Southeast Asian Nations (ASEAN), this is 4.7 percent point higher in terms of import volume and 11.9 percent point higher in terms of number of items.
By item, Korean exporters of plastics, rubber and auto parts are expected to enjoy the benefit as they will be free from tariffs as soon as the Korea-Indonesia CEPA takes into effect.
The report stated, “As Indonesia's population and income continue to grow, plastics and automobile markets are expected to grow stably,” and added, “It is an encouraging achievement that Korean companies have secured competitiveness in terms of tariffs with Korea-Indonesia CEPA compared to major rivals such as China and Japan in the Indonesian market with great potential.”
In addition, exports of steel products, cotton yarn and centrifugal pumps are expected to increase with additional tariff cuts. Especially, in the case of steel products, the level of concessions was generally low in the existing ASEAN-Korea FTA, and a standard tax rate of up to 15 percent has been applied. When the Korea-Indonesia CEPA goes into effect, tariffs are phasing out seven years after the implementation and the benefits of tariff cuts will be enjoyed.
Kim Kyung-hwa, a senior researcher at the Korea International Trade Association, said, “Indonesia is the largest economy in the Southeast Asia with a population of 270 million, the 4th largest in the world, and a gross domestic product (GDP) of 1.1 trillion dollars,” and added, “The efforts of the Korean government and the parliament are required to effectuate the agreement as soon as possible as Korean companies will benefit immediately when the Korea-Indonesia CEPA goes into effect, and the industry is expecting to see the effectuation in the second half of this year.”