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ndonesia and the European Union (EU) began negotiations on Monday on a comprehensive economic partnership agreement (CEPA) that seeks to eliminate over 95 percent of import tariffs on goods and improve bilateral investment.

The chief operating officer of the EU’s external action service, David O’Sullivan, said the Indonesia-European Union CEPA would be very important for the economic growth of both regions amidst the global economic turmoil.

“We already are a major trading and investment partner of Indonesia. In fact, we have huge complementarity. We believe it is very beneficial in terms of trade and investment to have an agreement with Indonesia. It is a win-win solution for both sides,” O’Sullivan said.

The EU has a combined non oil and gas trade value of US$32 billion in 2011 with Indonesia, an all time high, and a trade surplus of $8 billion for Indonesia.

In terms of investments, businesses from the EU invested up to $2.2 billion in 2011, making it the second-largest source of foreign investment into Indonesia. EU companies also employ over 500,000 employees in Indonesia.

“It is time to start the negotiation. From our perspective, trade negotiation typically takes a couple of years but this negotiation could go relatively quickly,” O’Sullivan said.

Based on policy recommendations from a joint study team, the CEPA would cover improvements in market access, capacity building and facilitation of trade and investment. On trade, the agreement would implement gradual tariff reduction within a period of nine years, eliminating 95 percent of tariffs and possibly even the remaining 5 percent. The capacity-building program would include a permanent forum for business-to-business and business-to-government technical dialogue and joint financing for programs. CEPA would also cover standard protocols for joint cooperation in infrastructure development under the so-called private-partnership framework.

House of Representatives’ trade commission chairman Airlangga Hartarto said that the multitude of issues being discussed meant the agreement could potentially provide many beneficial opportunities for both regions.

“This is not a Free Trade Area (FTA) agreement but will be more comprehensive. The issues being discussed include trading, investment and capacity-building. These issues make this agreement different from the FTA, which only aims at eliminating levies,” Airlangga said.

Indonesian Employers’ Association (Apindo) chairman Sofjan Wanandi said that he expected EU investment to provide benefits to small- and medium-scale enterprises (SMEs), a sector on which Indonesia relied heavily for growth.

“I believe this [agreement] will benefit both sides and we must also involve SMEs in our future investment plans. We are going to promote this agreement throughout the essential business regions in the country,” Sofjan said.

“Now that the negotiation is underway, we need to promote this agreement to the public so that they can give us their input. This [negotiation] will take time and therefore Indonesia must play the main role in ensuring the discussions go in line with our interests,” he added.

Indonesian Chamber of Commerce and Industry (Kadin) deputy chairman for international trade Emirsyah Satar said that establishing a comprehensive partnership with the EU was important because there was still a lot of untapped potential.

“We rank only at number 23 in the world in imports to the EU. On the other hand, the EU is the fourth-largest exporter into Indonesia. So, there is still a lot of room for business growth,” Emirsyah said.