After nearly a decade of negotiation, the European Union and Indonesia have reached a political agreement on a Comprehensive Economic Partnership Agreement (CEPA), announced on 13 July 2025 by European President Ursula von der Leyen and Indonesian President Prabowo Subianto. While the political agreement is merely a symbolic gesture of intention and does not signal that negotiations are over, the deal is still a milestone for both sides, and for the broader ASEAN–EU economic relationship, given Indonesia’s heft in the region. For ASEAN and EU businesses in particular, this is a moment worth paying attention to.

The CEPA will offer new commercial openings in both directions. According to Indonesia’s Ministry of Trade, the CEPA agreement, It aims to eliminate about 98% of tariff lines, covering roughly 99% of Indonesia–EU trade value, with sectoral phase-ins plans within seven years, and is expected to improve EU’s access to Indonesian sectors such as services, manufacturing, and telecoms. In addition to this, the deal includes a “visa cascade” for eligible Indonesian travellers and provisions for cooperation on sustainability and digital governance, reinforcing broader regional trade and investment linkages. 

However, beyond the headline figures, the conclusion of CEPA will send a signal that the EU is still able to exercise pragmatism and willingness to meet emerging economies halfway for mutual benefit, despite ongoing concerns on sustainability and labour. 

Unlocking the Deal

The CEPA process has not been smooth. Negotiations on the deal, which kicked-off officially nine years ago, were delayed by disagreements over environmental regulation and Indonesia’s restrictive policies over natural resources, but shifting political and economic priorities on both sides finally broke the deadlock.

Two of the most persistent friction points were palm oil and nickel. Indonesia’s ban on raw nickel exports, aimed at helping to develop a domestic EV supply chain, clashed with EU concerns about access to critical minerals and was disputed by the EU at the WTO’s dispute settlement unit. Meanwhile, the EU’s Renewable Energy Directive II adopted in 2018 sought to phase out palm-based biofuels due to deforestation concerns, a move that Indonesia also challenged at the WTO , arguing that the EU was unfairly targeting its key national export. Both issues became symbolic of deeper disagreements over sovereignty, sustainability, and market access, impeding CEPA negotiations for many years. 

What changed to make the CEPA a reality, however, was not the issues themselves, but how both sides approached them. For the EU, the need to secure reliable raw materials and deepen partnerships in the Indo-Pacific, especially amid growing geopolitical uncertainty and the need to secure new supplies of raw material, made compromise more valuable than rigidity. For Indonesia, concerns over its post-COVID growth and the incoming Prabowo administration’s focus on economic pragmatism also created room to achieve a deal. Hence, instead of forcing an impossible convergence, CEPA negotiations took a phased, flexible route: the EU agreed to recognize Indonesia’s national sustainability standard (ISPO) for palm oil, while the nickel issue was addressed through a non-binding cooperation clause that leaves room for future alignment without undermining domestic policy goals.

Implications for ASEAN and Regional Supply Chains

Indonesia’s CEPA gives it a first-mover advantage among the larger ASEAN economies. While Singapore and Vietnam already concluded FTAs with the EU, Indonesia’s will adds scale, industrial depth, and geographic proximity to regional supply hubs. That changes the game for how ASEAN businesses might position themselves.

One notable feature of CEPA will be the possibility for ASEAN cumulation under the rules of origin chapter, which allows certain inputs from neighboring ASEAN countries to count toward Indonesian origin if they meet the agreement’s processing and value-added requirements. This creates opportunities for regional supply chain integration, with Indonesia acting as a gateway to the EU market.

This configuration not only expands export opportunities for ASEAN partners but also enhances Indonesia’s appeal as a nearshoring base for European investors, particularly in sectors such as green technology, EV components, and high-value agriculture. However, these possibilities are not without challenges. Successful concluding a deal is only half the battle won, with successful implementation being an equal challenge. Changes in government, uneven sustainability standards, and bureaucratic slowdowns could dampen the pace of implementation.

A Broader Signal for ASEAN–EU Economic Cooperation

At its core, the Indonesia–EU CEPA is more than a bilateral agreement. It reflects the growing maturity of ASEAN–EU relations and a shift toward deeper economic engagement built on shared but flexible standards. The deal offers a glimpse into how the EU might adapt its green and digital ambitions to work more constructively with emerging partners.

For ASEAN as a whole, it marks an important milestone in the steady progress for both regions in establishing effective trade agreements. With the Philippines and Thailand scheduling further rounds of negotiation, and even Malaysia restarting talks, the momentum for renewed ASEAN–EU trade engagement could be revived. 

ASEANCham-EU continues to support the expeditious conclusion of negotiations and signing of the CEPA before the end of 2026.