The signing of the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) marks a significant milestone in enhancing Indonesia’s global economic engagement. It serves as a new bridge for strengthening bilateral ties between Indonesia and Europe.
However, the challenge ahead is whether, at a practical level, Indonesia can utilize the agreement to contribute to inclusive and sustainable growth. Success will depend entirely on fulfilling compliance with responsible business conduct on the ground.
While this opportunity will undoubtedly open market access and boost investment, it must be noted that the CEPA is not merely about tariffs and trade volumes. It is a values-based agreement that embeds principles of sustainable development, environmental protection and human rights into the very architecture of trade.
The critical question is: How will the CEPA affect inclusive and sustainable growth for both businesses and workers in Indonesia? Is the country truly ready to implement the commitments that come with it?
The CEPA offers a golden opportunity for Indonesia to boost export competitiveness in sectors such as palm oil, fisheries, manufacturing, textiles and critical minerals. Job creation is expected to rise in export-oriented industries gaining better access to the EU’s 450 million consumers.
Yet, on the flip side, issues regarding labor rights, environmental safeguards and due diligence will emerge amid growing concerns over the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) and Forced Labor Regulation. These regulations signal a new era of responsible supply chains, requiring Indonesian exporters to prove they are not causing, contributing to or directly linked to forced labor, deforestation or human rights violations.
This situation reveals the double-edged nature of the IEU-CEPA. It juxtaposes job creation with decent work, and exports with ethical supply chains. The absence of safeguards and a rush to meet demand could unintentionally increase informal work, undermine local communities’ rights and expedite environmental degradation.
To make this partnership work, three key challenges must be addressed. First is the limited awareness and capacity among businesses. Many small and medium-sized enterprises (SMEs), which form the backbone of Indonesia’s economy, still lack an understanding of the new sustainability expectations embedded in the IEU-CEPA. It is crucial that SMEs receive the resources, training and systemic support needed to comply with European standards.
Second is fragmented governance and monitoring mechanisms. There is currently a lack of a unified, transparent mechanism to track and enforce responsible business conduct across sectors. While initiatives like PRISMA, PROPER and NORMA 100 exist, their mandates vary, and coordination remains weak. Third is the inadequate implementation of Human Rights and Environmental Due Diligence (HREDD).
Although Indonesia has shown commitment through Presidential Regulation No. 60/2023 on the National Action Plan on Business and Human Rights (NAP BHR), implementation on the ground remains questionable. Key issues such as land rights, the consent of indigenous people and local communities, workers’ freedom of association and decent work are often sidelined. It is vital to ensure that the CEPA benefits both the economy and the people.
Going beyond mere compliance and embracing a transformative approach to trade governance is crucial. This can be achieved through three strategies. First, we must raise awareness and build multi-stakeholder capacity regarding the CEPA’s obligations. Tailored training and incentives should be provided to SMEs to help them adopt international standards gradually, particularly in high-risk sectors like palm oil, fisheries and mining. Second, it is time to strengthen national mechanisms for accountability and transparency to monitor responsible business conduct under the CEPA.
This initiative could include a centralized grievance mechanism accessible to workers and communities, linked to provincial and national oversight bodies. This must align with international frameworks such as the United Nations Guiding Principles on Business and Human Rights, the International Labour Organization’s principles concerning multinational enterprises and social policy (MNE Declaration) and the Organisation for Economic Co-operation and Development’s Guidelines for Multinational Enterprises.
Third, HREDD must be institutionalized in trade-linked projects. In other words, HREDD should not just be a reporting requirement, but an integral part of project life cycles, from investment screening and licensing to procurement and impact assessment. The CEPA offers a window to scale up existing good practices.
The Indonesia–EU CEPA is not just a trade agreement; it is a test of Indonesia’s readiness to align its trade with global sustainability norms. It is not a choice between growth and rights, it must be both. If implemented thoughtfully, the agreement can shift the country toward fairer supply chains and stronger governance. But if rushed or poorly executed, it could deepen inequalities and undermine our long-term resilience.