The European Union (EU) concluded negotiations of a free trade agreement (FTA) with Indonesia in September, which includes more limited government procurement provisions than are found in other recent EU agreements. The EU-Indonesia Comprehensive Economic Partnership Agreement (CEPA) eliminates over 98% of tariffs, removes trade barriers, and opens new pathways for investment, while taking account of each side’s priorities and sensitivities. One of Indonesia’s sensitivities was government procurement, expressed in its refusal to open its contracts to EU suppliers. However, to accommodate the high priority that the EU places on opening public procurement, Indonesia agreed to enter market access negotiations on procurement within five years. This post highlights the CEPA’s procurement provisions and compares them to the WTO Government Procurement Agreement (GPA) and other EU FTAs.
The EU and Indonesia finalized both CEPA and an Investment Procurement Agreement (IPA) on September 23 after nine years of negotiations. (They had reached a political agreement on the agreements in July.)
CEPA’s government procurement chapter follows other EU agreements in closely adhering to the provisions of the GPA in seting out rules to ensure that procedures to award public contracts are transparent, fair, and non-discriminatory. Its obligations include publication of all calls for tenders in a single electronic portal. It also contains several provisions not found in the GPA such as an article on market consultations that allows procuring entities to seek or accept advice from independent experts or market participants in preparing to launch a procurement, notably for the development of technical specifications. It also extends the use of limited tendering to consultancy services for legal consultants and advocates and provisions of arbitrators under specified conditions. In addition, until there are market access negotiations, the FTA’s dispute settlement provisions do not apply to any dispute arising from the interpretation and application of the procurement chapter.
In sharp contrast to other FTAs negotiated and implemented by the EU over the past decade, the Indonesia agreement does not include commitments to exchange access to public procurement. This reflects the EU interest in reaching an agreement this year with Indonesia as part of its expansion of its FTA network. The FTA does, however, call for procurement market access negotiations to start within five years after the FTA enters into force.
Despite its lack of market access commitments, the FTA prohibits discrimination based on foreign ownership and guarantees national treatment for all EU businesses established in Indonesia (and for Indonesian businesses established in the EU). It also requires national treatment for all EU companies (independently of their place of establishment) for tenders funded by EU grants, loans, and other EU assistance instruments.
Indonesia has not yet opened its procurement under any FTA nor is it a GPA party. In 2023, it implemented an FTA with the United Arab Emirates that includes many GPA provisions but not its non-discriminatory principle. It also limits the application of those provisions to government procurement “expressly open to international competition.” That agreement also does not provide for domestic review of supplier complaints.
After a legal scrub and translation into the EU official languages, the agreements will be adopted by the Council of the EU and signed by the EU and Indonesia. Following the European Parliament’s consent and ratification by Indonesia, the CEPA and IPA can enter into force. The parties aim to have the agreements ratified and implement before January 1, 2027 when Indonesia is expected to lose its current trade preferences. (The European Commission has proposed to remove Indonesia from the EU preferential trading scheme for developing countries, the Generalised System of Preferences.)
The European Union (EU) concluded negotiations of a free trade agreement (FTA) with Indonesia in September, which includes more limited government procurement provisions than are found in other recent EU agreements. The EU-Indonesia Comprehensive Economic Partnership Agreement (CEPA) eliminates over 98% of tariffs, removes trade barriers, and opens new pathways for investment, while taking account of each side's priorities and sensitivities. One of Indonesia’s sensitivities was government procurement, expressed in its refusal to open its contracts to EU suppliers. However, to accommodate the high priority that the EU places on opening public procurement, Indonesia agreed to enter market access negotiations on procurement within five years. This post highlights the CEPA’s procurement provisions and compares them to the WTO Government Procurement Agreement (GPA) and other EU FTAs.
The EU and Indonesia finalized both CEPA and an Investment Procurement Agreement (IPA) on September 23 after nine years of negotiations. (They had reached a political agreement on the agreements in July.)
CEPA’s government procurement chapter follows other EU agreements in closely adhering to the provisions of the GPA in seting out rules to ensure that procedures to award public contracts are transparent, fair, and non-discriminatory. Its obligations include publication of all calls for tenders in a single electronic portal. It also contains several provisions not found in the GPA such as an article on market consultations that allows procuring entities to seek or accept advice from independent experts or market participants in preparing to launch a procurement, notably for the development of technical specifications. It also extends the use of limited tendering to consultancy services for legal consultants and advocates and provisions of arbitrators under specified conditions. In addition, until there are market access negotiations, the FTA's dispute settlement provisions do not apply to any dispute arising from the interpretation and application of the procurement chapter.
In sharp contrast to other FTAs negotiated and implemented by the EU over the past decade, the Indonesia agreement does not include commitments to exchange access to public procurement. This reflects the EU interest in reaching an agreement this year with Indonesia as part of its expansion of its FTA network. The FTA does, however, call for procurement market access negotiations to start within five years after the FTA enters into force.
Despite its lack of market access commitments, the FTA prohibits discrimination based on foreign ownership and guarantees national treatment for all EU businesses established in Indonesia (and for Indonesian businesses established in the EU). It also requires national treatment for all EU companies (independently of their place of establishment) for tenders funded by EU grants, loans, and other EU assistance instruments.
Indonesia has not yet opened its procurement under any FTA nor is it a GPA party. In 2023, it implemented an FTA with the United Arab Emirates that includes many GPA provisions but not its non-discriminatory principle. It also limits the application of those provisions to government procurement “expressly open to international competition.” That agreement also does not provide for domestic review of supplier complaints.
After a legal scrub and translation into the EU official languages, the agreements will be adopted by the Council of the EU and signed by the EU and Indonesia. Following the European Parliament’s consent and ratification by Indonesia, the CEPA and IPA can enter into force. The parties aim to have the agreements ratified and implement before January 1, 2027 when Indonesia is expected to lose its current trade preferences. (The European Commission has proposed to remove Indonesia from the EU preferential trading scheme for developing countries, the Generalised System of Preferences.)
