After years of negotiations, Indonesia and the European Union have concluded their Comprehensive Economic Partnership Agreement (IEU-CEPA), a deal Trade Minister Budi Santoso hailed as a “golden opportunity” for Southeast Asia’s largest economy.
“Because our market access opens there—the market is huge, with a population of over 400 million. I think this is a great opportunity,” he said at the Kick-Off of ASEAN Online Sale Day on Thursday (Aug. 7).
Even before CEPA was formally sealed, Indonesia recorded a trade surplus with Europe. Exports to the region reached USD 9.6 billion in January-June 2025, making Europe Indonesia’s second-largest trading partner after ASEAN. With friendlier tariffs and preferential schemes, export potential to Europe is expected to surge.
Still, Budi cautioned that opportunity won’t translate into results without preparation. “If we have CEPA but do nothing, we can’t sell. The question now is how we optimize its utilization as best as possible,” he said.
Standards Hurdles and Collaborative Solutions
The biggest challenge for Indonesia’s MSMEs is often not product quality, but compliance with the destination country’s technical standards. Mulya Amri, Executive Director of the Kadin Indonesia Institute, said Europe is willing to help build capacity.
“That’s good news for MSMEs because many of our products have a market in Europe, but standards still need to be raised. Europe is willing to support capacity building,” Mulya told SUAR at Menara Kadin after attending the forum “Unpacking and Implementing Indonesia–EU and Indonesia–US Bilateral Trade Pathways,” on Monday (Aug. 4).
Mulya underscored traceability—the ability to track a product’s origin—as a non-negotiable requirement in the European market. Collaboration among European partners, the Indonesian government, and Kadin is being directed at preparing small businesses for export.
“If those are the standards set by Europe, then help us build our capacity to meet them,” he added.
Sectors in focus include food and beverages, leather, and agricultural products such as coffee and cocoa, much of which are produced by MSMEs. According to Mulya, these sectors could benefit from preferential tariffs, provided domestic regulations are aligned.
A Business Ecosystem—and Rules—that Work for MSMEs
Readiness isn’t only about certification and product quality. “Business becomes easier when regulations are clear and not burdensome. Infrastructure and logistics must also support it,” said Mulya.
Kadin has pledged to shepherd regulation-making so it becomes more MSME-friendly. Each sector and product has its own rules, he noted, and policymakers need to map which ones enable and which still hinder.
Behind every large industry are MSMEs that sustain it. Economist Heri Andreas said big companies can’t stand alone. “The strength of a large industry rests on strong MSMEs. Involving them is a necessity,” he said.
He added that the government should act as a bridge between large corporations and MSMEs. “If big companies are to partner with MSMEs, they should be given facilitation—such as tax allowances. Without the government, everyone goes their own way,” he said.
Collaborative schemes such as B2B can provide a middle ground. MSMEs don’t need to enter export markets directly; they can become vendors to large companies that already have access. “Indirectly, MSMEs still take part in exports because their products become part of the supply chain,” he said.
MSMEs Need More Than Access—They Need Competitiveness
David Chalik, founder of DCP Shoe Factory and a member of the Indonesian Footwear Entrepreneurs Association, highlighted the technical barriers that often block exports.
“Every country has technical barriers. We must prepare materials, equipment, and production methods that comply with their standards. Otherwise, our goods will struggle to enter,” David said.
According to him, four areas must be fixed: raw materials, production equipment, wage standards, and production cost efficiency. All of this requires supportive policies, including financing and tax relief.
Four areas must be fixed: raw materials, production equipment, wage standards, and production cost efficiency.
“If our production costs are already high, we can’t compete,” he said plainly. He hopes CEPA will not remain just a paper agreement, but be complemented by tangible supporting policies from the government.
David believes Indonesian MSMEs have the quality; what’s missing is the system. “If that support is in place, God willing, our products can compete in global markets,” he said.
