When the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) was finally finalized after a long process, many had high hopes for the deal. The Minister of Trade, Budi Santoso, described this agreement as a golden opportunity.

"Because our market is open there, the market is large, the population is 400 million more. So I think this is a good opportunity," he said at the ASEAN Online Sale Day Kick Off event, Thursday (7/8/2025).

In fact, even before CEPA was officially agreed, Indonesia had recorded a trade surplus with Europe. The value of exports to this region reached USD 9.6 billion for the January-June 2025 period, placing Europe as the second largest trading partner after ASEAN. Now, with more friendly tariffs and preferential schemes, the potential for exports to Europe is predicted to skyrocket.

However, Budi reminded that the opportunity will not turn into results without readiness. "If we have CEPA but we are silent, we can't sell it. Now it's just a matter of how we optimize this utilization as well as possible," he said.

Standards challenges and collaborative solutions

The biggest challenge that UMKM often face is not in product quality, but in compatibility with the technical standards of the destination country. Executive Director of Kadin Indonesia Institute Mulya Amri said Europe is willing to help with capacity building.

"That's good news for UMKM because many of our products have a market in Europe, but the standards still have to be improved. Europe is willing to help in terms of capacity building," said Mulya when interviewed by SUAR at the Kadin Tower after attending the forum on Exploring and Implementing Indonesia-EU and Indonesia-US Bilateral Trade Lines held by Kadin Indonesia, Monday (4/8).

Mulya emphasized the importance of traceability, the ability to track the origin of products, which is an absolute requirement in the European market. Collaboration between Europe, the Indonesian government, and Kadin is geared towards preparing small businesses to be export-ready.

"If that is the standard given by Europe, help us to increase our capacity to meet that standard," he added.

"If that is the standard given by Europe, help us to increase our capacity to meet that standard," Mulya said.

One of the highlighted sectors is food, beverages, leather, and agricultural products such as coffee and cocoa, mostly produced by UMKM. According to Mulya, these sectors can receive preferential tariffs, provided that domestic regulations are also adjusted.

Business ecosystem and friendly regulations

But readiness is not just about certification and product quality. "The business becomes easy if the regulations are clear and not burdensome. Infrastructure and logistics must also support," Mulya said.

Kadin is committed to overseeing the preparation of regulations to be more UMKM. According to him, each sector and product has its own regulations, and it is necessary to map which ones support and which ones are still obstacles.

Behind large industries, there are UMKM that support them. Economic expert Heri Andreas said that large companies cannot stand alone. "The strength of a large industry is because there are great UMKM behind it. The involvement of these UMKM is a necessity," said Heri.

According to him, the government must become a bridge between large companies and UMKM. "If big companies want to collaborate with UMKM, they need to be given facilities, such as tax allowances. Without the government, they will go their own way," he said.

Collaboration schemes such as B2B can be a middle ground. UMKM do not need to penetrate the export market directly, but can become vendors of large companies that already have access. "Indirectly, UMKM still participate in exports, because their products are part of the supply chain," he said.

UMKM not only need access, but competitiveness

David Chalik, founder of DCP Shoe Factory and part of the Nusantara Footwear Entrepreneurs Association, highlights thetechnical barriers that often hinder exports.

"Every country has technical barriers. We must prepare materials, tools, and production methods that meet their standards. If not, it will be difficult for our goods to enter," said David.

According to him, there are four things that must be addressed: raw materials, production equipment, wage price standards, and production cost efficiency. All of these need policy support, including in terms of capital and tax relief.

There are four things that must be addressed: raw materials, production equipment, wage price standards, and production cost efficiency.

"If our production costs are already high, we cannot compete," he said straightforwardly. He hopes that CEPA is not only an agreement on paper, but also equipped with real supporting policies from the government.

David believes that Indonesian UMKM have quality, it's just that they are not yet supported by the system. "If that can be supported, God willing, our products can compete in the world market," he said.