This article was translated from Dutch. Read the original article here.
Dutch Financial Times | 21 September 2025 — After nine years of negotiations, the European Union signed a trade agreement with Indonesia on Tuesday. Brussels and Jakarta are quickly seeking rapprochement now that they want to be less dependent on the United States. Economists expect European deals with Thailand, Malaysia, and the Philippines to follow soon.
Under pressure, everything becomes fluid. Even the strict demands that Jakarta and Brussels have been putting on the negotiating table for years. For example, there is the EU’s deforestation regulation for products like palm oil. This will take effect at the end of this year, to the frustration of Indonesia, which fears that small-scale farmers will lose income. The EU, in turn, has been protesting Indonesia’s export ban on raw nickel for years.
‘Don’t push everything through’
It may become clear on Tuesday how exactly these wrinkles have been ironed out. Then European Trade Commissioner Maros Sefcovic will travel to Indonesia to sign the deal, a high-ranking Indonesian minister confirmed after a report in the Financial Times.
“I think the EU realizes it needs to tone down its demands a bit to be able to conclude these kinds of deals in Asia,” economist Max Zenglein of the think tank The Conference Board told the FD. “They won’t have abandoned all their principles. But at the same time, the EU can’t afford to push through all its demands and thus derail the deal.”
The same applies to Indonesia. President Prabowo and his government could certainly use an economic boost. Unrest has been brewing on the Indonesian stock exchange and in the country’s streets for weeks. Investors are concerned about the president’s populist policies, and young people are demonstrating against high salaries for members of parliament and police brutality. At least ten people have already been killed in riots.
Not a done deal yet
Due to all the unrest, Chris Humphrey, director of the EU-ASEAN Business Council, expects Indonesia to also compromise. “The European Commission still needs to sell the deal in the EU,” Humphrey adds. “The final result will therefore be positive; otherwise, the Commission will not agree.”
The signing of the deal is not yet a done deal for both parties. The Indonesian parliament still needs to approve it, as do the European Parliament and the trade ministers of the member states. This trade agreement involves so-called “exclusive European competences.” This means that a qualified majority is required rather than unanimous agreement. Experts therefore expect the trade deal to be ratified within a year.
Sustainability regulations
In Indonesia, various stakeholders are closely watching. For example, the main employers’ organization wants the EU to simplify its regulations for products from Indonesia. “The EU standards are expensive and very demanding for Indonesian companies compared to other export markets,” wrote chair Shinta Kamdani in a response to the FD. She also emphasizes the importance of a more flexible approach to sustainability regulations.
Yet, there is also enthusiasm. For example, the Indonesian employers’ organization estimates that exports could grow by up to 50% over the next five years if a favorable deal is reached. This includes agricultural products such as palm oil, furniture, ceramics, shoes, and textiles. European companies active in chemicals, pharmaceuticals, ICT, and semiconductors, in turn, see opportunities in the Indonesian market, which, with 285 million inhabitants, is the largest in Southeast Asia.
Perhaps even more significant is the EU’s hasty search for new sources of crucial metals. To become less dependent on China, the EU wants to capitalize on Indonesia’s 55 million tons of nickel.
‘Exciting times’
Two-way trade between the EU and Indonesia is growing steadily. In 2024, it amounted to €27.3 billion. Ten years earlier, it was €25 billion. However, economists expect it will take a few more years for exports to take off. Nevertheless, the trade agreement is already significant. Malaysia, Thailand, and the Philippines are also in talks with the EU about a trade agreement. “The Indonesia deal gives them the impetus to reach an agreement,” says Humphrey. “Otherwise, they risk falling behind Indonesia and Vietnam.”
Humphrey has been following European trade interests in Southeast Asia from Singapore for over ten years. “I sometimes have to pinch myself because I can hardly believe the pace at which Brussels and this region are now strengthening ties. These are exciting times.”
