Wine Najibullah
Canada-Indonesia signing
Comprehensive Economic Partnership Agreement
(CEPA) last week is a significant increase for
Canada economic
Diversification agenda
Field
is
The largest economy with a population of nearly 300 million, a rapidly growing middle class and an annual gross domestic product of nearly $2 trillion. Its economy is projected to grow by about five percent per year in the coming years.
Indonesia's needs in food security, clean energy, digital and physical infrastructure and responsible mining closely mirror Canada's strengths in agronomy technologies, energy transition technologies, engineering services and critical minerals. The opportunity is clear and
To capture it.
Canada-Indonesia trade has grown but remains modest relative to its potential. Bilateral trade in goods has hovered around $5 billion in recent years, with
Led by grains, fertilizers, pulp and machinery, as well as imports including electronics, clothing, rubber products and processed foods.
The two-way private equity shares make sense—about $6 billion—but are still shy of Canada's scale with other Asian partners, including Australia, China and Taiwan.
CEPA is designed to help close this gap. Once sold, more than 95 percent of Canadian exports should receive preferential tariffs. The agreement also addresses non-tariff barriers through chapters covering sanitary and phytosanitary (SPS) requirements for food and animals, technical barriers to trade and good regulatory practices.
The agreement includes provisions on the environment, labor and investment protections, including measures for settlement of investor disputes, and strengthens predictability for Canadian service providers and investors. In simple terms, it reduces both the tariff and disruption costs of doing business.
What makes CEPA particularly significant is that it provides more than market access; It establishes working institutions—joint SPS committees, critical mineral collaborations, and regulatory best practices—that can turn potential into evidence. For Canadian exporters, knowing that beef, pulses, timber and gear will not be held back by opaque SPS rules or changing regulations is what matters.
This new economic agreement also builds on the momentum already in motion.
Opened an office in Jakarta in 2023, providing Canadian companies with a local financing partner for Indonesia's massive infrastructure pipeline – from ports and power to water and data centers.
In December 2024, the team's trade mission to Canada resulted in more than 190 companies and organizations catalyzing a combination of businesses and specific memorandums of understanding (MOUs) in agriculture, clean energy, technology and advanced manufacturing to Indonesia. These efforts demonstrated both market demand and Canada's ability to meet it; CEPA now provides rules and channels for scaling.
None of this has any risk. Indonesia's regulatory environment remains challenging. Inconsistent enforcement, bureaucratic delays and governance issues can increase the cost of entry into the market. Transparent problems are real.
International criteria rank Indonesia near the 100 mark globally in terms of perceptions of corruption, a reminder that strong compliance and trustworthy local partners are essential. Political volatility is also a factor. Recent large-scale protests and debates about the role of the military in civilian life highlight how domestic politics can intrude on business planning. Navigating corruption and regulatory complexity will be critical.
Canada has homework too. Only about one in 10 Canadians say they know about Indonesia, according to the Asia Pacific Canada 2024 Poll Foundation. Low awareness and understanding, equipped with a business appetite and makes it difficult to maintain political direction.
If CEPA is to deliver, Ottawa and the provinces will need to combine market access with practical support: trade readiness for SMEs, industry playbooks, patient capital mobilization, and sustained efforts to tell Indonesia's story to Canadian companies and investors.
The CEPA—along with the Defense MOU also signed during President Prabowo Subianto's visit—is an important step forward for Canada's Indo-Pacific agenda and for a high-potential partnership with Indonesia.
The challenges in governance, transparency and awareness are real and we must approach the market with our eyes wide open. But given Indonesia's enormous scale, growth trajectory and growing geopolitical importance in Southeast Asia and beyond, the effort is worth it.
If Canada seizes this moment wisely – using CEPA, building partnerships, investing in infrastructure and strengthening institutional trust – we can turn potential into reality not only in Indonesia, but also in the broader and in the current geo-economic and geopolitical context, a necessary reassessment in relation to Southeast Asia and the Indo-Pacific region.
Veena Najibullah is Vice President of Research and Strategy at the Asia Pacific Foundation of Canada.
