As a lower middle-income country with a per capita income of $4,332.7 (2021), Indonesia benefits from the Standard GSP. In 2021, total EU imports from Indonesia summed up to €16.7 billion, about half of these imports are eligible for preferential tariffs granted under the Standard GSP. Indonesia currently uses GSP preferences for about 80% of its eligible EU exports.
The Standard GSP targets developing countries that are classified by the World Bank as lower or lower-middle income countries and which do not have equal preferential access to the EU market through any other arrangement. Standard GSP beneficiary countries can benefit from duty suspension for non-sensitive products as well as duty reductions for sensitive products across approximately 66% of all EU tariff lines.
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Indonesia has the world's 4th largest population and managed to cut its poverty rate in half in the past 20 years, which reached an all-time low of 9.2 percent in September 2019.
Indonesia's most important export products are coal and palm oil, followed by rubber, lignite, and gold.
China accounts for the largest share of trade with 25,6 % and is both the most important source of imports and the most important export destination. Singapore follows the EU with 18% of Indonesia's total trade.
Services (42.82%) and industry (40%) contribute the largest shares to Indonesia's GDP. Both the mining sector, coal, copper, gold, and tin, and the textiles and footwear industries are important pillars of the Indonesian economy. About one third of the labour force is employed in the agricultural sector, which supplies rubber, coffee, cocoa, and palm oil to the world market.
Thanks to consistent growth rates in the last decade, Indonesia is now the world's 16th largest economy and is headed towards a ranking in the top 10.
Total trade with the EU summed up to € 24,707 in 2021. With a share of 6.8% of Indonesia's total trade, the EU is the fifth most important trading partner.
About half of Indonesia's export to the European market are eligible for reduced tariffs granted under the GSP.
With a preference utilisation rate of 79.6%, Indonesia currently makes considerable use of GSP preferences.
Indonesia’s preference utilisation rate remained constantly above 70% until 2016. In 2017, the utilisation of preferences increased by about 10 percentage points, which corresponded with an increase of eligible imports of about 10%. Currently, most of the major product sections make considerable use of the preferential market access granted by the Standard GSP. However, especially exports of apparel and textiles as well as machinery and tobacco exports could make greater use of the granted preferences.
The graph indicates that imports from Indonesia under the GSP are relatively well-diversified. Together with India, Indonesia belongs to the GSP beneficiaries that trade the largest number of tariff lines under the GSP. Footwear continues to be the dominant product section but is closely followed by chemical products (S06b), machinery and appliances as well as apparel and textile articles. Four product sections graduated on 1 January 2020 due to their high level of competitiveness. These include live animals and animal products (S1a), animal and vegetable oils (S3), mineral products (S5), and wood and wooden articles (S9a).
Indonesia maintains a high level of ratification, despite the preferential market access granted by the Standard GSP is not bound to the ratification of international conventions. Indonesia has ratified 14 out of 15 core international conventions on human rights and labour standards. In addition, Indonesia has ratified 8 international conventions on environmental protection and 4 conventions on good governance.
Despite Indonesia has graduated from bilateral assistance with the EU, the partnership and cooperation continue based on issues of mutual interest. In the past, the EU and Indonesia have successfully cooperated to induce inclusive economic development, strengthen good governance and civil society, protect the environment and address climate change.
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