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Indonesia and the European Union have reached a pivotal milestone by finalizing negotiations for the Indonesia-EU Comprehensive Economic Partnership Agreement (IEU-CEPA) in September 2025. While the agreement promises access to a massive market of 450 million consumers, Indonesian plantation exporters face a paradox: the market is becoming easier to reach through lower tariffs, yet more challenging to supply due to stringent sustainability mandates.
Data from Statistics Indonesia (BPS) highlights a significant structural challenge: smallholders manage 99.6% of cocoa areas, 98.6% of coffee, 91.3% of rubber, and 43.9% of oil palm. The vast majority of this land remains unregistered, posing a direct threat to compliance with the EU Deforestation Regulation (EUDR). Starting December 30, the EUDR requires medium and large companies to trace every shipment of palm oil, rubber, coffee, and cocoa back to the specific plot of land, proving no deforestation occurred after 2020.
The economic stakes are immense. In 2025, Indonesia exported approximately $6.9 billion worth of EUDR-regulated products to Europe, a 23% increase from 2024. Palm oil remains the dominant commodity, accounting for $3.9 billion of this total. Indonesia currently supplies 23.5% of the EU's imports of palm oil and its derivatives. The IEU-CEPA is particularly vital because the EU is set to remove Indonesia from its Generalized Scheme of Preferences on January 1, which would otherwise impose standard tariffs of 9% on refined palm oil and 7.7% on cocoa butter.
To bridge the compliance gap, Indonesia utilizes the Cultivation Registration Certificate (STDB). However, as of early November, only 231,247 certificates covering about 839,000 hectares had been processed—a small fraction of the 12.6 million hectares tended by smallholders across the four key crops.
Industry experts suggest that the government must prioritize mapping in high-exposure sectors like coffee and cocoa, while utilizing cooperatives to map entire villages simultaneously to save costs. Furthermore, diversifying markets to include the United States, China, and Japan is recommended to mitigate risks. Ultimately, the success of the IEU-CEPA for Indonesia's plantation sector hinges on whether the nation can map its farmers fast enough to meet the EU's transparency requirements.
Source: The Jakarta Post