Indonesia and Iran sign Preferential Trade Agreement

After seven rounds of negotiations, Indonesia and Iran signed a preferential trade agreement called the Iran Preferential Trade Agreement (II-PTA) on May 23. The agreement is viewed as an opportunity for Iran to increase trade volume between Indonesia and Iran. Indonesia also sees this initiative in line with its bigger agenda of using Iran as a gateway to the surrounding region such as Central Asia, or even Turkey where Indonesia does not have any trade deals yet.The II-PTA will potentially benefit both Indonesia and Iran. Iran would give Indonesia greater market access to products like processed food and pharmaceuticals, textile, palm oil, coffee, and tea, while Indonesia will lower tariffs for Iran's oil and chemical products, metals, and some dairy products. The agreement also includes a countertrade scheme, which will allow the exchange of goods and services without being constrained by scarcity or currency difficulties. In recent years, western sanctions on Iran has also impacted trade between Indonesia and Iran. Bilateral trade dropped from $715.5 million in 2017 to $141.6 million in 2019. Up until March 2023, total trade between Indonesia and Iran reached $54.1 million. In 2022, trade between the two countries reached $257.2 million.Indonesia is the largest economy in Southeast Asia and ranked 15th largest economy globally with 1.23 trillion and an annual growth rate of 5.7%. Indonesia has signed several free trade agreements including the Indonesia-Japan Economic Partnership Agreement, the Indonesia-European Free Trade Association Comprehensive Economic Partnership, Indonesia-Korea, Indonesia-Australia and Indonesia-Chile Comprehensive Economic Partnership, Indonesia-Pakistan, and Mozambique Preferential Trade Agreement, and the Regional Comprehensive Economic Partnership (RCEP).