Bridging Africa, Indonesia trade gap

This summit will lay the foundation for mutual economic growth in the 21st century through investment in high-potential sectors such as technology, infrastructure, electric battery production, agribusiness, education, and healthcare. The ongoing and future partnerships could significantly boost Africa’s and Indonesia’s growth and economic performance.

One of the most significant opportunities results from the formation of the world’s largest free trade area— the African Continental Free Trade Area (AfCFTA—encompassing 54 countries with a combined gross domestic product (GDP) of $3.4 trillion.

Read: Africa free trade deal a game-changer

The AfCFTA, stretching from Cape Town to Cairo and Accra to Antananarivo, is one of the most progressive trade agreements globally and will enhance market access to the Pan-African market.

The pact includes advanced protocols on trade in goods, services, digital products, competition, intellectual property, and investment. The recently concluded digital trade protocol opens up opportunities for investment in technology, e-commerce, and AI.

Additionally, the trade deal features a legally binding dispute settlement mechanism, similar to the European Union’s, which is crucial for establishing a level playing field.

Commitments to streamline and harmonise trade regulations, known as trade facilitation, further support the agreement. Africa is a burgeoning market, with a projected quarter of the world’s consumers by 2050.

The AfCFTA opens up opportunities for increased domestic and foreign investment in some of the world’s fastest-growing economies and sectors.

The AfCFTA will foster trade within and from Africa and support the continent’s structural transformation by encouraging industrialization and export diversification. These changes will drive job creation, investment, and economic prosperity for millions across Africa.

The United Nations Economic Commission for Africa estimates that full implementation of the AfCFTA could boost annual GDP growth rates by up to 2 per cent, increase intra-African trade by 52 per cent, and create 10 to 15 million jobs.

Most income gains are expected from measures simplifying trade and customs procedures, with trade-facilitation measures ($300 billion of the projected $450 billion). These impacts highlight the potential for trade growth to be a powerful transformative force in driving Africa’s ties with Indonesia.

The liberalisation of tariffs and the reduction of non-tariff barriers (NTBs) will boost global and cross-border investment and lower entry barriers across countries, significantly enhancing real income gains.

Read: The digital bridge for Africa’s growing trade finance gap

In the first phase of AfCFTA implementation, countries will eliminate tariffs on 90 percent of goods and reduce NTBs on goods and services, easing trade across borders. Foreign direct investment (FDI) inflows attracted by the AfCFTA will not only enhance local expertise and jobs but also forge connections that can help African firms join regional and global value chains.

Evidence shows that African countries with larger markets and fewer trade barriers already attract more FDI, indicating the potential of the AfCFTA to increase FDI inflows.

With deep integration under the AfCFTA, total export volumes are projected to increase by 32 percent by 2035.

And while the ratification of the AfCFTA represents a massive opportunity to drive growth through trade and investment, the challenge lies in its implementation. Reducing tariffs through the AfCFTA is an essential step forward, but the key to unlocking gains from the agreement lies in removing pernicious trade facilitation and infrastructure barriers.

The political commitment to moving forward solutions to these challenges is positive, and with support from partners like Indonesia, significant progress is likely.

Inter-regional cooperation can be the solution to tackling these challenges. Indonesia understands Africa’s potential and is eager to forge partnerships to help overcome the barriers and realise these gains, driven by trade, investment, growth, and economic opportunities, much like its own successful development journey to achieving middle-income status within ASEAN.

Indonesia has expertise in critical sectors that Africa needs and has demonstrated how trade can spur growth.

Through strong political leadership backed by the willingness to cooperate and learn across continental boundaries, countries can do more together and drive progressive and transformational change.