Analysing Bilateral Comprehensive Economic Partnership Agreement (CEPA) Impacts

Indonesia has had several bilateral trade and investment agreements named the Comprehensive Economic Partnership Agreement (CEPA) since 2008 with Japan, Chile, Australia, Republic of Korea, and EFTA (European Free Trade Association). This book, this chapter attempts to assess the effects of CEPA on the Indonesian economy. It adopts intra-trade as a proxy for CEPA and unemployment as a proxy for economic benefit. This chapter applies four econometric models of the Generalized Method of Moments, Logistic Regression, Difference and Difference, and Panel Data Regression with country effect. The first model finds the endogenous relationship between CEPA and open unemployment. The second model proved the effectiveness of CEPA in reducing open unemployment. The third model showed the impact of the country and time, and the fourth identified the effect of each selected country. This chapter finds that CEPAs benefit Indonesia's economy, following the economic partner's income level, and CEPA is a sufficient condition instead of a necessary condition. This chapter assesses the effects of the CEPA's trade and long-run investment agreement on Indonesia's economic development. The latter uses the open-unemployment rate as a proxy, and this is a novelty for both ideas and methods, particularly on Indonesia's bilateral economic strategies.