Implementation of Indonesia-EFTA CEPA and 70 Years of RI-Swiss Relations

Kompas

Didie SW

The year 2021 is a special year with many achievements in Indonesian-Swiss relations.

Indonesian (RI)-Swiss relations have been improving not only between governments (G2G), but also between business people (B2B), and between communities of the two countries (people-to-people).

This progress is expected to continue to increase with the two countries being committed to strengthening cooperation and promoting a comprehensive economic partnership through the Comprehensive Economic Partnership Agreement between Indonesia and the European Free Trade Agreement States (Indonesia-EFTA CEPA). EFTA comprises Iceland, Liechtenstein, Norway and Switzerland.

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There are four important points to note in this special year for RI-Swiss relations. First, the Indonesia-EFTA CEPA took effect as of 1 Nov. 2021. Second, this year marks the 70th anniversary of Indonesian-Swiss diplomatic relations.

Third, Switzerland has again made Indonesia one of its priorities this year through the Indonesia Cooperation Programme 2021-2024, with funding worth 65 million Swiss francs.

The program focuses on promoting inclusive and sustainable development, improving urban planning and effective public institutions, and increasing the competitiveness of Indonesian micro, small and medium enterprises (MSMEs).

Fourth, political ties are expected to improve further through the Indonesia-Switzerland Mutual Legal Assistance (MLA) in Criminal Matters, which was signed in February 2019 and took effect as of 14 Sept. 2021.

The implementation (entry to force) of the Indonesia-EFTA CEPA has come through an intricate and challenging process through the negotiation, signing and ratification stages.

The CEPA negotiations lasted eight years, due especially to Switzerland’s pros and cons regarding Indonesian palm oil.

The results of a nationwide vote in March showed that 51.6 percent of the Swiss people supported the Indonesia-EFTA CEPA, and green-lighted Indonesia and EFTA to proceed with ratifying the CEPA.

The Indonesia-EFTA CEPA is the country’s first trade agreement with European countries. The agreement enables an increased flow of trade in goods and services, investment, knowledge and technology transfers, and an open labor market, not only in Switzerland, but also in other countries in Europe and elsewhere.

It calls for Indonesia to prepare immediate steps to optimize the benefits from implementing the agreement. These steps are expected to address technical regulations, logistics issues, human resource capacity and product standards.

The Indonesia-EFTA CEPA will see Switzerland eliminate 7,042 tariffs, or 81.74 percent of all tariffs, which constitute 99.65 percent of the value of Swiss imports from Indonesia. Indonesia will also enjoy the abolishment of 6,338 tariffs in Norway and 8,100 tariffs in Iceland.

Sustainable palm oil

Paving the way for stronger economic relations, the Indonesia-EFTA CEPA will contribute to the sustainable development of the country’s.

KOMPAS/RIZA FATHONI

A worker harvest oil palm in a plantation area in Pangkalan Bun, Central Kalimantan, Thursday (29/4/2021).

The agreement provides binding legal certainty for Indonesia's sustainable palm oil industry, as mandated in Article 8.10 on trade and sustainable development.

Switzerland will import a maximum of 10,000 tons of Indonesia palm oil annually, with the figure set to increase to 12,500 tons.

The quota may not be as high as Indonesian palm oil exports to China and India. However, the entry of Indonesian palm oil into Switzerland, which is known for its strict sustainability standards, will increase the global branding of Indonesian palm oil as sustainable.

The ordinance contains the mechanisms and controls to ensure that the palm oil entering Switzerland meets its sustainability standards.

On 18 Aug., the Swiss government submitted a special ordinance on the importation of Indonesian palm oil following an internal public consultation. The ordinance contains the mechanisms and controls to ensure that the palm oil entering Switzerland meets its sustainability standards.

70th RI-Switzerland anniversary

In the trade sector, Indonesia recorded a trade surplus with Switzerland during the January-September period, which amounted to US$1.13 billion (Rp 16.1 trillion).

According to Swiss Federal Customs Administration data as of 28 Oct., the total value of Indonesian exports to Switzerland for this period was $1.41 billion (Rp 19.99 trillion), while imports were $273.89 million (Rp 3.89 trillion).

Indonesia's top ten exports to Switzerland are precious metals, jewelry and precious stones (HS 71), footwear (HS 64), nonwoven textile products (HS 62), woven textile products (HS 61), electrical equipment (HS 85), furniture (HS 94), coffee (HS 0901), turbine engines and spare parts (HS 84), essential oils (HS 3301.29), and organic chemicals (HS 29).

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Switzerland, with its strategic location in the middle of Europe, can be a transit hub for Indonesian products to penetrate other countries.

Indonesian products that have entered Switzerland will help improve the overall branding of Indonesian products, making it easier for them to enter other European markets.

AFP/GIUSEPPE CACACE

Visitors walk outside the Swiss pavillon at the Expo 2020, in the Gulf Emirate of Dubai, on October 2, 2021. - Dubai opened its extravagant Expo 2020 on September 30, with a flashy ceremony boasting fireworks and lights displays as it attempts to woo the world despite the pandemic.

In the investment sector, Switzerland is Indonesia’s second largest investor on the European continent and one of the 10 largest contributors of foreign direct investment (FDI) to Indonesia.

Data from the Investment Ministry/the Investment Coordinating Board (BKPM) shows that Swiss investment in Indonesia reached $469.5 million with 199 total projects in the first semester of 2021. There are 150 Swiss companies currently operating in Indonesia that absorb 50,000 workers.

Through the Indonesia-EFTA CEPA, Indonesia can explore other potential collaborations, including in the field of innovation. For the past 11 years, Switzerland has ranked first on the Global Innovation Index (GII).

Regarding Indonesia's G20 presidency, the country has invited Switzerland to also participate in the G20 “finance track”. Switzerland can assist Indonesia in responding to challenges related to green finance.

KEDUTAAN BESAR RI DI SWISS DAN LIECHTENSTEIN

Indonesian Ambassador to Switzerland and Liechtenstein, Muliaman Hadad (left), talks with an importer of furniture products from Indonesia in Meilen, Canton (Province) Aargau in Switzerland (3/9/2021).

In the field of education, Switzerland is supporting vocational education in Indonesia through a memorandum of understanding (MoU) on the Skill for Competitiveness (S4C) Project, which was signed on 26 Jan. 2018 in Davos, Switzerland.

The cooperation aims to develop a dual vocational education-training curriculum in Indonesia.

Switzerland and Indonesia also launched in 2018 a cooperation program in Lombok, West Nusa Tenggara, to improve the quality of the workforce in the tourism industry.

The two countries are also in the process of drawing up a Young Professional (YP) Agreement, which was among the proposals raised during the CEPA negotiations. The proposed agreement was part of a joint effort to facilitate the entry of Indonesian workers into the Swiss labor market in their field of interest, including contractual service suppliers (CSS) and independent professionals (IPs).

During the pandemic, Switzerland provided 600 portable oxygen concentrators and other medical equipment worth nearly 1 million Swiss francs to Indonesia on 14 July, through Swiss Humanitarian Aid (SHA).

Hope for the future

The friendly ties between the two countries are expected to be stronger in the future in order to achieve mutual prosperity.

KOMPAS/HERU SRI KUMORO

Muliaman D Hadad

We must take concrete steps to capitalize on the Indonesia-EFTA CEPA, especially Indonesian MSME entrepreneurs and exporters. They are encouraged to tap into the opportunity to market Indonesian products to EFTA countries, including Switzerland.

Muliaman Hadad, Indonesian Ambassador to Switzerland and Liechtenstein

(This article was translated by Musthofid)