Indonesia-Switzerland relations: Post I-EFTA CEPA Referendum
Writer: Hendra Manurung (Doctoral candidate in international relations at Padjadjaran University, Bandung)
Switzerland is looking forward to having a national referendum in March 2021 to determine the fate of Indonesia and the European Free Trade Area (EFTA) CEPA agreement. As it is known that the agreement between Indonesia and EFTA member-states was signed in December 2018 and approved by the Swiss parliament in December 2019. EFTA is an inter-governmental organization established to promote free trade and economic integration for the benefits of Switzerland, Norway, Liechtenstein and Iceland and their partner countries.
The EFTA member-countries are non-EU countries with a high average per capita income of more than US$ 80 thousand per year and a combined GDP value of around US$ 1 billion. More than 70 percent of the EFTA countries’ exports go to neighbouring countries in the European Union as the EU has been the main trading partners of EFTA countries for many years.
Henceforth, according to the Swiss constitution, although this agreement has been discussed and approved in Parliament, however, it is still given the opportunity for the public freedom to convey their aspirations. There is a group of NGOs and Swiss farmers who submitted a referendum to reject the I-EFTA CEPA, regarding the substance of the agreement in the arrangement regarding reduced tariffs for Indonesian palm oil. The referendum initiation can take place after the group has collected more than 50,000 signatures. The referendum is planned to be held on March 7, 2021.
I-EFTACEPA is a comprehensive trade agreement related to coverage of market access, trade and investment facilitation and capacity building cooperation. Thus, considering that EFTA is the 23rd group of non-oil and gas export destination countries and the 25th largest country of origin for non-oil and gas imports for Indonesia, it is certain that the benefits of the I-EFTA CEPA Agreement for Indonesia are enormous because it can expand market access to other EFTA countries as generating Indonesian products competitiveness and qualities at Central European markets. Since the end of 2018, the Indonesian ministry of foreign affairs has continued to intensify discussions regarding the ratification of the Indonesian Agreement – the European Free Trade Association (EFTA) Comprehensive Economic Partnership Agreement (IE-CEPA).
I-EFTA CEPA was signed on December 16, 2018 in Jakarta. On 16 December 2018, Ministers and other representatives from the EFTA States and from Indonesia signed a Comprehensive Economic Partnership Agreement. Suppose this agreement strengthens the economic ties and promote trade and investment between the two sides. Historically, Indonesia and EFTA Comprehensive Economic Partnership Agreement (IE-CEPA) negotiations began officially in 2007. These negotiations are an important part of EFTA’s marketable strategy promotion in Southeast Asia region. It is also expected that there are also many opportunities and benefits that can be obtained by Indonesian service trade businessmen as vice versa, particularly in the tourism sector from the enactment of the IE-CEPA agreement, as well as the development of the sustainable tourism sector in Indonesia which is an attraction for tourists from EFTA member countries.
Indonesia and EFTA countries effort to strengthen economic trade and investment relations through a Comprehensive Economic Partnership Agreement (Indonesia-EFTA Comprehensive Economic Partnership Agreement, IECEPA) enable two-way increase and diversification of trade and investment. Increased trade and investment will open new opportunities for both-sides of businesses, workers, and consumers which will have an impact on improving welfare in Indonesia and the EFTA countries. Moreover, EFTA countries foreign investment to Indonesia from 2012 to 2020 has continued to increase significantly from year to year.
Most large companies and micro, small and medium enterprises (MSMEs) will have wider and preferential access to markets that have so far been untouched yet. Lower tariff rates and more administrative processes will easily increase trade. A stable and predictable investment condition will encourage innovation and strengthen competitiveness. An open economy will encourage job creation and improve the standards and quality of life of people.
This agreement also regulates the requirements for sustainability and other terms for Indonesian palm oil. However, these opposing groups do not believe that the regulation will work and reject Indonesian palm oil from entering the Swiss market. In addition, these opponents of Indonesian palm oil honestly reveal that vegetable oil is produced in Switzerland such as sunflower oil, canola, rapeseed and others cannot compete in price and productivity with palm oil. Switzerland opponents are generating campaigning to invite Swiss people to reject the I-EFTA CEPA. However, the Swiss Government together with its business communities is also aggressively carrying out an open campaign for the Swiss public to support the I-EFTA CEPA.
Swiss President who also serves as Minister of Economy stated that if Switzerland was not part of the I-EFTA CEPA, the Swiss economy would suffer huge losses, especially in trade and investment. The Swiss President also said that all Swiss economic activities are related to trade and the I-EFTA CEPA agreement is one of the important accesses to boost trade and attract foreign investment. Meanwhile, the Indonesian embassy in Bern continues to collaborate with various concerning groups in Switzerland to provide recent updates and the latest information related to the improvement of the Indonesian palm oil industry including support for various government policies to improve standards for Indonesia Sustainable Palm Oil.
Indonesia also receives abundant support from business’ associations (Swiss Chambers and Swiss Contact) and other Swiss multi-national corporations operating in Indonesia. Furthermore, Indonesian Embassy in Bern expects that these associations will help provide reliable information to relevant parties in Switzerland regarding policies and improvement developments in the Indonesian palm oil industry as related stakeholders also are fully committed to the application of sustainability principles. It also followed by launching a special website regarding the benefits of the I-EFTA CEPA agreement for the Swiss economy as well as other positive information regarding Indonesian palm oil at the address https://indonesien-ja.ch/, Twitter: https://twitter.com/IndonesienJA.
The results of the I-EFTA CEPA referendum in Switzerland related to palm oil will have a major impact on the prospects for economic cooperation between the two countries, where Indonesia’s exports currently have a surplus of more than US$ 2 billion until November 2020. Thus, there will be greater export opportunities including palm oil exports to EFTA countries if this agreement can be ratified and implemented. Vietnam and Malaysia as Southeast Asian countries are also currently negotiating similar agreements with EFTA countries. However, Indonesia’s foreign relations with Switzerland continue to be strengthened simultaneously through bilateral trade and investment cooperation. It is done through Indonesia-EFTA CEPA free trade agreement and mutual legal aid cooperation in the criminal sector.
In conclusion, I-EFTA CEPA is able to become a means and locomotive for economic growth to bring closer and more prospective bilateral relations between the countries involved. This will hopefully pave the way for stronger economic relations and will make an important contribution to the continuation of sustainable economic growth and prosperity for the people of Indonesia and the EFTA countries.