In­done­sia: Great po­ten­tial for the Swiss econ­omy

On Tues­day, the 10th Joint Eco­nomic and Trade Com­mis­sion (JETC) be­tween Switzer­land and In­done­sia took place in Bern under the chair­man­ship of Am­bas­sador An­drea Rauber Saxer and the Di­rec­tor Gen­eral for Amer­i­can and Eu­ro­pean Af­fairs at the In­done­sian Min­istry of For­eign Af­fairs, Am­bas­sador Umar Hadi. While the pri­vate sec­tor was rep­re­sented on the In­done­sian side by the In­done­sian Cham­ber of Com­merce and In­dus­try (KADIN), economiesu­isse as well as rep­re­sen­ta­tives from the tech, phar­ma­ceu­ti­cal, tex­tile, watch, lo­gis­tics and cer­ti­fi­ca­tion in­dus­tries were pre­sent on the Swiss side.

The tim­ing of the JETC was ex­tremely op­por­tune for both del­e­ga­tions. This is be­cause in­ter­est­ing de­vel­op­ments have taken place in bi­lat­eral eco­nomic re­la­tions be­tween Switzer­land and In­done­sia over the past few months.

New in­vest­ment agree­ment com­ple­ments ex­ist­ing trade agree­ment

At the end of 2023, the Swiss par­lia­ment ap­proved the new in­vest­ment pro­tec­tion agree­ment (BIT) be­tween Switzer­land and In­done­sia. economiesu­isse ex­pects that the BIT, in com­bi­na­tion with the bi­lat­eral free trade agree­ment (CEPA) that has been in place since 2021, will sig­nif­i­cantly boost the trade and in­vest­ment dy­nam­ics of Swiss com­pa­nies in In­done­sia. The CEPA it­self has not yet been able to in­crease bi­lat­eral trade to the ex­tent hoped for – but the po­ten­tial is great. At the JETC, mea­sures were there­fore dis­cussed on how the uti­liza­tion of the agree­ment by com­pa­nies in both coun­tries can be fur­ther in­creased in the fu­ture. This in­cludes, for ex­am­ple, rec­og­niz­ing all pref­er­en­tial tar­iff rates.

New op­por­tu­ni­ties with In­done­sia's new pres­i­dent

In ad­di­tion, the In­done­sian peo­ple elected a new pres­i­dent, Prabowo Subianto, in Feb­ru­ary of this year. Prabowo will take of­fice in Oc­to­ber 2024. The Swiss busi­ness com­mu­nity is very keen to see how bi­lat­eral eco­nomic re­la­tions will de­velop under the pres­i­dent-elect.

One of Prabowo's pri­or­i­ties is likely to be the con­struc­tion and ex­pan­sion of the new In­done­sian cap­i­tal Nu­san­tara, which was ini­ti­ated under the cur­rent Pres­i­dent Jokowi. At the JETC, the pos­si­ble con­tri­bu­tion of Swiss com­pa­nies (e.g. in the in­fra­struc­ture, water and trans­port sec­tors) to this mega-pro­ject was dis­cussed.

On the in­ter­na­tional stage, Prabowo will also con­tinue to push for In­done­sia's ac­ces­sion to the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment (OECD). Of­fi­cial ac­ces­sion dis­cus­sions have been un­der­way since Feb­ru­ary of this year. As the largest econ­omy in South­east Asia (pop­u­la­tion around 275 mil­lion) with an­nual growth fore­casts of around 5 per cent, In­done­sia is hop­ing for in­ter­na­tional sup­port for its own re­form plans. The lat­ter re­late in par­tic­u­lar to eco­nomic pol­icy. In­done­sia ben­e­fits from a con­sid­er­able wealth of var­i­ous raw ma­te­ri­als (in­clud­ing crude oil, nat­ural gas, palm oil and nickel), but would like to process these more do­mes­ti­cally and ben­e­fit from the cor­re­spond­ing value cre­ation («com­mod­ity down­stream­ing»).

Con­crete steps for sec­tor-spe­cific con­cerns

Fi­nally, the Swiss busi­ness com­mu­nity was also able to ad­dress its con­cerns in the bi­lat­eral re­la­tions at the JETC. These in­clude the on­go­ing dif­fi­cul­ties in ac­cess­ing in­no­v­a­tive med­i­cines in In­done­sia, some com­plex im­port reg­u­la­tions in the food sec­tor and re­stric­tions on for­eign in­vest­ment in the In­done­sian avi­a­tion in­dus­try. In ad­di­tion, In­done­sian reg­u­la­tions re­gard­ing halal prod­ucts pose dif­fi­cul­ties for var­i­ous Swiss com­pa­nies when ex­port­ing. The In­done­sian del­e­ga­tion has as­sured Swiss busi­nesses of its ac­tive sup­port with re­gard to ac­cel­er­at­ing the mu­tual recog­ni­tion of halal cer­ti­fi­ca­tions.