Authors: Ica Cahayani and Agata Nina Puspita*
Indonesia and Switzerland’s commitment to sustainable economic and trade cooperation has started since the rising issue from cocoa to sustainable Indonesian palm oil. Through the cooperation, both countries discussed Indonesia’s strategic content in managing palm oil in the amidst of Indonesia’s oil scarcity. Palm oil has become Indonesia’s reliable commodity which has a high global value chain. In addition, the circulation of palm oil trade has become one of international concerned because of its useful functions. One of the countries, which is interested to be involved in resolving the problems of palm oil and cocoa, especially related to environmental and health issues in Indonesian plantation commodities, is Switzerland.
In the cocoa sector, Switzerland has facilitated the training of approximately 160,000 cocoa farmers in sustainable agricultural practices and has resulted in an increase in annual yields of 49%. Switzerland contributes to the establishment of sustainable value chains, the response related to gender in the management of public resources, the use of new technologies and environmentally and climate sensitive budgeting. Switzerland aims to help Indonesia in resolving development challenges. Besides, Switzerland is also intended to make Indonesia become more competitive, resilient, resource efficient, and thus become an increasingly important political and economic partner for Switzerland as a country concerned with sustainable economic development and the environment (State Secretariat for Economic Affairs SECO, 2021).
The meeting between Indonesia and Switzerland on 24 February 2022 through the 9th meeting of the Joint Economic and Trade Commission (JETC) discussed global supply value chain issues in relation with Indonesian palm oil. Through a statement, Directorate General of American and European Affairs, Ministry of Foreign Affairs of the Republic of Indonesia hoped that Switzerland’s government would be able to receive Indonesian Sustainable Palm Oil (ISPO) certification as one of the four certifications which had been recognised in the Switzerland Palm Oil Ordinance. Switzerland has a commitment to help Indonesia to increase the capacity of Indonesian small-scale farmers through the 2021-2024 development cooperation scheme (Ministry of Foreign Affairs of the Republic of Indonesia, 2022).
Indonesia and Switzerland discussed cooperation programmes, which is followed by the implementation of a comprehensive economic partnership agreement based on a sustainable economy. Both countries share similar interests, considering that Switzerland is a leading country in the environmental and health sector while Indonesia has palm oil plantations which promise superior mutual benefits.
The evidence of economic and trade cooperation between Indonesia and Switzerland is shown through the investment by Switzerland’s government to Indonesia, which has increased four times and reached US$576.3 million and it has made the trade balance continue to increase. Developing the commitment through sustainable palm oil cooperation requires a legal agreement which binds both Indonesia and Switzerland. On the other hand, it is not enough to have a commitment because it also needs an agreement through European Free Trade Association (EFTA). Bilateral cooperation between the two countries must be accompanied by a commitment of a legal agreement. It is due to the problem of resolving palm oil issue. In other words, it is not a short-term cooperation. According to Schwartz and Sykes in a book entitled “The Economic Structure of Renegotiation and Dispute Resolution World Trade Organization”, it is stated that an international agreement between two or more countries in signing a contract seeks to maximise mutual benefits for the state parties (Schwartz & Sykes, 2002.p.179), . In addition, in his book entitled “The Design of International Agreement”, Andrew T. Guzman said that international agreements contain a mechanism for dispute resolution procedures between countries that enter into agreements to maximise the relationship and benefits of two countries or more countries. For that reason, it is important for Indonesia and Switzerland to make a legal agreement in cooperation which has been carried out since 2009 in order to increase the strength of relations and the benefits of economic and trade cooperation between the two cooperation (Guzman, 2005, p.586).
Indonesia continues to boost this cooperation with the consideration that Indonesia has an abundant palm oil but has not provided maximum benefits, starting from health problems related to palm oil, environmental issues and many more. Thus, it is important for Indonesia to cooperate with Switzerland in order to improve sustainable Indonesian palm oil and, also, to increase and to maximise exports in the field of palm oil product management.
Furthermore, another problem facing by Indonesia nowadays is the scarcity of oil in Indonesia which continues to increase and invites various controversies in society. The issue of palm oil scarcity in Indonesia is allegedly because of the impact of Covid-19 pandemic. In connection with that, resolving the scarcity of oil requires a lot of investment, especially Switzerland which will not only have a financial impact but also will bring sustainability to palm oil in the fields of health and environmental issues. The cooperation between Indonesia and Switzerland is critical due to effectively reducing the long-term problem of palm oil and oil scarcity in Indonesia. In addition, Switzerland will also assist Indonesia in creating a circulation of palm oil exports in order to reach the global market by providing logistical assistance and opening direct shipping lanes for Indonesia.
Bilateral cooperation between Indonesia and Switzerland will not have a direct impact on oil scarcity, but in the long term, it will have an effective impact because the cooperation and commitment of the two countries in sustainable issues is important for Indonesia’s palm oil commodity. Besides, the cooperation between the two countries has long existed since 2009 which was marked by the signing of MoU in the Joint Economic and Trade Commission (JETC) on 24 November 2009. It continuously happened through the visitation of Switzerland’s President to Indonesia in 2010 to confirm the cooperation between Indonesia and EFTA which focuses on tourism cooperation.
Indonesia and Switzerland also cooperate in improving the cocoa farming of the two countries. The cooperation has been carried out since 2015 in order to reduce poverty and greenhouse gases in the cocoa farming sector. The collaboration was carried out in several cocoa production areas in Indonesia, such as in West Sulawesi and Southeast Sulawesi. The cooperation is called the Green Prosperity Program Cocoa Production Sustainability (GP-SCPP). This cooperation is committed to reduce poverty and to empower cocoa farmers who experienced a decrease income due to the increasement of greenhouse effect or global climate change in 2015 which happened both in Indonesia and Switzerland.
Supported by similar state’s interest, Indonesia and Switzerland legalise the cooperation in the framework of a legal international agreement. The relationship between the two countries is not only the relationship between the government but also people to people contact. Indonesia has become one of Switzerland’s priority countries through the Indonesia Cooperation Program 2021-2024 by financial support of CFH 65 million. ICP focuses on the promotion of inclusive and sustainable development, effective public institutions and the development of Micro, Small and Medium Enterprises. The two countries continue to foster cooperative relations to produce a comprehensive trade agreement between the two countries.
*Agata Nina Puspita, Student of Department of International Relation, Gadjah Mada University, Indonesia