Indonesia’s National Interests on Four Bilateral Agreements with Switzerland

Authors: Agata Nina Puspita and Ahmad Mujaddid Fachrurreza*

This article will discuss Indonesia’s national interests on four bilateral trade agreements with Switzerland at the World Economic Forum (WEF) in Davos on 22-26 May 2022 which will be reviewed based on the objectives and principles of trade investment cooperation. The focus of this article is a discussion of matters that are in Indonesia’s interest to agree on four bilateral agreements with Switzerland, namely the Bilateral Investment Treaty (BIT), the Agreement between the Chambers of Commerce and Industry (Kadin) and the Economiesuisse, the Agreement between the Indonesian Chamber of Commerce and Industry and Innosusse, as well as the agreement for the establishment of the Indonesia Trading House (ITH) between the Indonesian Chamber of Commerce and Industry and the Indonesian Market Versand, Switzerland. Furthermore, this article also discusses the form of international law used by Indonesia and Switzerland in agreeing on the four bilateral trade agreements.

Indonesia as a sovereign country has its purpose to promote public welfare and participate in carrying out world order in accordance with what is stated in Paragraph IV of the Preamble to the 1945 Constitution of the Republic of Indonesia. In addition, to fulfil these objectives, Indonesia conducts bilateral trade cooperation with Switzerland. Cooperation between Indonesia and Switzerland has been implemented for 71 years and based on the speech delivered by Ambassador Muliaman Hadad, bilateral relations between Indonesia and Switzerland are getting stronger day by day, especially in the trade sector (Ministry of Foreign Affairs, 2022).

The implementation of cooperation based on good relations is effective because there is certainty in the process to fulfil requests. The signing of this trade cooperation is also based on Law Number 1 2021 on May 7, 2021 which shows the ratification of the Comprehensive Economic Partnership Agreement between The Republic of Indonesia and The EFTA States. The law regulates comprehensive economic partnership agreement regulations to support national development programs in the economic sector in order to promote general welfare, as stated in the Preamble to the 1945 Constitution of the Republic of Indonesia.

Moreover, these trade agreements are also based on international law which provides principles for the interpretation of treaties and various technical rules on matters such as formation, reservation and amendment. The instrument that regulates the basic principles that are used as the basis for trade cooperation is contained in the General Agreement on Tariffs on Service (GATS) in Annex 1b of the WTO Charter. It is understandable, if there is an offense, the legal obligation is understood to create “legal responsibility”. In other words, the concept of a bilateral trade agreement signed by Indonesia and Switzerland is categorized as an agreement with a low level of delegation because international organisation such as the WTO has drafted international conventions and non-binding rules and some are used by private actors (Abbott, Keohane, Moravcsik, et al., 2000).

As it is known, globalization, which gives impact to the international economic system, has encouraged every country to open its market and economy so that it can be accessed and access global markets, including Indonesia and Switzerland. Since the Indonesia-EFTA CEPA took effect, Switzerland and Liechtenstein removed 7,042 Tariff Posts (81.74%) or 9965% of the value of Swiss commodity imports from Indonesia. The result of this implementation is an increase in Indonesian commodities to Switzerland in the first quarter of 2022.

In analyzing the relationship between Indonesia and Switzerland, the cooperation that has been built since 1951 becomes interesting to be discussed further. Diplomatic relations that have been built for decades have been running stronger by not only involving the two state government actors (G2G), but also between businesspersons (B2B) and people-to-people relations between the two countries. This condition is in line with the complex interdependence theory, which was first introduced by Robert Keohane and Joseph Nye, Jr in the late 1970s. This theory explains the state of relations between countries which no longer prioritizes the role of state leaders, but the presence of important roles from many other transnational actors such as multinational companies to the community level (Keohane dan Nye, Jr, 1997: 23).

The contributions made by companies and the Indonesian-Switzerland community greatly support the formation of development cooperation that has been maintained for 71 years. The establishment of the Indonesia-EFTA CEPA agreement in November 2021 also emphasized the high trust built between the two countries and the hope to continue in improving the welfare of the people of the two countries. Switzerland has agreed to make Indonesia one of its priorities starting in 2021 through a program that has been welcomed by the Indonesian government, the Indonesia Cooperation Program 2021-2024, with funding of CHF 65 million. The objectives of the program are focused on promoting inclusive and sustainable development, increasing the effectiveness of public institutions and urban planning, and increasing Indonesian Micro, Small and Medium Enterprises (MSMEs).

The four bilateral agreements that have been agreed by the Governments of Indonesia and Switzerland during the 2022 World Economic Forum (WEF) are expected to be good benchmarks after going through a complicated process for the two countries from the negotiation stage to ratification. The pros and cons of Switzerland regarding palm oil continued throughout the negotiation process, until finally 51.6 percent of the Swiss people agreed to the ratification process for the Indonesia-EFTA CEPA. The agreement is also based on the high desire of Indonesia and Switzerland to continue to strengthen economic relations and actively contribute to the sustainable development goals of the two countries, this is realized through legal certainty that is binding on Indonesia’s sustainable palm oil industry.

*Ahmad Mujaddid Fachrurreza, Magister Student of International Relations, Gadjah Mada University, Indonesia

Agata Nina Puspita
Agata Nina Puspita
Agata Nina Puspita is a graduate student in International Relation Studies at Universitas Gadjah Mada, Indonesia. Her research interests include practices and policies in international cooperation and development covering the realms of global political economy, trade and investment politics, global value chains, legal frameworks for international cooperation and business diplomacy. Other research interests include the teaching and learning, cultural and gender issues, and metacognitive strategies within the classroom in teaching and learning.