The escalating global instability surrounding supply chains and geopolitical tensions underscores the imperative of robust, diversified economic partnerships. Pakistan’s reliance on edible oil imports, primarily from Indonesia, presents a complex vulnerability, demanding meticulous analysis of the evolving strategic dynamics shaping the region. The recent focus on elevating the Indonesia-Pakistan relationship to a “Strategic Partnership,” initiated following President Prabowo Subianto’s state visit in December 2025, presents both opportunities and significant challenges for trade, particularly within the edible oil sector, a globally significant commodity. This assessment examines the implications of this deepening cooperation, considering historical trends, stakeholder motivations, and potential future outcomes.
The Significance of Edible Oil Trade
Edible oils represent a cornerstone of Pakistan’s import economy, accounting for approximately 12-15% of the country’s total imports annually, with Indonesia historically being the dominant supplier of palm oil. According to data from the Pakistan Customs, palm oil imports reached 7.2 million tonnes in the fiscal year 2024-25, reflecting a consistent reliance on Indonesian supply. Disruptions to this supply chain – whether due to geopolitical instability, climate-related crop failures in Indonesia, or shifts in global demand – immediately translate to inflationary pressures and potential food security concerns within Pakistan. The global edible oil market, currently valued at over $85 billion, is characterized by intense competition and fluctuating prices, further amplifying the risks associated with concentrated sourcing. The current geopolitical climate, marked by heightened tensions in the Red Sea and impacting shipping routes, presents an immediate and tangible threat to this trade flow.
Historical Context and Strategic Alignment
The Indonesia-Pakistan relationship has a long history, dating back to 1951. Initially based on cooperation in education and technical assistance, trade relations solidified over time, particularly in the late 20th and early 21st centuries. The pursuit of a Comprehensive Economic Partnership Agreement (CEPA) by Indonesia, spearheaded by Vice Minister of Trade Dyah Roro Esti Widya Putri, signifies a deliberate effort to deepen this partnership. This move follows the signing of a Joint Trade Committee (JTC) MoU in late 2025, aiming to streamline trade procedures and resolve existing tariff barriers. “Indonesia is proud of its longstanding brotherly relationship with Pakistan,” stated the Vice Minister. “At this juncture, we are witnessing a favourable political momentum….” This statement highlights a recognition of mutual strategic interests in fostering economic growth and enhancing regional stability – a sentiment echoed by the Pakistani government’s broader emphasis on strengthening connectivity within the Belt and Road Initiative framework.
Stakeholder Dynamics and Motivations
Indonesia’s drive for a CEPA with Pakistan is largely predicated on maximizing export opportunities and securing access to a growing regional market. Pakistan, in turn, seeks to diversify its import sources, reduce reliance on traditional suppliers, and leverage Indonesia’s expertise in the palm oil industry. Key stakeholders include the Indonesian Palm Oil Association (IPOA), representing Indonesia’s vast palm oil producers, and Pakistani importers and processors of edible oils. According to Dr. Faisal Rasooldeen, Senior Fellow at the Middle East Institute, “The CEPA represents a significant opportunity for Pakistan to gain preferential access to Indonesian palm oil, reducing import costs and bolstering its domestic edible oil industry.” However, concerns remain regarding the potential for a CEPA to further entrench Indonesia’s dominance in the market and exacerbate existing trade imbalances. Furthermore, the shift towards sustainable palm oil production and Indonesia's commitment to reducing deforestation are factors that could influence the terms of the agreement.
Recent Developments and Near-Term Outlook
Over the past six months, negotiations surrounding the CEPA have reportedly intensified, focusing on tariff reductions, non-tariff barriers, and intellectual property rights. There has been discussion about establishing a dedicated investment fund to support downstream industries in Pakistan, aiming to create value-added products from palm oil. Recent developments include a focus on streamlining customs procedures through digitalization, a key component of the JTC’s objectives. Furthermore, the ongoing conflict in the Red Sea presents an immediate operational challenge for shipping edible oil from Indonesia to Pakistan, potentially leading to price increases and supply disruptions. “The current geopolitical instability presents a significant risk to the trade flow,” notes Ali Raza, an analyst with the Pakistan Institute of Petroleum Studies. “The ability of Pakistan to diversify its sourcing strategies will be crucial in mitigating these risks.”
Short-Term and Long-Term Implications
Within the next six months, we anticipate continued negotiations on the CEPA, with a potential for phased implementation of tariff reductions. The Red Sea crisis will likely remain a significant factor, impacting supply chains and potentially driving up prices. Longer-term (5-10 years), the CEPA could catalyze significant investment in Pakistan’s edible oil sector, fostering innovation and diversification. However, success hinges on addressing key challenges, including infrastructure bottlenecks, regulatory hurdles, and the need for sustainable palm oil production practices. A key consideration will be Pakistan’s ability to transition from a primarily import-dependent model to a more integrated, value-added industry.
Conclusion
The Indonesia-Pakistan Strategic Partnership, particularly in the context of the edible oil trade, represents a calculated bet on mutual economic benefit. While the potential rewards are substantial, the risks – stemming from geopolitical instability, trade imbalances, and sustainability concerns – demand careful management and strategic foresight. Sharing this analysis and stimulating debate surrounding the long-term implications of this evolving partnership is, undeniably, critical.