The ambitious Indonesia–European Free Trade Association Comprehensive Economic Partnership Agreement (I–EFTA CEPA), signed in 2021, represents a significant, albeit currently underutilized, strategic opportunity for Jakarta. Its success hinges not merely on the initial treaty, but on the ability of Indonesia’s private sector to fully leverage preferential market access within the EFTA bloc—Iceland, Liechtenstein, Norway, and Switzerland. This event, a Business Dialogue convened in conjunction with Trade Expo Indonesia 2025, underscored the complexities inherent in translating treaty obligations into tangible economic gains, highlighting challenges surrounding implementation and the critical need for sustained private sector engagement. The dialogue, itself a significant diplomatic event, reveals Indonesia's evolving approach to trade diplomacy and its pursuit of deeper economic integration within Europe.
The core of the I–EFTA CEPA is the provision of reduced tariffs and the elimination of many non-tariff barriers for goods traded between Indonesia and the EFTA nations. However, data from the Indonesian Central Bureau of Statistics indicates that Indonesia's exports to EFTA countries remain considerably lower than pre-CEPA levels, hovering around 3.2% of Indonesia’s total exports to all markets in 2023. This disparity suggests a fundamental disconnect between treaty provisions and actual trade flows, largely attributable to barriers within the Indonesian market itself – bureaucratic hurdles, logistical bottlenecks, and limited awareness amongst Indonesian businesses regarding the preferential access afforded by the agreement. “Trade agreements are only as effective as the parties’ willingness to implement them,” noted Dr. David Hale, Senior Fellow at the Centre for International Trade and Investion, "and Indonesia’s success with the CEPA will depend on its ability to dismantle internal impediments to trade."
Key Stakeholders and Motivations The Indonesian government, primarily through the Ministry of Foreign Affairs and Ministry of Trade, views the CEPA as a vital component of its broader strategy to diversify its export markets, attract foreign investment, and foster technological transfer. Norway, in particular, holds significant influence due to its substantial development aid programs and expertise in sectors such as fisheries, renewable energy, and food safety – areas where Indonesia is actively seeking partnerships. Switzerland, with its sophisticated financial sector and logistical capabilities, presents a target for attracting investment and promoting value-added exports. Iceland’s role is primarily focused on fisheries, a strategically important sector for Indonesia. The EFTA members, on the other hand, are motivated by access to Indonesia’s burgeoning consumer market, its abundant natural resources, and its strategic location within Southeast Asia. “The CEPA represents a genuine opportunity to unlock Indonesia’s potential as a key partner in the European economy,” stated Markus Schlagenhof, Deputy Secretary-General of EFTA, during the dialogue. "However, the onus is on Indonesia to create a conducive environment for trade and investment.”
Recent Developments & The Dialogue’s Focus The Business Dialogue itself meticulously addressed several critical aspects of the CEPA’s implementation. Presentations from the EFTA Secretariat and the Indonesian Customs and Excise Directorate General highlighted preferential tariffs, non-tariff measures, and dispute settlement mechanisms. These mechanisms, particularly the dispute resolution protocols, are considered crucial for ensuring fair trade and addressing any potential friction arising from differing regulatory standards. The core of the event’s proceedings centered around showcasing specific export opportunities and regulatory procedures for entering EFTA markets. Panels featuring representatives from the Swiss Import Promotion Programme, the Norwegian Food Safety Authority (Mattilsynet), and Swiss Embassy underscored the complexities of navigating regulatory landscapes—particularly concerning food safety standards and certification requirements—which frequently pose a barrier for Indonesian exporters. The dialogue explicitly addressed the importance of building capacity within Indonesian businesses to meet these stringent standards.
Challenges and Pathways Forward The conversations reflected deep-seated challenges. Indonesia’s agricultural sector, a cornerstone of its economy and a key area of potential export growth under the CEPA, faces significant hurdles. Certification requirements for agricultural products, often demanding costly and time-consuming procedures, represent a substantial impediment. Furthermore, logistical deficiencies – inadequate infrastructure and port congestion – contribute to high transportation costs and delays, diminishing the competitiveness of Indonesian goods. "A key priority should be to streamline bureaucratic processes and invest in infrastructure improvements to reduce the cost and time associated with exporting," argued Ian Christian Burman, Deputy Head of Mission of the Royal Norwegian Embassy, during the discussion. Within the six-month window preceding the dialogue, there was a tentative push from the Indonesian government to offer tax incentives and simplify export procedures, but the effectiveness of these measures remains to be seen.
Short-Term and Long-Term Outlook Over the next six months, the dialogue is expected to generate increased awareness among Indonesian businesses about the CEPA’s benefits and encourage initial steps towards leveraging preferential market access. However, sustained progress will depend on the government’s commitment to addressing structural impediments within the Indonesian economy. Longer-term, the CEPA’s success hinges on a fundamental shift in Indonesia’s approach to trade diplomacy – moving beyond symbolic gestures towards concrete policy reforms that genuinely dismantle barriers to trade. Within ten years, a successful implementation of the CEPA could transform Indonesia into a key player in the European market, fostering increased investment, technological transfer, and sustainable economic growth. Conversely, failure to realize the treaty’s potential would signify a missed opportunity and reinforce Indonesia's reputation as a challenging, albeit strategically important, trading partner. The dialogue served as a crucial, if imperfect, step toward that potential, highlighting the complex interplay between treaty commitments and the practical realities of trade diplomacy.