Analysis

Free trade agreement with Indonesia: The potential for Swiss exporters

The free trade agreement between the EFTA states and Indonesia will eliminate customs tariffs from more than 98 percent of Swiss exports. This is set to create a maximum annual savings potential of around 25 million Swiss francs, as an analysis by Professor Patrick Ziltener for Switzerland Global Enterprise (S-GE) shows. The MEM, chemical and pharmaceutical industries are those most likely to profit from this.

Indonesia counts 260 million inhabitants
Indonesia counts 260 million inhabitants

As almost 15 percent of Swiss exports can now be exported duty free to Indonesia, a further 57 percent of Swiss products will be exempt from customs duties once the agreement comes into force. These include agricultural products, products from the MEM sector and the chemical and pharmaceutical industries, as well as watches and precision instruments. This will enable annual savings of around 15 million Swiss francs to be made from the outset, as Patrick Ziltener notes in the study.

Elimination over twelve years

In the following years, further tariff reductions are planned for trade between Switzerland and Indonesia: After five years, the tariffs for the next 20 percent of Swiss exports will be eliminated; the last two stages are set to follow after nine and twelve years. Thus, at the latest twelve years following commencement of the free trade agreement between EFTA and Indonesia, 98 percent of Swiss products will reach the archipelagic state without tariffs, increasing the annual savings to 25 million Swiss francs.

“The free trade agreement with Indonesia is extremely attractive for the Swiss export industry, given the market’s great future potential,” stresses Daniel Küng, CEO of Switzerland Global Enterprise. “The agreement facilitates access to a market with 260 million inhabitants, who, due to the growing middle class, are acquiring increased purchasing power. It is quite probable that Swiss exports will therefore also grow – and this with hardly any obstructive tariffs from now on. In order to meet an increasing demand and to optimally support Swiss exporters in Indonesia, we opened a new Swiss Business Hub in Jakarta in summer 2017.”

Particular benefits for the MEM, chemical and pharmaceutical industries

According to Patrick Ziltener's analysis, the greatest savings potential lies in the MEM industry, as well as in the chemical and pharmaceutical sectors. This is where tariff exemptions on medicines, perfumes, toiletries and cosmetics are likely to have a major impact. In the MEM sector, the elimination of customs duties on turbines and machinery for the food industry is of particular significance. The food industry will also benefit from massive reductions in customs duties; for example the customs tariff on certain confectionery products will be reduced from 19 percent to 0 percent. Chocolate has a savings potential of around 420,000 Swiss francs.

Date of entry into force still unknown

The EFTA States and Indonesia signed a free trade agreement on December 16, 2018. It is not yet known when this will come into force. The EFTA states are Indonesia's first free trade partner in Europe. Switzerland's export volume to Indonesia in 2017 amounted to around 440 million Swiss francs.

"Exportdialog" Lucerne: Moving forward in Indonesia

Would you like to learn more about the potential of the Indonesian market? Then visit our "Exportdialog" event in Lucerne on 13 September, which we are holding jointly with the Industrie- und Handelskammer Zentralschweiz IHZ. Two entrepreneurs working in Indonesia and the head of the Swiss Business Hub in Jakarta will report on their experiences and show you what is needed for a successful market entry in Indonesia and what local support you can receive.

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