Indonesia expects a concrete investment commitment from South Korea in the offer and request terms of a comprehensive economic partnership agreement (CEPA) to progress the talks, a minister says.
Industry Minister MS Hidayat said recently in Jakarta that his ministry had a firm stance to attract investment as an exchange of opening its market to Korean exports, whose manufactured items might flood the domestic market and thereby hurt domestic industrial sectors.
“We will lose if we rely solely on trade because much of our exports are raw materials instead of value-added products,” he said. “This won’t allow us to generate sizeable gains from exports [to Korea].”
Hidayat said his ministry, which is in charge of industrial interests, would fight for inclusion of a real investment plan in the agreement, talks of which were underway to ensure a “balanced package” deal.
According to Hidayat, negotiators should prioritize a win-win position in the deal rather than aiming for a quick conclusion of the talks.
“It will be useless if [the talks] conclude by the end of the year as targeted, but we cannot gain anything. Industrial sectors might suffer injury,” he further said.
Indonesia and South Korea are slated to carry out the fifth round of talks next month in South Korea.
During the fourth round of talks last month in Bali, both parties already delivered an exchange of requests and offers on the table.
Bilateral trade between Indonesia and South Korea, which commemorates 40 years of bilateral ties this year, valued at US$27 billion last year, down by 8 percent from 2011, as exports slumped over 8 percent to $15 billion and imports plunged by nearly 8 percent to $11.97 billion.
However, in terms of trade in industrial goods, Indonesia still lagged behind South Korea, which is known worldwide for its cutting-edge technology innovations.
Indonesia’s exports of manufactured goods to Korea rose by 11.5 percent from 2007 through to 2012, while imports soared by one-third during the same period.
As imports of industrial goods flowed faster than exports, Indonesia recorded a ballooning deficit in its trade with the East Asian country from $160.63 million in 2007 to $4.57 billion in 2012.
On the other hand, South Korea’s investment in Southeast Asia’s largest economy surged considerably in the past years.
Last year, foreign direct investment in Indonesia hit an all-time high of $1.95 billion through 421 projects, driven by huge investments from South Korean firms, such as the world’s third-biggest steel producer Posco, which is building a steel plant jointly with state-owned steel maker PT Krakatau Steel.
In response to the Industry Ministry’s stance, Trade Minister Gita Wirjawan said he acknowledged the necessity of investment thesis behind the planned free trade pact and would work out to materialize it in the deal.
However, he underlined that it would be difficult to put an exact figure in the agreement’s investment terms.
“To put a concrete figure in the agreement won’t be easy. We will discuss about this issue [with the Industry Ministry],” he told The Jakarta Post in a text message. (Linda Yulisman, The Jakarta Post)