RI, South Korea Agree US$10b Swap Deal

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Looking to capitalize on Indonesia’s rising number of middle class consumers, South Korea signed seven memorandums of understanding (MoUs) on investments worth over US$10 billion on Friday.

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Invest, invest: South Korean President Park Geun-hye addresses the Indonesia-Korea Business Investment Forum in Jakarta on Friday. In attendance were coordinating Economic Minister Hatta Rajasa, Indonesian Chamber of Commerce and Industry (Kadin) head Suryo B. Sulistyo and various Indonesian and Korean businesspeople. (JP/Ricky Yudhistira)

The sectors involved comprised transportation, infrastructure, manufacturing, information technology, automotive, energy, agriculture and the creative economy, according to Coordinating Economic Minister Hatta Rajasa.

He said that among the projects covered by the MoUs were the development of a 200-megawatt coal-fired power plant in Tebo, Jambi, the production of wood pellets in West Papua and the development of a railway system in South Sumatra.

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“We expect some of the investments to be realized later this year,” he told reporters after attending a business forum with South Korean President Park Geun-hye.

Quite apart from the pledged investments, last month South Korean tire maker Hankook Tire opened a $353 million plant in an industrial estate in Cikarang, West Java.

Park said in her opening speech to the forum that Indonesia and South Korea needed to consistently strengthen their economic cooperation for their mutual benefit.

“Therefore, we [Indonesia and South Korea] need the support of all businessmen present in this forum to reach our target of a trade volume of $100 billion in 2050,” she said.

According to Trade Ministry data, the two-way trade between Indonesia and South Korea totaled $13.82 billion in the first seven months of the year, with Indonesia booking a $232.6 million deficit.

The figure was down 17 percent from the $16.78 billion in the same period last year, which favored Indonesia with a $2.98 billion surplus.

South Korea’s foreign direct investment in Indonesia has steadily increased from $328.5 million in 2010, to $1.22 billion in 2011, and $1.95 billion in 2012, according to Investment Coordinating Board (BKPM) data.

The BKPM ranked South Korea as the third-largest foreign investor in Indonesia in the first half of this year, with total investments amounting to $454.2 million in 215 different projects.

Singapore topped the list with 519 projects worth a total of $1.36 billion during the same period, followed by Japan, which realized a total of 278 projects accounting for $1.15 billion.

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Indonesian Chamber of Commerce and Industry (Kadin) chairman Suryo Bambang Sulistyo said the East Asian nation had continuously increased its investment in Southeast Asia’s largest economy because Indonesia offered a huge market of 240 million people and was witnessing a sustained growth in the number of middle-class consumers.

He said Indonesia should allocate the money invested by South Korea for development in the manufacturing sector to improve competitiveness. “We can improve the quality of goods we export to South Korea when we already have a strong manufacturing sector,” Suryo said.

South Korea is not the only country extending its economic ties with Indonesia.

Earlier this month, a number of companies from Indonesia and China signed business deals worth $28.2 billion in total following a meeting between President Susilo Bambang Yudhoyono and his Chinese counterpart Xi Jinping in Jakarta.

Bank Mandiri chief economist Destry Damayanti said South Korea was currently the most aggressive country in terms of doing trade with, and investing in, Indonesia, citing the number of sectors that they had entered.

“They have entered numerous sectors including retail, technology and steel,” she told The Jakarta Post on Friday in a phone interview.

Japan started to restrengthen its investment in Indonesia last year after experiencing a decline over several years, she said.

“In 2012, Japan topped the list of the largest investors in Indonesia. I think Japan was aware that China and South Korea have begun to dominate and were moving to take its place, so it has begun to intensify its investment again,” she said.

She said that the three East Asian nations were willing to invest in Indonesia due to its huge market for their products, such as electronic devices and motor vehicles. (ogi, The Jakarta Post)

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