South Korea and Indonesia plan to ratify trade pact
Jakarta Globe | April 22, 2013
South Korea and Indonesia Plan to Ratify Trade Pact
Abdul Muslim
A major agreement aimed at boosting trade and investment ties between South Korea and Indonesia may be ratified before the end of this year, industry minister M.S. Hidayat said in Jakarta on Friday.
The Comprehensive Economic Partnership Agreement is likely to be finalized before the Asia-Pacific Economic Cooperation conference, which will be held in Bali in November.
Indonesia has set its sights on increased trade and investment from South Korea, while the latter views Indonesia as a manufacturing base, in addition to it being a potential market with its population of 240 million.
The two countries are seeking to increase bilateral trade to $50 billion per annum by 2015, doubling it to $100 billion by 2020, from around $27 billion in 2012 and $30 billion in 2011.
Hidayat said the South Korean government is keen to help Indonesia develop its steel manufacturing sector, considered the “mother of industry.”
South Korean steel giant Pohang Iron and Steel Company (Posco) has been partnering with Indonesia’s biggest steel maker Krakatau Steel in a $6 billion project to construct a steel mill in Cilegon in Banten province.
Hidayat said South Korea also wants to get involved in Indonesia’s petrochemical industry, since the Southeast Asian country still mainly relies on imported petrochemical products.
Last year Indonesia’s petrochemical imports were valued at $8 billion, with many industries, such as plastic and tire manufacturing, heavily relying on petrochemical products.
Honam Petrochemical Corporation, a South Korean petrochemical giant, has already announced plans to invest up to $5 billion in a new petrochemical complex in Banten province.
Hidayat said Honam is now waiting for assurances over additional land it needs to acquire from Krakatau Steel.
In a bid to further boost the local industry, South Korea also suggested that Indonesia improves its logistics sector, especially its ports and shipping industry, so that the transportation of goods between islands may be enhanced.
According to Trade Ministry data, bilateral trade between Indonesia and Korea has recently grown by 25 percent, with coal, mineral concentrates, synthetics, fiber and pulp being the main commodities exported from Indonesia.
In turn, Indonesia imports mainly electronics, home appliances, steel products and heavy equipment from South Korea.
Hidayat added that he hoped the CEPA would also help Indonesia in developing its human resources capacity.
Foreign companies often complain about the difficulty in finding skilled labor in Indonesia, because, despite its huge population, the country has relatively few university graduates, especially those holding masters and doctorate degrees, compared to neighboring rivals such as Malaysia and Thailand.
South Korea signed a similar agreement with India in 2009. The trade agreement involves South Korea reducing import tariffs on Indian goods by 93 percent, while India would cut its tariffs on imports from South Korea by 75 percent.
