Indonesia-Korea Economic Cooperation is Getting Tighter and Stronger

Seoul, 12 November 2020 – The Indonesian and South Korean Governments agreed to maintain and enhance economic and business cooperation on Thursday (12/11). Both countries realized that collaboration was a key strategy to jointly overcome the economic impact of the COVID-19 pandemic.

The Indonesian delegation led by the Indonesia Investment Coordinating Board (BKPM) Chairman, Bahlil Lahadalia, met with South Korean Industry Minister, Sung Yun-mo, in Seoul, South Korea. The two ministers shared ideas on expanding investment between the two countries. This meeting was also a follow-up to the visit of the President of the Republic of Indonesia, Joko Widodo, to South Korea in November 2019.

Bahlil said that amid the COVID-19 pandemic conditions, the accelerated efforts to maintain and attract investors are increasingly needed. The Indonesian government also continues to encourage strategic and qualified investment to enter the country. BKPM is committed to facilitating South Korean investors entering Indonesia. Investors only need to come with capital and technology, while the issue of land and licensing will be fully supported by the Government of Indonesia.

“Following the President’s direction, Indonesia must move quickly towards economic transformation. This is the momentum to build industries that create added value. And South Korea has become one of Indonesia’s strategic partners in making this happen,” Bahlil explained.

The two ministers also discussed the improvement of the business climate for Korean investors, such as in the steel, chemical, auto, and textile industries.

“We think Indonesia is getting better at building a business climate that is beneficial to both parties,” said Sun Yung-mo.

When referring to the Ease of Doing Business (EoDB) ranking issued by the World Bank, Indonesia is currently ranked 73rd. Of the 11 indicators that have been studied in EoDB, there are several things that Indonesia still has to improve, including starting a business. The BKPM Chairman believes in Law No. 11 of 2020 concerning Job Creation or what is known as the newly enacted, Job Creation Law, which will guarantee ease, speed, efficiency, and certainty in starting a business.

“I always say, the Job Creation Law is the regulatory reform that we need. Businesses, both domestic and foreign, need a guarantee of ease of doing business and a healthy investment climate. If this happens, it will eventually create jobs that the state must provide,” said one of the youngest members of the cabinet.

Indonesia and South Korea signed a Comprehensive Economic Partnership Agreement (CEPA) in November last year and are currently awaiting follow-up implementation. The CEPA is equivalent to a free trade agreement but focuses on a broader scope of economic cooperation. Through this CEPA, it is hoped that the relationship between Indonesia and South Korea can continue and have a positive economic impact on both countries.

During the January-September 2020 period, BKPM noted that investment realization from South Korea was ranked 7th with a total investment of USD 683 million. As much as 70% of South Korea’s investment realization is centered on Java, with the dominating investment sectors including electricity, water gas (USD 228.4 million); Chemical and Pharmaceutical Industry (USD 148.4 million); Textile Industry (USD 60.8 million); Leather Goods and Footwear Industry (USD 50.9 million); and the food industry (USD 14.8 million). Currently, there are around 2,000 South Korean companies from various sectors that have invested and operated in Indonesia. (*)