January 18, 2022
SEOUL – Indonesia will bolster economic ties with Korea through a range of projects involving cooperation through bilateral and multinational agreements and private sectors, said Indonesia’s newly appointed ambassador to Korea Gandi Sulistiyanto Suherman.
Through private-public partnerships (PPP), the Indonesia-Korea comprehensive economic partnership agreement (IK-CEPA), the regional comprehensive economic partnership (RCEP), foreign direct investment (FDI), and the creative economy, the envoy says the two sides have multiple channels to increase cooperation and overcome the economic impact of COVID-19.
The envoy said that the COVID-19 pandemic presents prospects for Indonesia and Korea to strengthen ties in the areas of socio-economic recovery, health, national protection, and both regional and world diplomacy by strengthening global health architecture, energy transition, and digital transformation.
According to Suherman, a special strategic partnership forged in 2017 fortified visions and key strategies between Indonesia and Korea in defense, international relations, bilateral trade and infrastructure, people-to-people exchanges as well as regional and global cooperation.
Suherman sees ample room for mutually beneficial cooperation with Korea’s green new deal and a digital new deal to recover the economy and normalize people’s livelihoods.
Suherman highlighted trade relations between Indonesia and Korea, which reached a total of $16.9 billion. It was a 37.18 percent increase compared to 2020, amounting to $12.3 billion.
Citing Korea International Trade Association (KITA) data and the increment of 32.28 percent in non-oil and gas exports to Korea and a 38.4 percent increment in imports from Indonesia, Suherman emphasized that Indonesia is a significant overseas investment destination for Korea, worth $7.8 billion in Q3 of the 2017-2021 period.
“Korea ranks sixth out of 145 countries that contribute to FDI in Indonesia excluding the upstream oil and gas and financial sectors,” he noted, referring to the total realized value of investment during Q3 of 2017- 2021 period.
Suherman highlighted Indonesia as South Korea’s third FDI investment destination after the US and Vietnam, based on FDI market statistical data for 2018-2021.
“Indonesia is ranked as the second destination for Korean FDI after Vietnam in the ASEAN region,” Suherman emphasized.
According to Suherman, the IK-CEPA signed in December 2020 under ratification to be effective in 2022 would boost bilateral trade and commerce, and achieve Korean companies’ goals to make Indonesia a new production base in the ASEAN region.
Suherman expressed hope that RCEP — which covers Korea, China, Japan, Australia, New Zealand — and the 10-member Association of Southeast Asian Nations would be the world’s biggest FTA. As its 15 member countries combined take up around 30 percent of the global gross domestic product, it would progressively eliminate tariff and non-tariff barriers on substantially all trade in goods to establish a free trade area among the parties.
“Scheduling of tariff commitments will maximize benefits of regional economic integration,” Suherman said, stressing that RCEP would help Indonesia emerge as a production hub and make the Indonesian economy more robust, competitive, and attractive for Korean investors.
According to Suherman, economic and technical cooperation under RCEP would narrow development gaps, maximize mutual benefits and strengthen economic and technical provisions of cooperation between Indonesia and Korea.
He recommended Korean companies to follow Hyundai’s lead, and urged them to get the Indonesian government’s help on favorable investment policies and incentives to successfully enter Indonesia. He pointed to intense market competition to secure and stabilize profitability upon entry.
Suherman referred to Hyundai’s investment of $1.55 billion to develop the first manufacturing hub in ASEAN. Established in 2019, it began commercial production in the second half of 2021 with an annual capacity of 150,000 and 250,000 units annually.
“Hyundai will deliver its latest products, technologies to Indonesia and key markets in other ASEAN regions,” he said, underlining that a manufacturing plant would provide thousands of jobs in the region.
According to Suherman, Hyundai is exploring world-class electric vehicle (EV) production in the Indonesian plant with long-term plans to launch eco-friendly vehicles and contribute towards the Indonesian government’s carbon reduction effort.
“Hyundai is establishing a comprehensive business for the subsidiaries and affiliates that operate automobile-related companies such as steel, parts, distribution, logistics, etc., to enter Indonesia,” he said.
“With Hyundai acting as an ‘anchor’ company, other subsidiaries and affiliates that follow will also add more value to Indonesia’s economy,” Suherman said. He noted that Hyundai is establishing a comprehensive business for its subsidiaries and affiliates that operate automobile-related companies of steel, parts, distribution, and logistics to enter Indonesia.
Explaining the potential prospects for Korean engineering, procurement, and construction contracts (EPC) companies in Indonesia, Suherman said that despite COVID-19, Indonesia is strengthening public-private partnerships. It is doing this by accelerating infrastructure development and economic recovery by cooperating with government and business entities for the public interest.
The ambassador said Indonesia’s KPBU, a public-private partnership, is a strategic move to finance development plans and project implementation.
KPBU is a government-to-business cooperation scheme of Indonesia
Suherman said the private sector would contribute over 50 percent of the total investment target through partnership schemes in water resources, building dams, hydroelectric power, multipurpose dams, sea dikes, roads, highways, bridges, housing, low-cost apartments, and settlement.
He cited Presidential Regulation No. 38/2015 as a milestone framework to achieve Indonesia’s infrastructure investment target of $429 billion between 2020-24.
According to Suherman, the settlement sector incorporates drinking water treatment systems, waste management, and wastewater treatment.
He said that each project under the PPP framework must complete a rigorous cycle comprised of four phases– project identification, preparation, procurement, and implementation.
Suherman referred to the Indonesian ministry of planning and development‘s data which shows 19 sectors covered by PPP projects related to connectivity, urban infrastructure, social infrastructure currently in progress with 88 solicited projects and 26 unsolicited project pipelines.
Some EPC contracts entered by Korean companies he named were the Karian Dam Water Supply Project, Hasang Hydroelectric Power Plant, Wampu Hydroelectric Power Plant, among many others.
Suherman noted that Indonesia’s public works and housing ministry (PUPR) with 25 ready-to-offer projects valued at $19 billion were available in 2021, the majority of which come from the roads and bridge sector, and many ready-to-offer projects valued at $670 million in the water resources sector.
He explained why Indonesia is a potential investment destination, citing its steady economic growth in the last decade and how it would further perform in the post-COVID-19 era.
“Indonesia is a member of the G20 and can break into the top seven largest economies by 2030,” he said. He hopes to strengthen bilateral ties, boost trade volumes, and increase foreign direct investment from Korea to Indonesia on the directives of Indonesian President Joko Widodo.
On the Indonesian president’s slogan of “Recover Together, Recover Stronger” in the 2022 G20 Bali summit, Suherman emphasized that Indonesia’s priority is to recognize collective action and have inclusive collaboration among major developed countries and emerging economies.
The 17th G20 Heads of State and Government Summit is to take place between October to November of this year in Bali.
Suherman said COVID-19 has affected every aspect of society, and gaps in countries’ capacities to address the crisis continue to prevent the world from fully controlling common problems.
“Today, the world needs it more than ever,” he stressed, acknowledging the challenges and need for collective action.
Suherman said that Indonesia will focus on three main pillars for the G20 summit and 2022 presidency: global health architecture, sustainable energy transition, and digital transformation. He proclaimed that Indonesia would continue to take the lead in ensuring equitable access to COVID-19 vaccines. It would also promote sustainable and inclusive economic development through MSMEs’ participation and focus on the digital economy.
Suherman reaffirmed Indonesia’s aspiration and commitment to collective capacity for securing shared prosperity among nations through reform efforts in global taxation, fighting corruption, deepening infrastructure financing, and pushing for a more democratic and representative international cooperation.
Meanwhile, the ambassador also highlighted Indonesia’s potential in the creative economy sector at the global level.
“Creative economy is projected to reach a global valuation of $985 billion by 2023, and could represent 10 percent of global GDP before 2030,” Suherman said, citing research data from G20 think tanks.
“Indonesia is the place where creativity is born and flourishes. Creativity is put center stage in the lives of each Indonesian,” he added, citing President Widodo’s statement at the launch of the First World Conference on Creative Economy in Bali in 2018 that the future of Indonesia will be dominated by the craft and creative industries.
“Now, as we usher in the new year of 2022, Indonesia stands ready not only for the holding of the G20 Summit, but also the Second World Conference on Creative Economy,” he said.
He noted that for the first time ever in 2021, G20 leaders recognized culture and creative industries as drivers for sustainable development and fostering economic resilience. And G20 ministers of culture have recommended including culture, cultural heritage, and the creative sector in post-pandemic recovery strategies.
“We will continue to pave the way for Indonesian ‘creative-preneurs’ to establish ventures with their Korean counterparts and vice versa,” said Suherman, adding that the strategy would be a win-win one that penetrates digital markets in Indonesia and Korea.
The ambassador said that the Indonesian embassy is operating an Indonesian batik (traditional dyed fabric) house and establishing a partnership with famous Korean designers. However, he did not reveal the names of the designers, saying the collection would be launched in the spring season.
“I would like to invite creative-preneurs to join the B-20, the business arm of G-20,” Suherman said as a conclusion to the wide-ranging interview, inviting Koreans to the B20, or “The Business 20.”
B20 is the official G20 dialogue forum with the global business community.