Indonesia, South Korea Celebrate 40 Years

By Bhimanto Suwastoyo on 8:30 am September 18, 2013.

With 40 years of history between them, Indonesia and South Korea are now enjoying the golden years of their relationship but much remains to be done to enhance, if not maintain, ties at this level.

“Frankly there are so many developments to report, particularly in the past three to four years. Dare we say that it is the golden period of our cooperation, and our cooperation is now at its highest,” Kim Young-Sun, South Korea’s ambassador to Indonesia, said.

Speaking to journalists to mark the 40th anniversary of diplomatic relations between the two countries, Kim said that with the two countries having no political issues between them, bilateral relations have focused on the development of trade and investment as well as other non-political sectors.

He said one milestone in the development of bilateral ties was the signing of the Strategic Partnership between the two countries in 2006.

Trade stood at $29.62 billion in 2012 with Indonesia posting a $1.7 billion surplus, Korean figures showed. Korea mostly exports diesel, gasoline, textile, hot rolled/cold rolled steel and synthetic rubber to Indonesia while importing natural gas, bituminous coal, crude oil, natural rubber and copper ore from the country.

Indonesia is the seventh largest destination for Korean investors and the second largest among member countries of Asean. In 2012, South Korean investment in Indonesia reached nearly $2 billion.

Kim characterized the strategic partnership as one concerning a sustainable relation with cooperation encompassing a wide range of sectors and areas. He said cooperation now ranged from traditional areas such as manufacturing and garments to advanced technology like steel, information technology, renewable energy and defense.

In the defense sector, the countries have been cooperating in advanced weaponry.

Kim said two of the 16 T50 advanced jet trainers ordered by Indonesia arrived in Surabaya last week and that the rest would be delivered by the end of the year.

Indonesian Navy chief, Adm. Marsetio, is scheduled to visit South Korea to attend the steel-cutting ceremony marking the start of the construction of two submarines commissioned by the Indonesian navy, he said. Three submarines of the U-209 type have been commissioned for delivery in 2015 and 2016. Two will be built at the Daewoo shipyard in Busan, South Korea while the third will be build at the state-owned shipyard facility of PAL Indonesia in Surabaya.

The two countries are currently also preparing to cooperate on jointly designed and build KFX/IFX next-generation fighter planes. In 2010, Indonesia agreed to assume 20 percent of the KF-X project cost in return for around 50 airplanes build for its air force after project’s completion.

Kim said he hoped a final decision on the cooperation will come before the year ended. “What is important is that everyone, both parties, like each other and trust each other,” he said.

He said evidence of this trust was not only the rising volume in trade and investment between the two countries but also the scale of investment involved. The ambassador cited the Posko-Krakatau investment in steel production worth $7 billion completed this year and the Hankook Tire factory worth $1.2 billion in Bekasi, West Java.

“The frequent exchange of views and communication is a very effective way to improve relations,” he said.

The two countries, he said, are also currently working on a comprehensive economic partnership agreement, rather that just on a free trade agreement. “With CEPA, we can become more than just strategic partners.”

“We are committed to an early conclusion and negotiations are still on the way,” he said, adding that a CEPA was preferable as it covered a wider range of economic cooperation not only in non tariff trade but also in industrial cooperation, capacity building and freer flow of people that could form the basis of a stronger partnership.

He said the negotiations allowed both countries to get a better understanding of each other, and in the process build confidence and trust.

“Indonesia is still a good destination for Korean investment but recently the business environment is getting more difficult,” he said, citing frequent worker demonstrations and demands for increased minimum wages.

He said that although wage increases were desirable, the speed at which it was taking place did not allow Korean employers to make adjustments. “It is very important to make the labor unions understand the consequences of demanding and getting high wages.”

There are now around 2,000 Korean companies investing in Indonesia and the South Korean community in Indonesia numbers around 50,000.

Assuring predictability and transparency as well as certainty, is also very important for investors, including South Koreans, he said, adding that a transparent mechanism of consultations between the government, businesses, investors and other stakeholders was vital to reach a compromise.

“Generally speaking, Indonesia remains a good destination for Korean investment although there are some stumbling blocks. But I think we can get over them with closer cooperation between the governments,” Kim said.