Indonesia-Korea economic ties expanding<\/p>\n
By Lee Hye-min,
\nEconomic Counselor, Korean Embassy in Jakarta<\/p>\n
The Indonesian and South Korean economies greatly
\ncomplement each other.
\nOn the one hand, Indonesia is richly endowed with a wide variety
\nof natural resources, the home to a potentially vast consumer
\nmarket with its population of more than 210 million and boasting
\na huge pool of easily trainable labor.
\nOn the other, Korea possesses the expertise, technology and
\nfinancial capital that can be deployed to develop those resources
\nfor the people's welfare.
\nThis deeply complementary and mutually beneficial aspect
\nis at the core of rapidly expanding bilateral economic
\nrelations. Rich natural resources have long attracted Korean
\ninvestment, beginning in the late 1960s.
\nKorean investors initially focused their attention on
\ndeveloping such natural resources as forests and minerals for
\nexports to Korea itself and other countries. But as Korean labor-
\nintensive manufacturing became less competitive, many Korean
\ncompanies relocated their light industrial factories, such as
\ntextiles, garments, toys, footwear, furniture and electric
\nappliances, to Indonesia.
\nIn line with the progress of Indonesian economic
\ndevelopment, Korean investors also expanded to such medium and
\nhigh-technology areas as electronics, automobile and
\ntelecommunications.
\nAs in most other countries, investment also spurred
\ntrade. Indonesia initially exported mostly raw commodities as
\nlogs, fish and minerals, but, with the development of a broader
\nbase and a higher capacity in manufacturing, it was required to
\nimport more basic and intermediate materials. It is now capable
\nof exporting a wider range of manufactured goods.
\nNo wonder that today Korea is Indonesia's fourth largest
\ntrading partner and seventh largest foreign investor. Conversely,
\nIndonesia is Korea's ninth largest trading partner and the third
\nlargest destination for its overseas investment.
\nKorean cumulative investment in Indonesia now amounts to
\nmore than US$4 billion spread across a wide range of industries,
\nsuch as textiles and garments, wood and furniture, footwear,
\nelectronics and telecommunications, mining, as well as several
\nothers.
\nThe economic crisis that engulfed both countries in the
\nlate 1990s did affect bilateral relations.
\nThe number of new Korean investment projects fell from 41 in
\n1996 to 36 in 1997, and had dropped to 20 by 1999, before
\nincreasing again to 58 in 2000, 63 in 2001 and 56 in 2002.
\nTwo-way trade also decreased immediately after the
\neconomic crisis but has risen again to reach $7.7 billion and
\n$8.8 billion annually in the period 2000-2002.
\nHowever, due largely to Korea's great demand for oil and
\nnatural gas and several other commodities from Indonesia, two-way
\ntrade has always been in favor of Indonesia to the tune of more
\nthan $1.5 billion a year.
\nEconomic cooperation expanded further in the early 1990s
\nwhen Korea became a donor member of Indonesia's consortium of
\ninternational creditors under the Consultative Group on Indonesia
\n(CGI).
\nKorea has cumulatively provided Indonesia with $20
\nmillion in grants and $160 million in soft loans. At the last CGI
\nmeeting in Bali in January, Korea pledged $3.1 million in grant
\nassistance and $20 million in soft loans to Indonesia.
\nThe complementary nature of both economies will continue
\nto contribute to a broadening and deepening of economic ties
\nbetween the two countries, especially with the strengthening of
\npolitical, macroeconomic and security stability in Indonesia.
\nIndonesia will remain one of the favorite sites for
\nKorean overseas investment, shown by the many Korean
\nbusinesspeople who have worked in the country for years and
\nbecome familiar with local culture and customs.
\nMany analysts, foreign chambers of commerce and
\ninternational institutions have provided a long list of targets
\nfor the government to fulfill to regain full investor confidence.
\nMost of these reforms are being implemented and many of
\nthem may take years to complete, but it's important to note that
\nsteady progress has been made in the improvement of the overall
\ncondition for economic activities.
\nNow it is up to the Indonesian government to continue pushing
\nforward with its reform measures, notably in upholding the rule
\nof law, to improve overall economic efficiency and draw more
\ninvestors.<\/p>\n
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