Korea targets RI despite labor concerns
Tony Hotland, Jakarta
Despite major concern at frequent increases in wage rates despite the relatively low productivity level of Indonesian workers, Korean businesspeople plan to keep Indonesia as one of their main trading partners.
"The productivity of Indonesian workers is quite good, but some Korean businesspeople are worried about the increasing rate of labor wages," chief executive officer of the South Korea Chamber of Commerce and Industry Hyo Sung Kim said on Wednesday.
"They say there's always an increase every year and that the trend will continue. It's one of the main concerns that has caused many of our businesspeople to decide to relocate their companies to other countries," he said.
Kim, along with some 20 businesspeople from South Korea, attended the 12th bilateral economic meeting between the two countries on Wednesday.
The meeting was also attended by head of the Indonesia-Korea Economic Cooperation Committee Soy Pardede and head of the Indonesian Chamber of Commerce and Industry M.S. Hidayat.
Many foreign investors have decided to relocate their businesses to other countries, such as China and Vietnam, due to the increasing salary levels set by the Indonesian government.
China sets a US$69 minimum monthly wage, Vietnam $45, and Indonesia $80 (average).
Soy admitted the concerns, saying that the government was stepping up efforts to improve its economic policies and strategies in Indonesia to attract more investors.
"About the increasing level of salaries -- I do think it should be left to the private sector to decide because each company or industry has a different capability (to pay wages)," he said.
Nonetheless, Kim gave an assurance that Indonesia would remain South Korea's main trade partner due to Indonesia's enormous market.
"For oil and gas we rely heavily on Middle Eastern countries, but their price has been going up so we have to diversify our import sources.
"The second is that ASEAN countries are becoming one economic bloc, so we have to seek opportunities to increase our market activities in this area," he said.
Kim said that South Korean business players were eyeing high- value-added industries, such as information and high technology and development of natural resources, and power generator projects, for investment.
South Korea's current main investment areas are focused on labor-intensive industries such as textiles, footwear and garments.
Latest data from the Investment Coordinating Board (BKPM) shows 41 newly approved investment projects from South Korea, worth $39.1 million.
Both parties also agreed that the manufacture of machinery and automotive components, rubber, plastic goods and furniture had good prospects for the future.
Indonesia mainly exports crude palm oil, natural gas, agricultural and mining products, and wood to South Korea. Indonesia mostly imports advanced textile and organic chemical products, general machinery and electronic goods from the country.
Indonesia's total exports to South Korea stood at $3.9 billion, while imports stood at $1.37 billion in 2003.