Korean businessmen to invest in RI's component industry

Rendi A. Witular, The Jakarta Post, Jakarta

South Korean component manufacturers are considering investing in Indonesia to supply components for Korean electronics, automotive and petrochemical industries in Indonesia as well as in Korea.

A delegation of 10 medium-scale component manufacturers from the Seo-Gu industrial district in Incheon city, South Korea, is also studying the possibility of making Indonesia the center of component producers for Korean industries in Southeast Asia.

Delegation chief Hag Jae-Lee, nevertheless, said the visiting Korean firms were interested in forming joint ventures with local companies to manufacture components here.

The local partners, he said, should already have a manufacturing facility and adequate human resources to support Korean technology.

Lee said that the joint ventures would help support the existing Indonesian units of Korean corporations such as Samsung and LG so that they would not need to import their supporting components and spare parts.

Lee also noted that Indonesia could become more attractive for Korean and other foreign companies if it could reduce corruption and improve security and legal certainty.

"Indonesia in fact still holds prospects for our industries. Despite the current bleak Indonesian investment climate, we believe that in the next five years, things will turn around," said Lee.

The investment plan in the component sector is in line with the government's program to cut the country's dependency on imported components and as such encourage electronics firms to produce high-tech products and automotive manufacturers to expand or open new plants in the country.

The Minister of Industry and Trade Rini M.S. Soewandi has previously said that the government would consider offering a stimulus package for component makers which could include the reduction or even exemption of import duties and taxes on raw materials needed.

Incentives alone, however, would not be attractive for foreign investors as long as issues of corruption and legal certainty are not addressed.

Lee contended that Indonesia would still be a favorable place for investment considering its huge market and abundant natural resources needed for the Korean components industry.

The delegation is set to meet Indonesian component and spare- part makers and buyers during their four-day visit here.

Currently, there are some 570 South Korean companies operating in the country, employing at least 500,000 workers or around 0.6 percent of the country's total labor force.

Their total investment in the country has reached US$10 billion with annual exports of around $4.5 billion per year.

The Seo-Gu district, which has more than 2,000 manufacturers, is one of Korea's prominent industrial zones which mostly manufactures electronics, machinery and information technology products.