Indonesia - Korea to nurture future growth drivers
Indonesia and Korea, marking the 50th anniversary of diplomatic ties this year, are seeking to further extend their economic cooperation in key areas as both countries are eager to nurture future growth drivers.
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| An overview of Jakarta, Indonesia. (Photo: Tempo) |
Over the past five decades, the two countries have enhanced their economic partnership. The trade volume has surged from 185 million USD in 1973 to 26 billion USD in 2022, with Indonesia becoming Korea’s 11th-largest export destination.
Amid geopolitical tensions and protectionist policies around the world more recently, the two countries have increasingly joined hands in effectively managing the supply chains of their key industries.
One of the key areas is electric vehicles and its batteries. Indonesia is the world’s biggest producer of nickel, the key material for EV batteries. The country owns the largest nickel reserve of around 21 million metric tons, according to United States Geological Survey data.
Hyundai Motor Group, which set up its first Southeast Asian manufacturing plant in Indonesia last year, has teamed up with LG Energy Solution, Korea’s top EV battery maker, to build a battery cell plant in the country. The plant is set to become fully operational from next year.
Korean steel giant Posco Holdings is also working to establish a nickel refining plant in the country to strengthen its global nickel value chain.
Another area of potential cooperation is infrastructure. Indonesia plans to relocate its capital from Jakarta to the new city of Nusantara in Borneo, with hopes of inaugurating it in August of next year.
Companies such as Samsung C&T, the construction unit of Samsung Group, and Daewoo Engineering & Construction, have already joined hands with Indonesia, ready to take part in the city building project.
As the Indonesian government hopes to develop Nusantara into a high-tech, green city, IT companies are also lining up, searching for business opportunities.
Korean telecommunications giant KT Corp. and information technology service provider LG CNS have secured partnerships with Indonesia, in a bid to make Nusantara a “smart city” in terms of city management and mobility.
Furthermore, Korean finance firms are eyeing expansion in Indonesia as the country is expected to grow rapidly, backed by its large, young population. Indonesia, the world’s fourth-most populous country saw 5.31 percent growth in its economy last year.
Korea’s top four commercial lenders, KB Kookmin Bank, Shinhan Bank, Hana Bank and Woori Bank, all have subsidiaries in Indonesia, seeing potential in its fast-growing economy.
Yet though Indonesia presents diverse opportunities with a booming economy, the Korea International Trade Association (KITA) also warned of risks with jumping headfirst into piling on investments, citing the volatile rupiah.
“For Korean businesses, the volatile rupiah remains a threat to stable earnings,” the official from KITA said.
“Together with rising costs of raw materials, the rupiah has strengthened against the US dollar since last year, but we are not sure how long this will continue.”
