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Indonesia
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APINDO | Facilitating Entrepreneurs and Capacity Building through the
Indonesia-South Korea CEPA

The Indonesia Employers Association (APINDO) met with representatives of various industry associations to discuss the socialization of the Comprehensive Economic Partnership Agreement between Indonesia and Korea. During the meeting, representatives of APINDO proposed a variety of forms of capacity building that need to be enacted for when the CEPA between Indonesia and South Korea is established.

Since the opening of Indonesia-South Korea diplomatic relations in 1973, the two countries have established strong relationships in the fields of politics, economics and culture among others. With huge domestic market potential, a wealth of natural as well as human resources and stable economic growth in the range of 6% per year; Indonesia is one of the most attractive investment destinations. Meanwhile, the South Korean economy has grown rapidly with capital-intensive industries, high technology and skilled labor.

Total trade between Indonesia and South Korea in 2011 reached $29.4 billion USD, with exports valued at $16.4 billion and imports of $12.9 billion USD (up 44.8% compared to total trade in 2010 which amounted to $20.3 billion USD). During the period of January to April 2012, total trade between the two countries amounted to $9.8 billion USD (up 12.17% compared to the same period in 2011 which totalled $8.8 billion USD). The trend in overall trade between the two countries over the last 5 years (2007-2011) is on a positive growth trajectory at 25.11%.

Growth in Indonesia-South Korea trade volumes reflect the complementary nature of the two countries. Significantly, the increased exports between both countries are in non-oil exports. Total non-oil trade between the two countries grew by an average of 4.75% per year during the course of 2006-2010.

The balance of trade between Indonesia and South Korea from 2007 to 2011 demonstrates that Indonesia has a trade surplus. In 2011, Indonesia’s trade surplus was $3.4 billion USD (down 29.1% compared to a surplus in 2010 which amounted to $4.9 billion USD). Meanwhile, for the period January-April 2012, Indonesia enjoyed a surplus of $2.4 billion USD (up 90.84% over the same period in 2011 when the trade surplus totalled $1.2 billion USD).

In terms of investment since 1968 up until 2010, South Korean investment in Indonesia reached $8.8 billion USD, making Indonesia South Korea’s seventh largest FDI destination. Yet, Indonesia's total investments in South Korea are still relatively small, at less than $1 billion USD throughout the past decade.

A joint study group has therefore been set up to examine the potential for trade and investment cooperation between Indonesia and South Korea taking into account the increase in the trading of goods, trading of services, investment and economic cooperation. Indonesia has the potential to increase trade values by $10.6 billion USD therefore the CEPA negotiations are a crucial and strategic step for the two countries to boost economic ties.

Learning from mistakes in past negotiations, Indonesian representatives are keen to ensure that capacity building is an integral part of the agreement. A formulated plan for capacity building must therefore be established covering training, internships and on-going educational facilities.

Indonesia’s major employers have reacted very positively to the proposed CEPA acknowledging that Indonesia can learn a lot from South Korea, particularly in high technology industries and developing new entrepreneurs. Logistics are a further area where South Korea has shown a high level of sophistication as illustrated by the performance of the Port of Busan. Therefore logistics training centres in the islands outside of Java such as Sulawesi and Papua would be a valuable part of the CEPA according to the Indonesian Logistics and Freight Forwarding Association.

The Indonesian Textile Association stressed the need for the government to negotiate for capacity development and training in the fields of dying, printing and finishing for the textile industry in Indonesia.

In terms of technology, Indonesian entrepreneurs believe that the CEPA could pave the way for Indonesia to learn from South Korea in areas including environmental technology, wind and solar energy utilization as well as welding technology.

APINDO - 2013

icone share

Indonesia Snapshot

Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)