The Korea Herald are reporting that South Korea and Indonesia are marking the 50th anniversary of diplomatic ties this year, and are seeking to further extend their economic cooperation in key areas from electric mobility and infrastructure to finance as both countries are eager to nurture future growth drivers.
Over the past five decades, trade volume between the two has surged from USD 185-million in 1973 to USD 26-billion in 2022.
In recent years, Indonesia, abundant in natural resources crucial for electric vehicles, has come under the spotlight of Korean firms. Companies such as Korea’s top automaker Hyundai Motor Group and steel giant Posco Holdings have been making bold investments in the country, say The Korea Herald, adding that 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, who launched its first Southeast Asian manufacturing plant in Indonesia last year, has joined hands with LG Energy Solution to build a battery cell plant there. The plant is set to become operational from next year. Posco Holdings is also working to establish a nickel refining plant in the country to strengthen its global nickel value chain, say The Korea Herald.
The Indonesian government has sought to rise as a supply hub.
“The Indonesian government is encouraging the exports of refined raw materials on a policy level, banning the export of raw ore,” an official from the Korea International Trade Association’s Jakarta branch said.
Indonesian President Joko Widodo’s administration banned the exports of unprocessed nickel ore in 2020 to control the limited pool of mineable nickel resources.
“For Korean companies that can create added value through processing raw materials, Indonesia will be a land of opportunities,” the official said.
The Korea Herald report that that another area of potential cooperation for Korea and Indonesia is infrastructure. Indonesia plans to relocate its capital from Jakarta to the planned city of Nusantara, with hopes of inaugurating it in August of next year.
Companies such as Samsung C&T Corp., 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 Indonesia plans to move its capital, infrastructure companies are expected to benefit from the relocation project,” Jung Jong-hyun, chief representative at Korea Overseas Infrastructure & Urban Develop Corp., said.
“A new city requires roads, buildings and all kinds of establishments. Companies are keen to seize opportunities in a project like this,” Jung, based in Jakarta, said, hinting many countries have already started to compete to win deals.
As the Indonesian government hopes to develop Nusantara into a high-tech, green city, IT companies are also lining up, searching for business opportunities, say The Korea Herald, adding that 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” with information and communication technology.
Furthermore, Korean finance firms are eyeing expansion in Indonesia, the world’s fourth-most populous country. Indonesia, with its booming economy, is a major market for Korean banks and securities firms, as the country is expected to grow rapidly, backed by its large, young population.
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.
Even Kakao Bank, the banking arm of Korean mobile giant Kakao, plans to acquire a 10-percent stake in PT Super Bank Indonesia, which would mark the firm’s first investment outside of Korea, say The Korea Herald.
Brokerage firms, expecting Indonesia’s middle-income market to grow, also have a presence in the country.
Korea International Trade Association (KITA) also warned of risks with jumping headfirst into piling on investments, citing the volatile rupiah currency.
“For Korean businesses, the volatile rupiah remains a threat for stable earnings,” the official from KITA said.
“With higher prices in raw materials from last year, the rupiah has strengthened against the dollar, but we are not sure how long this will continue.”
To highlight business opportunities and potential in Indonesia, Herald Media Group is to host a forum under the title “Korea-Indonesia Economic Cooperation Forum in Commemoration of the 50th Anniversary of Diplomatic Relations: K-Wave and I-Wave, Together for the Future” on November 30 at the Hotel Mulia Senayan in Jakarta.
The forum will discuss cooperation between Korea and Indonesia on a business level, from battery, infrastructure to retail.
Source: The Korea Herald
Stock image by Daniel Bernard on Unsplash
