Indonesia and South Korea are committed to accelerating the completion of the Comprehensive Economic Cooperation Agreement (Indonesia-Korea Comprehensive Economic Partnership Agreement / IK-CEPA) before the end of 2019. This commitment is marked by further negotiations between Indonesia and South Korea at the IK-CEPA intersection meeting which held on 18-25 June 2019 in Jakarta.
The intersection meeting series was held in parallel with six working group meetings and two working subgroups including trade in goods (subgroups of instrument work trade safeguards and text trade subgroups of goods), services, investment, provisions of origin, customs procedures and trade facilitation (ROOCPTF), cooperation and capacity building, as well as legal and institutional issues.
"As the agreement between the two countries to finalize the IK-CEPA negotiations as soon as possible this year, this meeting shows progress in resolving several pending issues, especially related to market access and discussion of the concept of negotiating texts," said Director of Bilateral Negociation at the Ministry of Trade Ni Made Ayu Marthini .
During the meeting, both parties committed to making the IK-CEPA a better agreement than the commitment of the two countries in the previous agreement, namely the ASEAN-Korean FTA (AKFTA). In this meeting, the two delegates also exchanged views on the initial market access offer that was exchanged on June 14, 2019. In addition, there were advances in the discussion of the concept of trade in goods and the concept of text on security instruments
trade in which most of the articles have been agreed before.
In the working group on cooperation and capacity building, the two parties discussed several possibilities for cooperation between the two countries in the industrial sector, trade in services, and capacity building in the health sector. This working group will produce a mutually beneficial and sustainable design of Indonesia and South Korea cooperation. The cooperation, especially in the fields of industry, health, fisheries, and other potential sectors, so as to increase South Korean investment in Indonesia.
In service negotiations, both parties discussed service market access for the distribution sector, legal services, construction services, independent professionals, as well as training participants and capacity building.
"The mutually beneficial increase in trade and two-way investment can be achieved if the IK-CEPA negotiations can be resolved," Made said.
The Indonesian and South Korean delegates are scheduled to meet again in August 2019 in the next IK-CEPA round to be held in South Korea.
IK-CEPA Negotiation Overview
IK-CEPA negotiations are based on the agreement between the two countries to start a comprehensive economic partnership by forming a joint study group (JSG / joint study group) IK-CEPA. The JSG meeting was held three times in 2011 and produced a JSG report in October 2011. During the period 2012-2014, the negotiations lasted until the 7th round and then stopped due to the change of government.
On February 19, 2019, the two countries agreed to reactivate the IK-CEPA negotiations through the signing of a Joint Ministerial Statement by the Minister of Trade of the two countries. IK-CEPA negotiations are targeted for completion in November 2019.
Indonesia-South Korea Trade Relations at a Glance
South Korea is the 7th largest export and source destination for Indonesia in 2018. The trade between Indonesia and South Korea in 2018 reached USD 18.6 billion. Indonesia's exports to South Korea were recorded at USD 9.53 billion and Indonesia's imports from Korea were recorded at USD 9.08 billion. Of the total trade, Indonesia had a surplus against South Korea of USD 443.6 million.
Indonesia's main export commodities to South Korea are coal, copper ore, natural rubber, plywood, and forged tin. Meanwhile, Indonesia's main import commodities are from
South Korea is synthetic rubber, flat iron steel products, electronic integrated circuits, synthetic filament yarn woven fabrics, and other vessels. (kemendag)
The Indonesian and Japanese governments agreed to continue to enhance comprehensive cooperation in developing efforts in the manufacturing industry sector. This strategic step is considered to be able to accelerate the economic growth of the two countries.
This bilateral collaboration was poured through the signing of a framework document between the Indonesian Minister of Industry Airlangga Hartarto and Japan's Ministry of Economy, Trade, and Investment (METI), Hiroshige Seko in Osaka, Japan, Thursday (6/27) local time. This synergy is an implementation of the New Manufacturing Industry Development Center (New MIDEC) project under the cooperation framework of the Indonesia-Japan Economic Partnership Agreement (IJEPA)
"With the cooperation of New MIDEC, it can compensate for the trade deficit between Indonesia and Japan in the form of basic capacity building for the manufacturing sector. For example, the capacity for welding techniques or other skills related to the automotive industry, "said the Minister of Industry.
New MIDEC activities include six sectors, namely the automotive, electronic, textile, food, beverage and chemical and metal industries. In addition there are also seven cross sectors, namely metal working, mold & dies (tooling), welding, SME development, export and investment promotion, green industry (energy, waste, emission), and industry 4.0 (digitalization, automation, policy reforms) .
The implementation of the New MIDEC program that can be implemented immediately after the signing is in the automotive sector by involving two cross sectors, including mold & dies (tooling) and SME development. Meanwhile, activities in other sectors will be carried out after both parties have prepared a Technical Arrangement and input from relevant stakeholders.
Through this collaboration, Airlangga is optimistic that there will be an increase in investment by Japanese investors embedded in Indonesia. For example, when the Minister of Industry met with the President of Toyota Motor Corp. Akio Toyoda in the One on One Meeting session, Toyota will develop electric-based vehicles especially hybrids in Indonesia. The plan, Toyota is ready to pour funds amounting to Rp28.3 trillion over the next four years.
"The next Toyota investment plan is related to new government policies, which are driving the development of electric vehicles. Well, that will be listed in two PPs. First, regarding the acceleration of electric-based vehicles, and the second is activities related to PPnBM for electric-based industries, which include hybrids. The PPnBM will become zero if it is based on electricity and the emission is the lowest, "he said.
The Minister of Industry said, the Ministry of Industry together with one of the Japanese automotive manufacturers, had conducted a study of the development and use of electric vehicles. This activity also involved six universities in Indonesia.
"From the results of the study, hybrids are seen as an alternative because of the well to wheel, where the ecosystem generation of energy is also seen, starting from primary energy to the automotive drivers," he explained. The Ministry of Industry itself has encouraged the development of domestic electric vehicle technology, including the making of fuel cells.
The Minister of Industry added, in attending the State-Group Summit 20 (G-20) in Osaka, it met with a number of CEOs from well-known companies in Japan. They hope that the investment climate in Indonesia will improve, which includes the guarantee of the availability of raw materials and the support of adequate infrastructure such as electricity and ports to become a force to improve the competitiveness of an industry.
"In a forum business consisting of various industries, the average large Japanese company has operated for more than 30 years in Indonesia. The sectors range from energy, electricity, pulp and paper, chemical, automotive and banking, "he said.
The Minister of Industry affirmed, the Indonesian Government will soon issue a new policy package to support the business world, by providing fiscal incentive facilities in the form of tax holidays, tax allowances, and super deduction tax for vocational and innovation.
"Besides that there are also discussed related to the banking industry. One of the topics of discussion is the existence of data centers and digital financial inclusive, which uses artificial intelligence technology. Then it was also discussed for the project prototype for smart cities, "he added.
On that occasion, Minister of Seko conveyed, one of the important automotive policies going forward was the development of battery or electric-based vehicles. So far, Japan has implemented a parallel policy for electric (EV) and hybrid bases. (kemenperin)
The Indonesian government continues to improve bilateral cooperation with South Korea in various fields, especially in the industrial sector, both increasing trade and investment. To open up greater opportunities for synergy between the two countries, the Indonesian Minister of Industry (Menperin RI) Airlangga Hartarto held a meeting with South Korea's Minister of Trade, Industry and Energy (MoTIE), Sung Yun Mo.
"This meeting was to follow up the leaders' meeting, which also followed up on the Memorandum of Understanding (MoU) in September 2017," the Minister of Industry said after the meeting in Seoul on Wednesday (26/6) local time.
In general, according to Airlangga, the business and economic sectors of Indonesia and South Korea have made a lot of progress. Some of the strategic cooperation that has been carried out includes joint task forces to promote economic cooperation.
"We have the Indonesia-Korea Comprehensive Economic Partnership Agreement in 2019 which targets bilateral trade up to USD30 billion in the next 2022," he added.
According to Airlangga, the Ministry of Industry currently has a total of 10 international cooperation agreements with various partners in the Republic of Korea. The six agreements include cooperation between units within the Ministry of Industry and government institutions in Korea.
"In general, the level of implementation of the Ministry of Industry's cooperation with partners in the Republic of Korea is very good, namely nine out of 10 agreements have been implemented," he said.
On that occasion, there was also a signing of further cooperation between the Ministry of Industry and the National Research Council for Economics, Humanity, and Social Sciences or the National Research Council for South Korea's Economic, Humanities and Social Sciences (NRC). "This is a derivative agreement on industry-related MoU 4.0 which was signed on September 10, 2018," he said.
The Minister of Industry explained, the continued cooperation would facilitate the placement of technical experts, including holding industrial implementation 4.0 which would be carried out in five industrial sectors, namely automotive, food and beverage, textile and textile, chemical and electronic products.
"As a follow-up to the MoU, we signed an agreement on the technical cooperation framework with NRC," he said.
The Minister of Industry also explained the development of industrial investment from South Korea in Indonesia. For example, the Posco steel industry company has invested in the past four years to produce 3 million tons of steel from the blast furnace process to the slab. "We are discussing the 10 million steel roadmap in Cilegon for the year 2025, then building a downstream industry with products such as CRC," he explained.
Meanwhile, in the chemical industry, Lotte Chemicals has conducted a ground breaking plant with an investment of USD4 billion. "It is expected that this plant will operate in 2020. Meanwhile, we are engaged with Hyundai Motor Corporation about its investment plans in Indonesia. In principle, we provide support for this investment, "he added.
Furthermore, the Ministry of Industry continues to support increased collaboration in five industrial sectors according to Making Indonesia 4.0's priority to conduct deeper cooperation. "One of the considerations is the Indonesian mobile market which amounts to 60 million. In addition, the digital economy is highly developed in Indonesia with the support of the younger generation, "said the Minister of Industry.
Airlangga believes that cooperation between Korea and Indonesia can be done to explore the structure of the industry, especially to support the cellphone and IoT industry. Moreover, with the current conditions of trade competition, there are several telecommunications equipment industries that compete for the 5G market, including Korean companies.
On the same occasion, Minister Sung Yun Mo conveyed, Indonesia is an important partner country for Korea. With the creation of a conducive business climate, a number of industrial investments from South Korea are still expanding.
"Regarding Posco which continues to expand in the steel industry sector, we thank you for the smooth running of the project. Then, related to Lotte, we hope to continue to get support for the continuation. Through this investment, it will sustain development in Indonesia and Korea. So, there is a win-win result, "he said.
Minister Sung Yun Mo added, strengthening the cooperation between the two countries not only in the steel and chemical sectors, but also targeting the automotive sector. This is important because it can strengthen industrial competitiveness in Indonesia.
"Automotive cooperation also opens opportunities for component suppliers, with a large number of vehicle component needs, this can also strengthen SMIs in Indonesia. This cooperation is very meaningful, because it will increase competitiveness, and contribute to a healthier industrial ecosystem, "he added. (kemenperin)
The Indonesian Foreign Minister, Retno Marsudi, has conducted a Bilateral Meeting with the Japanese Foreign Minister, Taro Kono, in Osaka on June 27, 2019. Opening the meeting, Minister of Foreign Affairs Kono welcomed the ASEAN Outlook on the Indo-Pacific and appreciated Indonesia's leadership in the region.
Both Foreign Ministers also discussed the development of the situation at Rakhine State and Minister of Foreign Affairs Kono expressed appreciation for the role of the AHA Center. "The AHA Center has done a good job," said Foreign Minister Kono.
Still related to regional issues, the two Foreign Ministers hope that the Regional Comprehensive Economic Partnership (RCEP) negotiations can be concluded by the end of this year.
Regarding bilateral relations, the two Foreign Ministers agreed that the 2 + 2 meeting (Minister of Foreign Affairs and Defense) will be held in the second half of 2019. On this occasion, the two Foreign Ministers also welcomed the completion of the General Review of Economic Partnership Cooperation (IJEPA) negotiations and committed to finalizing the discussion of the IJEPA amendment protocol before the end of 2019.
The two Foreign Ministers had the opportunity to discuss the progress of employment with the signing of the MoU on the cooperation of specific skills and the technical cooperation MoU for apprenticeship programs in Japan. With this agreement, Indonesia's skilled workers, including Indonesian apprentices in Japan, now have a greater opportunity to fill the fields of work in the formal sector, such as health, agriculture, fisheries and automotive. (Ministry of Foreign Affairs)