Expanding ties

The Jakarta Post ,  Jakarta   |  Tue, 12/05/2006 1:11 PM  |  Opinion

The comprehensive strategic partnership agreement South Korean President Roh Moo-hyun and Indonesian President Susilo Bambang Yudhoyono signed here Monday will lay a stronger and broader foundation for stepping up bilateral cooperation in energy, nuclear power and forestry.

Economic interests were the focus of Indonesia-South Korea cooperation even before the countries opened diplomatic relations in 1966. As early as 1963, Korean businessmen, with full support from then-president Park Chung-hee, were visiting Indonesia to explore business opportunities.

When Indonesia enacted a foreign investment law in 1967, South Korean investors were among the first rushing in to tap the country's natural resources, notably timber.

Official statistics show Indonesia has been the second largest supplier of liquefied natural gas and pulp and paper and the sixth largest supplier of crude oil to South Korea. Indonesia, in return, has been the third biggest recipient of Korean foreign investments. Koreans make up one of the largest foreign communities in Indonesia. Even more impressive is that South Korea has been a creditor member of the Consultative Group on Indonesia, a creditor consortium coordinated by the World Bank.

The strategic partnership will ensure that the cooperation between the two countries will be based on shared values, such as democracy and a market economy, and common strategic goals such as enhancing regional cooperation.

The Indonesian and Korean economies have always complemented each other. Already a developed country with a per capita income of US$16,300 but few natural resources and a population of only 48.5 million, South Korea needs raw materials and a market for its industrial products. In turn, Indonesia, which is endowed with a wide variety of natural resources, a population of over 220 million, but a per capita income of only $1,300, badly needs capital, technology and expertise from South Korea to develop its economy.

The nine areas of cooperation fully reflect the priorities of development in Indonesia: energy and mining; forestry; information, communications and telecommunications; small and medium-scale business; trade; human resource development (notably vocational training); finance; and tourism. These are also the areas where South Korean companies have a lot to offer in terms of expertise and technology.

Take, for example, pulp plantations. The government has granted 500,000 hectares of grassy land to a consortium of Korean companies to be developed into pulp plantations. This project fits well into Indonesia's development policy, which emphasizes environmentally friendly development, and pulp is one of Indonesia's most competitive industries.

Cooperation on the development of energy and other mineral resources is also quite promising. In fact, Korea Development Company (Kodeco) was the first corporation from a developing country that ventured into Indonesia's petroleum industry in the early 1980s; it was then dominated by oil giants from the United States and Europe. So impressed was the Indonesian government with the Kodeco success in its oil and gas concession near Madura Island, East Java, that then-president Soeharto took the time to inaugurate the Kodeco oil field, even though its production was comparatively small.

Bilateral cooperation on electronics and information technology is also highly promising, with Korean brands such as LG and Samsung already making significant inroads into the local market and competing fiercely with products from the U.S. and Europe.

The strategic partnership agreement, however, will not automatically make Indonesia more attractive to Korean investors. As with our economic agreements with other countries, our pact with South Korea will be meaningless unless the government seriously pursues its reform packages to strengthen the country's economic competitiveness. Foreign investors, including those in Korea, will remain in a wait-and-see-attitude until significant progress is made in reform measures to make it much easier to do business in Indonesia.

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