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t least 40 South Korean firms will set up factories in Indonesia to support the operations of the Korean steel giant Pohang Iron and Steel Company (POSCO) in Indonesia, an executive said.

PT Krakatau Steel corporate communication vice president Wawan Hernawan said on Thursday that around 40 Korean firms would enter the country with investments ranging from US$10 million to $30 million each.

The companies would support the operations of a steel plant which would be established by Posco and state-owned steel company PT Krakatau Steel (KS) in Cilegon, Banten. KS and Posco had established a joint venture, PT Krakatau POSCO (KP), to operate the steel plant.

“These firms will provide raw materials and other supporting materials for the project in Cilegon. Steel manufacturing is very specific and therefore requires specific supporting materials,” he told The Jakarta Post in a telephone interview. He cited refractory bricks for furnaces, cement and aluminum as examples of the raw materials for possible supply.

Investment Coordinating Board (BKPM) expert staff Silmy Karim told the Post on Friday that around 100 Korean firms had applied for business permits to his board since the arrival of Posco in Cilegon, last year. KP is currently clearing land to build the steel plant near the KS plant in Cilegon, Banten. The plant, estimated to cost $6 billion, would initially produce 3 million tons of steel plate when fully operational in 2014.

German-based Linde Group’s subsidiary, PT Linde Indonesia, recently unveiled its plan to set up an air-separation plant worth Rp 1 trillion ($117.33 million) in Cilegon, Banten, to provide industrial gas to the Krakatau Posco steel plant.

The new plant, due to begin operating in October 2013, will produce around 3,000 tons of oxygen, nitrogen and argon gas per day, according to the firm.

KS president director Kim Dong Ho, said on Thursday that Posco recently set up a resource-facilitating company in Indonesia, PT POSCO Resource Indonesia (PRI), to supply raw materials to KP and POSCO .

“However, if necessary, we will consider establishing another joint-venture company with Krakatau Steel and PT PRI in the future to facilitate raw materials for both companies,” he said without elaborating further.

PRI president director Noh Kyong Rae told the Post on Friday that his firm, set up on July 1, would develop raw materials like iron ore and metallurgical coal required by PT Krakatau POSCO and POSCO itself.

Nevertheless, he said, PT Krakatau POSCO would secure locally sourced raw materials as much as possible.

“In addition, if there is a specific target, PT PRI and PT Krakatau Steel will jointly acquire some portion of equity in the specific target,” he said in an e-mailed statement.

South Korea is gearing up to become one of the top foreign investors in Indonesia.

BKPM data shows that during the second quarter of this year, Korea became Indonesia’s fifth-largest foreign investor for the first time, with total investments of $199.1 million in 133 projects, representing 4.2 percent of total foreign investment of $5.04 billion in that period. The figure had risen from $139.3 million in 109 projects during the first quarter of the year.