The Investment Coordinating Investment Board (BKPM) noted that, while South Korea is the fifth-largest investor in Indonesia, its position was lower than that of fellow East Asian countries Japan and China, which ranked second and third respectively.

Korea International Trade Association (KITA) chairman for the Jakarta branch Daniel Kweon said that, while South Korea acknowledged there were several issues with Indonesia’s regulatory framework, its true non-tariff barrier in Indonesia was the competition with fellow East Asian neighbors.

Such concerns were addressed at an Indonesia-Korea business dialogue hosted by KITA and the Indonesian Chamber of Commerce (Kadin) on Monday, when the Indonesian government and business representatives met with several Korean businesses, including tech behemoth Samsung and diversified Korean business group Hankook.

“[...] Indonesia is a big market but there are already China and Japan who had come earlier,” Kweon said after the dialogue.

“Korean companies have to compete against these competitors [...] they are just hesitant to decide on their investment.”

Korea is nevertheless still eager to invest in Indonesia as it climbed to third on the BKPM’s investment list for the first quarter of 2018, directly trailing Japan and pushing China down to the fourth.

Throughout 2017, South Korea’s investment had doubled to US$2.024 billion from only $1.065 billion in 2016, thanks to the 3,274 investment projects it launched in Indonesia.

Meanwhile, in the first quarter of this year, it launched 517 projects worth $940 million, data from the BKPM show.

Kweon said that economic activities between Indonesia and Korea were not maximized because of a lack of specialized deals. Indonesia has forged with other main economic partners, such as Japan, bilateral foreign trade agreements (FTA).

“Right now, our trade activities are done under the ASEAN-Korea FTA, which is not specific enough. I think we need something just between Korea and Indonesia — some sort of a comprehensive economic partnership agreement,” he said.

He pointed out that such a framework was discussed in 2012, when the Indonesian and South Korean governments launched their first CEPA negotiations. However, the talks did not result in action and were halted in 2013.

With enhanced cooperation, Kweon said, Korea was hoping to introduce more of its small and medium enterprises (SMEs) to complement the Indonesian presence of its world-famous corporate giants.

Responding to the issue, Industry Ministry director general for metals, machinery, transportation equipment and electronic industries Harjanto said the government would look into the possibility of establishing a CEPA with Korea.

Harjanto said after the meeting that Korean businesses complained of an 8 percent tariff against some of their products, although they did not specify the commodities.

“In return, we urged Korea not to import too many of their final products [to Indonesia],” he said. “We were hoping that they invest more in the production of local-made content or components so that their businesses grow [from within Indonesia].”

At the same event, Kadin vice chairwoman Shinta W. Kamdani said that, while Korean businesses did not single out Indonesia’s regulatory framework as the biggest issue, there were, nevertheless, complaints over uncertainty and transparency within the system.

Korean delegates raised concerns over the newly launched Online Single Submission (OSS) system, which was met with confusion from domestic and foreign investors after its establishment on July 9, she said.

Similarly, Shinta also attributed problems between the countries’ economic relations to the absence of a bilateral FTA.

“[Bilateral agreements] would really help improve our business relationship,” Shinta said.

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