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RI, South Korea aim to seal CEPA at year’s end

Jakarta Post, Indonesia

RI, South Korea aim to seal CEPA at year’s end

By Linda Yulisman, The Jakarta Post

30 March 2013,

Indonesia and South Korea have agreed to continue talks on a comprehensive economic partnership agreement (CEPA), aiming to conclude at the end of this year a deal that will help boost bilateral trade to US$100 billion by 2020.

Trade Minister Gita Wirjawan said that apart from expanding trade, the agreement was expected to further boost investment from Korea into Southeast Asia’s largest economy and increase capacity building programs necessary for local stakeholders.

“[We hope that] the agreement upholds the spirit of partnership and is mutually beneficial,” Gita said on Friday in a statement following the conclusion of his three-day visit to Korea’s capital, Seoul, where he met his counterpart, Korean Minister for Trade, Industry and Energy Yoon Sang-jick.

Both countries formally commenced negotiations on the free trade pact that will further cut tariffs and ease commerce, in July last year and continued the second round of talks in December last year, which generated terms of reference for future negotiations.

The third round of negotiations is scheduled for May 29 to 31 this year to set up milestones that will help accelerate the process.

Separately, Korean Ambassador to Indonesia Kim Young-sun said that a quick conclusion of the agreement would be very beneficial for both Indonesia and South Korea.

“Due to complementary characteristics of both our economies, there is great potential for deeper cooperation in not only trade but also investment and industrial cooperation. If the CEPA is concluded, our economic cooperation will be further expanded and we can enjoy greater mutual benefits,” he told The Jakarta Post on the sidelines of the Korea-Indonesia Business Partnership Forum in Jakarta on Thursday.

Expressing optimism on the prospects the agreement entails, Kim said that as trade and investment were “mutually reenforcing”, the ambitious bilateral trade of $100 billion would be “achievable”.

In past years, Indonesia had already enjoyed a significant growth in trade with Korea thanks to the free trade agreement it signed through the Association of Southeast Asian Nations (ASEAN) in 2006, which was put into effect
in 2007.

In a five-year period since 2007, bilateral trade rose by 25.11 percent on average to reach $29.39 billion in 2011. But, as the world economic slowdown persisted, trade declined by 8.06 percent to $27.02 billion last year, with Indonesia exporting $15.05 billion and importing $11.97 billion.

As its firms expand massively into Indonesia, Korean investment picked up quickly and in 2011, for the first time, it became the fifth-biggest spender, pouring $1.2 billion into a variety of projects, including a steel plant by its steel giant, Pohang Iron and Steel Company (Posco), and a tire plant by the world’s seventh-biggest tire maker, Hankook Tire.

Oh Yung-ho, the president and CEO of the Korea Trade-Investment Promotion Agency (Kotra), said that at present, a number of Korean firms were seeking fresh opportunities in the areas of power generation, machinery and high technology industry in Indonesia.

“Small and medium companies from Korea also surveyed to assess the investment potential in Indonesia,” he told the Post.

Kim Kye Hwan, a research fellow at the Korea Institute for Industrial Economics and Trade, said that as Indonesia’s automotive sector had emerged as a major international player, there would be potential for both countries to develop cooperation in the sector, which was still untapped.

At present, 99 percent of Indonesian automobile production is heavily dominated by Japanese car makers, while the production of Korean firm, Hyundai, stands at only 0.6 percent.

Apart from the automotive sector, future prospects are also available in the shipbuilding industry, of which Korea has expertise and controlled a 43.9 percent market share of shipbuilding orders in 2011,
according to Kim.

“The shipbuilding industry has entered a new stage of development. It creates enormous opportunities for cooperation,” said Kim during the business forum.

Indonesia’s new vessel building capacity is about 499,000 gross tonnage (GT), whereas there is no new building shipyard for vessels of 50,000 dead weight tonnage (DWT) and over. Meanwhile, Korea’s shipbuilding industry has a building capacity of 35 million GT per year and in terms of new building shipyards, it can produce more than 200,000 DWT.