In a bid to boost investment from South Korea, the Indonesian government is planning to wrap up talks on a comprehensive economic partnership agreement (CEPA) with the East Asian nation in the first half of this year.

The Trade Ministry’s director general for international trade cooperation, Iman Pambagyo, said Monday that both parties were intensifying consultations on how to boost Korean investment in Indonesia, particularly in high-technology sectors, like automotive and electronics, once the agreement was inked.

“We’re still trying to balance our interests,” he said.

Any concessions for Indonesia were considered necessary because the country would likely benefit less from the CEPA, considering that its exports to South Korea primarily comprised natural resources rather than manufactured goods, officials have said.

The CEPA, whose negotiations began in July 2012, will encompass a deeper level of trade liberalization compared to Indonesia’s free trade agreement with South Korea and the other nine members of the Association of Southeast Asian Nations (ASEAN).

Both countries had earlier agreed to seal the CEPA by the end of last year, but they failed as a few sticking points remained unsettled during the sixth round of trade talks.

These included tariff reductions in several sensitive sectors, a real investment commitment from Korean firms, and industry cooperation for the capacity building of Indonesian business players.

Indonesia was banking on Korean investment as it would help the country become a regional production base in Southeast Asia for several major Korean corporations, Iman added.

In the first three quarters of last year, Korean investment in Indonesia totaled US$1.64 billion, channeled into 586 projects, after hitting a record high of $1.95 billion in 2012.

Between January and October last year, bilateral trade amounted to $19.2 billion, down 14.93 percent from a year earlier. Indonesian exports to Korea plunged by 26.09 percent to $9.54 billion, while imports fell only slightly by 0.03 percent to $9.66 billion, triggering a deficit of $121.45 million.

The Industry Ministry’s director general for international industry cooperation, Agus Tjahajana, said a strong investment commitment from Korea was crucial to help Indonesia combat its trade imbalance.

“The tariff reductions requested [by Korea] will affect our most sensitive products. So, we will not lower them further unless there’s a clear framework on how to endorse investment from Korea to address the imbalance,” he said.

Agus added that Indonesia was eying more investment from Korea in the areas of electronics, petrochemicals, automotive components and machinery.

The Jakarta Post | Business | Tue, January 07 2014, 11:31 AM