JAKARTA (TheInsiderStories) - Trade minister of Indonesia, Agus Suparmanto, and his counterpart from South Korea, Sung Yun-mo, has signed the Indonesia-South Korea Comprehensive Economic Partnership Agreement (IK-CEPA) in Seoul. The signing is an important milestone for both countries, considering South Korea is increasingly interested in making Indonesia a new production base in Southeast Asian region (ASEAN).
“I believe IK-CEPA will bring Indonesia’ economy to be stronger, more competitive, open, and more attractive to South Korean investors by making Indonesia a production hub to enter regional and world markets,” said the minister in a virtual press conference on Friday (12/18).
This signing adds to the long list international trade cooperation has been achieved from the Indonesia – Australia CEPA, ASEAN – Hong Kong, China Free Trade Agreement, ASEAN – Hong Kong - China Investment Agreement and the Regional Comprehensive Economic Partnership (RCEP) Agreement. The government and the parliament also agreed on the Indonesia – Mozambique PTA, the ASEAN – Japan EPA Protocol to amend be ratified by a Presidential Regulation, and the 7th Trade Policy Review at the World Trade Organization.
Suparmanto emphasized that the signing of the IK-CEPA showed the commitment of the two countries to strengthen economic relations in the midst of a challenging global economic situation in recent years before finally being faced with the COVID-19 situation. He hoped that the IK-CEPA can assist the economic recovery of the two countries more quickly.
The IK-CEPA covered trade in goods which includes elements of tariff reduction or elimination, provisions of origin of goods, customs procedures, trade facilitation, and trade remedies, also service trade, investation, economic cooperation, and institutional arrangements. In goods trade, South Korea will eliminate up to 95.54 percent of its tariff posts, while Indonesia will eliminate 92.06 percent of its tariff posts.
Several Indonesian products whose tariffs South Korea will eliminate are lubricants, stearic acid, t-shirts, block board, dried fruits and seaweed. Meanwhile, Indonesia will eliminate tariffs for several products such as gear boxes of vehicles, ball bearings, paving, hearth or wall tiles, and unglazed. Through this agreement, Indonesia will also provide tariff preferences to facilitate South Korean investment in Indonesia for 0.96 percent tariff post worth US$254.69 million or 2.96 percent of Indonesia’ total imports.
In terms of the value of imports, South Korea will eliminate tariffs for 97.3 percent of imports from Indonesia, while Indonesia will eliminate tariffs for 94 percent of its imports from South Korea. Meanwhile, in services trade, Indonesia and Korea are committed to opening more than 100 sub-sectors.
In 2019, the partnering country was the eighth export destination country and the sixth source of imports for Indonesia. The total trade between Indonesia and South Korea in 2019 reached $15.65 billion, with Indonesian exports to South Korea amounting to $7.23 billion and imports from South Korea amounting to $8.42 billion.
The trade trend between the two countries in the 2015 – 2019 period recorded positive growth of 2.5 percent. While, the value of Indonesia’ non-oil and gas exports to South Korea until November period was recorded at $5.03 billion. In November, the value of Indonesia’ non-oil and gas exports to South Korea was recorded at $495.4 million, increased 7.12 percent compared to October was recorded at $462.5 million.
Indonesia’ main export products to South Korea include coal, briquettes, stainless steel products, plywood, natural rubber and pulp. While, the country’ imports from South Korea include electronic circuits, synthetic rubber, processed steel products and clothing materials.
In 2019, South Korea was ranked seventh as a source country for foreign investment in Indonesia, with total investment reaching $1 billion. During 2015 – 2019, South Korea’ total investment in Indonesia reached $6.9 billion and spread over 12,992 projects.
Both countries agreed to start the IK-CEPA negotiations in 2012. After negotiating for seven rounds in 2012 – 2014, the negotiations were halted because there is a change of government. In 2018, the two head of states agreed to reactivate the IK-CEPA negotiations and this was followed up by the ministers of the two by launching the reactivation of the IK-CEPA negotiations on Feb. 19, 2019.
Both parties then held the 8th negotiations in Seoul on April - May 2019 and in Jeju on August 2019. They successfully completed negotiations at the 10th round of negotiations in Bali on Oct. 8 - 10, 2019. Then issued a Joint Announcement on Substantial Conclusion of IK-CEPA Negotiations in Banten, West Java, on the sidelines of the Indonesian Trade Expo, on Oct. 26, 2019.
Then, the Joint Declaration on the Conclusion of Negotiation for IK-CEPA, on the sidelines of the 30th ASEAN - Korea Commemorative Summit in Busan on Nov. 25, 2019.
Written by Editorial Staff, Email: theinsiderstories@gmail.com
