Jakarta. Indonesia-South Korea Comprehensive Economic Partnership Agreement, or IK-CEPA, would enhance the economic ties between the two countries that complement each other and boost economic recovery from the Covid-19 pandemic.
Indonesia Ambassador to South Korea Umar Hadi said the two countries complete one another in the economic recovery pathways.
South Korea excels in innovations but is home to an aging society. Statistics Korea data showed as of 2019, senior citizens aged 65 years old and above account for 15.5 percent of the total population. The elderly population stood at 14.8 percent in 2018.
"In comparison, younger citizens aged below 30 years old account for more than 60 percent of Indonesia's demographics. There is a bigger opportunity for the younger population to engage in productive activities and become a consumer," Umar told an online conference last week.
“If these two ‘energies’ —one with their innovations and the other with their productive population— join forces with IK-CEPA, this can greatly contribute to the recovery not only in South Korea and Indonesia but also the world."
Bolstering foreign direct investment also becomes part of the government's strategy to tackle the pandemic-induced unemployment crisis. Umar said Indonesia is aiming for investments in strategic industries like lithium batteries to create quality jobs.
“Via the IK-CEPA, we will try to boost South Korean investments that can bring high added value and open higher-paying jobs," the diplomat said.
He noted several Korean investments in the renewable energy sector in the pipeline, such as solar panels. "We are also trying to pull in semiconductor investments from South Korea. We need semiconductors for our gadgets, but we do not have the industry. Some have shown interest."
Ni Made Ayu Marthini, the Trade Ministry’s director for bilateral negotiations, named several products that will enjoy an increase in exports once IK-CEPA enters into force.
“For example, bicycles. Indonesia is among the world's renowned bicycle producers. [...] There is also a good prospect for motorcycles and their accessories,” Ni Made said.
The same goes for canned fish and textile products such as socks. As for agricultural products, South Korea has shown interest in snake fruits, she added.
The countries inked the IK-CEPA last December. The trade deal is currently waiting to be ratified. Indonesia will eliminate 92.06 percent of its tariff posts in the trade of goods, whereas South Korea will remove 95.54 percent of its tariff posts.
The bilateral trade between Indonesia and South Korea was worth $13.5 billion last year, down 15 percent from $15.7 billion in 2019. The Southeast Asian country enjoyed a $512 million surplus in oil and gas trade with South Korea last year. However, its non-oil and gas balance was in the red, with $854 million going in South Korea's direction.
Take Note, Exporters!
According to Umar, many Indonesian exporters are trying to penetrate the South Korean market. Unfortunately, their products often fail to meet their Korean partner’s expectations.
Among the four recurring complaints is the inconsistent quality of products. For instance, the first two shipments meet the standards, but then its quality recedes in the following batches. The packaging is also an issue, as South Koreans tend to go for more aesthetic, eco-friendly packaging.
"The third is taste. The Korean public taste is dynamic and changes every year. This is why Indonesian exporters must know the market well," Umar said.
Last but not least is the failure to comply with Korea's high sanitary and phytosanitary (SPS) measures. Umar highlighted exporters often collect the fruits from small-holding plantations, making the packing process difficult to meet the SPS standards. The packing plants are also not as technologically advanced.
"Businesses should be aware of the importance of SPS compliance."