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| South Korean steel giant Posco Holdings is also preparing to set up a nickel refinery in Indonesia. (Source: Alpha Biz) |
Over the past five decades, Indonesia and South Korea have steadily strengthened their economic partnership. Trade turnover increased from US$185 million in 1973 to US$26 billion in 2022, with Indonesia becoming South Korea's 11th largest export market.
Amid recent geopolitical tensions and protectionist policies around the world, the two countries have increasingly cooperated more closely in effectively managing the supply chains of key industries.
One of the key areas is electric vehicles and batteries. Indonesia is the world's largest producer of nickel, a key ingredient in electric vehicle batteries. According to data from the US Geological Survey, Indonesia has the largest reserves of nickel at about 21 million tonnes.
Hyundai Motor Group established its first Southeast Asian manufacturing plant in Indonesia last year and is partnering with LG Energy Solution, South Korea's leading electric vehicle battery maker, to build a battery plant in the country. The plant is expected to be fully operational next year.
South Korean steel giant Posco Holdings is also preparing to set up a nickel refinery in the country to strengthen the global nickel value chain.
Another potential area of cooperation is infrastructure. Indonesia plans to move its capital from Jakarta to the new city of Nusantara in Borneo, which is scheduled to open in August next year. Companies such as Samsung C&T, the construction unit of Samsung Group, and Daewoo Engineering & Construction have joined hands with Indonesia and are ready to participate in the city's construction project.
As the Indonesian government hopes to develop Nusantara into a green, high-tech city, IT companies are also lining up to seek business opportunities.
South Korean telecommunications giant KT Corp and IT service provider LG CNS have forged a partnership with Indonesia in an effort to turn Nusantara into a “smart city” in terms of city management and mobility.
Moreover, South Korean financial companies are looking to expand in the country with its large population and young workforce. Indonesia's economy grew by 5.31% last year. South Korea's four leading commercial banks - KB Kookmin Bank, Shinhan Bank, Hana Bank and Woori Bank - all have subsidiaries in the world's fourth most populous country.
While Indonesia offers diverse opportunities with its booming economy, the Korea International Trade Association (KITA) also warns of investment risks, citing the unstable Rupiah.
“For Korean companies, the unstable rupiah remains a threat to stable earnings,” said a KITA official. Along with rising raw material costs, the rupiah has strengthened against the dollar since last year, but “we are not sure how long this will continue.”
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