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Indonesia Invites More South Korean Companies for Investment

Written By Ariearmend on Wednesday, March 28, 2012 | 7:17 PM

President Susilo Bambang Yudhoyono invited
South Korean businesses to invest more in
Southeast Asia's largest economy by capitalizing
on the archipelago's plans to boost infrastructure
development.
Yudhoyono also said both nations would start
negotiations on a free-trade agreement this year.
"I invite you to invest and to do business in
Indonesia," Yudhoyono said in his speech to
South Korean and Indonesian business leaders at
a forum in Seoul on Wednesday.
Yudhoyono, who was in South Korea as part of a
week-long overseas trip, hoped that South
Korean business would take part in Indonesia's
economic master plan (MP3EI), a blueprint that
includes spending on roads, seaports and

airports to boost growth across the country.
Yudhoyono also reaffirmed Indonesia's
commitment to bolster economic ties between
the two countries, particularly in trade and
investment. "We have agreed to begin
negotiations on a Comprehensive Economic
Partnership Agreement [CEPA] shortly," he said.
The agreement aims to increase trade between
the two countries to $50 billion by 2015 and
$100 billion by 2020, Yudhoyono said, without
revealing more details on the pact.
According to a joint Indonesia and South Korea
CEPA study, the free-trade agreement could
contribute 0.03 percentage point to Indonesia's
gross domestic product growth by liberating
trade on imported goods that are subject to
tariffs.
Trade by value between Indonesia and South
Korea has increased threefold in the past four
years, to about $30 billion in 2011 from $10.8
billion in 2007.
Investment by South Korean companies in
Indonesia quadrupled to $1.2 billion last year
from $328.5 million in 2010, according to data
from the Investment Coordinating Board (BKPM).
South Korea is the fourth-biggest foreign investor
behind Singapore, the United States and the
Netherlands, according to BKPM data.
Indonesian company Duta Firza plans to set up a
joint venture with LG International to build a
petrochemical plant in Tangguh, Papua. The plant
will cost an estimated $3 billion.
Other South Korean companies such as Posco,
the world's third-biggest steelmaker, and Honam
Petrochemical also have plans to invest in
Indonesia.
Total 2011 foreign direct investment in Indonesia
rose 18 percent to a record Rp 175.3 trillion
($19.1 billion) from a year earlier.
Still, investment growth this year may not be as
strong as in 2011 due to concerns that higher
crude oil prices may stoke inflation and the
Indonesian currency will weaken.
"Increasing global fuel prices and a weaker
rupiah can also take their toll because it would be
more expensive for business to invest," said Eric
Alexander Sugandi, an economist at Standard
Chartered Bank.
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