4 Nov 2019
INDONESIA: Negotiations Concluded on South Korea Free Trade Agreement
The country has successfully concluded negotiations with South Korea with regard to a Free Trade Agreement (FTA). Formally entitled the Korea-Indonesia Comprehensive Economic Partnership Agreement (KI-CEPA), the trade in goods and services, as well as investment and economic cooperation, all fall within its scope. Following the success of the talks, the FTA is expected to be signed early in 2020 and come into force once it has been ratified by the parliaments of both countries.
Under the terms of the FTA, it will be easier for Indonesia to export many of its core fishery and agricultural products to South Korea while, in turn, it will be more open to investment and industrial imports from its 4,300 km distant neighbour. Overall, the KI-CEPA will remove import taxes on 95.5% of Indonesia’s exports to South Korea and 93% of South Korean exports to Indonesia. Previously, under the terms of the ASEAN Free Trade Agreement, the comparative figures were 90.2% and 80.1% respectively. While the newly-introduced duty cuts extend to steel products and auto parts, they specifically exclude a number of major agricultural items currently traded between the two countries.
South Korea is Indonesia’s sixth largest trading partner, with the total merchandise trade between the two countries amounting to US$18.62 billion last year. Of this, Indonesia’s South Korea-bound exports totalled US$9.54 billion, while its imports from South Korea were valued at US$9.08 billion. Indonesia’s primary exports to South Korea, meanwhile, include natural rubber, plywood, copper, lead and coal, while its main imports from the country include plated steel sheets, synthetic fibres, synthetic rubber, auto parts and electronics. According to Indonesia’s Director General of International Trade Negotiations, the FTA is expected to boost bilateral trade to US$30 billion by 2022.