Indonesia Signs Landmark Trade Deal with South Korea

JAKARTA, KOMPAS.com – Indonesia and South Korea agreed on a bilateral trade deal with the signing of the Indonesia-Korea Comprehensive Economic Partnership Agreement (IK-CEPA).

As a sign of strengthening bilateral relations, Indonesian Minister of Trade Agus Suparmanto and South Korean Minister of Trade, Industry, and Energy Sung Yun-mo signed the IK-CEPA on December 18.

Agus cited Korean drama series and K-Pop music for further boosting relations with its longstanding East Asian partner.

“It cannot be denied that one of the reasons for Indonesia and South Korea’s close relations is the latter’s cultural influence. It has introduced interesting and attractive Korean drama, variety shows, and K-Pop music.

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“This bond has proven to be a strong factor in further strengthening bilateral relations.”

According to Agus, the role of culture affects the improvement of business ties, thus Indonesian society’s vested interest in Korean culture has propelled trade cooperation between the two nations.

The next step for the IK-CEPA is the ratification process and once done, the trade deal with South Korea will come into effect. Indonesia has been given 90 days after the signing to ratify the agreement which the government must first announce to the House of Representatives.

The House of Representatives will have 60 days to agree on the groundbreaking trade cooperation before it is officially ratified through an official government law or presidential regulation.

Should the IK-CEPA be ratified, the volume of trade between both countries is projected to increase by 5-10 percent at the start and even increase to $20 billion.

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In 2019, bilateral trade totaled $15.65 billion, comprising $7.23 billion in exports and $8.42 billion in imports. Trade decreased this year to $10.10 billion.

“Through the agreement, we are aiming to boost the bilateral trade to reach $20 billion by next year. Once it [the trade deal] has been ratified, it will benefit both sides, thus raising hopes that our target can be achieved.”

Before IK-CEPA, bilateral trade deal resulted in an uptick of 2.5 percent between 2015-2019.

In 2019, the East Asian nation was Indonesia’s eighth-largest export destination and sixth biggest import partner.