This is the second in a series of contributions on prospects of ASEAN-Korea relations in 2021. ― ED.
By Kim Chang-beom
The end of 2020 gives us an opportunity to look forward to a fresh start in 2021, leaving unprecedentedly difficult and tumultuous times behind. South Korea and Indonesia are still going through the dark tunnel of the coronavirus pandemic. Nevertheless, the two countries have shown remarkable examples of their special partnership from the outset of the pandemic. Let me first highlight some salient features of the partnership which were demonstrated in 2020.
The Korean government put Indonesia on its priority list for cooperation and assistance in its COVID-19 response. It provided Indonesia with hygiene and quarantine supplies including test kits. Both countries have demonstrated their teamwork by coming up with solutions to jointly produce personal protective equipment (PPE). In addition, both governments established a "Travel Corridor" to facilitate essential business and diplomatic trips between the two countries amid the ongoing crisis. In a nutshell, they reaffirm that "a friend in need is a friend indeed."
Another achievement last year was the official signing of the Indonesia-Korea Comprehensive Economic Partnership Agreement (IK-CEPA) in December. It was an important milestone for the enhancement of overall bilateral economic cooperation. According to the agreement, in the trade of goods, the Korean side will eliminate up to 95.54 percent of its tariffs, while Indonesia will eliminate 92.06 percent of its tariffs.
Against this backdrop, the new year offers us higher expectations that a closer partnership will emerge between the two countries. However, it also demands precautions and concerns in view of the ongoing fight against COVID-19 and consequential economic slowdown.
In 2021, Indonesia is expected to face for a certain period an elevated pace of new infections. Last year the Indonesian government managed to proactively procure vaccines from multiple sources, but experts forecast that the distribution of vaccines across its vast archipelago will not be completed before the end of 2021, which may limit the speed of economic recovery.
Against this backdrop, we may note with some optimism four significant factors guiding the bilateral partnership in 2021.
Firstly, it will be about how well both countries can coordinate to accelerate economic recovery and properly prepare for the post-pandemic economy. It is expected that Indonesia's GDP growth for 2021 will be around 4.5 percent to 5 percent. Labor market reforms, an easing of administrative burdens on investors and a resumption of infrastructure investments will be important signals to domestic and foreign investors.
The recently signed IK-CEPA offers new opportunities for firms in both countries to expand trade and to restructure supply chain networks. Earlier ratification and effectuation of IK-CEPA hopefully within the first half of 2021 would be setting a more favorable ground for economic recovery for both Indonesia and Korea.
Secondly, we anticipate the further enhancement of industrial cooperation in 2021. Hyundai Motor's first full-scale car manufacturing plant in Indonesia is scheduled to begin operations at the end of 2021. Moreover, Hyundai Motor Group and LG Chem are among the Korean companies said to be considering investments for the local production of electric vehicles and battery cell manufacturing in Indonesia. These new investment plans, if realized, would be another big jump for the Korea-Indonesia special strategic partnership.
The third factor will lie in closer cooperation in jointly addressing the ongoing pandemic and its aftershocks. The Korean government can continue to assist Indonesia's efforts to strengthen its relief and resilience capabilities through extending grant aid and soft loans to Indonesia. In order to reactivate people-to-people exchanges in the business and tourism sectors, both countries can work to expand the scope of the Travel Corridor.
Lastly, it is important to see how both countries can come up with productive solutions in resolving outstanding bilateral issues including in the defense industry. For example, both governments seriously need to make a breakthrough in the protracted negotiations and payment delays related to the KFX/IFX (future fighter jet) Joint Development Project, which has put an unnecessarily heavy burden on the bilateral relationship. Another project requiring an early solution is the Indonesian Navy's purchase contract of three submarines from Korea.
In 2021, both Korea and Indonesia will first address and adjust to the "new normal" caused by COVID-19, while working together to develop mutual growth.
Kim Chang-beom is Korea's former ambassador to Indonesia. He is also co-founder and adviser at the Center for Strategic and Cultural Studies (CSCS).
By Kim Chang-beom
The end of 2020 gives us an opportunity to look forward to a fresh start in 2021, leaving unprecedentedly difficult and tumultuous times behind. South Korea and Indonesia are still going through the dark tunnel of the coronavirus pandemic. Nevertheless, the two countries have shown remarkable examples of their special partnership from the outset of the pandemic. Let me first highlight some salient features of the partnership which were demonstrated in 2020.
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| Kim Chang-beom, Korea's former ambassador to Indonesia |
Another achievement last year was the official signing of the Indonesia-Korea Comprehensive Economic Partnership Agreement (IK-CEPA) in December. It was an important milestone for the enhancement of overall bilateral economic cooperation. According to the agreement, in the trade of goods, the Korean side will eliminate up to 95.54 percent of its tariffs, while Indonesia will eliminate 92.06 percent of its tariffs.
Against this backdrop, the new year offers us higher expectations that a closer partnership will emerge between the two countries. However, it also demands precautions and concerns in view of the ongoing fight against COVID-19 and consequential economic slowdown.
In 2021, Indonesia is expected to face for a certain period an elevated pace of new infections. Last year the Indonesian government managed to proactively procure vaccines from multiple sources, but experts forecast that the distribution of vaccines across its vast archipelago will not be completed before the end of 2021, which may limit the speed of economic recovery.
Against this backdrop, we may note with some optimism four significant factors guiding the bilateral partnership in 2021.
Firstly, it will be about how well both countries can coordinate to accelerate economic recovery and properly prepare for the post-pandemic economy. It is expected that Indonesia's GDP growth for 2021 will be around 4.5 percent to 5 percent. Labor market reforms, an easing of administrative burdens on investors and a resumption of infrastructure investments will be important signals to domestic and foreign investors.
The recently signed IK-CEPA offers new opportunities for firms in both countries to expand trade and to restructure supply chain networks. Earlier ratification and effectuation of IK-CEPA hopefully within the first half of 2021 would be setting a more favorable ground for economic recovery for both Indonesia and Korea.
Secondly, we anticipate the further enhancement of industrial cooperation in 2021. Hyundai Motor's first full-scale car manufacturing plant in Indonesia is scheduled to begin operations at the end of 2021. Moreover, Hyundai Motor Group and LG Chem are among the Korean companies said to be considering investments for the local production of electric vehicles and battery cell manufacturing in Indonesia. These new investment plans, if realized, would be another big jump for the Korea-Indonesia special strategic partnership.
The third factor will lie in closer cooperation in jointly addressing the ongoing pandemic and its aftershocks. The Korean government can continue to assist Indonesia's efforts to strengthen its relief and resilience capabilities through extending grant aid and soft loans to Indonesia. In order to reactivate people-to-people exchanges in the business and tourism sectors, both countries can work to expand the scope of the Travel Corridor.
Lastly, it is important to see how both countries can come up with productive solutions in resolving outstanding bilateral issues including in the defense industry. For example, both governments seriously need to make a breakthrough in the protracted negotiations and payment delays related to the KFX/IFX (future fighter jet) Joint Development Project, which has put an unnecessarily heavy burden on the bilateral relationship. Another project requiring an early solution is the Indonesian Navy's purchase contract of three submarines from Korea.
In 2021, both Korea and Indonesia will first address and adjust to the "new normal" caused by COVID-19, while working together to develop mutual growth.
Kim Chang-beom is Korea's former ambassador to Indonesia. He is also co-founder and adviser at the Center for Strategic and Cultural Studies (CSCS).
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