Indonesia, consisting of 17,000 islands, boasts the largest land area among island nations. With a population of 276 million as of 2023, it ranks fourth in the world after India, China, and the United States. As the largest consumer market in ASEAN, Indonesia’s steadily growing GDP supports its domestic market. Per capita GDP surpassed $4,000 (around 5.44 million won) in 2019 and is expected to reach $5,500 (7.48 million won) this year, with projections to exceed $7,000 (9.52 million won) by 2027, according to Statista.
The International Monetary Fund (IMF) notes that when President Joko Widodo first took office in 2014, Indonesia was the 10th largest economy in terms of GDP based on purchasing power parity (PPP). A decade later, it has risen to the seventh position, following China, the U.S., India, Japan, Germany, and Russia. Some 54.4% of its population is from the MZ generation (born in the 1980s and 1990s). Based on this demographic trend, Goldman Sachs and other analysts predict that by 2050, Indonesia will become one of the world’s top four economies and a “global consumption hub.”
Indonesia is rich in key raw materials crucial for future growth industries, such as electric vehicles and batteries. The country has 21 million tons of nickel reserves, the largest globally, accounting for about 22% of the world’s nickel supply. It also has substantial deposits of bauxite and tin and was the largest exporter of coal in the world last year, with 508 million tons.
Last year marked the 50th anniversary of diplomatic relations between South Korea and Indonesia, and the Comprehensive Economic Partnership Agreement (IK-CEPA) between the two countries came into effect. Indonesia is the only ASEAN country with which South Korea has a “special strategic partnership.” President Joko Widodo’s visit to South Korea last year aimed to enhance strategic cooperation in areas such as supply chains and economic security.
ChosunBiz interviewed Eko Prilianto Sudradjat, Trade Attache, and Marviana Sendi Siregar, Economic Counselor, at the Indonesian Embassy in Yeouido, Seoul, on July 31. Sudradjat said, “Indonesia has abundant natural resources, skilled human resources, a growing domestic market, and a favorable investment environment,” emphasizing, “Indonesia is a land of opportunities for South Korea. Invest now.” Siregar noted, “With the recent elections, the next government is expected to continue current policies, making it an opportune time for Korean companies to invest.”
She added, “Establishing a factory in Indonesia enables [South Korea] for duty-free exports across Southeast Asia. We anticipate that South Korea will soon be among the top five foreign direct investors in Indonesia.” South Korea ranks seventh in terms of foreign direct investment (FDI) in Indonesia as of 2022.
Please introduce yourself. What is South Korea’s image in Indonesia?
Eko Prilianto Sudradjat: “I handle economic, investment, and trade matters as the Trade Attache. I’ve been working at the Indonesian Embassy in Korea since 2022. I’ve found Korea to be a very friendly and safe country. My wife, 11-year-old daughter, and I live here, and my daughter goes to school alone because it’s so safe here. I’m impressed by Korea’s ‘ppalli-ppalli’ culture, where people prefer to sign contracts quickly rather than discuss details extensively, which differs from typical Indonesian business practices.”
Marviana Sendi Siregar: “I started working in Korea this year and will be here for the next four years. If you’ve been to Indonesia, you’d know that many Korean celebrities work as brand ambassadors there. That shows how positive Korea’s image is in Indonesia.”
Why is Indonesia an important trade partner for South Korea?
Trade Attache Sudradjat: “Indonesia has abundant resources that Korea, as an industrial nation, lacks. Our main exports include raw materials like coal, gas, and oil. Indonesia is also a major producer of wood pellets, a substitute for coal in Korea’s energy transition. Additionally, Indonesia serves as a production base for Korean consumer goods, with many Korean products like Nike shoes and Under Armour clothing displayed in Korean stores, and several Korean furniture brands produced in Indonesia.”
Counsellor Siregar: “Over the past five years, Indonesia has been a major investment destination for Korea. From 2019 to 2023, Korea invested $9.3 billion [about 12.64 trillion won] in Indonesia, making it the seventh largest investor. The largest contribution from Korea has been in the manufacturing sector, accounting for about 46% of total investment.”
What are the strengths and weaknesses of Korean products?
Trade Attache Sudradjat: “Korean products are known for their long lifespan and high quality. From cosmetics to wearable tech, Korean products have a strong reputation due to their technology. However, price is a weakness. While quality may justify the price, Korean products are considered expensive by Indonesian standards.”
What are some interesting export and import items in trade between Korea and Indonesia?
Trade Attache Sudradjat: “The Korean entertainment industry has sparked a boom in interest in Korean cosmetics in Indonesia. And Korea, as a tech hub, attracts interest in electronics from brands like Samsung and LG. Korean fashion products are also popular in Indonesia.”
Although Korean cosmetics are popular, entering the market is challenging. Why?
Counsellor Siregar: “Similar to how functional cosmetics must be registered with the Korean Ministry of Food and Drug Safety, Indonesian authorities require government certification for cosmetics entering the market to protect consumers. The challenge is that each product from a single brand needs individual certification, which can take six months to a year.”
In addition to cosmetics, which other sectors and products could see expanded trade between South Korea and Indonesia?
Trade Attache Sudradjat: “The South Korean government is prioritizing electric vehicles and clean energy. With this in mind, Indonesia can provide the essential resources for South Korea’s clean energy sector. Indonesia is a major producer of key metals like bauxite and tin. Notably, nickel, a vital element in battery production, plays a key role in supporting the future of sustainable industries.”
What challenges does Indonesia face?
Counsellor Siregar: “Indonesia is a nation of diverse languages and cultures. Despite its wealth of resources, many people are drawn to the capital, Jakarta, leading to significant income disparity. With fierce competition for job opportunities, finding employment can be tough. The Indonesian government is working to reduce unemployment and develop social security systems to narrow the income gap. They are also promoting the growth of startups.”
Isn’t Indonesia recognized as a startup hub?
Counsellor Siregar: “Indonesia is actively fostering startup incubation as a key element of its economic restructuring. With the second-largest startup market in ASEAN, the country boasts seven unicorns and one decacorn in industries like e-commerce and fintech. As of 2023, Jakarta’s startup ecosystem was valued at $71 billion, placing it 15th among cities globally.”
Indonesia aims to become one of the world’s top five economies by 2045, coinciding with the 100th anniversary of its independence. To reach this milestone, the country has targeted the automotive, electric vehicle, chemical, and pharmaceutical sectors among its seven key manufacturing industries. As part of its “Making Indonesia 4.0″ strategy, Indonesia is enhancing foreign investment incentives and boosting R&D funding. What percentage of Indonesia’s GDP is currently attributed to manufacturing?
Eko Trade Office: “Indonesia recently joined the ranks of the world’s top 10 manufacturing nations. The large-scale manufacturing sector makes up nearly a quarter of Indonesia’s total GDP and employs over one-fifth of the country’s working-age population, around 25 million people aged 15 to 64.”
Why should South Korean companies consider entering the Indonesian market?
Counsellor Siregar: “Indonesia’s domestic market is well-positioned to absorb South Korean consumer goods. With 71% of the population in the working-age group (15–64 years old) and a median age of just 29.7 years, Indonesia has a youthful workforce actively contributing to the economy. According to the Statistics Bureau, the average monthly salary in 2023 was 3.07 million rupiah (approximately 280,000 won), making the country an attractive base for manufacturing companies.”
Trade Attache Sudradjat: “Entering Indonesia offers access not just to its domestic market, but to the broader Southeast Asian market as well. Establishing a manufacturing plant in Indonesia enables companies to sell products to Singapore, Vietnam, and other ASEAN countries, effectively gaining control of the Southeast Asian market. Furthermore, under the Indonesia-Korea Comprehensive Economic Partnership Agreement (IK- CEPA), South Korea benefits from tariff-free access on 11,683 items, covering 95.8% of Indonesia’s export products.”
What incentives does the Indonesian government provide?
Trade Attache Sudradjat: “The Indonesian government introduced the job creation law (commonly known as the ‘Omnibus Law’) in 2020 to boost industry incentives and job creation. This law revised over 40,300 regulations, including 39 key laws affecting Indonesia’s business and investment climate. It streamlined export approval processes, reduced permit barriers, and lowered export costs, among other improvements. Additionally, the law offers incentives for foreign investment, such as tax exemptions and simplified import procedures for raw materials and machinery.”
Indonesia, the world’s largest Muslim-majority nation, is a key player in the global halal market. The Organisation of Islamic Cooperation (OIC) anticipates that Indonesia’s halal market will rank among the top three worldwide by 2025. What halal-related products could South Korean companies sell in Indonesia? Additionally, could you explain Indonesia’s halal certification system?
Trade Attache Sudradjat: “With over 230 million Muslims in Indonesia, halal products and services are a daily necessity. The Indonesian government has made halal certification a mandatory requirement for all products sold in the country. A single agency under the Ministry of Religious Affairs is responsible for managing halal certification, which is processed through an online system called ‘SiHalal,’ provided by the Ministry of Health. Halal certification is mandatory for South Korean processed foods, and currently, two organizations in South Korea—the Korea Muslim Federation and the Korea Halal Authority—are accredited by the Indonesian government.”
How is the Indonesian government working to enhance trade and investment with South Korea?
Trade Attache Sudradjat: “Each year, the Indonesian government hosts the ‘Trade Expo Indonesia,’ an international event centered on trade, tourism, and investment. This year marks the 38th edition, with a special emphasis on B2B transactions. Last year, the expo facilitated meetings between 43 South Korean companies and 116 Indonesian SMEs. This year’s event will take place from Oct 9-12, and we encourage your participation.”
