Trade agreement is signed with Indonesia at BusanBUSAN - Korea has signed a trade deal with Indonesia as it works to broaden ties with Asean at the 2019 Asean-Republic of Korea Commemorative Summit in Busan.
According to the Ministry of Trade, Industry and Energy on Monday, Korea and Indonesia finalized a Comprehensive Economic Partnership Agreement (CEPA), which will eliminate the majority of tariff barriers between the two countries.
Korea currently has 15 free trade agreements (FTAs) and one CEPA, with India.
The CEPA with Indonesia will go into effect following legislative approval. FTAs with Britain and Israel have similarly been signed but are not yet effective.
According to the Trade Ministry, FTAs and CEPAs are broadly the same.
Under the new deal, 93 percent of the Indonesian market will be opened, which compares with the current 80.1 percent under the existing free trade agreement with Asean.
Korea’s top exports to Indonesia, such as steel, cars and auto parts will no longer face tariffs, while Indonesian bunker fuel, sugar cane and raw materials for chemical products will no longer face duties when entering Korea.
The new agreement comes as Korea seeks a more active role in the Asean market under President Moon Jae-in’s New Southern Policy.
Trade between Korea and Indonesia has fluctuated over the years.
As of 2018, Indonesia was Korea’s 12th-largest trade partner, with total trade between the two countries standing at $20 billion.
Among Asean countries, Indonesia is Korea’s second-largest trade partner after Vietnam.
Overall trade peaked at $30.8 billion in 2011 and fell to $14.9 billion in 2016, before recovering last year. Korea’s foreign direct investment into Indonesia reached $1.4 billion in 2011, while it only stood at $745 million last year.
The Korean Trade Ministry expects the new agreement to help Korean companies in their dealings with Indonesia.
“[The deal] opens Indonesia’s market by around 13 percentage points compared to the existing Korea-Asean FTA, leading to conditions to enter the market similarly as other nations,” said the ministry in a statement. “By eliminating tariffs that have impacted our companies that invest in Indonesia, such as those making steel used in cars, auto parts and petrochemical products, we have helped establish a foothold within Asean.”
CEPA negotiations with Indonesia started to progress in September last year after Indonesian President Joko Widodo visited Korea. The two countries have pursued the deal since back in 2011 and have held a total of 10 rounds of negotiations.
During the summit in Busan, Korea made overtures to other countries in the region to further lower tariff barriers. Trade Minister Yoo Myung-hee also announced that Korea will conduct a joint study with Cambodia on a possible FTA.
“We plan to seek a mutually beneficial FTA that will lead to economic cooperation with developing countries and expand Korean companies’ entrance in such markets,” said Yoo.
Korean exports to Cambodia have grown steadily in the past decade. Last year, outbound shipments to the country stood at $660 million, compared to $273 million in 2009.
BY CHAE YUN-HWAN [firstname.lastname@example.org]