Bilateral relations

GENERAL/BACKGROUND HISTORY

Since the establishment of diplomatic relations between Korea and Indonesia in 1973, both countries have maintained a close relationship in the fields of politics, economics, culture and others. The friendly bilateral relations between the two countries are indeed admirable which is marked by the frequent visits of both Presidents and their high ranking officials.

The bilateral relations between Indonesia and Korea has been gaining a greater momentum since the last ten years. The two countries established Joint Commission chaired by its Foreign Ministers on 9 June 2006. This is further strengthened by the signing of "The Joint Declaration on Strategic Partnership to Promote Friendship and Cooperation between the Republic of Indonesia and the Republic of Korea" by the two leaders on 4 December 2006 during the visit of President Roh Moo-hyun to Indonesia.

It is well-recognized that the two countries complementary each other. The Indonesia's abundant of natural resources and rich of biodiversity coupled by labor forces and market potential will bear fruit shall they be well-managed by the Korean high-technology, capital and skilled-management. This condition has indeed shown by the increasing trade, investment and economic cooperation as well as the strengthening of political and socio-cultural cooperation between the two countries.

POLITICS

The diplomatic relations between Indonesia and Republic of Korea was established in September 1973. The two countries believe that continuous and consistent efforts in strengthening relations and cooperation through concrete cooperation in various sectors are their best interests. The two countries share many similarities such as both are democratic country, having strategic geographical location, and active in contributing and addressing global and regional challenges.

Despite similarities, Indonesia and Republic of Korea have many complementarities in various aspects which become "opportunities window" for furthering bilateral relations and cooperation. As an illustration, Indonesia has abundant natural resources, sizeable market with increasing number of middle class societies, and manpower. On the other hand, Republic of Korea has strengths in capital, technology, IT, etc. Areas of cooperation of mutual benefit are wide-open.

Indonesia and the Republic of Korea has entered a strategic partnership in their relations through the signing of "Joint Declaration on Strategic Partnership to Promote Friendship and Cooperation between Republic of Indonesia and the Republic of Korea" by the Presidents of Republic of Indonesia and Republic of Korea. The two countries have a number of forums or modalities for bilateral relations such as
- Working Level Task Force (WLTF);
- Joint Task Force on Economic Cooperation (2007);
- Working Level Task Force Meeting/WLTFM (2008);
- Joint Secretariat RI – ROK di Jakarta (2012);
- Joint Economic Committee (WLTFM) at Economic Ministerial Level

How close the relations of the two countries probably could be seen in the frequent and quite regular exchange of visits of high dignitaries including the Presidents. Among others are visits of President Lee Myung-bak attending BDF V in November 2012, state visit of President Park Geun-hye to Jakarta, Oktober 2013, visits of President Susilo Bambang Yudhoyono attending the Nuclear Security Summit, Maret 2012, and visit of President Jokowi to Busan attending 25th ASEAN-ROK Commemorative Summit and for Bilateral Meeting on 10-12 December 2014.

During the bilateral meeting between President Jokowi and President Park Geun-hye, the two Leaders among others agreed:
- to conduct Annual Joint Commission Meeting at the Ministerial level,
- Republic of Korea will participate in shipyard development to support maritime development in Indonesia
- To resume IKCEPA negotiation
- To enhance cooperation in defense industry particularly technology transfer related with Submarine and air force planes.

Relations and Cooperation between Indonesia and Republic of Korea have also been strengthened through joint programs and activities under ASEAN-Korea Centre AKC) as well as MIKTA (Mexico, Indonesia, Korea, Turkey and Australia).

With regard to AKC, 7th Annual Meeting of Council of Directors ASEAN-Korea Center took place in Seoul on 5-6 February 2015. During the Meeting, Indonesia as Chairman of the Executive Board of ASEAN Korea Center has reported among others programs and activities implemented by AKC covering inter alia special commemorative activities in celebration of the 25th Anniversary of the ASEAN-ROK Dialogue Relations, namely, ASEAN Trade Fair, and the Best of ASEAN, which comprised of ASEAN Film Festival, the first-ever film festival in Korea, if not the whole world, that featured ten films from ASEAN Member States; Jewels of ASEAN, a large-scale public art installation symbolizing the cultural significance of the ten representative landmarks of each ASEAN Member State; ASEAN on Wheels, a road show based project with ten buses wrapped with photos illustrating the culture and tourism of ASEAN Member States that travelled through various provincial and metropolitan cities in Korea; ASEAN-Korea Youth Forum, a program which gathered 200 university students and young professionals of Korea and ASEAN Member States.

On MIKTA, several meetings have been organized by the Government of the Republic of Korea. They are:

- 1st MIKTA Senior Official Meeting (SOM) has been conducted in Seoul on 26 – 27 February 2015 chaired by Mr. Lee Kyung Soo, Deputy Minister for Political Affairs, Ministry of Foreign Affaiirs Republic of Korea. Delegation of the Republic of Indonesia was headed by Director General for Multilateral Affairs.

- 5th MIKTA Foreign Ministers Meeting (Retreat) in Seoul on 22 May 2015. The meeting was chaired by H.E. Mr. Yun Byung-se as MIKTA coordinator 2015, and attended by Minister of Foreign Affairs of Meksiko, H.E. DR. Jose Antonio Meade Kuribrena, Minister of Foreign Affairs of Turki, H.E. Mr. Mevlüt Çavuşoğlu, Minister of Foreign Affairs of Australia, H.E. Julie Isabel Bishop, MP and Director General for Multilateral Affairs Republic of Indonesia as Special Envoy of the Minister of Foreign Affairs.

- MIKTA Speakers Consultation in Seoul on 2 July 2015, attended by more than 50 delegates from MIKTA countries (Mexico, Indonesia, Korea, Turkey, Australia). Indonesian Delegation was headed by H.E. Irman Gusman - Chairman of DPD RI. On that the occasion, Minister of Foreign Affairs H.E. Yun Byung-se, attended and deliveried the outcomes of 5th MIKTA Foreign Ministers Meeting (MIKTA FMM).
During these meetings, Embassy of the Republic of Indonesia in Seoul actively participated as members of Delegation of the Republic of Indonesia.

 

ECONOMICS

B.1. ECONOMY

Indonesia today is an emerging global powerhouse in Asia, it is an attractive investment destination as well as a manufacturing hub. After the reform in 1998, Indonesia’s 250 million people have enjoyed a widening range of political freedoms, and participation in the political process is high. Joko Widodo, former businessman and governor of Jakarta, won a tight race for the presidency in 2014, pledging to end corruption and promote economic reform. As a member of the G-20 and a driving force within the Association of Southeast Asian Nations, Indonesia plays a growing role at the multilateral level. Its increasingly modern and diversified economy has recovered from the 2009 global recession.

The Gross Domestic Product (GDP) in Indonesia was worth 888.54 billion US dollars in 2014. The GDP value of Indonesia represents 1.43 percent of the world economy. GDP in Indonesia averaged 214.72 USD Billion from 1967 until 2014, reaching an all time high of 917.87 USD Billion in 2012 and a record low of 5.98 USD Billion in 1967. Indonesia's GDP contracted 2.06 percent in the last quarter of 2014, following a revised 3.16 percent growth in the previous quarter. The slow expansion was due to an increase in government spending, investment and exports were unable to offset a rising imports and a plunge in private consumption.

Indonesia is the largest economy in Southeast Asia and grew by 6.2% in 2012 and in 2014, stronger economic growth is expected around the lower end of the 5.8-6.2% range. Much less affected by the global financial crisis compared to its neighboring countries, Indonesia’s economy grew by 5% in 2014, making “The World’s Most Stable Economy in the Last Five Years” according to The Economist Magazine.

Indonesia's GDP contracted by 0.18 percent in the first quarter of 2015, following a 2.06 percent contraction in the previous quarter, as a small increase in private consumption was unable to offset a decline in government consumption, investment and exports. On the expenditure side, private consumption rose 0.11 percent, accelerating from 0.03 percent growth in the fourth quarter. Government consumption contracted by 48.68 percent, following a  43.28  percent  expansion in the December quarter. Non-profit institutions serving households spending also declined by 1.19 percent from 1.46 percent growth in the preceding quarter. Investment contracted by 4.72 percent, after registering a 2.99 percent growth in fourth quarter. Exports in the first quarter of 2015 declined by 5.98 percent from  a 4.32 percent expansion in the previous quarter. Imports also fell by 9.98 percent, following a 8.17 percent growth in the preceding period.

Nevertheless, Investment in Indonesia is still very much attractive because labor is considered relatively affordable: the average manufacturing job pays a base salary of $253 per month, compared with $369 in Thailand and $403 in China. Demography is in Indonesia’s favour: its median age, 29.2, is well below those of Thailand (36.2) and China (36.7). With a total population of around 250 million as of 2013, Indonesia is the fourth most populous country in the world after China, India, and the USA. During 2011-2013, the Indonesian population grew by 6%. In addition to being the fourth-most-populous country in the world, Indonesia has a huge, fast-urbanising domestic market and rising middle consumer class. A rapid expansion in the middle class has helped to transform the country's consumer market. Businesses in a wide range of industries can expect to capitalize on both the strong purchasing power and the high labor skills of the middle class.

    2009   2010   2011   2012    2013    2014    2015
Gross Domestic Product²
  (annual percent change)
   4.6    6.4    6.2    6.0     5.6     5.0     5.0¹
• Consumer Price Index
  (annual percent change)
   4.8    5.1    5.4    4.3     8.4     8.4     5.0¹
• Public Debt
  (percent of GDP)
  28.6   27.4   26.6   27.3    28.7    
Exchange Rate
  (IDR/USD)
10,389  9,074  8,773  9,419  11,563  11,800  13,200¹
Current Account Balance
 
(percent of GDP)
     0.7    0.2   -2.8    -3.3    -2.9    -2.7¹
• Population
  (in millions)
    241   244   247    250    253    255¹
• Poverty
  (percent of population)
  14.2   13.3   12.5   11.7    11.5    11.0  
Unemployment
  (percent of work force)
   7.9    7.1    6.6    6.1     6.3     5.9  
• Foreign Exchange Reserves
  (in billion USD)
  66.1   96.2  110.1  112.8    99.4   111.9  

 ¹ indicates a forecast

² Statistics Indonesia (BPS) shifted the basis of the computation from the year 2000 to 2010 and adopted a significantly updated methodology, hence GDP growth results between 2010 and 2014 have been revised in early 2015
Sources: World Bank, Statistics Indonesia, Bank Indonesia and International Monetary Fund (IMF), Investment-Indonesia

A large part of the Indonesia’s economic success is a result of growing middle class and stable economic growth. Indonesia is in list of MINT economies (Mexico, Indonesia, Nigeria and Turkey), namely those that were the most attractive to long-term investors due to their favorable demographic profiles.

Rising middle class in Indonesia has helped to transform the country's consumer market, with major implications for consumer goods companies. Companies in a range of industries including tourism, education, healthcare and entertainment can expect greater business opportunities, as middle-class Indonesians are spending increasingly on discretionary goods. Although the bulk of consumer spending in Indonesia is still on essentials (i.e. food, non-alcoholic beverages and housing), the proportion of discretionary spending in total consumer expenditure has been gradually rising, from 46.99% in 2006 to 52.29% in 2012.

Like many other Asian countries, the middle class in Indonesia is characterized not only by their purchasing power, but also their generally higher levels of skills and education. Many members of the Indonesian middle class are educated at universities in the West. As a result, multi-national consumer goods companies entering the Indonesian market can capitalize on both the rising wealth and the high skills of the middle-class labor pool.

The number of middle class households is set to increase substantially in the future. Euromonitor  International forecasts that by 2020, the number of households with an annual disposable income over US$10,000 (in constant terms) will reach 31.1 million, up from 13.7 million households in 2011. Over the period of 2012-2020, consumer expenditure per household will likely grow by 39.2% in real terms whilst per household disposable income will increase by 40.5% in real terms. Thanks to strong domestic demand driven by the expansion of the middle class, the Indonesian economy is largely insulated from external shocks of the global economic downturn.

B.2. PROJECTED ECONOMIC OUTLOOK

Political transition to the new government in Indonesia in October 2014 went smoothly and policy reform gathered momentum. Nevertheless, measures over the previous 2 years to restrain domestic demand and curb the current account deficit, coupled with sluggish exports, weighed on the economy. Growth in the gross domestic product (GDP) slowed to 5.0% in 2014, a fourth consecutive year of deceleration. In 2014, personal consumption remained buoyant, but government spending and fixed investment slowed and net exports fell.

Current President Joko Widodo is implementing policy reform to improve the investment climate that is expected to spur economic recovery this year and next year. Reform of fuel subsidies has already freed significant public funding for social and physical infrastructure. Inflation is seen subsiding to moderate rates through the forecast period, and the current account deficit to narrow. Challenges center on maintaining reform momentum, bolstering government revenue, and developing export-oriented manufacturing.

Selected Economic Indicators (%) - Indonesia 2015 2016
GDP Growth 5.5 6.0
Inflation 5.5 4.0
Current Account Balance (share of GDP) -2.8 -2.4

     Source: ADB estimates.

Projections for 2015 and 2016 assume that the new government’s rapid reform momentum is maintained through both years and that the administration follows through on policies to accelerate infrastructure development, improve the investment climate, reduce logistic costs, and enhance budget implementation. On this basis, GDP growth is forecast to recover to 5.5% this year and 6.0% in 2016.

(Excerpted from the Asian Development Outlook 2015)

 

SOCIO-CULTURAL

Cooperation between the two countries also occurred in socio-cultural fields. Exchange visits of cultural missions have been organized between the countries. The number of Indonesian students 

Cooperation between the two countries also occurred in socio-cultural fields. Exchange visits of cultural missions have been organized between the countries. South Korea is very active in organizing international promotional events in numerous cities in Korea and these events have been well taken advantage by Indonesia. The biggest cultural promotional events are Korea Travel Fair, Hi Seoul, Busan Travel Fair, Busan Film Festival etc.

Indonesian government has ratified Cooperation Agreement with South Korea in the cultural field signed in 2000. MOU in the field of tourism between the two countries was also signed in 2006. As a follow-up of those agreements, on 14-15 May 2008 in Yogyakarta was held the First Cultural Committee Meeting RI-ROK.

The two countries is trying to boost the cooperation in the educational field by signing MOU on the Educational Field during the state visit of President Lee Myung-Bak to Indonesia in March 2009. With the MOU, the cooperation will be carried out through joint cooperation in research projects and programs; visits and exchanges of lecturers, students, researchers, and other experts; exchanges of information and documents; organization of joint meetings, conferences, seminars and exhibitions; exchanges of material necessary, establishment of joint research centers; education, training, and participation in on-going programs; and other forms of cooperation.

Indonesia and South Korea have also signed an MoU on creative economy when President Prak Geun Hye visited Indonesia in 2013. The MoU is intended to enhance the cooperation on creative economy between Indonesia and South Korea especially in fields of art, handycraft, music, film and video games.

The number of Indonesian exchange students in Korea increased gradually every year. In 2004, there were only 70 Indonesian students, which later increased to be around 1200 students in January 2015.

Likewise, Korean student's interest to study in Indonesia is also increasing. Most of Korean students are studying Indonesian language at various universities in Indonesia. A number of Korean students also participate in Art and Culture Fellowship program which organized annually by the Ministry of Foreign Affairs. Starting from 2005, the foreign ministry has offered Indonesian language programs for diplomats from the ASEAN+3 countries.Korean students also participate in Darmasiswa Program, scholarship provided by Ministry of Education and Culture of Indonesia to study in various universities in Indonesia.

South Korean tourism potential is very high. According to data from the Korea Tourism Organization the number of South Koreans who traveled abroad each year are more than 14.5 million people (2014). The high level of prosperity with percapita income of more than US $ 33,100 based on purchasing power parity that is issued by the IMF, led to the need to travel abroad is no longer a secondary requirement but an activity that is prepared every year. The number of South Korean tourists to Indonesia continues to increase in the last five years, although slightly fluctuates due to a number of domestic events in Indonesia between the issue of terrorism, natural disasters and disease outbreaks of bird flu. The latest data in 2014 the number of South Korean tourists visiting Indonesia as many as 328.122 people, the sixth-largest after the tourists who travelled to Singapore, Malaysia, Australia, China and Japan.

In 2013 the Indonesian and South Korea celebrated 40 years of diplomatic ties. The culmination of the celebration was a Gala Dinner held at the Lotte Hotel Seoul on September 25, 2013. The Gala Dinner was attended by more than 400 persons from various groups including the South Korean Minister of Trade and Industry. Coordinating Minister for Economy Hatta Rajasa was present in the Gala Dinner after attending a meeting CEPA on the previous day. Coordinating Minister was accompanied by Minister of Industry MS Hidayat and Trade Minister Gita Wirjawan and Agus Yudhoyono became the guest of honour at the Gala Dinner. Batik fashion show by Alleira by eaturing Anissa Pohan as the main model is one of the events at the Gala Dinner. Other Indonesian artists who performed that night were Angels Percussion and Daeng Udjo Angklung orchestra. In addition, South Korean artist, Eru, who performed alongside Atiqah Hasiholan and lastly, Taejina also performed a number of songs. This event was a form of softpower diplomacy which was held Embassy in Seoul in order to promote and introduce Indonesian culture to South Korean society.

As part of celebrating 40th anniversary of diplomatic relations between Indonesia and Korea, on September 26, 2013, Minister for Economic Affairs inaugurated the opening of the Indonesian Film Festival in Seoul CGV theaters. The film festival was first held in South Korea, a total of 9 Indonesian films screened for the duration of more than 10 days at CGV theaters in Seoul and Ansan. It was a new breakthrough in the promotion of Indonesian films in the country of K-Pop.

In 2013, for the purpose of branding, positioning and introducing Indonesia to South Korean society, the Indonesian Ambassador realized that through South Korean celebrities and media were the most excellent and effective tools because it will be automatically broadcasted by many mass media even by South Korean televisions. With this idea in mind, in June 2013, the Indonesian Embassy appointed one of Korea’s famous artist, Lee Beum Soo and his wife Lee Yoon Jin to be Goodwill Ambassadors of Indonesia whose duties include helping to introduce and promote Indonesia to the South Korean people. The appointment of Lee Beum Soo was reported by various print media and television in South Korea. Also, this appointment was done because the Indonesian Embassy saw that this country has a great potential to promote Indonesian culture.

Furthermore, in January 2014, to further promote and introduce Indonesia among the people of the South Korea, the Indonesian Embassy in Seoul appointed Tae Jin A, Korea’s most prominent singer, as a Special Friend of Indonesia. The awards ceremony, was also aired more than 20 medias in South Korea. As a Special Friend of Indonesia, Tae Jin A was pleased to be a promotional media with his son Eru who is also a fairly well-known young singers in South Korea and Indonesia. For example is a huge picture of Tae Jin A  and Eru in front of the Embassy.

And then in August 2014, the Indonesian Embassy also awarded Special Friend of Indonesia to the son of Tae Jin A, Eru, for having a important role in promoting and strengthening the relationship between Indonesia and Korea through cultural exchange.

Throughout 2014, in order to promote Indonesia to the South Korean people, the Indonesian Embassy organized, among others, Open House Seoul in cooperation with the Seoul City Government in August 2014 and Indonesian Food Festival in cooperation with the Ministry of Tourism and the Creative Economy in October 2014.

In addition to the above, the Indonesian Embassy also organized several cultural promotional events in cooperation with the Indonesia community in Korea, such as One Indonesia Day in August 2014, which was attended by 5000 people of Indonesia in South Korea and some 1,000 Koreans visitors, Indonesian Week at Kyunghee University in June 2014 which was visited by approximately 500 visitors and Indonesian Week in November 2014 at Seoul National University which was visited by more than 1000 visitors.

Other than cultural performances, in 2014, the Ambassador also gave a public lecture on Indonesia in several top universities in South Korea, among others, at Kyung Hee University, Sookmyung Women's University, Kyungsung University, Seoul National University (SNU) and Korea Institute of Science and Technology (KIST). The lectures always fully attended by professors and Korean students who are interested in knowing more about Indonesia.

During 2015, the Embassy continues to organize events to promote Indonesia. In March 2015, the Ambassador of Indonesia presented before the CEO and senior executives South Korean companies in an executive class at Yonsei University. In the same month the Indonesian Embassy also presented the richness of Indonesian cuisine at Seoul National University. Furthermore, in June 2015 the Ambassador was the main speaker at a scientific discussion with faculty and students at Yonsei University, one of the best universities in South Korea.

The Indonesian Embassy also participated in various cultural activities and exhibitions to introduce Indonesia and to promote Indonesia, in April 2015, the Embassy promoted one of the famous painter Southeast Asia from Indonesia Christine Ay Tjoe to carry out the largest and most comprehensive exhibition of paintings first in South Korea. The exhibition was visited by businessmen and famous figures in South Korea and Indonesia. In May 2015, the Indonesian Embassy participated in the promotion of cultural activities in Seoul Friendship Fair 2015 and Khamsahamnida Bazaar 2015. And in June 2015, the Indonesian Embassy participated in tourism promotion and cultural exhibitions organized by the World Masters Committee at Gwanghwamun Square, Seoul.

 

MIGRANT WORKERS

At present, there are more than 2,500 Korean companies operating in Indonesia and more than 30 thousand Korean residence in Indonesia, which count the biggest foreign community living in the country. It ranked Korea the 7th biggest foreign investor in Indonesia and the 1st biggest in terms of number of projects. Most of the Korean investors are small and medium sized companies working on manufacturing such as textile, garment, footwear, toys, plastic ware, etc.

Such complementarities between the two countries has also proven by the fact that the Korea is hosting quite number of migrant workers from Indonesia. Both workers and their employers have been contributing to the economy of their respective countries.

Indonesia sent its workers to Korea since 1994 through Industrial Trainee Program. MOU on sending of Indonesian workers to Korea under the Employment Permit System (EPS) was first signed on 13 July 2004. The MOU is the basis for sending workers from Indonesia to Korea with the system G to G.

The extension of the MOU was signed on 9 September 2008 in Seoul by the Ministry of Manpower and Transmigration of Indonesia and Ministry of Labor of Korea. This MOU replaced the previous one which expired on 9 October 2008.

Under the MOU, placement of workers should only be carried out by the government. In Indonesia it is organized by government institution named BNP2TKI. To replace the role of recruitment agencies, a special committee in Korea has been set up to handle the placement and protection of migrant workers.

MOU arrangement for Korean Language Training was signed on 8 December 2008 between BNP2TKI with HRD Korea. The objective is to organize a Korean language training and its test as a requirement for workers to go to Korea.

Foreign workers market in Korea is still promising, given the country's need for labor cannot be filled by the domestic force. Korean government has worked with 15 countries, including Indonesia, to fill the needs of approximately 100,000 jobs each year. Indonesia get a quota of an average 9,000 per year. All migrant workers working in formal sectors categorized as 3D jobs (dirty, dangerous, difficult) such as textile factory, automotive and spare parts, construction, electronics, food industry, household appliances, etc.

As of 2013, Indonesian citizens in Korea has reached approximately 38 thousand with more than 95 percent is workers. The rest are students, professionals and housewives. Indonesian workers scattered throughout Korea with some concentration in Ansan, Suwon, Bucheon, Taegu, Taejon, Uijeongbu, Ulsan and Busan. (dari berbagai sumber)

 

Indonesian Embassy Seoul © 2014