No special treatment for South Korea, says minister

Andi Haswidi, The Jakarta Post, Jakarta

Despite South Korea's clear commitment to the Indonesian-Korean strategic alliance, the government insists it is not in the business of providing special treatment to Korean investors.

"To tell you the truth, it was they who took most of the initiatives. They are not looking for incentives or special treatment. All they are looking for is clarity, information and certainty," Trade Minister Mari Elka Pangestu told reporters after concluding the first joint meeting between delegations from the two countries in Jakarta on Tuesday.

Mari said that the strategic alliance differed from other bilateral cooperative ventures as it envisaged concrete action, projects and programs without spending too much time debating policies, frameworks and other peripheral issues.

Echoing Mari's comments, Korean Commerce, Industry and Energy Minister Kim Young Joo said that among the concrete actions that would be taken were the signing of five memorandums of understanding (MoUs) between firms from the two countries.

The MoUs cover a project worth US$1 billion for the construction of a railway and a port for the transportation and shipment of coal in East Kalimantan by two consortiums from the two countries, a joint investment for the production of infusions involving PT Indentrust Pharmatech and P and Partners Investment, a joint study on oil and gas exploration involving Pertamina, KNOC and SK Corp, a cooperation agreement for the development of a coal mine involving PT Tambang Batu Bara Bukit Asam and the Korea Resources Corp., and a direct coal liquefaction project involving PT Nuansa Cipta Coal Investment, Posco E&C and Kenertec CO.

Among the other topics discussed during the joint meeting were further collaboration with a view to identifying the locations for 7 power, gas, and coal exploration and mining projects, establishing the Korean Investment and Trade (Kotra) Business Support Center, identifying priority infrastructure sectors, establishing the ICT Human Resources Center in Jakarta and paving the way for cooperation in building submarines and engines for armored vehicles.

"Other concrete actions concern the forestry field, where 500,000 hectares of land have been allocated for Korean investments," Mari said.

"On top of the 500,000 ha, another 150,000 hectares of land will be available, with an estimated investment potential of $165 million," she explained.

Mari said that the Koreans were primarily interested in the infrastructure and energy sectors. However, she expressed the hope that they would show more interest in the electronics and automotive sectors.

"They are quite hesitant about these two sectors due to the lack of component industries here," she said

Commenting on issues hampering investment in Indonesia, Kim said that institutional support was the most pressing issue.

"Many Korean companies are eager to invest in Indonesia. There are some obstacles but the difficulties are different in the case of each project. But mainly the problems concern institutional support."

"It is difficult for companies to invest if there are risks or unclear outcomes involved," Kim said.

He stressed the importance of policy-support coordination between local and central government.

Speaking also of the risks of doing business in Indonesia, Mari said that the government would provide guarantees for foreign investment projects in Indonesia, especially in the infrastructure sector, through what is known as the Risk Sharing Framework under the public-private partnership arrangements that were introduced at the second infrastructure summit last year.