The term “resource nationalism” was splashed across headlines around the world to describe Indonesia in recent weeks, the stories including dire predictions that the Southeast Asian country could scare off vital foreign direct investment.
Despite such admonishments, measures in Jakarta ostensibly to slow down the export of oil, gas and minerals do not appear to crimp trade and investment ties between Indonesia and Asia’s fourth-largest economy ― both trillion-dollar-plus nations.
Proof could be seen as Mahendra Siregar, chairman of the Indonesia Investment Coordinating Board, wrapped up a three-day visit in Seoul on Thursday. He said Indonesia must ensure sustainable development.
“Having an added-value processing program to take place in Indonesia would certainly provide that opportunity. Otherwise sustainable economic growth in Indonesia would be difficult. The current global economic situation has created a depressed demand for commodities,” Siregar said during a gala dinner at the residence of Indonesian Ambassador to South Korea John Prasetio on Tuesday.
“Countries everywhere nowadays cannot only rely on exports of commodities alone, but should also develop domestic demand. These countries cannot only rely on natural resources exports alone, and never develop productive domestic industries,” he said.
|Chairman and CEO of Lotte Group Shin Dong-bin (left) holds up the appreciation plaque that he received from Indonesian Ambassador to South Korea John Prasetio (center) and Mahendra Siregar, chairman of the Indonesia Investment Coordinating Board, at Prasetio’s residence in Yeouido in Seoul on Tuesday. (Philip Iglauer/The Korea Herald)|
Prasetio said he has been especially focused on strengthening business ties between his country and South Korea since the start of his posting, about 18 months ago.
The Indonesian Embassy is putting the finishing touches on an electronic visa service to be launched by the end of March. The online service covers all types of visas, even bank transfers to pay visa fees. Applicants will still have to visit the embassy with their passports to print out the visas. Embassy officials call this service “E-Consular Services,” and say the new “e-visas” will make traveling to Indonesia for business or pleasure much easier.
At Tuesday’s dinner reception, Mahendra and the ambassador awarded appreciation plaques to three South Korean corporate leaders: Shin Dong-bin, chairman of Lotte Group; Lee Hee-beom, vice chairman and CEO of LG International Corp.; and Kang Tae-hwan, vice chairman and CEO of Samtan Co., Ltd.
In addition to meetups with top South Korean corporate executives, Mahendra also met with Korean Chamber of Commerce and Industry Chairman Park Yong-maan and Trade, Industry and Energy Minister Yoon Sang-jick.
South Korean investment in Indonesia is riding on an upward trajectory. South Korean FDI in Indonesia was $2.2 billion in 2013, representing 13 percent year-on-year growth. That makes South Korea the fourth-biggest investor in Indonesia after Japan, Singapore and the United States.
Since he was appointed by Indonesian President Susilo Bambang Yudhoyono last year in October, Mahendra has been on a whirlwind tour promoting investment around the world, including visits to Japan and South Korea.
Indonesia’s investment board announced that it expects $2.3 billion in South Korean investment in 2014. Projects already reported in the media include: $516 million in Indonesia’s electricity, gas and water supply; $216 million in the chemical and pharmaceutical industry; $201 million in the metal, machinery and electronics industry; $196 million in the textile industry; and $147 million in housing, industrial real estate and office buildings.
While so-called “resource nationalism” appears to be a concern in some corners, it did not faze Kang of Samtan, an honoree at the reception.
“Most countries have concerns about preserving their resources, about sustainable development. In the case of Indonesia, it is the same trend,” he said. “In fact, Indonesia has a very good investment environment. Recently, we started investing in Mongolia in mining, but ran into some obstacles. Indonesia is much more open to foreign investment than Mongolia. So, we decided to withdraw from Mongolia and, instead, further expand our investments in Indonesia.”
Samtan is an energy and coal mining company that has had for decades extensive investments in the Southeast Asian nation, adding that Samtan has been expanding operations there beyond coal to include electric power plants, LPG production and even palm oil plantations.
Kang said he has been doing business in Indonesia since 1982.
Mahendra’s visit comes at a time when Korea Inc. looks for a better return on its Southeast Asian investments.
“During visits like this one in South Korea, we update on economic and investment developments in Indonesia. Secondly, we present an accurate picture of the upcoming election, because what people might read in the newspapers might not be a reality,” Mahendra said.
Japan appears to be doing the same. It is now the largest foreign investor in Indonesia. Japan was the biggest source of FDI in 2013 at about $4.7 billion, 16.5 percent of the total, inching ahead of Singapore’s 16.3 percent and into the No. 1 FDI slot.
Political turmoil in Thailand and rising wages in Malaysia could boost Indonesia’s investment attractiveness. Some 23 people have lost their lives in Thailand since anti-government protests began last October.
“I think if there is a country in the world that understands very well the value of added value and productivity it would be Korea. Your growth ― as fast, as remarkable and as continuous as it is ― has nothing to do with natural resources. So, I think you can be the friends that understand very well what we have in mind,” Mahendra said during Tuesday’s reception. “When we talk about how to increase productivity, it is-all about how to sustain economic growth, how to improve social welfare. It is all about how to ensure a much more long-lasting economic progress. It has nothing to do with protectionism or nationalism.”
By Philip Iglauer (email@example.com