Korea-Indonesia Industry & Tech Cooperation

Korea-IndonesiaIndustry & Tech

CooperationDynamic Partner, Dramatic Prosperity

CONTENTSo Introductiono Tradeo Investmento Current Focus Toward Newo Industrial Tech Tie-Ups by Sector - Manufacturing - Energy & Resource Development - SOC - Otherso Social Contributiono Conclusion

Introduction

□ Showcasing Robust Growth in Economic Exchanges

Two-Way Trade

Two-Way In-vestment

Visit or Ex-change

3.9-FoldUS$7.7 Bil.

2001 2012

US$29.6 Bil.

66.6-FoldUS$16.1 Bil.

2005 2012

US$1.1 Tril.

5-Fold20

2001 2012

100 Firms

□ Maximizing the Benefits of Complementarity

Korea..Expertise in transforming fromabsolute poverty into world's 8thlargest trading nation

Indonesia..-After China, the 2nd fastest growing economy in G20 -Growing purchasing power with rapid increase of middle-class-income population

Introduction

Korea..-High-quality pool of human resources embracing policymakers, business executives, engineers, researchers, skilled workers, etc.-Powerhouse industries, having a number of major global names such as Samsung, Hyundai, LG, SK, etc.-Global positions: Automobile No. 5, Shipbuilding No. 1, Displays: No. 1, DRAM (Semiconductors) No. 1, etc.

Indonesia..-Endowed with abundant natural resources such as crude oil, coal, steel, forests etc.

-Emerging Asian production hub with quick adaption to technology competence; globally-recognized aerospace competitiveness, etc.

□ Tremendous Synergy in Industrial Competitiveness

o Beyond bilateral, emerging new horizon partner, evolving G20, ASEAN+3, APEC, etc.

Key Facts & Statistics

Trade □ Tremendous Synergy in Industrial Competitiveness

o Bilateral Trade Volume Exceeded US$38 Billion in 2012 - Partners aim to increase total trade to US$50 billion by 2015 & US$100 billion by 2020 - Korea is fourth largest trading partner for Indonesia, surpassing the U.S., India, Australia and others

188.57

266.22213.34

293.44

380.94 381.71

Two-Way Trade TrendKorean Exports to IndonesiaKorean Imports From IndonesiaTrade Volume

2007 2008 2009 2010 2011 2012

114.1137.02

116.51

157.78

203.5 190.04

74.47

129.296.83

135.66

177.44 191.67

Indonesia's Top Export Destinations in 2012(Unit: US$ Mil.)

AustraliaTaiwan

ThailandMalaysia

IndiaUSA

KoreaSingapore

ChinaJapan

4,9056,2426,635

11,28012,496

14,87415,049

17,13521,459

33,715

Source : Indonesia Investment Coordinating BoardSource : KOTRA

□ Showcasing Golden Complementarity in Economic Struc-ture o Indonesia.. Major source of energy & raw material resources for Korea o Korea.. Reliable supplier of intermediary industrial goods to In-donesia

Top 10 Trade Items Between Korea & Indonesia

Export Items US$ Mil. Ratio Import Items US$ Mil. Ratio

Light (Diesel) Oil 1,301 19.40% Natural Gas 2,184 28.00%

Gasoline 742 11.10% Bituminous Coal 1,528 19.60%

Knitted Fabrics 380 5.70% Crude Oil 806 10.40%

Synthetic Resins 369 5.50% Pulp 302 3.90%

Hot-Rolled Steel Sheet 259 3.90% Heavy Oil 254 3.30%

Cold-Rolled Steel Sheet 163 2.40% Natural Rubber 213 2.70%

Synthetic Rubber 152 2.30% Copper Ore 206 2.70%

Passenger Cars 101 1.50% Apparel Fabrics 114 1.50%

Color T/V 90 1.30% Other Oil Products 111 1.40%

Galvanized Steel Sheet 85 1.30% Vegetable Materials 158 2.00%


Source : KOTRA

Investmento Korea: Indonesia’s Third Largest Investor (2012)- US$1.94 billion, ahead of the U.S., China, others- Number of Korean companies having advanced into Indonesia has reached about 1,300

60101

140164 182 186

356

456421

Two-Way Investment Trends in Indonesia(Unit: US$ Million)

2004 2005 2006 2007 2008 2009 2010 2011 2012

63

430 476628

301

625

329

1219

1950

Amount Cases

Indonesia FDI Realization by Country of Origin

No. CountryInvestment Value(in USD Million)

2011 Q3 2012

1 Singapore 5,123 3,489

2 Japan 1,516 1,787

3 South Korea 1,219 1,237

4 United Kingdom 419 897

5 United States of America 1,488 735

6 British Virgin Islands 517 722

7 Mauritius 73 659

8 Australia 90 653

9 Taiwan 243 641

10 Netherlands 1,354 619

11 Malaysia 618 431

12 France 134 149

13 Switzerland 9 134

14 Hong Kong 135 133

15 People’s Republic of China 128 86

16 Luxemberg 48 84

17 Seychelles 80 80

18 India 42 76

19 Germany 158 66

20 United Arab Emirates 7 32

21 Other Countries 6,073 5,542

Total 19,475 18,252

Source: Indonesia Investment Coordinating Board


Source: KOTRA Data

Korean Investment Trends in Indonesia by SectorPrimary Industries

(Unit: US$1,000)Secondary Industries

(Unit: US$1,000)Tertiary Industries

(Unit: US$1,000)

8.60%

4.50%

45.20%

Total100%

4.4%

14.3%

7.6%0.6%

0.1%

10.1%

5.1%1.1%

54.3%

0.5% 1.8% 4.50%

26.90%

1.50%64.90%

1.00% 1.20%

Total100%

Total100%

Agriculture 1,232

Livestock 649

Forestry 0Fisheries 0 Mining 6,500

Sub-Total 14,381

Processed Food 50,616

Textiles164,577

Leather Goods & Footwear88,316 Timber7,384

Paper & Printing1,610 Chemicals & Pharmaceuticals117,023

Rubber & Plastics58,837

Nonferrous Metals13,000Metals, Machinery & Electronics 626,843 Medical & Precision Optical Machinery 0Automobiles & Transportation Equipment5,920 Other Manufacturing Industries20,381 Sub-Total1,154,507

Construction2,225

Trade/Repair13,427

Hotels & Restaurants750

Transport, Warehousing & Communication32,328 Real Estate & Industrial Complexes500 Electricity, Gas, & Piped Water 0Other Services609 Sub-Total49,839


Source : KOTRA

Moving Toward New Horizon

Promotion Status of Korea-Indonesia Economic Cooperation

Oct. '10At the Korea-Indonesia summit, Korea agreed to participate in the Master Plan for Accelera-tion and Expansion of Indonesia's Economic Development (MP3EI) as major partner

May '11Held '1st Korea-Indonesia Economic Cooperation T/F' meeting and discussed about 50 agenda items at seven subcommittees

Mar. '12 Declared the launch of Korea-Indonesia CEPA negotiations

Oct. '11Held '2nd Korea-Indonesia Economic Cooperation T/F' meeting in Seoul and newly estab-lished Environmental Cooperation Subcommittee

Nov. 11Signed TOR (Terms of Reference) of the guidelines for the operation of Korea-Indonesia economic cooperation secretariat

Feb. '12Held '1st Korea-Indonesia Economic Cooperation Committee' meeting and launched 'Korea-Indonesia Economic Cooperation Secretariat' in Jakarta

Mar. '12 Concluded 'Korea-Indonesia Energy Cooperation MOU' at the 2012 Nuclear Security Summit

Oct. '12 '3rd Economic Cooperation T/F' meeting held and adopted 'Jeju Initiatives'

Oct. '13At the time of the Korea-Indonesia summit meeting, the two countries agreed to conclude bilateral CEPA negotiations by the end of 2013

Korea's Participation in MP3EI as Major Partner● Master Plan for Acceleration and Expansion of Indonesian Economic Development (MP3EI)-Indonesia's medium- and long-term plan (2011-2025) to become world’s 9th largest economy

● Minister-Level Indonesia-Korea and Korea-Indonesia Joint Economic Cooperation Committee Established in February 2012

● Ten Subcommittees Actively Advancing Joint Economic Cooperation

- Trade & Investment - Industries - Energy-Resources - Environment- Construction/Infrastructure - Agriculture/Fisheries - Defense Industries- Policy Development & Finance - Eco-Friendly Cars - Culture & Creativity

● Joint Secretariat Established in Jakarta on February 28, 2012

-Korean officials dispatched from the Ministry of Trade, Industry & Energy, Ministry of Strategy & Finance, Ministry of Environment, etc


Comprehensive Economic Partnership Agreement

● CEPA Expected to Blossom into 1-Trillion-Rupiah Trade Era by 2020

- Indonesia-Korea Summit Agreement to conclude CEPA by end 2013- Goal: Enhance strategic partnership to expand the scope and depth in trade and other areas

● Lower Tariffs on Korean Automobiles, Petrochemical Products, Ships, Steel and Other Goods

● New Investment and Greater Technological Cooperation for Indonesia from Korea

Estimated Effects of CEPA (Joint Study Group)● Indonesia- 0.03% increase in GDP- US$800 million increase in welfare-Taking into consideration potential productivity increase in major industries: 4.37% increase in GDP and US$1.6 billion increase in welfare

● Korea- 0.13% increase in GDP- US$1.5 billion increase in welfare


Bilateral Currency Swap Arrangement

● Practical Drive to Bolster & Accelerate Indonesia-Korea Economic Cooperation

● Date/Venue: October 12, 2013, on the Sidelines of the IMF/World Bank General Assembly

● Attendees: Finance Ministers and Governors of Central Banks of the Two Countries

● Scale: Up to 115 Trillion IDR/10.7 Trillion KRW (equivalent to US$10 billion)

● Period of facility: 3 Years

● Expected Outcomes- Boost trade and increase economic & financial cooperation- Strengthen regional financial safety net complementing the Chiang Mai Initiative Multilateralization (CMIM)


Landscape of Cooperation by sector

ManufacturingTextiles

■ Active Korean Textile Companies in Indonesia Reached About 400 in 2012 ● Cumulative Investment: US$5 Billion ● Employment: 450,000 ● Exports: US$7 Billion ● Indonesian Skilled Manpower Combined with Korean Expertise Maximizes Mutual Benefits

Eco-Friendly Cars

■ MOU for Cooperation in Eco-Friendly Cars Signed at Indonesia-Korea Summit November 9, 2012

● Prized cooperation and partnership in eco-friendly automotive sector expected to spread cooperation in entire automotive sector- Indonesian auto market scale exceeded 1 million vehicles in 2012- Korean share of market stands at just 1.2%, dwarfed by Japan’s 90%

Steel■ POSCO Integrated Steelworks in Indonesia● Joint venture with PT Krakatau Steel● 3-million-ton annual capacity● Construction began in October 2010 with completion targeted for December 2013● Plant confirms POSCO’s position as major global steel maker and sets stepping stone for the joint venture’s advance into Southeast Asian market with high growth potential

Aerospace & Defense■ Partners in Peace-Keeping and Disaster-Relief Operations● Defense Industry Cooperation- Indonesia acquired 17 KT-1 single-turboprop basic trainers worth US$91 million from KAI (Korea Aerospace Industries)● Indonesia awarded DSME (Daewoo Shipbuilding & Marine Engineering Co., Ltd.) a US$1.1 billion contract to build three 1,400-ton U-209 diesel-electric submarines● Indonesia, Korea signed letter of intent in 2009 concerning joint development of KFX/IFX jet fighter program● Korea purchased four Indonesian CN 235 patrol planes for 120 billion won in 2008


Petrochemicals● Collaboration of Korea’s Expertise & Indonesia’s Resource-Based Industry Advancement Drive- Indonesia’s petrochemical imports: US$8 billion in 2012● Lotte Chemical Launched US$5 Billion Investment Program- Targeting new petrochemical complex in Banten Province-Currently awaiting assurances over additional land availability

ICT● Indonesia-Korea -- Emerging Potential as Frontier for ICT-Based Global Technology- Indonesia -- Facebook’s fourth largest market & Twitter's third largest market-Korea is recognized worldwide as IT powerhouse, realizing US$81 billion in IT exports in first half of 2013● PT Samsung Electronics Cited as Success Story by BKPM- Market leadership in TVs, smartphones, other segments● Indonesia-Korea MOUs for e-Government Partnership- Realizing forward-looking vision for more innovative & transparent government


Machine Tools● Machine Tools, called Mother of Machines, to Fuel Indonesia’s Drive to Advance its Manufacturing Sector-Facilitate automotive industry transition from assembly production stage to processing stage● Korea Looking to Advance into Indonesia as the Emerging Manufacturing Hub of Southeast Asia-Korea stands out as world’s 4th largest machine tool producer at US$5.7 billion in 2012● Bilateral Exchange Visits in Pursuit of Win - Win Cooperation Programs- Designing roadmap for development of Indonesia’s machine tool industry- Procuring Korean machine tools to support education & training programs

Shipbuilding & Offshore● Korea: Home to World's Top 6 Shipyards● Indonesia Targets Construction of Larger Vessels by 2015-Up to 75,000dwt, with oil tankers as a priority as well as CNG & LNG carriers- Critical task is to enhance capacity & capabilities at 200 shipyards● Joint Government-Private Sector Efforts Underway Based on Win - Win Approach● Marine Equipment Sector Evolving Under Indonesia-Korea Shipbuilding & Offshore Cooperation


Energy & Resource Development

■ Representative Case of Combining Bilateral Complementarity ● Indonesia is Korea’s 7th Largest Mineral Product Import Source

5.5%

Korean Imports of Mineral & Mining Goods in 2012

IndonesiaUS$11.5 Billion (5.5%)

TotalUS$208.7

Billion(100%)

12%

Korea's On-Going Overseas Resource Projects

Total508 Cases

(100%)

Indonesia61 Cases, 12%

● Time-Honored Government Level Energy-Resource Cooperation Committee - The first country with which korea established a bilateral committee in 1979 - Converted into Bilateral Energy Forum with the dynamic participation of the private sectors.


Major Korean Players in Indonesian Energy World

● KOMIPO - Cirebon Thermal Power Plant - Tanjung Jati Thermal Power Plant (600MW x 2 Units) ㆍ Supplying 9% of Java Island’s electric power- Wampu Hydropower ㆍ Indonesian - Gov’t-guaranteed hydropower project

● KIDECO-Established by Samtan of Korea in 1982, focused only on resource development-Now, third largest bituminous coal mine in Indonesia-Production volume reached over 200 million. tons in 2010, supplying bituminous coal to over 40 customers in 12 countries including China, Japan & Hong-kong

● KGS-MOU with MIGAS, Indonesia on Gas Safety Management ㆍ Gas safety technology standards, consulting on gas refueling stations, etc.-Expanding tie-ups into service field besides investment in oil & gas facilities

● KOGAS-Starting with the first import of LNG from Indonesia in 1986, KOGAS has become the world's biggest buyer of LNG-Importing about 5 million tons of LNG annually from Indonesia-CBM (Coal Bed Methane) Development Tech Cooperation MOU signed with SUGICO of Indonesia


Construction & Infrastructure● Indonesia Focused on Quality Infrastructure to Support Dynamic & Sustainable Growth - Roads, Rail, Air, Maritime, Power Plants, etc.● Indonesia’s 2011-2025 Development Plan Comprises Investment Reaching US$440 Billion● Korea Ideally Positioned to Support Indonesian Infrastructure Development - As a main partner for Indonesia’s MP3EI - Accumulated experience & expertise in rags-to-riches legend based on SOC development

A● Rallying Behind Indonesian President Susilo Bambang Yudhoyono’s Initiatives - Strengthen Asia-Pacific connectivity through infrastructure development & promotion of infrastructure investment

Indonesia-Korea Co-Authored Jeju Initiative● Identified 8 Large-Scale Cooperation Projects● Combined Value of US$50 Billion● Established Joint Commission & Working Groups


Highlights of Jeju Initiative

Project Name Major Content Scale

CNG (Compressed Natural Gas) Package

o Jointly develop small & medium-sized undeveloped gas fields in Indonesia and promote comprehensive businesses linking large-scale projects based on the development out-comes, such as CNG power plants and transport facilities

US$2 billion

Sumsel-6 Coal-Fired Power Plant (IPP Business)

o Construct and operate a 600MW (300MWx2)-scale coal-fired power plant in Pendopo re-gion of South Sumatra

US$1.02billion

Restoration of Cili-wung River

o Improve the quality of drinking water resources and support for securing of water re-sources through restoration of the Ciliwung River in Jakarta and promote pilot projects, including installation of sewage treatment plants in certain parts of the river

US$11billion

Establishment of Multi-Industry Clus-ters (MICs)

o Create agro-based industry clusters to secure arable lands through development of farmland and create MICs for advances into related industries, including processing and distribution.

US$11billion

Shipbuilding & Plant Industry Cooperation

o Expand Korean enterprises' investment and cooperation in Indonesia's shipbuilding and plant industries to win shipbuilding & plant projects

US$5.5million

Bengkulu-Muara Enim Railway

o Develop infrastructures for coal transportation, a railway between Sumatra's Bengkulu and Muara Enim, coal terminal, harbor, etc.

US$3.3billion

Sunda Strait Bridge o Construct a 69km-long marine bridge linking Sumatra Island and Java Island US$24 billion

Batam-Bintan bridge o Construct a 7km-long marine bridge linking Batam Island and Bintan Island US$3 million


Agro-Forestry, Distribution, & Creative IndustriesAgro-Forestry● Bilateral MOU on Reforestation & Eco-Tourism- Expanding scope of forest industry cooperation from plantations, forest biomass- Natural recreation forests and healing forestsCulture● Bilateral MOU in Creative, Culture Industries- Fueled by growing popularity of Korean pop music and films-Bolstering cooperation in movies, music, games, animation & digital content development Distribution● Greater Distribution Sector Opportunities in Snowballing Indonesian Consumer Markets- Lotte Mart’s success story, operating 34 stores in IndonesiaEnvironment● Environmental Market Expanding in Line with Industrialization- Indonesia-Korea Environmental Cooperation Center Opens in Jakarta


Social Contribution

KOMIPO● Establishment & Support of Three Elementary Schools in Remote Areas of Indonesia● Establishment & Donation of Small Hydro-Electric Power Plants in Remote Area of Indonesia

KIDECO● Improving Local Infrastructure (Roads, Drinking Water, etc.)● Health Care for Local Residents, Support for Various Leisure & Sports Activities, etc.

KORINDO● Scholarship Fund for Human Resource Development and Science & Technology Advancement● Various Education & Welfare Support Programs Under the Motto “The World Along With Our Families & Neighbors”

Lotte Mart● Facility Improvement Support for Two Elementary Schools Every Quarter● Establishment of CSR Fraternity at Every Store to Provide Services for Regional CommunityMiwon● Conducting “Help Regional Community” Drive with Variety of CSR Programs Including Blood Donation, River Restoration Projects, etc.KOTRA● Opened Korea Win - Win Innotech Plaza in Jakarta in June 2013 to Combine the Excellence of Korean Enterprises’ CSR Activities and Indonesia’s “One Village, One Product” Program

Social Contribution

Conclusion

Thank You!Korea-Indonesia Jointly Developing a New Blue

Ocean for mutual Prosperity & Beyond

Documents

Korea-Indonesia Industry & Tech Cooperation