Jakarta. Indonesia posted a double-digit decline in trade with South Korea, and Jakarta wants businesses to take better advantage of the bilateral trade pact IK-CEPA.

The IK-CEPA –- short for Indonesia-Korea Comprehensive Economic Partnership Agreement -- entered into force in January 2023. Indonesia at the time expected that the trade pact, which would greatly eliminate tariff posts, could give a major boost to trade. 

However, government data shows that Indonesia-South Korea trade stood at almost $19 billion in the first 11 months of 2023. This marks a 15.97 percent year-on-year decline compared to $22.6 billion over the same period the previous year. Indonesia recorded a deficit of almost $500 million in January-November 2023. 

The Indonesian embassy in Seoul attributed the double-digit drop to the global trade slowdown, among other things. To illustrate, the UNCTAD projected that global trade would shrink nearly 5 percent in 2023 compared to 2022 amid geopolitical strains. Indonesia also blamed the shrinking trade with South Korea on the weakening coal prices. 

“We mainly export raw materials, especially coal, to South Korea, and their prices were going down [in 2023]. Although prices improved in the middle of the year,” Eko Prilianto Sudrajat, the embassy’s trade attaché, told a press briefing on Wednesday.

To save the declining trade, the embassy is planning to ramp up its IK-CEPA promotion this year. Eko said: “We will not only promote [the IK-CEPA] to Indonesian companies but also Korean businesses. So they understand the benefits of IK-CEPA.”

According to Eko, businesses today are more aware of other existing trade pacts versus the IK-CEPA. As a case in point, many of the so-called “certificate of origin” documents in Indonesia-Korea trade were directed at the Regional Comprehensive Economic Partnership (RCEP). A certificate of origin states in which country the product is produced to prove that it meets a trade pact requirements.

The RCEP is a separate trade pact encompassing the 10 ASEAN member states, China, Japan, South Korea, New Zealand, and Australia. It is set to remove up to 90 percent of the tariffs imposed on goods traded between its member countries.

Eko also told the press that businesses had a better understanding of the ASEAN-Korea Free Trade Agreement, which came into effect in 2010. 

Under the IK-CEPA, South Korea eliminates 11,267 tariff posts for Indonesian goods. The pact is expected to grant better access to Indonesian bicycles, motorbikes, and snake fruits, among others. Indonesian main exports to South Korea include coal, copper, and vegetable oil, according to the Trade Ministry.