Bahlil Lahadalia, Indonesia’s Investment Minister, described the development as “a very dynamic phenomenon.” He highlighted the recent completion of HLI Green Power, a battery cell joint venture between Hyundai Motor Group and LG Energy Solution, as a key factor in South Korea’s ascent. (Image courtesy of Hyundai Motor, Kia)
JAKARTA, Jul. 31 (Korea Bizwire) – In a significant shift in foreign investment patterns, South Korea has emerged as the third-largest investor in Indonesia for the second quarter of 2024, outpacing both the United States and Japan, according to recent government data.
The Indonesian Investment Ministry reported that foreign direct investment (FDI) in the country reached $13.35 billion between April and June, marking a 16.6% increase compared to the same period last year.
Singapore maintained its position as the top investor with $4.6 billion, followed closely by China at $3.9 billion. South Korea’s investments amounted to $1.3 billion, securing the third spot ahead of the United States ($900 million) and Japan ($800 million).
Bahlil Lahadalia, Indonesia’s Investment Minister, described the development as “a very dynamic phenomenon.” He highlighted the recent completion of HLI Green Power, a battery cell joint venture between Hyundai Motor Group and LG Energy Solution, as a key factor in South Korea’s ascent.
Indonesian President Joko Widodo visits Lotte Chemical’s petrochemical complex in Banten, Indonesia. (Image courtesy of the Embassy of the Republic of Korea in Indonesia)
Lahadalia expressed optimism about future South Korean investments, mentioning ongoing projects by KCC and LG.
He noted that KCC Glass is constructing one of the world’s largest glass manufacturing plants in a new industrial park in Central Java, scheduled to begin production in October.
Additionally, LG Energy Solution plans to build an automotive battery factory in the same industrial complex.
David Sumual, chief economist at BCA Bank, predicted that South Korea could become one of Indonesia’s largest investors in the long term, potentially rivaling China.
He emphasized that South Korean investments align closely with the Indonesian government’s core policy of establishing an electric vehicle ecosystem.
Sumual also pointed out that Indonesia is seeking to partner with South Korea for nickel production, partly in response to the U.S. Inflation Reduction Act (IRA).
Indonesia, the world’s largest nickel producer, has traditionally seen significant Chinese investment in its nickel mining and processing sectors.
However, the IRA potentially excludes electric vehicles using nickel produced with Chinese capital from subsidy benefits.
Reuters reported that the Indonesian government is exploring ways to reduce Chinese firms’ stakes in Indonesian nickel mines and smelters, viewing South Korea as a potential alternative. Negotiations with South Korean companies are reportedly underway.
Joshua Pardede, chief economist at Permata Bank, noted the rapid increase in investments from China, South Korea, and Japan in Indonesia.
He suggested that South Korea could potentially fill the void if U.S. investments in Indonesia decrease following the upcoming U.S. presidential election.
M. H. Lee (mhlee@koreabizwire.com)
