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Korean Conglomerates to Triple Investment in Indonesia This Year
Southeast Investment
Korean Conglomerates to Triple Investment in Indonesia This Year
  • By Jung Min-hee
  • October 5, 2015, 00:45
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A photo of the staff of a Samsung Electronics' plant in Indonesia.
A photo of the staff of a Samsung Electronics' plant in Indonesia.

 

Korean conglomerates, such as Samsung Electronics, POSCO, and Hankook Tire, are expected to invest a total of US$3.36 billion (3.97 trillion won) in facilities in Indonesia this year. The figure has almost tripled from the US$1.1 billion (1.3 trillion won) spent last year. Since Samsung Electronics plans to expand its cell phone production lines in the country, it will account for the highest percentage of the investment.

[[{"fid":"12990","view_mode":"body_image_left","type":"media","attributes":{"alt":"Investments in Indonesia by Korean companies.","height":"402","width":"450","class":"media-element file-body-image-left"},"link_text":null}]]According to local media reports on Oct. 4, Indonesia's Investment Coordinating Board (BKPM) expects that Korean companies will make investments worth US$3.36 billion (3.97 trillion won) this year.

Indonesia is the world’s fourth most populous country, with a population of 25 million. Also, it is a rapidly-growing country with an economic growth rate of more than 5 percent in the last five years. The recent report published by consulting firm PWC says that Indonesia will become the world’s fourth largest economic power in 2050.

Samsung Electronics has been establishing production facilities in Indonesia to produce 1.5 million cell phones a month. Until now, the company has been producing mobile phones in Korea, China, and Vietnam, and its annual sales last year stood at 3 million. However, Samsung has decided to expand its production facilities in Indonesia largely due to the regulations of the Indonesian government. Since the government has required manufacturers to use more than 40 percent of locally-produced parts when producing and selling 4G smartphones in the country, the company has no choice but to expand its cell phone production facilities.

AS POSCO has decided to put on hold a US$12 billion (14.2 trillion won) project to build a steel plant in the eastern state of Orissa in India, the company is highly likely to make an additional investment in Indonesia. With a joint investment with Indonesia’s state-owned Krakatau Steel, the South Korean steel maker has completed the construction of a plant, the first stage of the investment, and is currently discussing the second stage of the investment. Making a foreign investment of 134.8 billion won (US$113.95 million) alone last year, Hankook Tire is also gradually expanding its production capabilities in the production lines in Indonesia.