South Korean company POSCO and Indonesian steelmaker PT Krakatau Steel are to finalise a deal soon to build a $5-7 billion integrated steel mill in the Southeast Asian country, Indonesia’s Investment Coordinating Board Chairman Gita Wirjawan said.

The joint venture between two countries’ largest steelmakers will break ground within the next few months, he said in an interview with The Korea Herald.

The plant will be located in Cilegon, northwest Java with an output target of 6 million tonnes. It will have 3 million tonnes of capacity by the end of 2013.

The project is one of significant achievement by the agency’s “one-stop” investment service policy launched in February, Wirjawan noted.

“It’s simplifying the decision-making process under one roof, without having to go through a number of different ministries to set out a project,” he said.

Founded in 1973 as an Indonesian ministry, the BKPM has worked as a proactive advocate and matchmaker for investors to boost domestic and international investment by creating a conducive investment climate.

“We’re trying to find smart capital,” said Wirjawan, who has been involved in advising the government and private sector in many Asian countries with respect to corporate restructuring, mergers and acquisitions and strategic sales. “We’re encouraging not just to buy our product, but to build a power plant too. So that’s value-added. This has never been encouraged by the government in the past but now we’re consciously doing it.”

As the biggest economy in Southeast Asia, worth $650 billion, Indonesia holds unpredictable potential for growth and investment, the minister said. Gaining recognition as the region’s only member of the G-20, the country expects its economy to size up to $1 trillion by 2014.
 
“There’s no reason for us not to do it,” Wirjawan said. “Our economy is emerging. We have population, political stability, microeconomic sustainability and so on. We stood pretty well from the recent economic crisis.”

Korea and Indonesia’s bilateral relations have advanced in diverse fields since 1973, when diplomatic ties were established. Cooperation in the economic sector made great strides, with trade volume nearly doubling in four years, from $10 billion in 2004 to $19.2 billion in 2008.

As the fourth biggest investor, Korea’s investment in Indonesia has recorded almost 3,000 cases from 1968 to 2008, worth approximately $3.3 billion. In recent years, investment has grown nearly four times, from $150 million in 2006 to $540 million in 2008, according to the BKPM.

However, Wirjawan calls on Korean investors to step up, indicating potential future deals with large electronics manufacturers.

“They have experiences in Indonesia for many years and done very well having taken proactive views there,” he said.

Indonesia has been a good market for electronics manufacturers. Samsung Electronics reported that it has benefited from Indonesia’s large labor force and a growing number of middle income consumers since it opened a factory in 1992. Samsung and LG Electronics became market leaders there for products such as TV over the past decade.