ndonesia and the Republic of Korea have seen a significant strengthening of their economic cooperation post-pandemic, with bilateral trade reaching US$20.8 billion in 2023. Korea's foreign direct investment (FDI) in Indonesia, totaled approximately $2.5 billion in 2023, up by over $200 million from the previous year, marking Korea as the seventh-largest investor in Indonesia. Among the major investments realized is the construction of a downstream petrochemical plant by Lotte Chemical, a leading Korean chemical company established in 1976 and ranked among the world's top seven with a stable profit structure. The realization of PT Lotte Chemical Indonesia’s investment is the downstream petrochemical complex, the LOTTE Chemical Indonesia New Ethylene Project (LINE Project), a naphtha cracker worth tens of trillions of rupiah located in Cilegon, Banten.
"The construction of this downstream petrochemical plant by PT Lotte Chemical is one of the real investment forms that has been realized, of course, I highly appreciate this investment," said Coordinating Minister for the Economy Airlangga Hartarto during a meeting with the chairman of Lotte Chemical during a working visit to the Republic of Korea on Monday. Minister Airlangga took the opportunity to express his appreciation for the realization of investment and the development of the downstream petrochemical plant complex carried out by Lotte Chemical. The investment will employ up to 15,000 people during the construction phase and 1,300 people during commercial operations. At the time of the visit of President Joko Widodo to the factory site in September 2023, the construction progress stood at 73 percent. The construction project is targeted for completion and the beginning operations in 2025. The factory will have a total production capacity of 3.1 million tonnes per year, while the 2025 production target will amount to 1 million tonnes of ethylene, 520,000 tonnes of propylene and 250,000 tonnes of polypropylene per year. Currently, Indonesia still imports significant quantities of these chemicals. Domestic industrial capacity for these products is currently only 7.1 million tonnes per year, so efforts are still needed to increase production capacity to meet domestic needs.
Therefore, Airlangga said he hoped that the development of the Lotte Chemical Indonesia factory could substitute imports so that it can be a stimulus for the local downstream petrochemical industry and support the creation of new jobs.
"We hope the investment in the construction of the PT Lotte Chemical factory can be a stimulus for the petrochemical industry in the country. Besides that it is also hoped it will encourage new job opportunities for the community," Airlangga said.
As well as the construction of the petrochemical factory by Lotte Chemical, South Korea's investment in Indonesia includes the development of Hyundai car factories and the commitment to build a steel industry cluster with a capacity of 10 million tonnes by 2025. Airlangga, during his visit to South Korea met with Hyundai Motor Group CEO Euisun Chung and applauded Hyundai's active involvement in various global hydrogen projects, ranging from waste-to-hydrogen, to utilizing local community waste. "I appreciate Hyundai's efforts in actively implementing HTWO [H2] network solutions. This will not only benefit Indonesia but also benefit the ASEAN market in the long term, as hydrogen can play a crucial role in promoting carbon neutrality and economic development," said Airlangga in Seoul.
To encourage the development of Hyundai's hydrogen project, it is planned to collaborate with state-owned enterprises, specifically state-owned oil company Pertamina. The government is currently also accelerating the development of electric vehicles (EVs) in Indonesia through the preparation of an EV development road map, providing various incentives and developing an EV ecosystem in Indonesia.
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"Hyundai is one of the most capable electric vehicle manufacturers, so we encourage Hyundai to increase the capacity for MSMEs or local suppliers, or Indonesian engineers to master EV technologies, not just cars, but engines, and their derivatives such as charging stations, so that Hyundai can be more involved in local suppliers in the area around the factory," said Airlangga.
This article was published in collaboration with Coordinating Ministry for Economic Affairs Republic of Indonesia
