Although perhaps best known for its tropical islands and emerald seas, Indonesia is also an emerging powerhouse in Southeast Asia, with economic growth of 5% per year. HMG has chosen Indonesia as a bridgehead into the region, with Hyundai Motor, Hyundai Engineering & Construction, and Hyundai Engineering already in the market. Let’s re-discover the true potential of Indonesia through following pictures and essays.
Bali, the island of gods
Indonesia attracts 5 million tourists annually with its year-round mild climate, and exotic scenery of active volcanoes, palm trees, fine white sand beaches, and crystal-clear water. Popular destinations include Ubud which is always a part of any Bali tours, and Lombok, a small island in the east. Both are always crowded with young people wanting to enjoy yoga, massages, and surfing. Before COVID-19, it was very hard to find accommodation unless you had booked early.
However, tourism is only a small part of Indonesia. Indonesia consists of 17,500 islands including the well-known islands such as Java, Sumatra, Borneo, and the many smaller islands, where a large population reside. It would be a little unfair if Indonesia was only known by the famous tourist destination Bali.
A city of great potential, Jakarta
Indonesia has a population of about 270 million people, half of whom live in Jakarta on Java Island. Filled with stylish streets and skyscrapers, schools and research institutes, Indonesia’s capital city is the economic and cultural center, and quite different from Bali. While Jakarta may not appear to be an industrial city, its suburbs host industrial facilities, developed with foreign investment. Nearly half of Indonesia’s trade is centered around Jakarta, with its land, sea and air transport networks.
Thanks to the growing economy, industries are booming in Indonesia. In particular, demand for automobiles is increasing, especially among young people. About 1.03 million cars were sold last year alone. In the near future, the Trans-Java highway, which runs from the east to the west of Java island, will be opened and it is expected to further boost the economy of the surrounding areas, fueling demand for cars. This is why Hyundai Motor decided to enter the Indonesian market, with the construction of a local plant capable of producing 250,000 vehicles per year.
The recent Comprehensive Economic Partnership Agreement (CEPA) between Korea and Indonesia removed tariffs on auto parts and steel products used in automobiles, paving the way for Hyundai Motor’s entry into the Indonesian market. Despite its high growth potential including its vibrant market, abundant natural resources, and hard-working government, expanding the country’s infrastructure, especially in Jakarta, still has many problems.
Due to the excessive ground water development and the construction of high-rise buildings, flood risk is increasing, with the ground sinking at a rate of 7.5cm per year. Its population density is 15,000 people per km2, resulting in serious traffic congestion and air pollution. It is also located in the Pacific Rim, or the “Ring of Fire,” with particularly high natural disaster risks. President Jokowi pledged to relocate capital and won re-election for a second term last year.
Indonesia’s new capital, Kalimantan on Borneo Island
Kalimantan on Borneo island was chosen as the new capital. Borneo is Indonesia’s largest island, covered mostly by primeval forests, with the equator passing right through the middle of the island. Although it is mostly barren, the province has many good reasons to be the new capital. It is located in the center of Indonesia, relatively safe from natural disasters, and is easier to develop because most of the land is owned by the government.
President Jokowi has an ambitious plan to make the entire east Kalimantan of Borneo into an IT-based sustainable smart city. His idea is to create a state-of-the-art transportation and logistics system including roads and ports with only zero-emission autonomous cars for the new capital. Many Japanese and Saudi Arabian companies have already pledged to make astronomical investments into capital relocation projects, backed by the president. HMG is also paying attention to the Jokowi government’s move, as it is preparing to expand into Indonesia.
The capital relocation is scheduled to begin in 2021 and be completed by 2024. About 1.5 million will move to the Kalimantan region for the project. Many are keeping an eye on how the island, with its endless jungles and small towns will be transformed into the new capital, starting a new chapter in the history of Indonesia.
A country where everything is given only to those who know how to wait
Hyundai E&C is currently carrying out two projects in Indonesia: the Peusangan hydroelectric power plant and the Cirebon coal power plant. The Cirebon plant, which is to be located about 200km east of Jakarta, is a USD 500 million project, and is expected to improve Indonesia’s economy when completed in 2022. In 2019, we signed an MOU with the state-owned construction company Hutama Karya, and are preparing to bid for projects related to the relocation of the capital.
It is often said that Koreans are always “in a hurry.” Perhaps this is because Koreans have become accustomed to pursuing ”speed” and ”accuracy” since the country’s high-growth period in the 1970s. But in Indonesia, it works quite the opposite. I am in charge of construction projects of Indonesia’s state-owned enterprises. There are many projects in the pipeline and therefore many opportunities to win, but they come with challenges.
Perhaps one of the biggest is that the entire process, from decision-making on the construction project to financing and securing a site, is much slower than in South Korea. While Koreans prioritize an expedited work flow, Indonesian’s value a “pelan-pelan saja (slowly)” attitude and being accurate even if it is time-consuming. Even the Korean style of “quickly” can be interpreted here as “loosely.” Therefore, it is important to slow down and carefully set priorities for all planned projects, presenting previous examples step by step to less experienced clients and provide guidance as needed.
Similarly, the meeting culture is vastly different. Unlike South Korea, where only key officials usually participate in meetings, in Indonesia, it is common for more than 10 officials to discuss a project for over 3 to 4 hours, as the person in charge listens to advice from key staff from each area. Another big issue is the traffic. During the holiday season, the news often has stories about people even dying because of the horrific traffic jams, usually due to dehydration and exhaustion. The government is trying to solve the traffic problems, but it is not so easy. Indeed, it is one of the reasons for the capital relocation plan.
Although several projects, including the relocation of the capital, have been delayed due to the global pandemic, we will use these delays as an opportunity to be better prepared so that we can have even greater successes.
Indonesia, a country poised to make a great leap forward
Hyundai Engineering completed the construction of two 100 MW units at the coal power plant in Kalimantan, Borneo. Among them, the IKAL coal power plant is the largest in the southern region, greatly improving the urban infrastructure, preventing power shortages, and creating local jobs. Currently, Hyundai Engineering is strengthening its presence in the refinery and petrochemical plant industry, working on the Balikpapan Refinery, a USD 4 billion project.
The KALSEL-1 coal power plant (IKAL) project in Indonesia provided me with big challenges and big rewards at the same time. Although I had heard about the unpredictable weather and difficulties in the field from my colleague who had been working at the site, I panicked when I visited there in November 2016 for the first on-site inspection. The ground was so soft and muddy that it was difficult to even walk on it, let alone moving any heavy equipment.
We tried to strengthen the foundation by pouring aggregates, but they were just mixed with the soil and did not make much difference. After many meetings with the site manager and the plan manager, we decided to pave the temporary road with reinforced concrete. Road asphalt work is usually the last thing to be done at a construction site, and the cost of concrete was also high. However, thankfully the result was good. Overall, it was challenging, but I learned a great deal.
Another difficulty I encountered in Indonesia was finding experienced workers because the infrastructure around the site, such as roads was so underdeveloped. Eventually, we hired local college graduates who did their job well enough to ease our concerns that they lacked experience. Although they only had about 1 or 2 years of professional experience, they had excellent communication skills including English, and were very quick to learn. What impressed me most was their strong passion. Thanks to their dedication and willingness to learn, the project was completed smoothly.
Indonesia is still a developing country but if these talented people lead the country, maybe 10 or 20 years later, it will be a much stronger nation. We look forward to the future of Indonesia, which could be much more advanced than it is today. Hyundai Engineering will make a lot of accomplishments along the way.
Deputy General Manager Jeong-ho Park, the IKAL Project Team at the Seoul Office of the Hyundai Engineering Indonesia/
Text by. Byeol-nim Jung