Written by Students: Chika Amalliah Purnomo (6092201218@student.unpar.ac.id); Fauzan Fadhil Ibrahim (6092201074@student.unpar.ac.id); Viandra Virgianto (6092201128@student.unpar.ac.id); Traviata Capella P. (6092201003@student.unpar.ac.id)
The idea of reunification between North and South Korea has long been one of the most sensitive issues in East Asia. For the Korean people, the reunification of the two countries separated since the Korean War is not only a political issue, but also an emotional and historical one. However, behind this idealism lie various economic and geopolitical consequences that must be considered, especially for trading partners like Indonesia. From Indonesia’s perspective, Korean unification could bring more uncertainty than benefits. This is based on several considerations.
First, South Korea is currently one of Indonesia’s most important economic partners. The relationship between the two countries has become even closer through the economic framework of the Indonesia–Korea Comprehensive Economic Partnership Agreement (IK-CEPA), which came into effect in 2023. Through this agreement, trade volume between Indonesia and South Korea has increased significantly across several trade goods. South Korea has become Indonesia’s seventh-largest trading partner and one of the largest investors in strategic sectors such as electric vehicles, battery manufacturing, renewable energy, and infrastructure. This relationship is complementary, with South Korea excelling in technology and capital. At the same time, Indonesia is rich in natural resources, such as nickel, coal, and palm oil, which support South Korea’s manufacturing industry. This relationship pattern creates a stable and mutually beneficial economic interdependence.
However, if unification between North and South Korea actually occurs, South Korea’s economic stability, which has underpinned trade relations with Indonesia, would likely be shaken. Germany’s experience after reunification in 1990 demonstrates that the costs of regional integration with highly unequal levels of economic development can be substantial. South Korea, with its advanced economy and open market system, would face a heavy fiscal burden to rebuild the closed-off North Korea. In this scenario, South Korea would likely shift its budgetary and political focus domestically to stabilize its internal economy. As a result, foreign investment, including in Indonesia, could decline significantly in the short to medium term.
Second, for Indonesia, a reduction in South Korean investment would directly affect several key sectors. Many collaborative projects between the two countries, such as the development of a battery factory in Karawang, the mass transportation sector, and green energy projects, are heavily dependent on South Korean capital and technology. If Seoul’s fiscal priorities shift to North Korean development, many bilateral projects could be delayed or even canceled. This could slow Indonesia’s industrialization and slow the government’s ongoing efforts to build a national electric vehicle ecosystem.
Third, unification also has the potential to change the direction of Korean trade policy. South Korea has historically relied on imports of raw materials from countries like Indonesia to support its manufacturing industry. However, a unified Korea would seek to develop North Korea’s natural resources, such as coal, iron ore, and other minerals. This could reduce Indonesia’s export volume of raw commodities to Korea. In other words, unification could create new competitive conditions that would disadvantage Indonesia’s trade position.
Fourth, from a macroeconomic perspective, the fiscal burden arising from the integration process could hamper the economic growth of both Koreas. The South Korean government would have to raise taxes and divert some of its overseas budget to economic rehabilitation programs in the northern region. This situation could depreciate the won and reduce Korean consumers’ purchasing power for imported products, including goods from Indonesia. In the short term, this would worsen Indonesia’s trade balance with Korea due to reduced export demand.
Fifth, Korean unification will have complex geopolitical implications for East Asia. The political stability that has supported the region’s investment climate could be disrupted, particularly if the unification process triggers new tensions with major powers such as China, Japan, or the United States. This geopolitical uncertainty could have a domino effect on regional markets and disrupt global supply chains. Indonesia, as a country dependent on commodity exports and cross-regional trade relations, will certainly not be immune to these impacts.
Finally, beyond the economic aspects, it is also essential to consider the social and political risks that could arise from the unification process. South Korea will face significant challenges in uniting two societies with vastly different ideologies, educational systems, and cultural values. Social tensions that may arise during this process could slow economic recovery and reduce the stability of Korea’s domestic market. Under such conditions, South Korea’s ability to maintain its financial role in the region will be weakened, ultimately reducing Indonesia’s trade benefits.
From all these considerations, Korean unification, while morally and historically desirable, could disrupt economic relations with external partners, including Indonesia. Therefore, in addition to prioritizing domestic considerations between the two Koreas, consideration of the implications of unification on relations with external partners is necessary.
