I

ndonesia and South Korea failed to reach a deal after nearly two years of negotiations on a comprehensive economic partnership agreement (CEPA) collapsed.

A disagreement over guarantee of direct investment from South Korea and Indonesia'€™s access to the East Asian nation'€™s agriculture market were largely responsible for the failure, Trade Minister Muhammad Lutfi said Friday.

'€œWe will not be able to make [the deal] anytime soon. We'€™ve decided now is not the right time to agree on the CEPA,'€ he told reporters at his office.

Lutfi said that both parties might now need to come up with new modalities before talks could resume.

But with the presidential election slated for July 9 and a new government set to assume office in October, the talks may need more time.

The negotiations, which began in July 2012, aim to strike a deal that will encompass a deeper level of trade liberalization than a free trade agreement (FTA), which Indonesia sealed with the East Asian economy along with its nine fellow members of ASEAN.

That will further cut 1,051 tariff lines uncovered by the ASEAN-South Korea trade pact.

Duty reduction that Indonesia demands from South Korea only covers US$150 million in exports.

In stark contrast, a similar cut South Korea wants from Indonesia would affect $530 million in outbound shipments.

More than 90 percent of the lines placed under sensitive and highly sensitive lists in the pact are industrial goods, while the rest are agricultural, fishery and pharmaceutical products.

Up to the seventh round of talks, some sticking points repeatedly emerged and remain unsettled.

Indonesia has forecast that it will certainly lose out in a trade deal with South Korea as its exports to the East Asian nation mainly comprise natural resources rather than manufactured goods.

In return, the largest economy in Southeast Asia demands a guarantee in sizeable investment, which the South Korean government says it cannot give because any decision made on investment is in the hands of the private sector.

South Korea'€™s investment in Indonesia has jumped dramatically in recent years and hit a record high of $2.21 billion last year.

But, Indonesia needs more investment to strengthen its manufacturing industry, particularly in electronics, petrochemicals, automotive components and machinery.

Bilateral trade has expanded by 15.57 percent on average to $23 billion last year from 2009.

Indonesia'€™s exports, which primarily consist of liquefied natural gas, bituminous coal, crude oil, natural rubber and copper ore, rose by only 8.94 percent.

In contrast, its imports '€” diesel, gasoline, textiles, steel and synthetic rubber '€” surged by 24.96 percent.

The Trade Ministry'€™s director general for international trade cooperation,Iman Pambagyo, said that despite requiring a breakthrough to move negotiations forward, both parties must maintain a '€œwin-win'€ situation.

'€œThe Indonesia-Korea [trade pact] is a top-up from the ASEAN-Korea FTA, so we must be sure of what we want,'€ he said.

'€œIf we cannot win in trade, we need to seek investment,'€ he added.

'€œWe need to find ways to bind investment commitment [from South Korea] to obtain the '€˜win win'€™ position.'€