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South Korean President Moon Jae-in delivers his speech on the 2018 budget bill during a plenary session at the National Assembly in Seoul, South Korea, November 1, 2017. Yonhap via REUTERS

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By Cindy Silviana and Bernadette Christina Munthe

JAKARTA (Reuters) - South Korean President Moon Jae-in on Thursday unveiled a new policy aimed at deepening ties with Southeast Asia, as the North Asian economic powerhouse seeks to curb its reliance on traditional trading partners like China and the United States.

Moon made Indonesia, Southeast Asia's biggest economy, his first state visit to the region and was accompanied by a delegation of around 200 business leaders.

The "New Southern Policy", aims to better connect South Korea to Association of Southeast Asian Nations (ASEAN) and expand the economic influence of Asia's fourth-largest economy in the region home to over half a billion people.

"Korean diplomacy in Asia has been more towards Japan, China and Russia. But I see that it should expand to new horizons and Indonesia has good prospects," Moon said in opening remarks at a business forum.

South Korea's presidential Blue House has said the policy will mirror Moon's "New Northern Policy" aimed at expanding cooperation between China, Japan, Russia and Mongolia. Moon announced that in September while at the East Economic Forum in Russia.

Indonesia and South Korea signed a memorandum of understanding to develop a light rail transit (LRT) system, Indonesia's industry minister Airlangga Hartarto said.

South Korea's Yonhap news agency said the project in Jakarta was part of a series of MOUs worth up to $1.9 billion (1.45 billion pounds) due to be signed.

A recent year-long diplomatic standoff between Seoul and Beijing over the deployment of a U.S. anti-missile system has exposed the dependence of Korean companies on Chinese customers and likely exacerbated Seoul's urgency to diversify ties.

During a joint news conference with U.S. President Donald Trump this week, Moon said he was aiming for a more "balanced diplomacy," which would include Russia, ASEAN countries, and members of the European Union.

Moon is due to meet Indonesian President Joko Widodo at a state palace in Bogor, south of Jakarta, later on Thursday for talks and then a state dinner.

The two are due to discuss infrastructure, trade, and also tensions on the Korean peninsula.

Indonesia has traditionally had good relations with North Korea and maintains diplomatic ties and is one of a small number of countries with an embassy in Pyongyang.

A number of South Korean companies already have or are planning big investments in Indonesia. Steel giant POSCO has a multi-billion-dollar joint venture with Indonesia's Krakatau Steel, Hyundai Motor is setting up a car factory and Samsung Electronics Co assembles smartphones in the country.

Indonesia is also emerging as an important market for South Korean defence equipment and the countries are cooperating on a venture to jointly build a fighter plane, dubbed KF-X.

Indonesia's trade with South Korea was worth about $10 billion in the first nine months of 2017, while Korean foreign direct investment rose about a quarter to $1.37 billion over period.

South Koreans make up one of the largest expatriate groups in Indonesia and parts of Jakarta have numerous Korean restaurants and bars.

As well as corporate muscle, Korea's soft power has also grown in Indonesia alongside other countries in Southeast Asia.

Korean K-Pop is hugely popular among Indonesians, with long-established fan clubs and bands, like BTS, touring the Southeast Asian country. Indonesian Twitter accounts dedicated to Korean pop idols have around a million followers.

(Additional reporting by Christine Kim and Hyonhee Shin in SEOUL and Nilufar Rizki in Jakarta; Writing by Ed Davies; Editing by Michael Perry)

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Reuters