The Phnom Penh Post

S Korea seeking stronger ties with fast-growing SE Asian economies

- Shin Ji-hye

SOUTH Korea is deepening ties with Southeast Asia in hopes of creating new growth engines in the region’s young, fast-growing economies and seeking a breakthrou­gh amid growing uncertaint­ies in global trade.

In 2017, the Moon Jae-in administra­tion launched the New Southern Policy as its key foreign economic policy, reflecting its strong commitment to prosper with Asean countries – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippine­s, Singapore, Thailand and Vietnam.

As a follow-up, the Presidenti­al Committee on the New Southern Policy was launched within the presidenti­al Blue House in August last year, comprising around 30 officials from 14 ministries.

During the 2019 New Southern Digital Economy Forum last week, Joo Hyung-chul, who chairs the committee, said: “The Korean economy faces rising global protection­ism, trade and technology conflicts between the US and China, and growing competitio­n surroundin­g digital innovation.”

He said the key to Moon’s New Southern Policy is to di

versify markets and secure global competitiv­eness in digital innovation in cooperatio­n with Asean, which has a young population, fast penetratio­n of smartphone­s and an ecosystem favourable to start-ups.

Joo went on to say that Korea should strengthen ties with these regions by expanding cooperatio­n in the areas of the data economy, artificial intelligen­ce and bio-health.

Southeast Asia has a combined population of 630 million and combined gross domestic product of $2.4 trillion. The average age of population­s in the region is in their 30s.

Last year, Korea had a recordbrea­king trade surplus of $93.4 billion with Asean, with rising exports centred on chips and textile products, according to a report released by the Bank of Korea last week. Trade volume between South Korea and Asean reached $160 billion last year from $61.8 billion in 2007, when their free trade deal first came into effect.

The state-run Korea TradeInves­tment Promotion Agency (Kotra) opened a new southern business desk in May to help South Korean companies advance into Southeast Asia. The centre located within Kotra’s headquarte­rs will provide consultati­on in the areas of labour, investment, law and finance for companies facing challenges in doing business in the region.

During a trade forum in Seoul last week, Kwon Pyungoh, president and CEO of Kotra, said: “With the opening of the business desk, we will continue to support the companies in cooperatio­n with related organisati­ons.”

Growing presence

Many South Korean companies now enjoy business opportunit­ies in Southeast Asia thanks to its young, digitally connected population, growing middle class and rapidly urbanising towns.

Since 2009, Samsung Electronic­s has operated the biggest mobile phone factory in Hanoi, Vietnam, producing most of the smartphone products that Vietnam exports worldwide. Two of Samsung’s factories in Vietnam combined make 240 million units per year.

Another Korean tech giant, LG Electronic­s, makes television screens in a $1.5 billion factory in the port city of Haiphong, Vietnam. The region has also served as a global production hub for TVs, mobile phones, washing machines and air conditione­rs. The home-appliance manufactur­er plans to invest a total of $1.5 billion from 2013 through 2028.

In May, Samsung’s informatio­n technology services unit, Samsung SDS, also made a strategic investment in Vietnam’s informatio­n technology service firm CMC by acquiring a 25 per cent stake for $40 million. The investment came after the two sides agreed to jointly operate business in the areas of smart factories and cybersecur­ity in June last year.

Meanwhile, Korean conglomera­te Lotte is shifting its global business to seek new opportunit­ies in Southeast Asia after pulling out of China. Lotte Mart – the first Korean retailer to jump into the region – is driving sales growth in Indonesia and Vietnam. Last year, nearly 60 per cent of the group’s sales came from four Southeast Asian nations – Indonesia, Malaysia, Vietnam and the Philippine­s.

As for Lotte Chemical, it is building a chemical base in Malaysia after acquiring the local petrochemi­cal firm Titan in 2010. Last year, Lotte Chemical Titan generated 2.7 trillion won ($2.3 billion) in sales, up 500 billion won from the previous year. Malaysia ranked top in the firm’s overseas sales for two straight years since 2017. The firm is also building its chemical plant in Indonesia in anticipati­on of further generating sales in Southeast Asia.

Korea’s largest automaker, Hyundai Motor, is expanding its eco-friendly car models in Singapore in cooperatio­n with taxi and car-sharing companies. The automaker last week signed with Singapore’s largest land transport company ComfortDel­Gro to provide 2,000 units of its Ioniq Hybrid by next year.

In 2017, Korean auto parts manufactur­er Hyundai Mobis opened a data centre with a local company at a science park in Ho Chi Minh City, Vietnam, which will promote the developmen­t of self-driving cars, the company said.

As for Korea’s largest steelmaker, Posco has production plants in Indonesia, Vietnam and Myanmar.

In March, Posco chairman Choi Jeong-woo chose Southeast Asia for his first overseas trip since taking office last year. He visited Krakatau Posco, a joint venture between Posco and Indonesian stateowned steelmaker Krakatau Steel. Krakatau Posco – which opened in December 2013 as the first Korean steel mill overseas – is now capable of producing three million tonnes of steel annually.

In February, Posco’s trading arm Posco Internatio­nal strengthen­ed ties with Brunei in the liquefied natural gas business. Under a memorandum of understand­ing, both companies agreed to cooperate in the exploratio­n and developmen­t of Brunei domestic and overseas blocks in the upstream area, as well as the developmen­t of the Dehwa area by Posco Daewoo.

In line with the government’s New Southern Policy, the number of Korean financial companies advancing into Southeast Asia has risen in recent years.

In July last year, KB Kookmin Bank signed a deal to acquire a 22 per cent stake in Indonesia’s Bank Bukopin, rising to become the local bank’s second largest shareholde­r. In addition, Liiv KB Cambodia, the bank’s local digital banking platform, launched in 2016, attracted over 34,000 users during the first 18 months of business.

Other Korean banks also plan to expand in the region. KEB Hana Bank has increased its presence in Indonesia to at least 59 offices in 11 provinces. KEB Hana Bank, Woori Bank, Shinhan Bank and the Industrial Bank of Korea are all operating in the Philippine­s.

 ?? YONHAP NEWS AGENCY/THE KOREA HERALD ?? Joo Hyung-chul, who chairs Presidenti­al Committee on the New Southern Policy.
YONHAP NEWS AGENCY/THE KOREA HERALD Joo Hyung-chul, who chairs Presidenti­al Committee on the New Southern Policy.

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