Korea seeks stronger ties with young, fast-growing economies of Southeast Asia

By Shin Ji-hye
  • Published : Jun 27, 2019 - 20:33
  • Updated : Jun 27, 2019 - 20:33

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 Cheong Wa Dae in August last year, comprising around 30 officials from 14 ministries. 

Joo Hyung-chul, who chairs Presidential Committee on the New Southern Policy (Yonhap)

During the 2019 New Southern Digital Economy Forum on Tuesday, 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 that key to Moon’s New Southern Policy is to diversify markets and secure global competitiveness in digital innovation in cooperation with ASEAN and India, which have young populations, fast penetration of smartphones and ecosystems favorable to startups.

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. When India is included, the combined population soars to 2 billion and combined gross domestic product stands at $5.4 trillion. The average age of populations in the regions is in their 30s.

Last year, Korea had a record-breaking trade surplus of $93.4 billion with ASEAN, with rising exports centering on chips and textile products, according to a report released by the Bank of Korea last week. Trade volume between Korea and ASEAN reached $160 billion in 2018 from $61.8 billion in 2007, when their free trade deal first came into effect.

The state-run Korea Trade-Investment Promotion Agency opened a new southern business desk in May to help Korean companies advance into Southeast Asia. The center located within KOTRA’s headquarters will provide consultation in the areas of labor, investment, law and finance for companies facing challenges in doing business in the region.

During a trade forum in Seoul on Tuesday, Kwon Pyung-oh, president and CEO of KOTRA, said, “With the opening of the business desk, we will continue to support the companies in cooperation with related organizations.” 

President Moon Jae-in (center) shakes hands with delegates accompanying Chairwoman of Vietnam’s National Assembly Nguyen Thi Kim Ngan (right) at Cheong Wa Dae during her visit to Seoul on Dec. 6. During the meeting, Moon emphasized the importance of Vietnam to South Korea and the need for wider economic and human exchanges. (Yonhap)

Korean firms’ growing presence in ASEAN, India

Many Korean companies now enjoy business opportunities in Southeast Asia thanks to its young, digitally connected population, growing middle class and rapidly urbanizing 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 a 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 percent 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 percent of the group’s sales came from four Southeast Asian nations -- Indonesia, Malaysia, Vietnam and the Philippines. 

On March 15, Samsung Showcase officially opened in Vietnam

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. On Monday, the automaker signed with Singapore’s largest land transport company ComfortDelGro to provide 2,000 units of its Ioniq Hybrid by 2020.

In March, Hyundai Motor and Kia Motors invested $300 million in Ola, an Indian online transportation network company. They plan to jointly develop a fleet solution business, build an electric vehicle ecosystem customized for India and develop new mobility services.

In 2017, Korean auto parts manufacturer Hyundai Mobis opened a data center 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 state-owned steelmaker Krakatau Steel. Krakatau Posco -- which opened in December 2013 as the first Korean steel mill overseas -- is now capable of producing 3 million tons 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 percent 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.

By Shin Ji-hye (