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Study on Strengthening Economic Cooperation between Korea and CLMV

Author Hyeok Ki Min et al Date 2019.12.26 Page

 Considering the share of trade in Korea's economy, expansion of international trade is necessary for sustainable growth of Korea. In particular, because of a high degree of dependence on China and the United States in Korea trade, the recent amplification of the US-China trade conflict may induce the higher uncertainty to Korea than other countries. Therefore, it is necessary to establish a trade strategy to ease the concentration of trade.

 The Moon Jae-in administration is pursuing a new southern policy with ASEAN and India as key strategic regions as one of the government’s key foreign economic policy. This aims to ease the concentration of external contacts mentioned above, and to strengthen our strategic advancement into emerging markets.

 The CLMV countries are late-stage ASEAN participants, and the recent economic growth is far higher than that of other ASEAN countries, and maintained stable growth even during the last financial crisis. In particular, it is said that these countries, along with their economic potential, can play an important role in the global value chain being reorganized in the recent US-China trade dispute process. 

 These countries are currently pursuing economic growth through open economic policies and expansion of foreign investment attraction, and their proximity to China and India, which have huge markets, further strengthens their growth potential. However, it can be said that CLM countries, excluding Vietnam, have yet to establish a foundation for economic development, and there is no distinct manufacturing sector except for clothing and shoes based on low-wage labor.

 CLMV's import and export status by industry, RCA and TSI of the manufacturing industry, which were examined through the actual trade status, were found to have low competitiveness in most manufacturing industries. Along with this, according to the product space model, the CLMV countries still have a low proportion of products with advanced opportunities, and products with low linkage with core competencies appear as major export products.

 Analysis of Korea-CLMV's import and export and investment status showed that class 32 and 15 industries were competitive to Cambodian market, and class 30, 22, 33, and 36 industries were competitive to Laos market. Similarly class 37, 5, and 33 industries in the Myanmar and class 18, 33, 32, and 31 industries in the Vietnamese were currently competitive. In addition, it seems to be gradually strengthening their competitiveness.

 Korea's investment in Cambodia and Laos is concentrated in the service industry due to the weak manufacturing industry in the country, and investment in Myanmar is concentrated in the abundant natural resources and hydropower sector. On the other hand, it was confirmed that investment in Vietnam is gradually expanding into the manufacturing sector, led by Samsung Electronics.

 As a result of a survey of CLMV local leading companies and Korean investment companies, the structure of the production network between the two groups is generally similar. However, local companies in Korea have a relatively high share of purchasing intermediate goods from local companies and third countries (Korea), and local leading companies have a very large trade relationship with neighboring Thailand.

 Based on these points, this study proposed a plan for strengthening Korea-CLMV cooperation as follows. First, it is necessary to approach economic cooperation from a mid- to long-term perspective. To this end, we need to fill the necessary parts of the country and expand cooperation. Second, it is necessary to create a production network or regional network in which the Korea-CLMV countries coexist. Through this, Korea's production network can be stably established and the production capacity of CLMV countries can be strengthened. Lastly, Korean companies promoting entry into CLMV must establish differentiated strategies for each country. Cooperation measures should be specified based on the different elements of the countries concerned.