How to Expand Korea-ASEAN Industrial Cooperation
|Author||Shin, Yoonsung et al||Date||2018.12.12||Page|
Korea Exportation has taken a new turn even if it has led the growth of the Korean economy. Since 2000s, Korea’s trade has expanded mainly with the G2 nations of the U.S. and China - the world’s two largest markets. Generally, high trade dependency on certain countries can make one’s economy vulnerable to the risks associated with changes in economic and geopolitical relations with those countries. In turn, external risks can have a negative impact on the domestic economy due to a decrease in trade. As the trade environments with the U.S. and China (the countries with the largest share of Korea’s foreign trade), have recently gotten worse, and as trade disputes between Washington and Beijing have intensified, it seems to be risky for the Korean economy.
Accordingly, the Korean government has stepped up its economic cooperation with emerging markets, such as the ASEAN countries and India, in an effort to mitigate any economic crisis resulting from its own conflicts with each of the G2 nations, as well as from the trade feud between the two. In particular, in November 2017, President Moon announced a new foreign policy called the ’New Southern Policy’ in Indonesia, with the goal of expanding economic cooperation between Korea and the ASEAN nations; shifting from simple exchanges of goods to services, investment and technology, and the promotion of cultural, artistic and personnel exchanges.
This study aims to present a platform for the successful promotion of the New Southern Policy, under which Korea can support the economic development of low- and middle-income developing nations in the ASEAN region, and expand its export of a composite materials system to the ASEAN countries.
It is known that Korea’s high trade dependency results from the export of its powerful manufacturing industry. Korea has produced price-competitive industrial products and exported them to other countries, further accelerating its economic growth. Although Korea’s high trade dependency is an outcome of aggressive overseas market development to overcome the limitations of its domestic market, Korea’s economy has been increasingly criticized for leaving itself vulnerable to rapid changes in foreign economic environments. Against this backdrop, Korea has taken a great interest in the ASEAN market with its high growth potential, and taken steps toward market entry and expansion there to reduce its dependency on exports to the U.S.
and China. This study focuses on the priority sectors for cooperation, taking both internal and external conditions of the ASEAN into consideration, because there is a need to look for industries with higher potential for practical cooperation. The results of the study show that both high possibility and the potential for cooperation exists in the power infrastructure industry, and should therefore be prioritized for bilateral cooperation.
However, intensified competition with other countries (such as China, Japan, and Australia) that have already begun to expand their economic cooperation with ASEAN member nations is inevitable in this New Southern Policy. The examples of Japan’s EIRA and JOIN, which have been actively implementing infrastructure projects in the region, as well as Australia’s PROSPERA (formerly known as AIPEG), suggest what Korea needs to act on immediately. Japan and Australia have already established local cooperative systems to carry out research, investigation and planning for the purpose of promoting cooperation in the infrastructure sector, thereby expanding their influence. With this in mind, the Korean government should move away from expanding commodity exchanges and shift to a different paradigm in foreign economic cooperation. In addition to the Korea-ASEAN FTA and bilateral investment treaties, the Korean government should engage inoverseas cooperation from a long-term perspective and become more skilled in higher-level planning to expand market penetration to the power infrastructure sector in developing nations in the ASEAN market.