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The 3rd-Largest Investment Destination with US$5 Billion Last Year: ASEAN Connectivity Projects and S. Korea's New Southern Policy
President Moon Jae-in (fifth from left) poses for photos with participating leaders of the 20th ASEAN-ROK Summit at Suntec Singapore Convention Center on Nov. 14, 2018. President Moon said that “ASEAN members and Korea have similar experiences.”
Despite being a giant economic bloc with high growth pro-spects, Southeast Asia has not fully reaped the benefits of its potential due to a shortage of advanced and efficient infrastructure. That is about to change gradually, as member states of the Association of Southeast Asian Nations (ASEAN) increasingly connect their domestic territories physically, technologically and institutionally, as well as among their economies and with the world.
An ASEAN connectivity forum, as the annual event since 2013, has become a leading platform for industry profes-sionals and government officials working in connectivity-related infrastructure initiatives. With the participation of experts from ASEAN governments and global financial institutions, it introduces the region's latest development plans, infrastructure projects and financial procurement methods.
Korea's New Southern Policy announced by President Moon Jae-in in Manila is a clear indication of our interest to deepen engagement with ASEAN, according to Lee Hyuk, Secretary General of the ASEAN-Korea Center. In a speech at the ASEAN connectivity forum, the Secretary General said, "This policy is also expected to strengthen the various channels of commerce between ASEAN and Korea."
According to the center - established as an intergovernmental organization in 2009 to mark the 20th anniversary of the bilateral sectoral dialogue partnership - ASEAN is Seoul's second-largest trade partner, with volume reaching nearly US$150 million last year, and the country's third-largest investment destination with investments of US$5 billion last year.
ASEAN - Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Myanmar and Vietnam - is home to 640 million people and has a regional gross domestic product of US$2.8 trillion and regional trade volume of US$2.6 trillion, making it the world's fifth-largest economic bloc.
"ASEAN's connectivity underpins its community-building process and will enable its member states to further integrate themselves as a competitive region, while spurring innovation and resilience and providing a long-term foundation for inclusive and equitable growth," said General Secretary Lee Hyuk, the former South Korean ambas-sador to Vietnam and the Philippines.
"Korea has the experience, expertise, technology and global competitiveness in infrastructure development. More importantly, Koreans have huge enthusiasm and the will to cooperate with ASEAN."
To this end, Seoul recently established the Korea Overseas Infrastructure and Urban Development Corporation and held the first ASEAN-Korea Infrastructure Ministers' Meeting. Furthermore, it has plans to double its annual financial contribution to the region to US$14 million by 2019 through the ASEAN-ROK Fund, and raise US$100 million by 2022 to create the ASEAN-Korea Infra-structure Fund, which targets trans-portation, energy, water resources and smart city development.
"The connectivity projects in transport-ation, energy and information communi-cations technology, among other industries, are where most Korean companies have high competitiveness," said Kim Jun-dong, executive vice chairman of the Korea Chamber of Commerce and Industry.
"Korea can lend its expertise from its rapid economic development, including lessons in success and failure, and offer a high level of cooperation."
Examples of bilateral collaboration include light rail expansion and renewable energy projects in Indonesia; plant construction in Vietnam; a new harbor construction in the Philippines; an electrical station construction in Myanmar; smart city development in Singapore; and the implementation of an information and communication technology master plan in Cambodia, he said.
"Since 2011, ASEAN has embarked on a long journey toward the creation of a single community supported by three major pillars: the political-security community, economic community and socio-cultural community," said Philippine Undersecretary of Department of Trade and Industry Rowel S. Barba.
"As a region of 10 diverse states, geographically separated by rugged terrains, mountains and oceans, the challenge of establishing an integrated community lies in effectively connecting all our countries."
Building on the first phase of the ASEAN Connectivity Master Plan (2011-15), he noted, the second phase (2016-25) targets sustainable infrastructure, digital innovation, seamless logistics, regulatory excellence and people mobility.
Among these five strategic objectives, the Korean government expressed its interest in digital innovation, the ASEAN Smart Cities Network and Technical and Vocational Education and Training program - areas of competitiveness for Korea, according to Korean Deputy Minister for Political Affairs Yoon Soon-gu.
Noting that next year marks the 30th anniversary of the ASEAN-Korea dialogue partnership, Yoon said the Korean government will host the ASEAN-ROK Commemorative Summit and inaugural Mekong-ROK Summit.
In line with the South Korean government's push to strengthen diplomatic and economic ties with Southeast Asia, Korean entrepreneurs are increasingly seeking new opportunities in the region to benefit from its fast-growing economies, which have a combined population of 630 million and a combined gross domestic product of US$2.4 trillion.
The New Southern Policy is the Moon Jae-in administration's key foreign economic policy and reflects its strong commitment to prosper together with the ASEAN countries.
In line with the policy, a special committee was launched within Cheong Wa Dae in August 2018, comprising around 30 officials from 14 ministries.
"ASEAN and India are important to us to the extent that our future relies (on them) ... I found that the New Southern Policy is very important from the perspective of expanding mutual economic cooperation and diversifying our export markets," President Moon said after his trip to attend the 33rd ASEAN Summit and APEC Summits in 2018.
He also called on ministries to work together to host the special Korea-ASEAN Summit, to be held in Korea this year to mark the 30th anniversary of diplomatic relations between Korea and the ASEAN region.
The New Southern Policy is expected to accelerate the economic partnership between the two sides, which have seen a gradual rise in trade and investment in recent years. In the decade, the trade volume between Korea and ASEAN went up to US$149 billion in 2017 - from US$61.8 billion in 2007, when the free trade deal first came into force. The trade volume was expected to reach US$160 billion in 2018.
Among Korean exports to ASEAN, the value of all exports from new industries such as next-generation chips, displays and premium consumer goods stood at US$37.4 billion in 2017, surpassing exports of traditional industry products such as cars, steel, ships, petroleum products and synthetic resins, which totaled US$31 billion.
Korea's leading tech firms are not only providing advanced IT services and products for the Southeast Asian nations - they also contribute directly to the host countries' economic growth by making significant investments.
Ever 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.
In October last year in Kuala Lumpur, Malaysia, Samsung unveiled its newest Galaxy smartphone, the A9, with the world's first rear quad camera. This was Samsung's first "Unpacked" event in Southeast Asia.
Mobile carrier KT is making aggressive inroads into the Southeast Asian region by helping provide ICT solutions for smart cities. KT recently signed a partner-ship with Vietnam's largest construction group, the Hoa Binh Corporation, to build artificial intelligence-enabled hotels and push for smart city projects in Southeast Asia.
In August last year, the telecom firm signed a KR\53 billion contract with the Philippines' Converge ICT Solutions Inc. to build an optical fiber network along some 1,570km of main roads in the northern region of Luzon.
Last year, SK Networks, a trading unit of SK Group, announced that it would start a home-appliance rental business in Malaysia through its local office, SK Networks Retails Malaysia.
Alongside tech firms, Korean companies are also gearing up their efforts to capture the growing business opportunities in the areas of transportation, infrastructure and energy in the region. In Indonesia in 2014, steel giant POSCO opened Krakatau POSCO, Southeast Asia's first-ever integrated steel mill, with a production capacity of 3 million tons. POSCO and Indonesia's state-run Krakatau Steel invested 70% and 30#, respectively, in the steel mill.
Korea's auto industry is also shifting its focus to Southeast Asia with the country's No. 1 automaker, Hyundai Motor, pioneering the transition. In November 2018, Hyundai and Kia invested US$250 million in Grab, Southeast Asia's leading online-to-offline mobile platform, eyeing Southeast Asia's growing ride-hailing market. They also plan to pilot electric-vehicle programs across the region.
Korean auto parts manufacturer Hyundai Mobis opened a data center jointly with a local company at a science park in Ho Chi Minh City, Vietnam, in 2017, which will promote the develop-ment of self-driving cars, the company said. Hoping to increase its presence in the Southeast Asian defense market, Hanwha System participated in Asia Defense and Security 2018nin the Philippines.
In line with the government's New Southern Policy, the number of local financial companies advancing into the Southeast Asian market has fast risen in recent years. According to the Financial Supervisory Service, the number of overseas offices of Korean financial companies has increased 20% - to 431 2017, from 359 in 2011. One of the champions of Southeast Asian market expansion is KB Financial Group, steered by its flagship KB Kookmin Bank.★