The improved political landscape in Southeast Asia, evidenced by last year's Indonesia presidential election and continuing progress Myanmar, and the formation of the Asean Economic Community (AEC) later this year, have helped brighten prospects for economic relations between Asean and South Korea, say Korean executives.
Last year, bilateral trade topped US$135 billion as the two partners celebrated the 25th anniversary of the Asean-ROK (Republic of Korea) Dialogue Relations. The Asean-Korea Free Trade Agreement (FTA), which took full effect in 2010, and closer cultural relations between the two regions, thanks to the growing popularity of Korean pop culture, have helped create a 16-fold increase in trade value from $8.2 billion 25 years ago.
Bilateral trade is projected to reach $150 billion this year and $200 billion or even $250 billion in a more optimistic forecast by 2020. The Asean-Korea FTA is also being upgraded for further liberalisation to support the goal.
"The FTA has played important part but the economies of Korea and Asean have also become considerably integrated. Also, we have seen Asean and Korea have become more interdependent over the past 25 years when we initiated the dialogue partnership (in 1989)," said Chung Hae-moon, secretary-general of the Seoul-based Asean Korea Centre.
"Asean and Korean have become more integrated in economic and socio-cultural aspects. Nowadays more Korean businesses are rushing to Southeast Asia and this trend has accelerated," said Mr Chung, who served as Seoul's ambassador to Thailand from 2008-11.
However, he believes both Asean and Korea could still do more to encourage their business sectors to tap the benefits of the FTA.
"The level of utilisation of the Korea-Asean FTA is not up to par, or not as high as we expected. The governments of Korea and Asean need to work very hard to make sure that the business communities will be able to enjoy the benefits of the FTA," he said.
"We have to do much more for our people to know that there is Korea-Asean FTA in place waiting to be utilised by them."
Among Asean nations, Singapore is the top trading partner with South Korea, followed by Vietnam and Indonesia. Last year, the value of trade between Asean and Korea, at $135 billion, was second only to that between China and Korea, at $228.8 billion, but the growth rate of the latter was lower.
Seoul is also negotiating bilateral FTAs with Vietnam and Indonesia but the talks have not concluded yet. With Vietnam, the negotiations have made considerable progress with political commitments made by both sides.
For Malaysia and Thailand, leaders of both countries have agreed to undertake feasibility studies for bilateral deals, noted Mr Chung.
Trade with Asean accounts to around 13% of Korea's total trade of $1.068 trillion, surpassing its trade with European Union, the US and Japan. In 2013, Asean was Korea's second largest trading partner behind China which trade with Korea totaled $228.9 billion.
NEW AEC OPPORTUNITY
Robust economic growth is expected to continue in Asean, said Mr Chung. The region has been resilient in terms of economic performance with annual growth of around 5% during the past five years.
"I believe that if Asean continues to maintain this level of economic growth, you will be able to solidify your global status further. Korea is very pleased to do more business with Asean as we have already become important partner," he said.
"Now Myanmar and Indonesia have created a positive political environment. The world's attention has been shifting toward Asean as Myanmar is undergoing a long-awaited reform process while Indonesia successfully carried out a presidential election."
Korea has also been cooperating with Asean to bring the Regional Comprehensive Economic Partnership (RCEP) into being by the end of 2015. That agreement would link Asean with China, Japan, India, South Korea, Australia and New Zealand.
Asean regained the status as Korea's largest investment destination in the first half of 2014 with a total value of $2.3 billion, after falling to third place in 2013. The second and third largest destinations for Korean FTI were the US with $1.9 billion and China with $1.6 billion.
"What also merits our attention is the socio-cultural landscape of the two regions," said Mr Chung.
Asean-Korea people-to-people exchanges, chiefly tourism, reached 6.5 million in 2013, including 4.9 million Asean-bound Koreans, making Asean the most visited region by Koreans and Korea the third most visited country for Asean citizens.
At least one million Koreans travelled in 2013 to Thailand and the Philippines, together with China, Japan, and the United States. Nearly 15 million Koreans travelled overseas last year, including an estimated 5 million to Asean.
The Hallyu (Korean Wave) phenomenon, led by K-pop, television and movies, has now expanded to more fields such as fashion, consumer goods and publications, working as a catalyst to connect the people of Asean and Korea. Asean culture has been gaining popularity in Korea as well, Mr Chung added.
STRATEGIC PLAN NEEDED
To serve the freer flows of goods and 600 million people living in Asean under the AEC, massive amounts of funding are now required for physical infrastructure, and Korea can play a role in this area, said Choi Kyung-hee, a research fellow at the Asia Centre of Seoul National University.
Apart from official development assistance (ODA) funds from governments and financial assistance from international organisations such as the Asean Development Bank (ADB), private funding including foreign investment can play a role for infrastructure development in Asean, she said.
Many countries competing to become more engaged dialogue partners of Asean including China, Japan and India. They have been actively trying to get involved in infrastructure investments while the Korean government has not devised a concrete investment plan of its own for the region.
"I believe now is the time for the Korean government to make a special plan for building connectivity infrastructure," she said.
"We should think of how to effectively use funding and resources for the development of Asean in the form of loans, also through the private sector, and grants from the government to create ideal matches from the government and private sides to make most of the use of limited funds."
Other countries have already established a major presence as investors in Asean infrastructure. The Kunming-Singapore railway established in 2012 represents a major investment by China. The Dawei port in Myanmar is very close to India but the Myanmar government has given investment priority to Japan, which has been actively involved in those infrastructure projects.
"In the case of Korea, we have a kind of limited connection to the continent so far because of [concerns about] North-South Korea relations. So we need to overcome the North-South issue to be connected to the continent first, and of course we need to look at connecting with other countries through seas and ports," said Prof Choi.
"We need to make a concrete plan about how we can participate in development of connectivity infrastructure on the ocean side."
One aspect of connectivity in which Korea is a global leader is broadband internet, and a study is under way into possible investments in IT infrastructure to connect Asean countries with broadband systems.
"I believe we can expect synergy impacts from this project to develop technology from the Korean side to meet the needs of the Asean region," Prof Choi said.
But infrastructure projects are large and big companies from Korea need some kind of guarantee from the government side. "At least, they need profound trust and confidence in the targeted countries," she said, adding that a public-private partnership (PPP) will be a good option.
"To induce this kind of investment in your country, you need to ensure your commitment and also demonstrate your improvement to the outside world, and also political stability in your country," she said, citing Myanmar as an example.
"Money and funding always move to new markets that have abundant natural resources and [investors] also look for new opportunities in these new markets. If Myanmar wants to attract this funding, it needs to show the world its will to promote more development toward stability so that investors will be assured that they are safe when investing in the country."