Korean businesses tune in to Asean opportunities

Korean businesses tune in to Asean opportunities

Kim Young-sun (second from left), secretary-general of the Asean-Korea Centre, and BoI secretary-general Hirunya Suchinai (third from left) toast their cooperation at a recent dinner. (Photo courtesy of Asean-Korea Centre)
Kim Young-sun (second from left), secretary-general of the Asean-Korea Centre, and BoI secretary-general Hirunya Suchinai (third from left) toast their cooperation at a recent dinner. (Photo courtesy of Asean-Korea Centre)

Amid growing awareness about the Asean Economic Community (AEC), member states are being encouraged to further strengthen their integration to draw interest from Korean companies that are exploring more opportunities in the region.

"With the launching of the economic community, Asean is a growing interest of Korean businesses. They are looking for new partners, more attractive, sexy partners in this region," said Kim Young-sun, secretary-general of the Asean-Korea Centre (AKC).

Most Korean businesses active in Southeast Asia look mainly at individual countries when they plan their strategy, but they are beginning to look at the bigger picture.

"Their understanding about Asean as an economic community, however, still has a long way to go. They are changing their attitude one by one," Mr Kim told Asia Focus during a recent visit to Bangkok.

The launch of AEC at the end of 2015 was a good start but more work needs to be done, in his view.

"Ten member countries of Asean have different interests and diversity but you agreed to form the community. That's a great thing," he said. "To the Korean people, the launch of the community is marvellous even though the content must be strengthened."

Many Korean conglomerates are now doing business in most Asean member states. Now it's time for them to understand Asean as a group so that they can achieve greater synergy, said Mr Kim, who has worked with the Ministry of Foreign Affairs since 1977 with postings in the United States, Israel, Egypt, Lebanon and Japan. He served as ambassador to Indonesia from 2011-14 before joining the AKC.

The value of trade between Korea and Asean has jumped from US$8.2 billion in 1989 to $138 billion in 2014, and Asean has surpassed the US, the EU and Japan to become Korea's second largest trading partner. Since the Asean-Korea FTA came into force in June 2007, economic cooperation has expanded in various areas including investment and services, making Asean the second largest investment destination for Korea. The two sides aim to achieve $200 billion in bilateral trade by 2020.

People-to-people exchanges have also been on the rise. The number of travellers between the two regions last year totalled around 7 million, of whom 5.4 million were Koreans visiting Southeast Asia.

One million visitors from Korea came to Thailand in 2015 and 20,000 Koreans are living in Thailand.

The AKC is an inter-governmental organisation established under an agreement reached during the 11th Korea-Asean Summit in Singapore in November 2007 to build mutually beneficial sustainable partnerships. Its mandate is to increase trade volume, accelerate investment flows, invigorate tourism and enrich cultural and people-to-people exchanges.

Mr Kim recently accompanied representatives of 10 Korean information technology companies to Bangkok and Phuket, in collaboration with the Board of Investment (BoI) of Thailand. The mission aimed to provide a first-hand view of the investment environment and opportunities in the IT sector in Thailand to potential Korean investors.

The trip was a follow-up to a visit that Thai Deputy Prime Minister Somkid Jatusripitak made to Korea in March, when he encouraged Korean businesses to further invest in the ICT sector in which they have world-class competitiveness.

The ICT industry in Asean employs 11.7 million people and contributes to more than $32 billion, or 3% of Asean's gross domestic product. Regional leaders have adopted the Asean ICT Masterplan (AIM) 2015, which seeks to expand the reach of services such as broadband and telecommunication infrastructure, develop innovation capacity, and encourage foreign direct investment.

"Thailand is among the leading countries in Asean for IT with great potential for further growth in its ICT industry. Many of its advantages such as good infrastructure, a well-trained workforce and strategic location will allow it for greater development," said Mr Kim.

The IT industry is a priority for the Thai government as it will help drive the digital economy in line with the "Thailand 4.0" strategy. The AKC event featured one-on-one business meetings at which Korean and Thai participants explored areas for future cooperation, said Mr Kim.

"Thailand's IT industry faces some challenges such as the need to further develop skilled labour, [and promote] digital devices and technology adoption by SMEs," he said. "If some of these challenges are addressed, it will indeed give a great boost to the industry."

As well, Thailand is a regional hub that connects Myanmar, Cambodia, Laos and Malaysia. It plays a key role in the increasingly sophisticated regional supply chain, especially in regard to the rising demand for a cross-border logistics service, he added.

Direct investment from Korea to Thailand is rising with total net applications from Korean companies to the BoI jumping 4.6 times to $566 million in 2015 from $121 million the year before.

According to BoI deputy secretary-general Chokedee Kaewsang, the government this year has budgeted 3.7 billion baht for projects to accelerate the digital economy and foster a digital society. Of the total, about 60 million baht has been allocated to develop Phuket into a smart city.

"The government is committed to transforming the kingdom into a smarter, more innovative nation through improving infrastructure, fostering a high-tech talent pool and providing multinational tech companies with a superior business climate," he said.

In response to the clear government strategy, the BoI received 67 project applications with a total investment value of 1.35 billion baht in the first three months of this year, up 68% in value from the same period last year.

In 2015, there were 559 project applications with a total investment value of 106.54 billion baht from foreign investors. Of the total, 23 projects worth 1.8 billion baht were from Korean firms, ranking eighth among foreign investors. In the IT sector, two Korean projects were approved with a total investment value of 17 million baht.

Last year, Thailand's ICT market was worth about 230 billion baht. There were 495,000 ICT professionals in Thailand as of 2014 and the number is expected to rise to approximately 600,000 in 2018. The county had 38 million active internet users in 2015, accounting for 56.7% of the total population.

"Thailand is mostly recognised by Koreans as a tourist destination but the BoI investment promotion policies surely will turn Thailand into a destination for foreign direct investment," Mr Kim said.

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