The second session on Day 3 of the ASEAN Business and Investment Summit following the keynote speech by Secretary General of the United Nations, Ban Ki-Moon, was to highlight business opportunities between ASEAN and Republic of Korea (ROK). The panel was presenting Baek Sung‐Kwan (Executive Vice President of POSCO), Jae Bum Park (Vice President, ASEAN-Indo Marketing & Sales Division of Hankook Tire co.,ltd), Kwangyul Peck (Korindo Group Advisor), and Jongkie D. Sugiarto (President Director PT Hyundai Indonesia Motor).
The background of this panel is as follows.
The ROK was accorded a full Dialogue Partner status by ASEAN in July 1991. Compared to the 22.6% decline in global trade in 2009, the total trade between ASEAN and ROK showed a strong performance in 2009 with only a slight decline of 4.5% from the previous year, reaching the level of USD 74.7 billion from USD 78.3 billion 2008. The 2009 value of total trade between ASEAN and ROK was much higher than its pre-crisis level, which was USD 61.2 billion in 2007. Total flows of foreign direct investment (FDI) from ROK declined by 10.21 per cent in 2009 with ASEAN receiving a substantial amount of FDI of USD 1.4 billion last year. (asean-bis.com)
The moderator, Meidyatama Suryodiningrat (Chief Editor of the Jakarta Post), opened the session by highlighting some the aspects that the session should focus on. These include: the impediments in business relationships between the two regions, priorities and how the business sectors can contribute to sustainable and inclusive growth. The last aspect was related development challenges proposed by UN Secretary General in the previous session.
Baek Sung‐Kwan of POSCO (The Pohang Iron and Steel Company), the world’s third largest steel maker based in Pohang, South Korea, explained that to move the global economy forward we need stability. Statistics suggest that Foreign Direct Investment into the Asian region grew by 11-14% indicating the potentials that the region has. POSCO has invested in ASEAN since 1990 with Myanmar as its first investment destination. Mr Sung-Kwan viewed that the growth of steel industry can also improve other sectors such as automobile and ship building indicating the importance of the industry. However, there is still room for improvement. Mr Sung-Kwan suggested that the ASEAN steel industry should continue to extend its capacity and improve competitiveness. At the moment, ASEAN is still an importing region. He also added that good infrastructure is crucial especially ports to allow better transportations of raw materials. Addressing the question how his company contributes to inclusive growth, Mr Sung-Kwan explained assistance that POSCO has provided to small and medium enterprises (SMEs).
Jae Bum Park of Hankook Tire, the seventh largest tire company in the world based in South Korea, talked about ‘why invest in Indonesia’ based on his company experience. Hankook Tire is scheduled to invest US$ 1.2 billion until 2018 in Indonesia. The company has started building a plant in Cikarang to expand its auto-mobile related production. Mr Park explained that Indonesia has a good business prospect. The ‘ghost of the global recession’ will stay for a while, but ASEAN is quite resilient. The initial consideration to invest in Indonesia was due to its low-labour cost. But thanks to the development of human capital in Indonesia, Mr Park viewed that Indonesia not only offers low-cost labours but also high productive labours. Nevertheless, the Indonesian government as well as other ASEAN countries have some homework to do. Indonesia should have a single window to support foreign investors and make sure that the staff who deal with these foreign investors are professional. Infrastructure development is also required. Looking at the macroeconomic development strategy, ASEAN countries should focus more on domestic and intra-regional consumption-driven strategies than export-oriented strategies.
Jongkie D. Sugiarto of Hyundai Indonesia Motor complemented the discussion by looking at opportunities that Korea-based SMEs can further explore. He viewed that ASEAN is also profitable for Korean SMEs. Korean companies can enjoy the benefits from ASEAN free trade by investing in the region without the needs of waiting for ASEAN-Korea free trade agreements to get approved.
The panel definitely presented the best and brightest businessmen in two regions. There are some concerns, however, about whether the idea of shifting away from export-oriented growth to domestic-demand driven growth is ASEAN’s first best option. Whilst ASEAN and its business partners might be quite confident that the region is quite resilient, statistics suggest that Asian trade characteristics with high intra-regional trade especially in parts and components (regional product fragmentation) has led to a pretty much uniform effect of the global economic downturn on exports from some Asian countries at about 20% (Athukorala and Kohpaiboon 2009). Surely, focusing on domestic consumption will lessen ASEAN’s vulnerability to external shocks. But, does it imply we move towards deglobalisation, or at the minimum, regionalism? Recall that this is the biggest concern that Professor Klaus Schwab, the World Economic Forum’s Founder and Executive Chairman presented in Jakarta in June 2011.
This article is prepared by Risti Permani.