Korea needs 'single market strategy' in ASEAN

By Kim Jae-kyoung

SINGAPORE ― Korean companies should develop a “single market strategy” in the ASEAN market as the Southeast Asian bloc’s latest accord to enhance transport cooperation is expected to speed up integration of the region, according to ASEAN experts.

They said Korean players should act swiftly because once ASEAN becomes more integrated, they will need new production models and market strategies.

“This agreement is very relevant as transport connectivity is key to enhance economic integration, especially in neighboring areas,” Alicia Garcia-Herrero, Asia-Pacific chief economist at Natixis, told The Korea Times.

“For South Korea, it means ASEAN should increasingly be thought of as a good substitute for China in terms of outward FDI for manufacturing. South Korea should move before others do as Japan and China are the key competitors.”

Venkatachalam Anbumozhi, a senior economist at the Economic Research Institute for ASEAN and East Asia (ERIA), agreed.

“It is a step closer to full economic integration and connectivity,” he said.

These views came after 10 ASEAN member states signed an agreement to strengthen land, sea and air links by lowering barriers at the 23rd ASEAN Transport Ministers Meeting held in Singapore on Oct. 13.

The move is expected not only to bolster ties among the countries, but also to boost travel and trade within the region by enabling the greater movement of people and goods, benefiting the region’s economies and businesses and expanding tourism.

“The agreement is an important step forward to facilitate closer linkages between ASEAN member states,” said Katrina Ell, economist at Moody's Analytics.

“It will be particularly beneficial for cementing closer trade and tourism ties by removing red tape and bureaucracy.”

She pointed out the expanding economic service sector via higher tourism is an important burgeoning industry with lots of potential, particularly given the impressive rise of the middle class in many ASEAN member states.

“South Korea would do well to work toward inking a similar agreement with ASEAN to achieve the same forecasted benefits,” Ell said.

Rob Carnell, head of Asia research at ING Bank, concurred.

“Any move like this has to be seen as a small step for greater free flow of labor and services,” he said.

“And it is generally a positive for all economies involved, though presumably there are still border checks and limitations, even if a change in transport is no longer required.”

Catalyst for engagement in ASEAN

The latest initiative on connectivity came nearly two years after the launch of the ASEAN Economic Community (AEC) at the end of 2015. ASEAN consists of 10 countries ― Brunei, Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Laos, Thailand and Vietnam.

The AEC is an agreement among 10 ASEAN member nations to create by 2025 a single market in the region with a free flow of goods, capital and skilled labor.

Experts say in order to capitalize on opportunities in the region, Korean firms need to take a more comprehensive approach by considering ASEAN as one market.

Korean Ambassador to ASEAN Suh Jeong-in believes Korean firms should try to see both “the forest and the trees” and take a “think regional, act local” strategy to find an optimal place for a regional production base that can cover the entire ASEAN market.

“Korean firms need to see the region as a single market and take action at an early stage of the integration process, with the vision to look 10 years ahead,” he said in an earlier interview

“They should come up with a strategy for the entire ASEAN market while employing tactics tailored to each country because the 10 member countries are all different in regards to economics, politics and culture.”

Anbumozhi said Korea also needs to be more strategic.

“The initial willingness of ASEAN members to agree to enhance the connectivity should be seen as a positive development, as six intra-ASEAN routes are now among the business international air-transport and sea line connectivity routes,” he said.

Citing the region’s lack of infrastructure ― airports, seaports and railroads, he said Korean intervention should be both hard ― investment in infrastructure ― and soft ― training of human resources and policies.

“Korea should see the agreement as one of the major catalysts for long-term engagement in Southeast Asia’s commercial transport and tourism industries linking the fast-growing Chinese and Indian markets,” he said.