Gov't urged to discuss boosting ties with ASEAN at special summit in Nov.
By Park Jae-hyuk
Competition between Korea and Japan has heated up in the Southeast Asian market.
Amid the intensifying trade dispute over Japan's export curbs on Korea, the two countries have stepped up efforts to earn support from the rapidly developing countries belonging to the Association of Southeast Asian Nations (ASEAN).
According to the Korea Trade-Investment Promotion Agency (KOTRA), Korea surpassed Japan in terms of the amount of foreign direct investment (FDI) in Vietnam during the first half of 2019.
Following Hong Kong that invested $5.3 billion, Korea ranked second as it invested $2.7 billion in the Southeast Asian country. Japan came in third as it invested $1.9 billion.
Japan was at the top spot in 2017 and 2018, while Korea ranked second.
The KOTRA data showed Korea's investments in manufacturing, retail and construction enabled the country to outdo its neighbor.
But still, Japan is holding supremacy in the ASEAN market, due to its long-term relationship with countries there.
Moreover, Japan has increased its investments in the region since 2012, with its "China Plus One" strategy devised to curb China's expansion in the ASEAN market.
The island country is also leading the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trade agreement among Pacific Rim countries which took effect in 2018.
Against this backdrop, experts said Korea needs to boost its ties with Southeast Asian countries, convincing them of the negative effect of Japan's export control.
"Fears over Japan's regulation on its exports to Korea have been growing in Vietnam, Malaysia and Singapore," the Korea Institute for International Economic Policy (KIEP) said in its Aug. 14 report.
"At international meetings with the ASEAN nations, Korea should underline the negative impact of Japan's protectionist policy on the ASEAN and global markets."
Korea, which has pushed forward its New Southern Policy since 2017, is supposed to attend meetings which will be held in Bangkok in September and November for member states of ASEAN and the Regional Comprehensive Economic Partnership (RCEP).
In late November, Busan will host the third Korea-ASEAN special summit and the first Korea-Mekong summit.
The KIEP suggested the Korean government consider discussing stronger ties with rising Asian nations during the Busan summits, so as to protect the global free trade order.
According to the government-funded economic think tank, most ASEAN member states are regarded as export-reliant countries, so they have been concerned about the U.S.-China currency war and the Korea-Japan trade dispute, both of which can disrupt global value chains.
Nguyen Anh Duong, researcher of Vietnam's Central Institute for Economic Management, said the escalating tension between Korea and Japan may deal a blow to the Vietnamese economy, because it may disrupt Vietnam's exports of electronic goods, computers and phones.
To Ngoc Son, deputy director of the Vietnamese trade ministry's department of Asia-Africa markets, also expressed fear of the trade dispute's knock-on effect on the country's entire industry.
Arin Jira, chairman of the ASEAN Business Advisory Council in Thailand, said he believes "there will be a similar economic impact" to that of the U.S.-China trade war but on different sectors.
Indonesian and Singaporean foreign ministers expressed their concerns about Japan's export control as well, during the ASEAN plus Three Foreign Ministers' Meeting in Thailand in early August.
Considering the growing number of Southeast Asian countries criticizing Japan, some experts say Korea should capitalize on the current crisis in attracting the ASEAN nations to its side.
However, former Korean Ambassador to ASEAN Suh Jeong-in, who is leading a team preparing for the forthcoming Busan summits, said it is not appropriate for Korea to persuade the ASEAN countries to support Korea and oppose Japan.
He said Korea should win the hearts of the ASEAN nations by stabilizing the global value chain which has been rocked by the recent trade feuds.
He also suggested Korea expand its presence in other Southeast Asian nations and stop being overly dependent on the Vietnamese market.
"Indonesia and the Philippines are also large markets having populations of over 260 million and 100 million, respectively," Suh said. "However, their volumes of trade with Korea are still small, compared to that of Vietnam."
He also said boosting ties with Myanmar and other countries in the Mekong River basin will help Korea discover new markets.