China's rebuff of South Korea is Asean's gain

Amid Thaad row with Beijing, Seoul looks to S-E Asia for trade and tourism growth

South Korean girl band Twice at a press conference on April 28, 2017, ahead of their first concert in Singapore. PHOTO: ST FILE
A shuttered Lotte Mart store in Beijing yesterday. The South Korean conglomerate, which was forced to close most of its 112 discount stores in China, has since expanded investments in Vietnam and Indonesia.
A shuttered Lotte Mart store in Beijing yesterday. The South Korean conglomerate, which was forced to close most of its 112 discount stores in China, has since expanded investments in Vietnam and Indonesia. PHOTO: AGENCE FRANCE-PRESSE

Beijing, angered by Seoul's controversial deployment of an American missile shield system, boycotted South Korean companies and pop stars, and banned tour packages to South Korea in protest.

But as things turned out, China's retaliatory moves have benefited South-east Asian countries.

South Korean conglomerate Lotte, which was forced to close most of its 112 discount stores in China, has since expanded investments in Vietnam and Indonesia.

K-pop stars banned in China have headed to Singapore, Thailand and other Asean nations to hold concerts and fan meetings.

The South Korean government has even designated this year as Asean-Korea Cultural Exchange Year and lined up activities, including the opening of the Asean Culture House in Busan on Sept 1.

South Korean President Moon Jae In, who has stressed that Asean is "as important" as the United States and other neighbours, is also likely to visit two Asean states by the end of the year.

Analysts say the Chinese backlash against the deployment of the United States' Terminal High Altitude Area Defence (Thaad) system could leave South Korea with losses of up to US$14.8 billion (S$19.8 billion). A Hyundai Research Institute report released yesterday said some 3.33 million Chinese cancelled trips to South Korea after China first banned the sale of group tours in March. This led to an estimated US$6.51 billion in lost tourism revenue.

  • US$72b Value of bilateral trade between South Korea and Asean in the first half of this year - a record-high.

    29.3% Percentage rise in visitors from Vietnam in the first half of the year.

The Lotte Group, which bore the brunt of China's wrath as it had given up part of a golf course for Thaad's installation, said yesterday it has appointed US investment bank Goldman Sachs to sell some of its shuttered Lotte Mart stores in China. A spokesman told Agence France-Presse that Lotte Mart could lose 1 trillion won (S$1.2 billion) this year if the situation continues.

At the same time, the retaliatory moves exposed the risk of over-reliance on China for trade and tourism, and prompted South Korea to cast its net further and wider.

The efforts are beginning to pay off, although experts say more can be done to deepen ties with Asean, South Korea's second-largest trade partner after China.

Bilateral trade between South Korea and Asean hit a record-high of US$71.8 billion in the first half of this year and is expected to grow beyond last year's US$118.8 billion, according to Trade Ministry figures.

South Korea even beat Singapore and Japan to become the largest foreign investor in Vietnam this year, with investments surpassing US$6.02 billion as of last month.

Tourist arrivals from South-east Asian countries have also risen as South Korea increased promotional efforts and issued electronic visas. More than 1.06 million visited South Korea in the first half of the year, marking a 3.3 per cent increase year on year. Visitors from Vietnam jumped 29.3 per cent to 177,192.

Mindsets have also shifted among South Korean businesses looking to expand overseas. A recent survey of 1,015 mid-sized export companies by the Korea International Trade Association showed that over 33 per cent plan to expand in Vietnam, followed by 19 per cent in China and 10.7 per cent in other Asean countries.

More can be done though.

Experts say South Korea should show more sincerity in engaging Asean with high-level visits, and examine what it could offer that would set it apart from China and Japan, both of which are also eyeing a slice of Asean's US$2.5 trillion economy, the seventh-largest in the world.

The English-language Korea Times urged Mr Moon to "take a leading role in Asean diplomacy" and make state visits to Asean nations as soon as possible. Japan's Prime Minister Shinzo Abe, it noted, visited all 10 Asean countries in his first year in office.

Mr Shawn Ho, associate research fellow at the S. Rajaratnam School of International Studies in Singapore, said state visits would signal Mr Moon's "strong interest to engage Asean early on in his presidency despite the other major issues that require his attention in North-east Asia".

A check with South Korea's presidential office showed that Mr Moon "will likely visit" Vietnam for Asia-Pacific Economic Cooperation meetings, and the Philippines for the Asean-Korea Summit. Both are in November.

Mr Ho said Mr Moon's interest in expanding ties with Asean is "encouraging and most welcome".

"The challenge is for him and his government to sustain this level of interest and engagement in Asean, especially when there is a crisis on the Korean peninsula," he said.

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A version of this article appeared in the print edition of The Straits Times on September 16, 2017, with the headline China's rebuff of South Korea is Asean's gain. Subscribe