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GETTING A SLICE OF THE PIE:
THE PHILIPPINES IN ASEAN-SOUTH KOREA RELATIONS

by: Krista Kyla D. Seachon

The 25th year of relations between ASEAN and South Korea in 2014 was highlighted by the commemorative summit held last December 2014 in Busan, South Korea. With the theme “Building Trust, Bringing Happiness,” ASEAN leaders met with South Korean President Park Geun-hye and issued a joint statement promoting increased political, economic, and socio-cultural cooperation. Given the growing interaction between ASEAN and South Korea, how can the Philippines take advantage of these relations and maximize its participation in ASEAN- ROK?

South Korea is committed to building a strong partnership with ASEAN

From being a sectoral dialogue partner in 1989, South Korea’s relationship with ASEAN was elevated to the summit level in 1997 and finally to a strategic partnership in 2010. Eventually, South Korea opened its mission and appointed a representative to ASEAN.

The growing cooperation between ASEAN and South Korea is evident in terms of regional trade and investments. ASEAN is South Korea’s second largest trading partner while South Korea is the fifth largest trading partner of ASEAN. The two-way trade between South Korea and ASEAN amounted to USD 135 billion in 2013, a three percent increase from the 2012 trade volume of USD 131 billion. With the signing of the ASEAN-Korea Free Trade Agreement (AKFTA), the two parties have sought to further expand trade volumes by setting a target of USD 200 billion in two-way trade by 2020. Meanwhile, Foreign Direct Investments (FDIs) from South Korea to ASEAN, amount to USD 3.5 billion in 2013.

Another reflection of ASEAN and South Korea’s strong partnership is in people-to-people connectivity. Every year, an average of five million tourists travel between ASEAN member states and South Korea. Data from the ASEAN-Korea Centre also reveal that nationals from ASEAN countries account for 23 percent or 330,000 people of the total number of foreign residents in South Korea.

Therein lies the problem

Among ASEAN states, South Korea’s trade volume with the Philippines remains dismally low. As of 2012, the country ranks 6thin bilateral trade at USD 770 million compared to Indonesia’s USD 29,631 million and Malaysia’s USD 2,294 million. As of 2013, Philippine exports to South Korea reached USD 3.4 billion while Philippine imports from South Korea amounted to USD 4.82 billion. From this data, a trade surplus in favor of South Korea currently exists. This is attributed to various issues surrounding the investment climate in the Philippines; problems on the utilization of natural resource endowments available in the country; and the low value added of products manufactured by local industries. Philippine economic diplomacy could encourage more Korean investments but these have to be paved with sound infrastructure and improved investment climate in the country.

In the area of tourism, the country has a long way to go if it wants to be on par with its neighbors, although the Philippines is currently undergoing infrastructure development and rehabilitation. Among ASEAN countries, the Philippines has the second highest tourist arrivals from South Korea – next only to Thailand –with 1,165,789 tourists in 2013. While the Philippines has a lot of pristine beaches and lush forests, interconnectivity of these tourist attractions to airports has to be addressed. While airports in neighboring ASEAN states have been vastly improving in the last decades, we have to overhaul our own—the Ninoy Aquino International Airport (NAIA) 1 hailed from 2011 to 2014 as one of the worst airports in the world.

In 2014, the Philippines ranked 52nd among 144 economies in the Global Competitiveness Index. The country’s ranking was up seven notches, from the 59th spot among 148 economies in 2013. Based on the ease of doing business report, however, there is still a lot of red tape just to start a business. In addition to streamlining requirements, there is also clamor for putting in place a consistent policy for investment to encourage more businessmen from South Korea to set up shop in the country.

Maximizing opportunities: implications for the Philippines

Given South Korea’s strong interest in the region, the Philippines should take advantage of this opportunity. South Korea is active in providing support for projects in ASEAN. This is seen through the establishment of the ASEAN-ROK Special Cooperation Fund (SCF) and the ASEAN-ROK Future Oriented Cooperation Fund (FOCP). Figures on the Regional Development Assistance from South Korea amount to USD 59 billion. The huge amount offered by South Korea for development programs remain underutilized by ASEAN countries. Philippine Permanent representative to ASEAN Amb. Elizabeth P. Buensuceso also stated that most projects are South Korea-initiated and there is a need to synergize ASEAN and South Korean priorities. Completed projects under the SCF and the FOCP are mostly exchange programs and knowledge transfer programs. The Philippines can take advantage of the funds available by proposing projects that are in line with tourism and infrastructure development, two key areas where South Korea has comparative advantage.

With the upcoming ASEAN integration, ASEAN countries are scrambling to improve their infrastructure and mechanisms in order to accommodate the changes that will be occurring in the region. The Philippines can take advantage of this as rationale to carry out needed reforms in developing infrastructure and improving the investment climate in the country. It cannot maximize its partnership with South Korea through ASEAN if it remains lackluster in its effort. But with a change of administration in 2016 looming, hopefully, the current administration will be able to cover all potholes in the Philippines’ bilateral relations with South Korea.

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*Krista Kyla D. Seachon is a Foreign Affairs Research Specialist with the Center for International Relations and Strategic Studies of the Foreign Service Institute. Ms. Seachon can be reached at [email protected].

The  views  expressed  in  this  publication  are  of  the  authors’ alone  and  do not  reflect  the official position  of  the  Foreign Service Institute, the Department of Foreign Affairs and the Government of the Philippines.