The Ministry of Trade, Industry and Energy announced on May 31 that in a decade since the Korea-Association of Southeast Asian Nations (ASEAN) Free Trade Agreement entered into force in 2007, the region has become Korea’s second largest trading partner with trade in goods and services and investment all expanding.
June 1, 2017 marks the 10-year anniversary of the entry into force of the Korea-ASEAN FTA. Between 2007 and 2016, trade in goods between Korea and 10 ASEAN nations has grown an average of 5.7 percent every year -- 3.3 percentage points higher than the pace of Korea’s total trade growth. Trade in services advanced 6.6 percent on average a year during the period, while Korea’s investment in the region soared more than fivefold.
The ASEAN region has become Korea’s second largest trading partner after China from the fifth in the past 10 years. The Ministry expects the significance of the region as a partner for economic cooperation to become even greater in the changing international trade environment.
The Korea-ASEAN trade volume stood at USD 119 billion, which represents 13 percent of Korea’s total trade volume of $902 billion -- up from 9.9 percent in 2007. Vietnam is the largest trade partner among the 10 member countries with goods worth $45.1 billion exchanged in 2016, followed by Singapore ($19.3 billion), Malaysia ($15 billion), Indonesia ($14.9 billion), Thailand ($11 billion), the Philippines ($11 billion), Myanmar ($1.2 billion), Cambodia ($813 million), Brunei ($779 million), and Laos ($149 million).
Korea’s exports to the region jumped an average of 7.5 percent a year between 2007 and 2016, compared to a 3.3-percent annual growth in total exports. Shipments to the region made up 15 percent of total exports in 2016 -- up from 10.4 percent in 2007, while Korea’s share of the ASEAN market increased to 7 percent from 5 percent.
Main exports include semiconductors, petroleum products, and wireless communication devices. Before the FTA took effect, Korea sold mainly semiconductors. Under the trade pact, large Korean corporations set up manufacturing bases in the ASEAN region and exports diversified with shipments of intermediary goods growing fast. Between 2007 and 2016, shipments of wireless communication devices and flat-panel displays surged an average of 15.8 percent a year to $5.6 billion and 20.3 percent to $2.9 billion, respectively.
Imports from the ASEAN countries advanced 3.3 percent on average during the same period, compared to a 1.9-percent annual growth in total imports. Inbound shipments from the trading bloc came to $44.3 billion in 2016, which accounts for 10.9 percent of total imports. Main imports are semiconductors, wireless communication devices, and clothing. Korea’s purchases of wireless communication devices and clothing leaped an average of 28.6 percent per year to $4 billion and 38.8 percent to $3.7 billion, respectively.
Trade in services grew an average of 6.6 percent a year between 2007 and 2015, and stood at $43 billion in 2015, which represents one fifth of Korea’s total service trade. Service exports jumped 7.2 percent on average a year, and grew to $21.9 billion in 2015. The 2015 volume comprises transport (35.6 percent), travel (10 percent), intellectual property rights (8.8 percent), and others.
Imports of services from the region also rose by 6.1 percent on average a year. They came to $21.1 billion in 2015, which consists of transport (30.7 percent), travel (27.7 percent), processing services (10.7 percent), and others.
Korea’s investment in ASEAN countries soared more than fivefold during the 10-year period between 2007 and 2016, compared to a decade earlier. Korea invested an average of around $6 billion a year in the region, while an average of $1.1 billion was put in every year between 1997 and 2006. Vietnam accounted for 38.6 percent of Korea’s investment into the ASEAN in the last five years.
As more Korean companies entered the region and established their manufacturing bases, exports of intermediary goods increased, help creating jobs in small and medium enterprises. This also contributed to ASEAN countries’ exports to third markets as well as the development of their manufacturing industries.
The ASEAN countries invested $1.4 billion on average a year in Korea during the same period, compared to about $1 billion a decade earlier. Singapore is the third largest investor in Korea, and represented 89.2 percent of the investment by the ASEAN in the last five years.
In order to maximize benefits of the trade agreement even further, Korea will endeavor to accelerate negotiations for upgrading the existing Korea-ASEAN FTA.
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