South Korea to beef up supply chain resilience by tapping Malaysia and Asean
09 Jun 2024
South Korea is enhancing its supply chain resilience by intensifying collaborations with Asean countries, particularly Malaysia, in response to the escalating United States-China economic rivalry.
South Korea’s special envoy for Indo-Pacific affairs, Chung Kee Yong, told Bernama that his country is currently prioritising the development of secure and diversified supply chains through its Indo-Pacific Strategy.
“We are actively collaborating with Asean partners by working with countries like Malaysia. It is possible to develop robust regional supply chains together.
“The MOU between the two countries for Strategic Cooperation on Critical Supply Chains, currently being discussed, may serve as a good example of such collaboration, setting an invaluable precedent. This collaborative approach strengthens economic integration within Southeast Asia and reduces dependence on any single supplier, mitigating risks.”
Chung said this to Bernama after his plenary session at the 37th Asia-Pacific Roundtable (APR) here recently.
He was in the capital to present, alongside other speakers, at a session titled “Megatrends Shaping the Global Economy: Implications for Asia-Pacific”.
Chung highlighted that to enhance its supply chain further, South Korea invests in domestic production capabilities in crucial sectors such as semiconductors and batteries, and is committed to fostering research and development in cutting-edge technologies.
“This strengthens our position within global supply chains and makes us less vulnerable to external disruptions that could cripple production.
“By focusing on innovation, the aim is to reduce dependence on external suppliers for critical components. This focus on technological advancement ensures that we remain competitive in the global market for the long term,” the career diplomat added.
South Korea’s Indo-Pacific strategy, announced by President Yoon Suk Yeol’s government in late 2022, seeks to promote freedom, peace and prosperity through the establishment of a rules-based order, under the principles of inclusiveness, trust and reciprocity.
Free trade agreements (FTAs) as opportunities
Elaborating on the escalating US-China economic rivalry, Chung said the competition between the two superpowers represents a complex situation for South Korea.
“But while it presents challenges, it also opens doors to new opportunities. This is where we see that our strategy to navigate this complex landscape is multifaceted. We are firm believers in free trade agreements (FTAs), so we know the importance.
“We are strengthening existing agreements and actively pursuing new FTAs with promising partners, such as Malaysia. It is encouraging to hear that (South) Korea and Malaysia decided to resume negotiations for the bilateral FTA in March, during our Minister of Trade’s visit to Malaysia.
“I believe that the FTA will be a cornerstone for further strengthening economic ties between South Korea and Malaysia,” he added.
Chung also noted that his country is investing strategically in domestic industries and technologies critical to supply chain resilience that strengthens the East Asian nation’s position and reduces vulnerability to disruptions emanating from the US-China competition.
Despite the changing landscape, he said South Korea remains committed to a rules-based international trading system that benefits all nations, and is essential for continued global economic stability and prosperity.
On March 26, both countries, part of the Asean-Korea FTA and Regional Comprehensive Economic Partnership (RCEP), resumed FTA negotiations suspended since 2019.
Local currency settlements (LCS)
On a similar note, recognising the growing trend of de-dollarisation in Asean, South Korea sees the potential of local currency settlements (LCS) in strengthening regional economic stability.
This approach, Chung pointed out, could reduce dependence on the US dollar, mitigating the impact of exchange rate fluctuations and creating a more stable financial environment for the region.
“South Korea’s recent agreement to renew the bilateral swap arrangement (BSA) with Bank Negara Malaysia (BNM) further supports this initiative by facilitating regional trade and financial cooperation.
“Through discussions with Malaysia and other Asean nations on the practicality and feasibility of LCS, Korea aims to establish a more resilient and efficient regional financial system, contributing to economic stability and prosperity in the Asia-Pacific,” he said.
The central banks of South Korea and Malaysia announced on May 14 that they had renewed their bilateral currency swap arrangement for three more years.
In 2023, total trade with South Korea amounted to US$24.3 billion (RM111.1 billion).
Malaysia was ranked as South Korea’s third largest trading partner in Asean, and 12th largest globally, with total trade amounting to US$25 billion (RM118.4 billion) in the same period.
Source: Bernama
