Australia-Korea: Strengthened Economic Partnership
Executive Summary
Australia and Korea (Korea refers to the Republic of Korea) are important trading partners, with a strong and mutually beneficial relationship that reflects the underlying fundamentals of the two economies. The traditional complementary relationship is one in which Australia has supplied raw materials and food to Korea’s factories and people, with Korea supplying manufactured goods to Australia. These traditional relationships are not only secure for the foreseeable future, but also have substantial growth potential, based around new opportunities in both technology and infrastructure.
The relationships in areas such as agriculture and food; and minerals and energy could be transformed into more of a partner relationship, through improved customer focus built around new technologies. This will involve intra-industry investment: by Korea in upstream activities in Australia and by Australia in downstream activities in Korea. It could also involve greater use of e-commerce, person-to-person contacts, and training of Koreans on Australia’s food standards and conformance systems.
What this study shows is that there are emerging new areas for a strengthening of the economic relationship. There are opportunities in the more technology intensive sectors, in education and training and in infrastructure and utilities (and related professional services). Australia has pioneered new ways of private sector project finance of investment in infrastructure services, and export of these skills will be timely.
The well documented shortfall in much of urban and transport infrastructure service provision in the major cities of Korea creates an opportunity for Australia to export skills and expertise that are fundamental to removal of the bottlenecks that constrain urban Korea. What is more, the financial governance issues which continue to cause problems in Korea, can also be assisted by a move to a more Australian approach to the structuring and finance of infrastructure service provision — underpinned by customer and project funding rather than the model usually applied across Korea in the recent past.
The reform policies of Korea, and the corporate governance agenda, involve a moving away from government bank finance of state owned utilities, towards more project finance of infrastructure investments and some divestment and other forms of privatisation in infrastructure service provision. This provides opportunities for Australian financial institutions, professional service providers, and construction and operating companies in the areas of highways, tunnels, pipelines, water treatment plants, power generation units, and other infrastructure and utilities.
The other major change in Korea is the emergence of a knowledge-based economy. Korea’s plans include a decreasing reliance on other countries and more reliance on the development of its own technologies. But it also implies a widening of its international cooperation in science and technology away from USA, Europe and Japan to other countries, both bilaterally and multilaterally.
The challenge for Australia is to become an important ally for Korea in achieving its science and technology objectives. While Korea will want to use many technologies developed within Korea, Australia could play an essential complementary role. Working towards such an objective will considerably strengthen the economic partnership between the two countries.
In many ways Australia and Korea are complementary in the technology area. Australia is relatively stronger in basic R&D and in the services sector, including education and training, that underpins the science and technology sector. Korea is relatively stronger in large-scale industrial application of technology and in marketing. Korea is relatively stronger in the successful commercialisation of R&D. Australia also benefits from the widespread use of English and in its innovative education system.
Australia could become the source of much of Korea’s R&D capability (with the added role of assisting Korea to improve its own R&D capabilities through the education and training sector) and Korea could become the source of the financial and commercial skills needed to develop Australian R&D successfully on a large scale.
Such a vision does not need to be restricted to any particular technologies, but the more obvious possibilities would appear to be in information and communications technology, biotechnology, and environmental technology. These are in addition to manufacturing technologies such as automotive components where there is already a strong Korean interest in Australian capabilities. There are other potential areas such as nanotechnology and space technology.
There is emerging a new paradigm of comparative advantage between Australia and Korea. Australia has a comparative advantage in basic R&D, science and technology and human resources development. Korea has a comparative advantage in the commercialisation and industrialisation of technologies. By working together Australia and Korea can develop technologies, products and services for marketing to third countries: high technologies to countries such as Japan and USA and medium technologies to countries such as China.
The major barrier to achieving this vision is a lack of knowledge about each other’s strengths and weaknesses across the industrial/commercial chain. At the present time both countries tend to think of USA (and then Western Europe and Japan) as potential partners. Encouragement needs to be given to the industry participants, and not just the researchers, to work together to get a better understanding of what each has to offer and what needs to be done to strengthen the relationship.
A key area in strengthening the relationship is education and training. Education and training has two roles in strengthening the economic partnership between Australia and Korea. The first is as a services export that not only earns income for Australia but also augments Korean education and technology. The second is as a means to change Korean perceptions of Australia.
The major challenge for Australia is to get across the message that Australia is both a centre of excellence for education and a source of technically or intellectually advanced inputs to assist Korean development. Increasing the number of Korean students participating in Australian university and vocational education will be a means, albeit medium to long term, of meeting this challenge.
In addition the Korean education system is facing major challenges, as it is not designed for an advanced knowledge based economy. Many Koreans recognise the system should be based around overall human resources development where there is a need for education and training that promotes quality, creativity and lifelong learning as well as education that is relevant to the needs of industry (and which prepares students to be more productive on entry to employment). These prospective changes offer new opportunities for Australia. There is indeed a window of opportunity for Australia to become a strategic partner for Korea’s education and training sector — and redress the emphasis that Koreans have placed on an education in the USA.
This study recommends a number of specific initiatives namely -
(i) Australia and Korea enter into an umbrella agreement designed to strengthen the economic partnership between Australia and Korea (e.g. a Trade and Investment Facilitation Agreement - TIFA). It should provide the framework for the recommendations set out below.
(ii) Australia and Korea foster greater interest in each other’s technology sectors: Australia as a source and a place to develop technologies and Korea as a source of funding and a partner in the development of successful technologies.
(iii) Support be given to the development of closer linkages between Australia and Korea throughout the industrial/commercial chain in various technology segments (e.g. information and communications technology, biotechnology, photonics, environmental technology). This should initially involve workshops and possibly lead to the establishment of Australian/Korean clusters in particular technology segments.
(iv) A bilateral arrangement be made on the implementation of intellectual property protection. This could include a Code of Practice and possibly a joint forum that would consider tangible issues raised by Australian and Korean firms about infringements of their intellectual property rights.
(v) Australia and Korea work on a sector-by-sector basis towards adopting common systems for obtaining approvals/certificates that goods from each country comply with the standards and regulations applying in the other country.
(vi) The Australian Government, in partnership with Australian private sector groups, continue to promote the capabilities of Australian businesses and the relevance of Australia’s financial and advisory sectors to assist in the modernisation and reform of Korea’s infrastructure and utilities. Such promotion should build on innovative partnerships between private sector and public sector entities, with improved customer focus, along lines pioneered in the new Australian infrastructure sector.
(vii) There be increased support for road-shows, seminars and workshops presenting the Australian approach to reform of these sectors such as rail, roads, water, energy and communications infrastructure. The congestion in urban Korea creates a major opportunity for communication of how new project finance models can address both the problems and the need for improved quality of investment and governance in the infrastructure sector in Korea.
(viii) A coordinated, long-term strategy be adopted involving the Australian Government and educational institutions to capture the attention of Korean Government and educational decision makers as to the quality and relevance of the Australian education and training system and products to the human resources development needs of Korea.
(ix) A Government to Government cooperative agreement be reached whereby Australia agrees to provide advice to Korean authorities and institutions on developing Korea’s new human resources development system and introducing Australian institutions that can provide the particular systems and courses that meet Korea’s needs.
(x) The use of scholarships and work placements be introduced for Korean postgraduate students in Australia as a longer term means to raise the general profile of Australian education and training among younger Koreans and to build a counterweight to the usual attraction of postgraduate students to the USA.
(xi) The building of Australian alumni groups in Korea be supported.
(xii) The media be utilised more extensively to increase the profile of Australia and Korea in each other’s country, including through the exchange of industry specific media specialists who could highlight "success stories" of complementary initiatives. In addition, consideration be given to the implementation of the recommendations of the inaugural Australia-Korea Media Forum held in Sydney on 17 August 1999.
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