Australia and the Republic of Korea (ROK, also known as South Korea) are strong economic, political and strategic partners with common values and interests. People-to-people links between the two countries are increasing and make a significant contribution to the relationship.
Our important economic relationship continues to expand with the agreement in December 2013 of the Korea Australia Free Trade agreement (KAFTA). The ROK is a key market for Australian minerals, energy and travel and education services and Australia is a major market for ROK passenger vehicles, petroleum, and electronic goods and parts. The investment relationship is also growing, from a small base.
Australia and the ROK have common strategic interests, particularly in seeking a peaceful resolution to tensions on the Korean peninsula. Both countries have important alliances with the United States and both have made significant and practical contributions to efforts to secure regional security and stability, such as sending troops to Afghanistan, Iraq and East Timor and conducting counter-piracy operations.
Bilateral relations have strengthened considerably in recent years. Cooperation on international affairs has reinforced the partnership, for example, promoting global stability as fellow-members of the United Nations Security Council (UNSC), the G20, Asia-Pacific Economic Cooperation (APEC) and the East Asia Summit (EAS).
The ROK held Presidential elections on 19 December 2012, with President Park Geun-hye taking office on 25 February 2013.
The ROK is situated on the southern half of the Korean Peninsula. An independent Korean state or group of Korean states has existed almost continuously for several millennia. Between its initial unification in the 7th century – from the three Kingdoms of Goguryeo, Baekje, and Silla – until 1910, Korea existed as a single independent country. From 1910 to 1945, the Korean Peninsula was subject to Japanese colonial rule. Following Japan's defeat in World War II, Korea was temporarily divided into two zones of occupation, with the United States administering the southern half of the Peninsula and the Soviet Union administering the area north of the 38th parallel. Initial plans to unify the peninsula under a single government quickly dissolved due to domestic opposition and the politics of the Cold War. In 1948, new governments were established in each occupied zone – the Republic of Korea in the south and the Democratic People's Republic of Korea (DPRK) in the north.
From the outset, the ROK and the DPRK operated under vastly different political, economic and social systems. Unresolved tensions created by the division led to the Korean War of 1950–1953, sparked by a DPRK invasion of the ROK. An armistice in 1953 ended the fighting but a more comprehensive peace agreement has not been negotiated. Relations between the DPRK and the ROK remain tense.
The first recorded contact between Australia and Korea took place in 1889, when Australian missionaries landed at Busan. Australian photographer George Rose travelled the length of the peninsula in 1904 and photographed the country and people. Today, his images of everyday Korean life, clothing and customs form a valuable part of Korea's documentary history.
The Australia-ROK relationship was strengthened by Australia's participation in the United Nations (UN) Commissions on Korea (beginning in 1947) and in the Korean War (1950–53). More than 18,000 Australian troops served under UN command and 340 Australians died during the Korean War. In September 2010, HMAS Warramunga visited the ROK to mark the sixtieth anniversary of the beginning of the Korean War and take part in a re-enactment of the landing at Incheon. Australian veterans of the Korean War travelled to the Republic of Korea for a commemorative mission in July 2013 for the 60th anniversary of the Korean War Armistice.
Full diplomatic relations were established between Australia and the ROK in 1961. The ROK Consulate-General in Sydney (opened in 1953) was elevated to embassy status with a chargé d'affaires from January 1961 and the first ambassador was in place from April 1962 (later, the ROK moved the embassy to Canberra). In June 1962, Australia opened an Embassy in Seoul. Since then, strong economic, political and strategic connections have grown between Australia and the ROK. People-to-people links, supported by a large and growing Australian Korean community, are positive and increasing, and the bilateral trade and investment relationship is complementary, longstanding and robust. Marking the 50th anniversary of diplomatic relations, the Governments of Australia and the ROK designated 2011 as a "Year of Friendship" and links were further enhanced in 2012 by Australia's participation in the World Expo with the theme of "The Living Ocean and Coast" in Yeosu on Korea's south coast. Our security and defence ties are expanding: the joint meeting of our foreign and defence ministers in Seoul on 4 July was the first 2+2 meeting the ROK has conducted with any country, except the US.
Australia-ROK high-level contact is substantial and expanding, with regular meetings and contact between leaders and senior ministers. During her first week in office, the Minister for Foreign Affairs, The Hon Julie Bishop MP, met with Korean Foreign Minister, H.E. Yun Byung-se, on 23 September 2013 during UN Leaders’ Week in New York. They met again in Korea on 17 October 2013, where she also met with President Park Geun-hye and participated in the Seoul Conference on Cyberspace. Ms Bishop has also met with the Korean Minister for Trade, Industry and Energy, H.E. Yoon Sang-jick, Minister for National Defense, H.E. Kim Kwan-jin and Blue House National security Office Chief, Mr Kim Chang-soo.
Prime Minister, The Hon Tony Abbott MP, met with President Park in Brunei on 9 October 2013 in the margins of the East Asia Summit and President Park will visit Australia for the G20 in late 2014. Minister for Trade, the The Hon Andrew Robb AO MP, has met with his counterpart, Korean Minister for Trade, Industry and Energy, H.E. Yoon Sang-jick, on three occasions: 7 October 2013 in the margins of APEC Trade Minister meetings in Bali; 15 November 2013 in Seoul; and on 4 December 2013 at the seventh and final round of KAFTA negotiations in Bali. Mr Robb also met with the Korean Deputy Prime Minister and Finance Minister, H.E. Hyun Oh-seok on 15 November 2013. The Governor General, H.E. the Hon Quentin Bryce AC CVO, attended President Park’s inauguration on 25 February 2013.
Australia and the ROK share key security interests in North Asia and the Asia-Pacific region, with peace and stability on the Korean Peninsula critical to the economic performance and security of both countries. Both support a nuclear-free Korean Peninsula and regard the continued commitment of the United States to the Asia-Pacific as critical to stability and prosperity in the region. Our security and defence ties are expanding: the joint meeting of our foreign and defence ministers in Seoul on 4 July 2013 was the first 2+2 meeting the ROK had conducted with any country, except the US.
Australia's security cooperation with the ROK continues to expand in practical ways. Australia contributed to the ROK-led investigation into the 26 March 2010 sinking of the ROK navy vessel, the Cheonan, and, in May 2010, the Australian Army contributed to the ROK military's force preparation for its re-deployment to Afghanistan. Australia and the ROK have also cooperated under the multinational Proliferation Security Initiative (PSI) since the ROK joined the PSI in 2009. In October 2010, Australia sent an RAAF P-3 Orion aircraft and an inter-agency team of officials to participate in the maritime interdiction exercise Eastern Endeavour 2010 hosted by the ROK in Busan.
Security issues are discussed regularly by the two countries, including at Foreign Ministers' consultations, in Political-Military Talks between senior foreign ministry and defence officials, in Defence Policy Talks, and through the relationships that the Australian Defence Force (ADF) staff colleges and the Australian Civil-Military Centre pursue with ROK military staff colleges and institutions. The Royal Australian Navy holds Navy-to-Navy talks with the ROK and makes regular ship visits. HMAS Warramunga visited the ROK in 2010 and two ROK Navy ships visited Sydney in August 2010 to mark the 60th Anniversary of the beginning of the Korean War. HMAS Ballarat conducted a port visit to Busan and took part in the RAN's inaugural bilateral maritime exercise with the ROK Navy, Exercise HAIDOLI WALLABY, on May 2012. The Royal Australian Air Force makes visits to the ROK and holds Airman-to-Airman talks annually. Defence ministers from Australia and the ROK met on 14 December 2011 in Canberra for the first bilateral Defence Ministers' talks. Throughout 2013, Australian military and civilian personnel participated in joint exercises with the ROK.
People-to-people and institutional links
Australia has important geopolitical and economic interests in Korea, which need to be sustained by a closer relationship. The Australia-Korea Foundation (AKF), an Australian Government-funded body, was established in May 1992, to promote bilateral relations between Korea and Australia. It makes an important contribution to people-to-people links. The objectives of the Foundation are to increase public awareness of Australia in Korea and of Korea in Australia; develop partnerships in areas of shared interest in the bilateral, regional and global context; and increase Australians' capacity to effectively engage with Korea. Supported by a Secretariat within the Department of Foreign Affairs and Trade, the AKF offers annual funding rounds for Grants and Scholarships to organisations and individuals to support projects or activities which advance Australia's engagement with Korea, including exchanges, partnerships and other collaborations in the general fields of commerce and industry, science and technology, education, academia, arts/culture, sport and media.
The AKF funds around 15 scholarships each year for young Australians to study in South Korea, as well as around 45 general projects that strengthen Australia-South Korea ties. The AKF in cooperation with its ROK partner organisation, the Korea Foundation, administers the Australian-Korean Internship Program (AKIP). AKIP is a biennial program that runs in alternate years to the Korea-Australia Internship Program (KAIP), which is a reciprocal program administered by the Korea Foundation.
AKIP recruits students who are interested in pursuing Korea-related business careers while enhancing mutual understanding and knowledge of Australia-Korea relations. The program offers students an opportunity to develop their professional and cross-cultural skills through on-the-job experience within businesses and multi-national organisations in the Republic of Korea (ROK). In 2013, interns from universities across Australia (Queensland University of Technology, University of New South Wales, Deakin University, University of Sydney, Monash University and University of Western Australia) participated in the program and travelled to Korea over January and February 2013. Recent placements have been with POSCO, POSRI, Hyundai Heavy Industry, Hyundai Corporation and Daewoo International. Participants were able to gain invaluable experience on both professional and personal levels.
Under KAIP, Korean university students participate in a seven-week internship program in Australia, which is funded and managed by the AKF. The program is held every alternate year and in 2014, seven students from South Korean universities participated in the program across January and February. Placements were with Australian and international companies and public organisations such as Macquarie Bank, The City of Sydney, Tourism Australia, and Kia Australia. The students also undertook a comprehensive program of cultural experiences, including visits to regional Australia and calls on government departments in Canberra.
Non-governmental links are encouraged by the Korea-Australia Business Council and the Australia-Korea Business Council. Their annual joint meeting allows members to exchange views and expand private sector links between the countries.
People-to-people links have also been fostered through sister-city relationships, such as those between Townsville QLD and Suwon, Parramatta NSW and Jung-gu, Burwood NSW and Geumcheon-gu, and, most recently, Strathfield NSW and Gapyeong County. Sister-state relationships include those between Queensland and Gyeonggi Province, New South Wales and Seoul, South Australia and Chungnam Province, and Victoria and Busan.
Bilateral economic and trade relationship
Australia's trade relationship with the ROK developed rapidly during the 1960s, as the ROK pursued industrialisation requiring large amounts of raw materials. The two countries have historically shared a complementary trade relationship, with Australia providing raw materials, manufactured products and food to the ROK, and importing products such as cars, telecommunications equipment and computers, as well as refined petroleum. Australia also now enjoys a flourishing services exports trade, including in education and tourism.
The ROK is Australia's fourth-largest overall trading partner (total two-way trade was worth around $30.5 billion in 2012-13, 5 per cent of all of Australia's international trade).
In the five years to 2012-13, merchandise exports to the ROK grew by an average of 6.4 per cent per year. The ROK was Australia's third-largest goods export market in 2012-13 ($19.1 billion). The value of exports fell in 2011-12 and 2012-13 reflecting declines in the price of coal and iron ore and the Australian dollar remaining historically high over much of that period. As well as coal, iron ore and crude petroleum, the ROK remains an important market for Australian beef, with exports valued at $703 million in 2012-13.
The ROK was also Australia's third-largest market for goods and services combined in 2012-13 (exports totaling $20.8 billion). Australian exports of services to the ROK totaled $1.7 billion in 2012-13, mostly education-related travel and recreational travel. Education has been a major export, with the ROK Australia's third-largest source of foreign enrolments after China and India for the last three years. In 2012, there were 27,610 enrolments by ROK students in Australian institutions (a decrease of 7.1 per cent from 2011). Australia's exports of education-related travel services to the ROK in 2012-13 totaled $707 million.
The ROK is Australia's 10th largest source of goods and services imports totaling $9.7 billion in 2012-13. The primary imports from the ROK in 2012-13 were refined petroleum, passenger motor vehicles, and heating and cooling equipment and parts.
The level of investment between Australia and the ROK is relatively small, but has grown and diversified over the last decade. The stock of Australian investment in the ROK totaled $10.4 billion in 2012, more than five times the level in 2001. The stock of ROK investment in Australia grew twenty-five-fold from a low base in 2001 to $12.0 billion in 2012, which still represents only 0.6 per cent of all foreign investment in Australia. Macquarie Bank has a significant presence in the ROK and is active in funds management and infrastructure investment. The ANZ Bank is also active in the ROK. In the other direction, major Korean investments have included Korea Zinc's $1 billion investment in the Sun Metals Corporation refinery in Queensland in the late 1990s and POSCO's $16 million investment in 2002 in BHP-Billiton's iron ore resources in Western Australia. Korean companies such as KOGAS, KEPCO, SK Energy and KORES have also invested in Australia.
The ROK has signed three major LNG contracts to source gas from Australia – with Santos (Gladstone LNG), Total (Ichthys) and Shell (Prelude). When full production commences, around 2015, these contracts should see Australia provide around 25 per cent of the ROK's LNG, a sharp increase from the current two per cent.
The recently negotiated KAFTA agreement is expected to result in increased two-way investment, with investment outcomes up to the level of only a few other Australian FTA partners such as the United States. This includes a higher FIRB screening threshold for Korean investors. The ROK has agreed to further open its economy to Australian investors through the progressive raising of foreign equity caps in certain sectors and removing restrictions on investment in sectors previously closed to Australian investors, including the telecommunications sector, legal services and accounting and taxation agency services.
The gains from increased investment cannot be understated. Korea’s current account surplus continues to grow to new heights and Korean investors will look subsequently for greater opportunities to invest their surplus savings overseas. The improved FIRB threshold treatment will encourage Korean investment in Australian projects. Initiatives such as the Asia Region Funds Passport, which Australia and the ROK are signatories of, will further improve the bilateral investment climate.
The Australia–Korea investment environment
The bilateral investment environment between Australia and the Republic of Korea (ROK) has grown rapidly and diversified over the last decade, albeit from a small base. The stock of ROK investment in Australia grew twenty-five-fold from a low base in 2001 to $12.0 billion in 2012 (Chart 1), which still represents only 0.6% of all foreign investment in Australia. The stock of Australian investment in the ROK was $10.4 billion in 2012, more than five times the level in 2001. ROK investment has helped build Australia's economic capacity in key industries, for example Korea Zinc's investment in Townsville helps us to export zinc to the world. Korean cutting edge technology is being used to construct the multi-million dollar Prelude – North West Shelf floating LNG processing plant. The Prelude project is expected to create at least 350 skilled jobs. The Korea Australia Free Trade Agreement will further improve the investment environment between our countries.
Korea Australia Free Trade Agreement
In December 2013, the Australian Government concluded negotiations for the KAFTA. KAFTA is one of Australia’s most comprehensive trade agreements, delivering significant improvements in market access and tariff liberalisation for merchandise trade.
Under KAFTA, the ROK will also address many restrictions on services trade and provide Australia with better treatment in trade in services, including financial services, telecommunications services, education services, legal and other professional services than is currently available under Korea’s existing WTO commitments. The key obligations of the investment chapter - which operate on a reciprocal basis - include non-discrimination, most favoured nation treatment, performance requirements and obligations on senior management and boards of directors.
Government and administration
Since its establishment in 1948, the Republic of Korea has maintained a presidential system (except briefly when a parliamentary system was in place between June 1960 and May 1961). Under the presidential system, power is shared by three branches: the executive (headed by a president), the legislature (a single-house National Assembly) and the judiciary.
The president holds supreme power over all executive functions of government, within the constraints of the Constitution. The president appoints public officials, including the prime minister (with the approval of the National Assembly), ministers (who do not need to be members of the National Assembly) and the heads of other executive agencies. The president is also commander-in-chief of the armed forces. The president is limited to serving a single five-year term. H.E. Ms Park Geun-hye was inaugurated as President of the Republic of Korea on 25 February 2013.
Legislative power is vested in the unicameral National Assembly, comprising 300 members elected for a four year term. This includes 246 members elected by popular vote, with the remaining 54 seats distributed proportionately among political parties according to a second, preferential ballot. A regular legislative session, limited to 100 days, is convened once a year. Extraordinary sessions, limited to 30 days, may be convened at the request of the president or at least 25 per cent of the Assembly members. Several extraordinary sessions are usually held each year. The most recent National Assembly election was held on 11 April 2012.
More detailed information on the ROK's system of government can be found at the official ROK Government website.
President Park Geun-hye of the Saenuri (New Frontier) Party was elected President of the Republic of Korea on 19 December 2012 and assumed office following her inauguration on 25 February 2013.
President Park has twice visited Australia; once as a teenager with her father (former President Park Chung-hee) in 1968 and again as a guest of government in May 2008. President Park also met Prime Minister Abbott in Brunei on 9 October 2013 and Foreign Minister Bishop in Seoul on 17 October 2013.
President Park is Korea’s first female president and has an impressive political pedigree. She was first elected to the National Assembly in 1998 and was Chair of the Grand National Party (predecessor of Saenuri) from 2004-2006. She is the daughter of former President Park Chung-hee, who came to power in 1961 and masterminded Korea’s economic rise. One year into her term, President Park remains popular for her strong, principled engagement or “trustpolitik” with North Korea. She visited North Korea in 2002 and 2005 and met former leader Kim Jong-il on both occasions. Domestically, President Park is focused on economic growth, employment and supporting small businesses. In the most recent National Assembly election, on 11 April 2012, Saenuri defied expectations to maintain control of the Assembly by a slim margin.
Relations with North Korea have been particularly tense. The North’s behaviour remains a major foreign policy and domestic political challenge for the ROK. The North conducted a long-range rocket test on 12 December 2012 and its third nuclear test on 12 February 2013 in contravention of UN Security Council resolutions. Other recent provocations have included its threat to launch nuclear attacks on the US and ROK and the extended closure of the Gaesong joint industrial complex.
Other potential trigger-points in recent years were: the sinking of the ROK navy ship the Cheonan with the loss of 46 sailors on 26 March 2010; the revelation by the DPRK on 12 November 2010 that it had industrial-scale uranium enrichment capabilities; the DPRK's shelling of Yeonpyeong Island in the ROK on 23 November 2010, which left four South Koreans dead and 55 wounded; the news of North Korean leader Kim Jong-il's death in December 2011; and the North's failed satellite launch using a long-range rocket on 14 April 2012.
Since the Korean War, the ROK has been preoccupied with the military threat from the DPRK and has been closely allied with the United States to guarantee its security. At present, the United States maintains around 28,500 troops in the ROK.
Foreign policy under the Kim Dae-jung administration (1998–2003) emphasised a 'sunshine policy' of engagement with the DPRK. President Kim's overriding objective was to secure regional peace and stability, and build a firm foundation for reconciliation with the North and the eventual reunification of the peninsula. This approach was continued by the succeeding Roh Moo-hyun administration (2003–2008). President Lee Myung-bak (2008-2013) took a tougher line on the DPRK, linking economic aid to the need for the DPRK to end its nuclear arms program. From August 2003, the ROK participated in Six-Party Talks with the DPRK, the United States, China, Japan and Russia, with the aim of finding a lasting solution to the problems of the Korean Peninsula. See also DPRK country brief.
By virtue of geography and economic influence, relations with the major powers – China, the United States, Japan and Russia – remain the most important foreign policy priorities for the ROK, after its relationship with the DPRK. Over time, the ROK has actively sought to diversify its diplomatic and trade links and has made considerable efforts to ensure itself a place in the international community commensurate with its economic status. The ROK joined the UN together with the DPRK in September 1991 and the Organisation for Economic Co-operation and Development (OECD) in 1996. It is an active member of the World Trade Organization (WTO), regional fisheries organisations, UN agencies and regional organisations such as APEC, the ASEAN Regional Forum (ARF), the Forum for East Asia – Latin America Cooperation (FEALAC) and the EAS. In 2010, it chaired the G20, culminating in the Seoul G20 Summit in November 2010. It also takes part in the Asia-Europe Meeting (ASEM) and is a dialogue partner of the Pacific Islands Forum. In 2009, the ROK joined the Proliferation Security Initiative. It also joined the OECD's Development Assistance Committee (OECD-DAC) in November 2009, signaling its support for the international consensus on principles of good donorship and aid effectiveness, and hosted the international aid donors' conference known as H-LF4 at Busan in November 2011. The ROK hosted the second Nuclear Security Summit in March 2012 in Seoul.
The ROK sees itself as that is well-positioned to play a pivotal role on global and regional issues, such as disarmament and economic governance. It appreciates the benefits of working together with Australia, which it sees as sharing similar values and interests. In this context, Korea and Australia have come together more recently as members of “MIKTA” (Mexico, Indonesia, South Korea, Turkey and Australia), an informal and non-exclusive group of influential countries cooperating to address diverse international challenges.
At a glance
The ROK has made remarkable economic progress in the last half-century. When the Japanese occupation ended in 1945, Korea was impoverished and its economy was rurally-based. Much of its infrastructure was destroyed during the Korean War, which also had an enormous human cost. As a result, by 1960 the ROK's per capita GDP was comparable with those of the poorer countries of Asia and Africa. Sustained high economic growth since the 1960s, supported by significant US investment, has enabled the ROK's transformation into a highly industrialised and internationally competitive economy. In 2012, the ROK was the 15th largest economy in the world based on GDP at market prices and the 12th largest economy based on purchasing power parity (PPP). With a population of 50 million, the ROK ranked 35th in GDP per capita terms in 2012 while on a PPP basis, the ROK ranked 26th for GDP per capita.
- Despite being hit by the effects of the global financial crisis, in 2009, the ROK was one of the few OECD countries besides Australia to record growth (0.3 per cent, down from 2.3 per cent in 2008) and not enter into technical recession. Factors supporting this included the rapid devaluation of the Korean won, providing exporters with a significant buffer, and a series of government fiscal stimulus packages. The ROK economy grew by 6.3 per cent in 2010, but slowed to 3.7 per cent in 2011 and slowed further to 2.0 per cent in 2012. Growth was strong in 2010, but since changes to unemployment often occur with a lag, the unemployment rate reached its peak in 2010 (3.7 per cent) and subsequently fell to 3.2 per cent in 2012. Partially reflecting the slowing rate of economic growth more recently, inflation declined in 2012 and continues to remain low. GDP grew 0.9 per cent in the December quarter of 2013 to be 3.9 per cent higher through the year. The recent stronger pace of growth in 2013 reflects higher government spending and accommodative monetary policy. The ROK Government expects annual growth to pick up in 2014 to reach 3.9 per cent.
- Government spending has been a key driver of recent growth, with the 2013 budget front-loaded in the first half of the year and a fiscal stimulus package implemented in May 2013. A rate cut by the Bank of Korea in May 2013 is likely to have provided a further boost to consumption.
It is believed by ROK authorities that the depreciation of the US dollar and the Japanese Yen in 2012 and 2013 led to a loss of ROK’s competitiveness. As a very open economy, the ROK’s growth is affected significantly by external demand and global growth prospects. As such, South Korea’s prospects will be enhanced by a stronger global economy that feeds through into stronger external demand. While ROK exports recovered after a decline in 2009, they face increasing competition around the world, particularly in the ROK's markets in the emerging economies.
Inflation has continued to be moderate - consumer prices grew by a modest 1.0 per cent in through-the-year terms in December 2013, easing from a peak of 4.3 per cent in September 2011.
Long-term, the ROK economy faces the challenge of structural pressures: it has an ageing population and low birth-rate, has low service-sector productivity and faces increasing competition in global markets, particularly from emerging exporters.
The ROK's traditional trade and financial links with the United States are supported by strengthening ties within Asia. In 2004, China became the ROK's largest merchandise trading partner. The United States, as the main market for many Chinese goods manufactured from ROK intermediate inputs, is likely to remain vital to the ROK's economic prospects for the foreseeable future.
The ROK has concluded free trade agreements (FTAs) with Chile, Singapore, the European Free Trade Association (EFTA – Iceland, Norway, Liechtenstein and Switzerland), ASEAN, India, Peru, the United States (ratified by the ROK in November 2011; not yet in force), the European Union and Colombia.
The ROK is currently negotiating FTAs or similar agreements with Canada, Mexico, Japan, the Gulf Cooperation Council, New Zealand and Turkey. The ROK has also been considering bilateral FTAs with China, Russia, MERCOSUR (a South American regional trade agreement), the Southern Africa Customs Union, Panama, Vietnam, Israel, a trilateral FTA with China and Japan, and has expressed an interest in joining the Trans-Pacific Partnership (TPP).
Updated February 2014