|Title||Strategic Industries of Southeast Asia: IT|
|Author||In Soo Kang, Toe Eun Kim, Seung Yeon Hong|
|Series||Policy References 10-33|
This report aims to provide strategic policy suggestions for stronger Korea-ASEAN cooperation in IT by looking into the evolution and achievements of Korea and Southeast Asia’s IT industries since the Asia-wide financial crisis in the late 1990s.
As a politically and strategically crucial region, Southeast Asia is Korea’s one of the most important economic partners that represents significant amount of trade exchanges. It is also a major investment destination for the Korean private sector which increasingly seeks business opportunities in the region. While Southeast Asia looks to enhance economic cooperation with Korea, which has a high degree of industrial complementarity to the region, Korea has also recognized that a stronger engagement is necessary to better use each other’s competitive edge, and develop new markets and resources. In particular, ASEAN is benchmarking Korea for economic growth, and has shown great interest in the Korean IT industry’s role and accomplishments during the Asian financial crisis and continuously extended cooperation with Korea.
Despite frequent natural disasters, weak domestic fundamentals, social instability and global crises like the 1997 financial woes, the Southeast Asian economy has continued steady growth since the 1980s with particular focus on IT development. The region's IT sector has maintained sturdy growth defying the challenges of the past decade and emerged as a major driver of the Southeast Asian economy. The region has shown marked economic progress, but the growth has been limited to the mobile communications sector. Korean telcos that noted the region's potential and set up operations there have been barely successful due to the uncertainty coming from the outdated regulations and policies, and immature market conditions. Still, the region presents significant business opportunities, especially the countries with strong commitment to IT.
Recognizing the saturated domestic market and the need to export home-grown technology-based services, many Korean IT companies are turning to foreign markets, and Southeast Asian countries are on the top of their list. ASEAN countries have a very high level of awareness on the history of Korea's IT development compared to other regions or countries, and have expressed their need for assistance including policy consultation to benchmark Korea's experiences and policies. Korea will be a suitable model for developing nations since it achieved remarkable economic advancement mostly on IT development over a short period of time.
The Korean government―including the Korea Communications Commission―has shared Korea's policy experience in IT through cooperative projects with Southeast Asian countries. Although the projects have been helpful in broadening the policy platform, they have failed to realize wide adoption of Korean technology or service in the region. The region’s protective regulations and practices are of course responsible, but the major constraint is the lack of competitiveness of Korean companies, which are losing to the multinational enterprises with high brand perception and value, Chinese players with strong cost competitiveness, and local firms in Southeast Asia.
Nevertheless, the region is still full of opportunities since ASEAN and the member states have established and implemented policies and initiatives to develop broadband network, which is considered essential for future growth. Korea’s WiBro(WiMax) and DMB technologies, which have been adopted as global standards, are likely to be well-received in the region whose fixed networks remain unsophisticated. In addition, the now effective Korea-ASEAN FTA will offer greater business/investment opportunities to Korean firms.
A support plan and viable efforts from the government based on thorough SWOT analysis will substantially raise the chances for Korean IT companies to succeed in Southeast Asia and other foreign markets. With ASEAN taking firm root as a regional community, Southeast Asia is also seeking to expand the association into a pan-East Asian community. Since Southeast Asia has become a key player of the Asian economy and also a gateway for Korean IT companies' overseas expansion, the Korean government should further strengthen cooperation with the region. Suitable strategies would be: establishing a collaboration system that meets the need from ASEAN, and combining or aligning different cooperative projects; expanding ODA, especially for leading member states; generating new content for cooperation; and raising effectiveness of the cooperation system.