South Korea National Foundation Day: Pakistan-South Korea economic relations

Kalim Farooqui, Managing Director, Technology Links

TEXT: "Korean Exim Bank plans to double Pakistan's financing to $1 Billion" was the news headline late last month and in contrast to a similar headline in 2015 "Pakistan, South Korea sign $500m Development Framework". The quantum jump speaks volumes about the developing Pakistan-Korea economic relations.

Since the establishment of diplomatic relations between Pakistan and Korea, mutual understanding and cooperation between the two countries have extended and comprises of areas which includes economics, culture, capacity building, health, education and agriculture. The growing trade between the two countries figured in excess of a Billion dollars in 2019. From trade, now the focus has also turned to investments by Korean companies and names such as Hyundai, Kia, and Samsung are setting their footprints in Pakistan with manufacturing facilities in different sectors to include automobiles and electronic for which they are now known globally. The export-oriented policies of South Korea are one of the most important factors of its economic success. The country is the world's seventh largest exporter of goods and the ninth largest importer according to the World Trade Organization. In 2019 trade represented almost 80% of its GDP as recorded with the World Bank. The country exports mainly electrical equipment, vehicles, chemicals and parts and accessories for vehicles. Its main imports are petroleum, electrical equipment, Gas, hydrocarbons, and iron & steel. South Korea has concluded free-trade agreements with as many as 58 countries representing almost than 75% of the global economy. Free trade agreements, FTA as it's called are beneficial if the balance between imports and exports can be maintained and which Korea has managed to the extent of having a comfortable surplus in its favour. Pakistan can benefit from Korea by establishing joint ventures in manufacturing and in trade since according to WTO, exports of goods from Korea amounted to USD 542.2 billion in 2019, while imports amounted to USD 503.3 billion. South Korea's economy is a 20th century success story that is today firmly established as an advanced, industrial economy known for its strategy of export-led growth and the dominance of its chaebols (large conglomerates).

Better business to business contacts by way of trade delegations, exhibitions and seminars can help both countries to benefit from each other. Promotion of SME'S can greatly help increase the trade volume. At the government level, exchanges have taken place and lately a high-level Korean Delegation led by Chong Hwa Lee, Director General, Korean Ministry of Economy and Finance held meetings with Omar Ayub Khan, Pakistan's minister for Economic Affairs. Currently, five development projects: Technology Park in Islamabad, Kalkatak-Chitral Road, Chakdara-Timergara Road, Malakand Tunnel and Children Hospital in Sukkar are under implantation with $343 million financing by the Government of Korea against what is called Economic Cooperation Development Fund (EDCF) loan bearing token interest and extended payback period applicable for state credits for infrastructure development. Additional projects in the social sectors, information technology, climate change, and capacity building to promote entrepreneurship are being proposed. The Ministry of Information Technology and Telecommunication has already laid the foundation stone of Information Technology Park at Chak Shahzad in Islamabad to be financed by Korea. Earlier, a delegation of the Department of Rural Development & Administration (DRDA) of Korea led by Hur Taewoong, Vice Minister of the Department called on Prime Minister Imran Khan and briefed him about the cooperation between the two countries particularly in capacity building and research in agriculture sector.

In a recent meeting between Shaukat Tarin, Pakistan's Federal Minister for Finance and Revenue and the Ambassador of Korea, Suh Sang-Pyo, both sides exchanged views on economic potential and stressed upon the need to further promote mutual trade and investment linkages. Korea's Ambassador Suh Sangpyo, is keen to also promote cultural linkages and has expressed his desire for direct flights between Pakistan and Korea which will not only help Korean investors but also tourists as Pakistan is blessed with beautiful landscapes in addition to 1100 Kilometers of coastline. Since a sizeable population of Korea is Buddhist and Pakistan possessing heritage site such as Mohenjo-Daro, Taxila (cradle of Buddhism dating back to 600BC), many Korean tourists can be attracted.

Cooperation between the two countries go back decades when Pakistan assisted Korea with its development program and assigned the Planning Commission of Pakistan to share its 5 Year Development Plan as at the time, Pakistan was amongst the fastest developing country in the region. South Korea is now the 10th largest world economy, 6th largest exporter and a member of the G20. With a GDP of US$ 1.5 Trillion, its exports stand at almost half. Presently over 20 Korean Companies are already operating in Pakistan, some on ongoing projects, and with the impetus expected to be provided by the input of $ one Billion by the Korean Government under their Economic Development Cooperation Fund next year, more will find Pakistan as a potential destination for trade and investments.

Long live Pakistan Korea Friendship!!

The writer is an active member of several Bilateral Business Forums including that of Korea [email protected]

Copyright Business Recorder, 2021