Korea as a Newly developed Asian Country

							                        International Next-Generation Leaders Program

                             Republic of Korea, October 29th – November 5th 2006


 Korea as a Newly Developed Asian Country: Prospects, Challenges and Korea-
                                         Europe Relations

                               (by Dr. Martin S. Ledolter, LL.M.)

Over the last decade, the European Union and the Republic of Korea, i.e. South Korea,
have not only shown an increasing interest in each other’s security and prosperity, but
have carefully and thoroughly formed an increasingly solid and broad-based partnership,
whereof, as a member of the 2006 International Next-Generation Leaders Program, I
myself bore witness in the fall of the year 2006 on the occasion of a week long
magnificent program perfectly organized by the National Strategy Institute and
sponsored by the Korea Foundation.

The development of democracy and respect for human rights in the Republic of Korea
has created an increasing number of shared political values with the European Union.
Moreover, progress in European integration has led to an increasing range of political,
economic and social issues being undertaken at the EU level in relations with other
countries, thus creating further areas for co-operation as also stressed out by H.E. Yrjö
Kim David Luotonen, the incumbent Ambassador of Finland to the Republic of Korea
during a Luncheon Session on the second day of the program.

As the process of European integration and enlargement have made the EU the world’s
largest economy and leading trade bloc, South Korea’s development process has taken
it from sheer poverty to become the world’s tenth largest economy in but four decades,
as remarked by Prof. Choong Soo Kim from Kyung Hee University. The size of the two
economies has facilitated profitable economic interaction. In 2004 bilateral trade
between the EU and South Korea reached 45.9 billion Euro and already in 2005 the EU
was Korea’s second largest export market and held the largest stock of foreign
investment in the country.

South-Korea is both geographically and culturally well located for constituting a bridge
for investment in Northeast Asia and this is considered a priority by its leaders. As a
principal foreign investor to South-Korea, the EU plays an important part in this process.

                                     Dr. Martin S. Ledolter, LL.M.
                         International Next-Generation Leaders Program

                           Republic of Korea, October 29th – November 5th 2006


The on-going structural reforms to which the South-Korean Government is committed,
and that are strongly supported by the EU, should contribute to further improving the
investment climate in South-Korea and assuring that the European Union as the largest
foreign investor to South-Korea in terms of cumulative total since 1962 will further
enlarge its foothold on the Peninsula.

Interestingly enough, as my fellow colleagues and I found out during our Country Tour
Program, the main EU exports to South-Korea in the year 2003 were power generating
machinery, chemicals, transport material and ITA equipment, whereas these days the
main imports from South-Korea to the EU are not only ITA equipment, transport
material, textiles and clothing, but also power generating machinery as we have learned
during a spectacular tour at the Doosan Heavy Industries & Construction Co. premises
in Gyeongsangnam-do.

Not only Doosan Heavy Industries & Construction Co., but also STX Shipbuilding Co.,
Ltd. and LG Philips gave the members of the International Next-Generation Leaders
Program an idea as to why - despite the strong EU - South-Korea trade relations - there
has been a structural EU deficit since the late 1990s. To another extent, however, this
deficit may also be attributed to the difficulties EU companies have in accessing and
operating in the South-Korean market as South-Korean requirements for products and
services often create barriers to trade.

Thus, as vividly discussed with Prof. Chong Wook Chung from Seoul National University
during a Luncheon Session, one of the main interests of the EU is to facilitate bilateral
trade not only by supporting any such reforms but also by strong expert level co-
operation in order to remove the existing trade barriers especially with regard to the
preparation and application of requirements to products or services or protection of
intellectual property rights or uncompetitive practises and to prevent new ones from
appearing.

According to Prof. Choong Soo Kim, bilateral/regional Free Trade Agreement initiatives
are gathering momentum and have become an established part of Korea's trade policy.
Set against a trend of market driven and rapidly increasing regional interdependence of

                                   Dr. Martin S. Ledolter, LL.M.
                          International Next-Generation Leaders Program

                            Republic of Korea, October 29th – November 5th 2006


trade and investment in Northeast Asia (in particular among the core countries China,
Japan, and South Korea), the Republic of Korea has performed a fundamental shift
away from an exclusive reliance on multilateral trade negotiations towards parallel
bilateral/regional FTA initiatives.

Thus, it seems that South Korea continues to affirm her 'belief in the primacy of the
multilateral trading system'. Brought in context with the EU, however, it is vital that
regionalism in East Asia remains open beyond the region and supportive of the
multilateral trading system. Both the EU and South-Korea have clearly benefited from
the multilateral trading system and are in positions to reap more benefits from further
liberalization of international trade. Like the EU, South-Korea has clear offensive
interests in the DDA in terms of enhancing market access for industrial products, anti-
dumping rules and services.

The EU and South-Korea are important trading partners and committed proponents of
the multilateral trading system but, and that I came to acknowledge during the
continuation of the International Next-Generation Leaders Program, both parties must
realise that they should not be complacent and expect trade relations to improve by
themselves. There are two avenues to facilitate trade and investment flows between the
EU and South-Korea relating to both multilateral and bilateral action. Thus, the EU and
South-Korea will need to assess what implications the increasing number of free trade
agreements globally and especially in Asia will have on the bilateral trade relations and
adjust the bilateral cooperation accordingly.

                                                   ***

Last, but certainly not least, I would like to genuinely thank both the National Strategy
Institute and the Korea Foundation for a magnificent International Next-Generation
Leaders Program that is second to no other program I have ever participated in and for
further strengthening the close European-South Korean bonds.




                                      Dr. Martin S. Ledolter, LL.M.