Invest KOREA

A  great leap forward was made in March when President Yoon Suk-yeol took a two-day shuttle trip to Tokyo to meet Japanese politicians and business leaders. It was as surprising as was great, because the previous two presidents of Korea, president Park and Moon, had never dared to do so. It was also equally audacious, as the political consequence of the visit was far from assuring for the administration suffering a record low approval rate from the start. Despite countless similarities, the two nations have been so hindered by centuries’ old historical conflicts, personal anxiety, and emotional animosity that any acquaintance at any time between the two summits could trigger an unsurmountable cascade of opposition on both sides. That is exactly why president Park and Moon had refrained from visiting Tokyo under their presidencies. It is almost like another DMZ on the East Sea. For President Yoon, the trip was a serious risk-taking venture like walking through a mine-fields of DMZ, but he could not put it off further as the urgent current economic and security circumstances surrounding the East Sea has left him with no other choice but to dash into immediate action. He said it took great courage. Slow economic growth, rapid inflation, global slackening of trades, tumultuous financial environments and North Korean provocations all directed the President to a quick response.

As a business trip, it was not formality but substance that mattered to President Yoon and his government. The substance he dearly sought after was a “cooperating partnership” between the two nations. Cooperation, not just in the areas of mercantile businesses, but in security matters, research and technology, human rights, environmental protection, climate change, supply shortages, and sustainable common prosperity. Being one of the top three industrial economies in the world, Japan has tremendous capability that Korea could benefit from through mutual cooperation. During the visit, President Yoon and Korean business leaders met with a number of business gurus in Japan to discuss possible venues for mutual cooperation, paving a critical path for building a cooperative partnership. The first step was launched through the mediation of President Yoon for a business bridge between the Federation of Korean Industries (FKI) and the Japan Business Federation (JBF, Keidanren). It was dubbed as the Korea-Japan Business Roundtable, and this alone could have been enough to make the two-day shuttle trip a success. It was quite a symbolic and historic gathering, as it was a meeting between the biggest business associations in each of the countries, representing almost all of the world-class enterprises of the two nations. It is hoped that FKI and its Japanese counterpart JBF could come up with systematic and long-lasting schemes upon which major enterprises in both nations would cooperate in investments, technology development and human resources for mutual prosperity in the future.

The business cooperation between Korea and Japan should further be extended, however, to small and medium enterprises (SMEs) because there lies much more potential to gain from bilateral cooperation than between conglomerates. SMEs in both nations seem more susceptible to fierce global competition and the changing economic environment that they would be more inclined to cooperate with on another. In this respect, it is urged that the administrations in both countries arrange a table for dialogue between the representatives of their SMEs.

Furthermore, bilateral business cooperation was not the only concern for President Yoon. There were more pertinent issues of procuring future technology, which are essential and critical to both nation’s economies. Cutting–edge technologies in AI, robotics, bio-health science, aerospace exploration and tele-communication are sine-qua-non for future economic sustenance in both countries, and the odds become a lot greater if Korea and Japan cooperate together in R&D investments than otherwise. Japan has been one of the leading countries in scientific research, especially in natural science and engineering. The Japanese government has been spending the highest proportion of its budget in R&D. With 29 Noble laureates, of which 25 are in natural science such as physics and chemistry, Japan is undoubtedly a formidable powerhouse in scientific research that Korea seeks to become. The Yoon government announced the 12 national strategic technologies (NSTs) at the last presidential conference on October 28, 2022, and cooperation with Japan and Japanese R&D institutions could propel and speed up Korea’s tech advancement initiatives. Cooperation amid competition between leading R&D institutions in both nations seems much more inevitable.

Another important area of bilateral cooperation is finance and trade. Japan has long been the second largest international investor after the US in global finance and among the top five international traders. With its status of global currency, the Bank of Japan (BOJ) could supply a significant amount of global liquidity without jeopardizing its financial stability. If the Bank of Korea (BOK) could reinvigorate a swap-agreement with BOJ, as it has been in the past after the financial crisis in 2008, Korea’s financial stability could be further enhanced. This could further stabilize the value of the won and decrease volatility of interest rates.

Despite such innumerable advantages, there has been a pocket of people who vehemently oppose any level of talks whatsoever between Korea and Japan. Generally emotionally charged, the deep-rooted hatred and antagonism against Japan emanates from the historical atrocity under the colonial occupation from 1910 to 1945. They believe Japanese apologies have not been enough, nor had they been truthful and sincere, which almost everyone in Korea would have to agree. Nonetheless, President Yoon seems to believe that Korea cannot, and should not, be a prisoner of the past, doing nothing until Japan comes up with an almost unconditional surrender to Korea by conceding to all the requests that anti-Japanese groups have been asking for the last eight decades, which is near impossible in practicality. Here is the audacity of President Yoon, by exercising a Geddes Axe on the centuries’ old Gordian knot. With his surprising strike, Japan has agreed to immediately nullify the export ban on three key materials, and the Korean government correspondingly halted a World Trade Organization (WTO) dispute against Japan regarding export infringement. The two countries also restored military information-sharing pact soon after. Still, the Korea-Japan relationship has just returned to its pre-2018 state, and there remain many more steps that the two nations must take to proceed forward together in the future.

By Professor Se Don Shin
Professor Emeritus, Sookmyung Women’s University
seshin@sm.ac.kr

*The opinions expressed in this article are the author’s own and do not reflect the views of KOTRA