Tuesday, 26 May 2009

Economic crisis won't spell end to Korean investment: ambassador

Photo by: Tracey shelton
Construction at the Camko City satellite city in Phnom Penh - a high-profile South Korean development project.

Mr Lee Kyung-soo, the Republic of Korea's ambassador to Cambodia

The Phnom Penh Post

Written by George Mcleod
Tuesday, 26 May 2009

In his first interview in Cambodia, South Korea's new ambassador Lee Kyung-soo talks to the Post about the economic crisis, North Korea and growing ties with Cambodia.

You took up the post of ambassador to Cambodia in March. What are your initial impressions of Cambodia?

It has been about two months since my arrival in Phnom Penh on March 27.

As director general of the South Asian and Pacific Affairs Bureau of the Ministry of Foreign Affairs and Trade, I visited most Asian countries, but I never made it to Cambodia....

I'm very proud to be working as ambassador to Cambodia, a beautiful country with time-honoured culture and tradition. I was very impressed with the appearance of Cambodian people working and developing this city with towers and cranes in every corner. I'm also deeply touched by the warm hearts of Cambodians.

How are political links with Cambodia and ASEAN evolving, and why is South Korea becoming such a big economic and political player in the region?

Cambodia is a very important partner to Korea not only in the context of bilateral cooperation but in the framework of regional cooperation.

This year marks the 10th anniversary of Cambodia's membership of ASEAN. For the past 10 years, Cambodia has played a leading role in the development and integration of ASEAN.

I'm confident that Cambodia will, with its valuable contribution, lead ASEAN to further development in the future. I hope that Korea will continue to collaborate with Cambodia for the prosperity and peace of our region.

I hope that North Korea goes its way towards openness and cooperation following the example of Cambodia.

This year also marks the 20th anniversary of ASEAN-ROK [Republic of Korea] Dialogue Partnership. Over the past 20 years, Korea-ASEAN relations have continued to develop in a wide range of areas.... Korea's trade volume with the ASEAN countries was US$90.2 billion in 2008, making the region Korea's third-largest trade partner after China and the European Union. Korea's investment in ASEAN was $5.9 billion in 2008, making the region Korea's second-largest investment destination following the United States.

About 3.5 million Korean people visit ASEAN countries every year. In March this year, the ASEAN-ROK Centre was established in Seoul as an international organisation for promoting ASEAN culture and tourism in Korea.

In addition, the ASEAN-Korea FTA Agreement on Investment will be signed during the ASEAN-ROK Commemorative Summit to be held on Jeju Island from June 1-2 in celebration of the 20th anniversary of the ASEAN-ROK Dialogue Partnership.

Together with the already effective ASEAN-Korea Free Trade Agreement Framework Agreement and Agreements on Trade in Goods and Services, the Agreement on Investment will complete the entire set of the ASEAN-Korea FTAs. With this, trade and investment between ASEAN and Korea will be greatly increased....

The Korean government is pursuing in earnest the "New Asia Initiative". It focuses on strengthening mutual cooperation to achieve prosperity in the Asian region. In this vein, ASEAN is the most important partner for the initiative.

Korean investment in Cambodia fell to $472.89 million in 2008 from $629.49 million in 2007. You reportedly told Foreign Affairs Minister Hor Namhong that Korea will try to attract more investment to Cambodia, especially in construction, tourism and garments. Can you explain how you will do this?

I'm very proud to tell you that many Korean enterprises have actively worked in the key industrial sectors of Cambodia.... The figures you quoted are statistical data based on the actually transferred amount.

According to the statistical figures of investment registered with the Council for the Development of Cambodia (CDC), Korea's investment to Cambodia has shown an 8.4-fold increase to $1.24 billion in 2008 from $148.1 million in 2007.

It is true that Korea's investment in Cambodia has been temporarily affected by the global economic downturn.

However ... I have high hopes that Korea's investment will rise again if the Cambodian government continues to introduce active and transparent policies to attract foreign direct investment and improve the investment environment in Cambodia.

Basically, it is business judgment on the market and its future prospect that makes a decision on where and what to invest.

My embassy will make every effort to forward information to the Korean business community on the investment environment and promising sectors for investment in Cambodia.

Cambodia has had strong historical links with North Korea. Has this negatively affected diplomatic relations with South Korea?

The Korean government hopes North Korea will undertake its responsibility as a member of the international community.

I hope that North Korea goes its way towards openness and cooperation following the example of Cambodia, which is pursuing development on the foundation of market economy and democracy.

I'm happy to note that since the establishment of diplomatic ties in 1997, the friendly relations between Korea and Cambodia have been satisfactorily developed. Prime Minister Hun Sen's visit to Korea this time will further strengthen our bilateral relations.

When the financial crisis hit, the won dropped 30 percent against the dollar, raising building costs. The developer behind the proposed Phaeros Mekong Towers is now gone, for instance, and the IFC developers are redrawing their plans. Camko City is also slowing development. How optimistic are you that Korean developers will renew their commitment to Cambodia?

The reason why Korean developers rushed to Cambodia is that they have confidence in the future of the country.

Some large-scale construction projects were affected by the global economic crisis, but I think it is a passing phenomenon. If international business recovers, Korea's investment to Cambodia will come back.

Korean developers were also outspoken against a controversial prakas on housing development financing. What correspondence have you had with developers and the Cambodian government on this issue, and are you confident agreement will be reached?

Not only Korean developers but also Cambodian local developers recognise that some provisions of the Cambodian government's prakas on housing development do not appropriately reflect what is happening in the construction market.

I know that the Cambodian government is now examining the cases of other countries including Korea.

I expect that the Cambodian government will find a suitable solution that can accommodate the intent of the prakas, which is "protection for buyers", and the policy goal of inducing more foreign investment.

Korea exported $294.4 million worth of goods to Cambodia in 2008, including $117.5 in textiles, $54.8 million in car machinery and $43.2 million in textile goods. It imported $14.3 million in goods, including $8.8 million in textile goods, $2.4 million in non-ferrous metals and $1.6 million in agricultural food. What is being done to correct the trade imbalance?

Such trade imbalance between Korea and Cambodia is structural and due to Cambodia's imports of Korean goods as inputs for Cambodia's products such as garments. But such Cambodian products contribute to Cambodia's exports.

I expect the trade between the two countries will become balanced with the growth of the Cambodian economy in the long run.

It should be also taken into account that the influx of Korean investment into Cambodia greatly contributes to Cambodia's economy.

Last year, the Korean government urged companies to sell assets abroad to cover any shortfalls at home. How has that policy affected Cambodia?

It is up to businesses whether they sell their assets abroad to secure liquidity in preparing for unforeseen shortages of funds.

Interview by George Mcleod

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