Facing falling birthrates and an ageing population, South Korea and Japan strategise for the future. 

South Korean business circles have begun efforts to strengthen economic relations with their Japanese counterparts as President Moon Jae In’s administration prioritises revitalising the country’s economy, which has seen low growth rates for many years.

Both the Japanese and South Korean domestic markets are shrinking due to falling birthrates and greying populations. Therefore, the two countries’ business circles aim to expand cooperation in other countries, including in Asia.

The Japan Business Federation (Keidanren) and the Federation of Korean Industries, which is the largest business organisation in South Korea, held a meeting on 22 May in Seoul.

At the meeting, officials of the two federations discussed ways to expand collaborations between Japanese and South Korean companies in other countries. A source said it was the first time the two federations held talks about businesses in other countries.

“Until recently, we have engaged in joint businesses mainly by South Korean construction firms and Japanese trading companies,” Huh Chang Soo, chairman of the Federation of Korean Industries, told participants. “From now on, we want to expand our collaborations into a wider range of fields, such as service industries.”

A sense of emergency on the South Korean side is serving as an impetus behind the move to strengthen business between the two countries.

In South Korea, real economic growth rates have continued to be as low as 2 per cent to 3 per cent in recent years. Having seen growth in its own industries, China — South Korea’s largest export partner — sees less need to import South Korean products, such as smartphones.

South Korea’s domestic market is also shrinking due to a declining birthrate and ageing population. However, the technological levels in South Korea’s manufacturing industries are weaker than Japan’s.

Many Japanese companies worried about the falling domestic population are also paying attention to overseas markets. Business circles from the two countries plan to supplement each other’s weak points.

Nearly 90 joint projects launched

To date, Japanese and South Korean companies have jointly operated businesses in Asia and Africa. There are nearly 90 publicly announced joint business projects by Japanese and South Korean companies, mainly in emerging countries, according to the Japan-Korea Economic Association.

On the Japanese side, general trading companies have bolstered among the firms, along with fund procurement in overseas large-scale business projects, for many years. The technology of plant makers has also been used.

On the South Korean side, huge conglomerates have bolstered the country’s economy. For the construction industry, it is said that the procurement of large volumes of construction materials made it possible to lower construction costs.

If the two sides’ advantages can be combined, the pair will get a leg up in worldwide competition. For example, for Japan and South Korea, both of which do not have a lot of natural resources, liquefied natural gas is an important energy source. If Japanese and South Korean companies form an alliance and invest worldwide, their influence in natural gas markets will grow.

Mitsubishi produces LNG in Indonesia with Korea Gas Corp and others. JGC Corp, a major Japanese plant maker, is constructing an offshore LNG production plant with a South Korean conglomerate group. Similar joint business projects cover other resources, such as crude oil and nickel.

Collaborations have started in fields other than natural resources, too. Sumitomo Corp and a South Korean major food maker established a joint venture in Vietnam that produces and sells wheat and other products. The Japan-South Korea relationship, which is sometimes seen as one with conflicting elements, is deepening economically.

Source: The Japan News/ANN News Desk