Bakyt Dyussenbayev. Kazakhstan and South Korea: Focus on Technology and Investment

Bakyt DYUSSENBAYEV

Kazakhstan and South Korea:

Focus on Technology and Investment

Almost the whole Korean industry is based on high value-added sectors. At the same time, Korea achieved progress having absolutely no foundation. In the 1960-70s, the country embarked on the course of accelerated industrialisation. At the first stage, key basic industrial sectors were created aimed at meeting domestic demand. Through perseverance, consistency and rational allocation of resources, Korea has managed to achieve significant results. Heavy and chemical industries and light industry developed at a high rate. Subsequently, the import substitution policy was replaced by the export focus of the South Korean economy. The Korean economic miracle was promoted by the foreign economic strategy of the country aimed at protecting the domestic market and entering foreign markets. The production of consumer electronics and electric goods, shipbuilding and the motor vehicle industry successfully developed.

Gradually, the Republic of Korea changed industrial priorities to knowledge-intensive production – information and bio technology, robotics, aerospace equipment, medical equipment, renewable energy sources, optical fibers and new materials, becoming an independent developer and supplier of new technologies.

It is estimated that for every 10,000 employed people in the world there are an average of 60 industrial robots. In South Korea, this indicator reaches 400 robots; in Japan, 340 and in Russia and Kazakhstan, it is less than 10 robots. Scientific and technical progress in South Korea resulted from the policy of export-oriented industrialisation. The Korea Institute of Science and Technology was established in 1966 aimed at developing these areas and the Ministry of Science and Technology was established in 1967.

It should be emphasised that initially, the scientific and technological development of the country was aimed mainly at the introduction, implementation and application of foreign technologies. However, in the 1980s, the focus shifted towards the development and implementation of their own national projects in order to increase the level of scientific research and technological development. Programmes were designed to increase both public and private investment in this area, as well as to train highly qualified personnel to work in science and technology.

Currently, Korea is one of the global leaders in innovation and advanced technologies, ranking second in the world in the ICT (information and communications technology) Development Index, fifth in World Bank's Doing Business and 11th in the Global Innovation Index (GII). The GII is a calculated ranking of countries based on data in six categories: research and development, education, scientific personnel, high-tech companies, manufacturing and patents. Thus, according to the indicators of research & development, high-tech companies, higher education and patents, the Republic of Korea is in the top five countries of the world.

The country has advanced engineering inventions; in particular, the South Korean plan deserves attention, according to which by the end of 2019 the number of hydrogen cars in the country will be 6,358, which is seven times more than last year. Thus, the annual distribution of new hydrogen cars increased by 35 percent up to 5,467. Beginning in August 2019, 10 hydrogen taxi cars and 35 buses will start operating.

Korea is also a leader in ICT. Thus, the three South Korean telecommunications companies – KT, LG and SK - started providing 5G mobile services for the first time in the world. The 5G technology was successfully tested during the Winter Olympics in Pyeongchang in February 2018. Fifth-generation mobile communication provides a high data transfer rate which reaches 25Gb/s, which makes it possible to broadcast video in Ultra HD resolution.

Korea independently developed new-generation space satellites, modern types of weapons, pharmaceuticals, software, new materials, etc.

The Korean government pays special attention to the fourth industrial revolution and South Korean companies are ready to fight for primacy in this area. Thus, the priorities are the development of big data infrastructure, blockchain technologies, artificial intelligence (AI), alternative and renewable energy and financial technologies (FinTech). To finance these areas, five trillion won (US$4.4 billion) is being allocated in 2019 and the total investment for 2018-2022 will amount to 30 trillion won (US$26.6 billion).

The development of Industry 4.0 was preceded by the rapid development of industrial automation and appropriate human resources. Together with innovative thinking and the industrial system as a whole, experience of engineering and design personnel, skills in robotics, programming, electronics development, etc. is of great importance. Experience in developing advanced countries shows that education and training play a special role in ensuring technological progress and the development of relevant industries. The Korean government, deciding to invest over $240 billion won ($205 million) in enhancing the competitiveness of the semiconductor industry, at the same time announced plans to establish departments of related semiconductor technologies at five major universities in the country. Thus, there are a sufficient number of experts in this field. With that, since 2017, more than 20 percent of the global semiconductor products market has been shared by South Korean companies Samsung Electronics and SK Hynix. Today, Samsung Electronics is the world's largest semiconductor manufacturer, leaving Intel behind last year, which held the leading position over the past several decades.

In this context, Kazakhstan is interested in the advanced experience of state policy in the field of science and technology, as well as the whole range of issues related to the transfer and commercialisation of technologies, support for innovative enterprises, mechanism for defining priorities for science and technology policy.

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During the establishment of diplomatic relations between Kazakhstan and Korea in 1992, the trade turnover between the two countries did not exceed $10,000. The GDP of the Republic of Korea in 1992 was $350 billion, which was $7,982 per capita. In Kazakhstan at that time, GDP per capita did not exceed $700. Accordingly, trade and economic cooperation between the two countries was determined by the level of economic development and consisted of simple and irregular trade.

In the first decade of bilateral relations, a solid legal framework was built, which served as the basis for the ongoing development of trade, economic, scientific and technical and investment cooperation between the two countries.

Thus, we should note the Trade Agreement between the governments of Kazakhstan and the Republic of Korea dated July 3, 1992 and the intergovernmental Agreement on the Promotion and Mutual Protection of Investment dated March 20, 1996 signed in Alma-Ata (now Almaty). In addition, an important Agreement on Scientific and Technological Cooperation (entered into force on Feb. 13, 1997) was signed in Seoul on May 16, 1995.

It should be noted that the trade and economic component, in particular the technological and investment areas, have always been a leitmotif of bilateral relations. This is caused by the structure of the South Korean economy, mainly consisting of innovative and knowledge-intensive industries.

As for technology transfer, I believe that technological cooperation with Korea should be based on meeting the current needs of modernising big Kazakh enterprises, as well as on facilitating medium and large business to implement high-tech projects in Kazakhstan. In particular, there are great prospects in the field of digitalisation and automation of industrial enterprises in Kazakhstan. In this context, the reorientation of state support measures to knowledge-intensive industries becomes important. A number of Korean companies are ready to execute relevant orders in various industries.

By the way, the modern industrial potential of the Republic of Korea is almost $700 billion and is comparable in scale with the industrial production of India and Brazil; their GDP substantially exceeds the Korean GDP.

Forty-six Korean companies from Global 2000 are identified as the highest priority. First of all, these are companies engaged in mechanical engineering, metallurgy, construction, chemistry and petrochemistry, oilfield services and gas supply, telecommunication services, food industry, logistics, electronics and IT services. These companies are leaders in their respective industries; have a strong scientific, technological and financial framework and huge investment potential.

Such transportation network companies (TNCs) as CJ Corp., Doosan, Doosan Heavy Industries,Hanwha Corp., Hyundai Engineering, Hyundai Heavy Industries, Hyundai Motors, Hyundai Steel, KIA Motors, KT Corp., LG Chem, LG Display, LG Electronics, LS Corp,Posco, Samsung Electronics, SK Innovation and SK Telecom can be mentioned as top priorities to attract to Kazakhstan.

In terms of investment and trade interaction with Kazakhstan, Korea ranks second after the People's Republic of China (PRC) in the Asian region and in terms of export, in 2018, it is also among the top ten global markets for Kazakhstan's products.

At the end of 2018, the trade turnover between Kazakhstan and Korea amounted to a record $3.9 billion (export - $2.976 billion, import - $922.5 million), which is two times more than in 2017, and increased 5.7 times compared to 2016 turnover.

Kazakhstan's export is based on oil, ferroalloys, titanium, rolled non-alloy steel and iron.

The main items of Kazakh import are wires and cables, switchboards, panels and consoles, metal products and tools, bodies (including cabs) for vehicles, machinery and equipment.

Currently, our countries have about 40 Kazakh-South Korean projects totaling $7.2 billion.

Korea is among the top ten investors in the economy of Kazakhstan and has a leading position in the number of joint ventures and promising projects. According to the National Bank of Kazakhstan, the inflow of foreign direct investment (FDI) from Korea to the Republic of Kazakhstan from 2005-2018 exceeded $5.5 billion.

In Kazakhstan, 1,081 legal entities, branches and representative offices with South Korean participation (Hyundai, LG Electronics, LG Chem, POSCO, SK Corporation; construction companies Dongil-HighVill and Urim and others) are registered; 516 of them are operating. Together with these enterprises, we assemble household appliances and produce titanium slabs.

These facts indicate the huge potential of trade and economic cooperation. We can note the following most promising areas: engineering, agricultural machinery, petrochemistry (gas chemistry, agrochemistry), food industry (processing, packaging), medicine (pharmaceutical industry), metallurgy (metalworking), information and communication technologies, etc.

In all these areas, active interaction is built with private companies, state agencies and institutions of Korea.

Along with this, of importance in active business exchange is the visa-free regime established by the Agreement between the Government of the Republic of Kazakhstan and the Government of the Republic of Korea on the Mutual Exemption from Visa Requirements (Astana, June 19, 2014) and direct air service between Almaty, Nur-Sultan and Seoul.

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The state visit of President of Korea Moon Jae-in to Kazakhstan on April 21-23 gave an additional impetus to bilateral political and economic cooperation. Despite the significant intensification of economic cooperation between Korea and the countries of Central Asia, Kazakhstan once again proved its status as a regional leader in terms of mutual trade and investment. During the visit, seven interdepartmental and over 30 commercial documents totaling $3.2 billion were signed. Among the documents signed were:

-Memorandum between the Ministry of Information and Communication of the Republic of Kazakhstan and the Ministry of Science and ICT of the Republic of Korea on the fourth industrial revolution;

-Memorandum of understanding between the Ministry of Defense and Aerospace Industry of the Republic of Kazakhstan and the Ministry of Science and ICT of the Republic of Korea in joint exploration and use of outer space for peaceful purposes and

-Protocol of intent on the establishment of a joint international IT Centre between the Ministry of Information and Communication of the Republic of Kazakhstan and the Ministry of Science and ICT of the Republic of Korea.

These documents will contribute to the further development of technological cooperation between the two countries.

President Kassym-Jomart Tokayev takes part in Kazakh-South Korean business forum.

Nur-Sultan, Hilton Hotel, April 22.

We can also note a number of commercial projects signed during the visit, such as the construction of residential facilities and public parks, production of greenhouse equipment and vertical-axis wind turbines, construction of infrastructure projects (roads, bridges), a solar power plant, a waste recycling plant, opening of modern medical facilities and diagnostic laboratories, training personnel for the fourth industrial revolution, etc. All of the above will be done with South Korean financial and/or technological participation.

At present, close cooperation in mechanical engineering is actively developing between Kazakhstan and Korea, the main areas of which are the production of household and electronic equipment and the motor vehicle industry. We have vivid examples of cooperation with Hyundai, KIA, LG Electronics, etc. There are successful projects with Dongil-HighVill, Kolon World Investment, SK E&C and others in the petrochemical, transport and construction sectors.

In addition, as part of the state visit, the start was given to the construction of a new automobile plant in Almaty. There are plans to manufacture 30,000-45,000 products annually by Hyundai Motor Company. The new export-oriented production will serve as another symbol of strong relations between the countries and will strengthen the technological potential of the motor vehicle industry of Kazakhstan.

Of particular importance for further investment and technology cooperation is the New Economic Programme of the Republic of Kazakhstan and the Republic of Korea titled Fresh Wind adopted during the state visit, which provides for the development of cooperation and implementation of projects in industry, new technology, agriculture, infrastructure construction, medicine, etc. The main goal of the programme is to ensure greater integration and achieve a synergistic effect from the combination of resources and technological and scientific potential.

In conclusion, I think it should be emphasised that in the modern, rapidly globalising world, there is no alternative to constructive and mutually beneficial cooperation between states and business. Meeting the growing needs of infrastructural, industrial and social development requires attracting significant financial resources; ensuring sustainable economic modernisation, transition to an innovative and technological model and introduction of ICT is impossible without science and modern technology.

In this context, cooperation with countries with technological and investment potential is becoming particularly practical and requires a clear and meaningful approach. The dynamics of modern Kazakhstan-Korea relations can be characterised by successful transformation of the trade and economic potential developed in recent years into joint projects. The interaction of Nur-Sultan and Seoul is one of the examples of successful and mutually beneficial cooperation.

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ABOUT THE AUTHOR. Bakyt Dyussenbayev - Ambassador Extraordinary and Plenipotentiary of the Republic of Kazakhstan to the Republic of Korea.

In 1993, he graduated from V.M. Lomonosov Moscow State University specialising in History. In 1996, he graduated from the Diplomatic Academy of the Ministry of Foreign Affairs of the Russian Federation with a degree in International Relations.

He has been working in the system of the Ministry of Foreign Affairs of the Republic of Kazakhstan since 1993. In more than 26 years of work in the diplomatic service, he has gone from being a desk officer at the Foreign Ministry of Kazakhstan to the Ambassador Extraordinary and Plenipotentiary of the Republic of Kazakhstan.

Created at : 13.06.2019, 11:40, Updated at : 13.06.2019, 11:40