[Korea's Great Transformation, Korea-Japan Future Cooperation] "Synergy from Structural Korea-Japan Cooperation Needed in Advanced Technology, Energy, and Startups"

60 Years of Korea-Japan Relations: Toward Future Cooperation Partners
Naoyuki Maegawa, JETRO Seoul Director
Emerging Korea-Japan Cooperation Amid Trade Uncertainty
High Potential for Collaboration in Semiconductors and Pharmaceuticals
Synergistic Effects Expected in Biohealth Sector

"Last year, 80.4% of Japanese companies operating in Korea recorded a profit. I believe there is strong demand for cooperation in various fields such as semiconductors, biohealth, energy, decarbonization, and DX (digital transformation)."

Naoyuki Maegawa, Seoul Director of the Japan External Trade Organization (JETRO), stated in an interview with Asia Economy on June 20 that such exchanges can go beyond simple transactions and develop into structural cooperation. Since his appointment to Korea in August 2022, he has maintained close contact with the industrial sectors of both countries.

Japanese companies that supply parts and materials to major Korean partners are generally welcoming exchanges with Korean companies. This is because they have achieved results through cooperation in various industrial fields. He emphasized that, as both countries have defined roles in their respective areas of strength, it is necessary to create a system that generates synergy.

He cited the biohealth sector as a representative example. He explained, "Japan's basic science R&D capabilities and pharmaceutical technology, combined with Korea's production capacity and clinical trial environment, can create a synergistic effect." He particularly pointed out that "it seems there is a certain division of roles," highlighting the clear industrial strengths of both Korea and Japan.

Naoyuki Maegawa, Seoul Director of the Japan External Trade Organization (JETRO), is being interviewed by Asia Economy at his office in Jongno-gu, Seoul. Photo by Jo Yongjun

Regarding the industry's call to strengthen Korea-Japan corporate cooperation amid intensifying US-China tensions, Director Maegawa said, "I agree," and added, "Cooperation between Korean and Japanese companies has always been important, but its importance has grown even more recently." As calls to reduce dependence on trade with the United States and China and diversify supply chains have grown, strengthening Korea-Japan cooperation has emerged as a new, realistic option.

Since the signing of the Treaty on Basic Relations between Korea and Japan, the two countries have maintained a close economic relationship for 60 years. During the period of industrial development in the 1980s, Korea imported a large amount of capital goods, equipment, and technology from Japan. From the 1990s onward, Korea entered the global market in areas such as semiconductors, automobiles, and shipbuilding. Even at that time, dependence on Japanese equipment and materials was high, but despite conflicts such as export restrictions after 2010, the relationship has developed into mutually dependent cooperation.

JETRO believes that there is high potential for cooperation between Korea and Japan in advanced fields such as semiconductors and pharmaceuticals. Director Maegawa said, "In the case of semiconductors, there will likely be strong demand from Korean finished product manufacturers for Japanese materials, parts, and equipment."

In the energy sector, he saw promising prospects for cooperation in the 'hydrogen ammonia' field. This is because both countries are entering the energy industry, and it aligns with the global direction of carbon neutrality. He explained, "Discussions are underway in various areas such as joint supply chain construction, production, and transportation in the hydrogen ammonia sector," and added, "The Korean and Japanese governments are also supporting companies and organizations, as seen in the 'Korea-Japan Hydrogen Cooperation Dialogue.'"

However, he added that, due to economic and cultural differences between the two countries, cooperation should proceed step by step with caution. Japanese companies operating in Korea are experiencing some institutional and regulatory differences. There is also a growing call in some quarters to resume Korea-Japan Free Trade Agreement (FTA) negotiations with the launch of a new government. Regarding these discussions, Director Maegawa responded, "The utilization rate of the Regional Comprehensive Economic Partnership (RCEP) agreement, which came into effect in 2022, is quite high," and added, "If mutual understanding and consensus for a 'win-win' are achieved, FTA negotiations could also be resumed."

He also stated, "Korea-Japan cooperation within the multilateral framework of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is also necessary," and added, "The joint statement at the 57th Korea-Japan Business Conference expressed support for Korea's accession to the CPTPP as part of efforts to create an environment for linkage and cooperation between the Korean and Japanese business communities."

Naoyuki Maegawa, Director of the Japan External Trade Organization (JETRO) Seoul Office, is being interviewed by Asia Economy at his office in Jongno-gu, Seoul. Photo by Jo Yongjun

JETRO has also recognized the need for cooperation between the two countries and, since 2023, has resumed regular consultations with the Korea Trade-Investment Promotion Agency (KOTRA) for the first time in seven years. The two organizations jointly conducted a survey on cooperation needs between Korean and Japanese companies in third countries. In that survey, they identified possibilities for Korea-Japan corporate cooperation in India, Vietnam, and Indonesia. He suggested, "If Korea and Japan jointly enter third-country markets, it seems that roles are defined in the energy, infrastructure, and plant sectors," and explained, "Japan, with its general trading companies, excels in project operation, while Korea's engineering and construction companies have strengths in EPC (engineering, procurement, and construction)."

JETRO plans to actively support startups in the future. Last year, JETRO organized the 'Korea-Japan Ecosystem Exchange Meeting' to strengthen the startup ecosystems of both countries. Director Maegawa said, "Recently, the number of Japanese startups entering Korea has also been increasing," and noted, "The scale of the startup ecosystems in both countries is similar, they share common social challenges, and they are geographically and culturally close." He added, "Joint Korea-Japan funds, the launch of Korea-Japan economic organization startup initiatives, and high-level government dialogues are being further strengthened," and explained, "JETRO is also working to promote regional linkages between Korea and Japan for the purpose of supporting startups."

A badge featuring the logo commemorating the 60th anniversary of Korea-Japan normalization of diplomatic relations. Photo by Jo Yongjun

Director Maegawa emphasized, "Although the Korea-Japan economic relationship is becoming closer, there are clearly challenges that must be addressed together," and added, "Both countries are facing the unstoppable trends of population decline, low birth rates, and aging populations. Now, we must face this shared reality and work together to find a path toward sustainable growth."