Mu-hyup "Alternative to Reduce Dependence on China, Utilize ASEAN 'BIG 3'"

Proposal to Utilize ASEAN 'BIG 3' to Reduce Dependence on China
Indonesia, Vietnam, and the Philippines Emerge as Rapidly Growing Consumer Markets
Korea's Market Share in Major ASEAN Countries Stagnates or Declines
Institute Suggests Promising Industries in Each Country for Short, Medium, and Long Term
Strengthening Cooperation with ASEAN Essential for Korea's Economic Stability

As tensions between the U.S. and China are expected to intensify with the potential return of U.S. President Donald Trump to power, a proposal has emerged to utilize the so-called ASEAN 'BIG 3' as a way to reduce dependence on China. Attention should be paid to the rapid economic growth of Indonesia, Vietnam, and the Philippines.

The ASEAN flag is placed alongside the member countries' flags ahead of the ASEAN Foreign Ministers' Retreat held on the 17th in Langkawi, Malaysia. Photo by Reuters Yonhap News

The Korea International Trade Association's Institute for International Trade and Commerce evaluated in a report titled "Utilize ASEAN BIG 3, a 500 Million Market," published on the 23rd, that ASEAN countries are becoming attractive consumer markets due to rapid economic growth and an increasing middle class. Additionally, the institute's analysis highlights the significant value of these countries as next-generation production bases, thanks to low production costs, abundant raw materials, and proactive industrial promotion policies by their governments.

However, Korea's market share in the import markets of major ASEAN countries has either stagnated or declined recently. For example, in Vietnam, Korea remains the second-largest importer after China, but its market share has steadily dropped from 20.1% in 2018 to 17.3% in 2022. In other countries, Korea's import market share has either decreased or remained low, ranking 6th in Indonesia, 7th in Malaysia, 5th in Singapore, and 7th in Thailand.

The institute focused on three ASEAN countries?Indonesia, Vietnam, and the Philippines?that have an average annual economic growth rate exceeding 5% and collectively hold 72% of the ASEAN population. To expand the declining market share of Korean companies in these markets, the institute investigated each country's key economic development policies and proposed promising industries for the short, medium, and long term by considering the growth potential and marketability of major export items, as well as policy support and potential.

Donald Trump, President of the United States.

In Indonesia, the new government has selected nine priority investment sectors, including ▲semiconductors ▲renewable energy ▲the construction of the new Nusantara capital city, and plans to implement various investment promotion policies. The institute foresees semiconductors and automobiles as promising sectors in the short term, and general machinery and petrochemicals in the long term.

Vietnam is pursuing participation in the global value chain of its domestic industries. To this end, it has designated ▲processing and manufacturing ▲electronics and information and communications ▲renewable energy as priority development sectors. Promising fields in Vietnam are expected to be wireless communication devices and next-generation semiconductors in the short term, and shipbuilding and electric vehicles in the long term.

The Philippines has designated key investment industries through its strategic priority investment plan, offering benefits such as tax exemptions and special corporate income tax rates for investments in these sectors. In the short term, petroleum products and advanced new materials are promising, while semiconductors, robotics, and new energy industries are expected to be promising in the long term.

Song Hyo-gyu, a research fellow at the Korea International Trade Association, stated, "Given Korea's high dependence on China, strengthening economic cooperation with ASEAN is essential for economic stability and resilience. If trust is built through common initiatives such as industrial infrastructure development and digital transformation pursued by ASEAN countries, they will become excellent economic cooperation partners."