[Asia Report] In the Era of Megatrends, Korea Must Join Forces with ASEAN

Jensen Huang, CEO of NVIDIA, Visits Vietnam, Singapore, and Malaysia in Succession
Expresses Commitment to Developing AI Hubs
ASEAN Nations Gain Geopolitical and Supply Chain Significance
Strong Market Foundations Drive Growth Potential
ASEAN Emerges as Korea's Last Bastion for Sustainability
Time to Discard Prejudices Against Southeast Asia

Malaysian ruling party politician Member of Parliament Lyu Chintong (Deputy Minister of Investment) declared at the New Industry Master Plan (NIMP 2030) meeting, where top industry officials gathered on New Year's Day, that "the semiconductor industry is our nation's new oil." Malaysia and Singapore have long honed their skills mainly in semiconductor assembly and packaging, the back-end processes, but now they are making a full-fledged challenge in advanced fields such as design and engineering. Malaysia has the advantage of relatively smooth English communication due to its history as a British colony. Multinational companies prefer it because data and production management are easier, and highly educated talents seeking affordable and comfortable environments are flocking there, so significant growth is expected.

Last month, Jensen Huang, the semiconductor magnate and CEO of NVIDIA from the United States, visited Southeast Asia consecutively. In Vietnam, he unveiled a bold plan to make the country a "second base (after Taiwan)." During his visit to Malaysia, he said they are exploring cooperation plans to nurture it as a potential artificial intelligence (AI) hub, and in Singapore, he also mentioned cooperation for AI development. This is evidence that while Xi Jinping's China is stuck in a structural reform quagmire, the world is paying attention to Southeast Asia as a new supply chain.

◇ Time to discard the ‘Southeast Asia prejudice’... The power of a young population = Southeast Asia is still imprinted in Koreans' minds as a perennial developing region with two decisive weaknesses: ‘underdevelopment’ and ‘non-democracy.’ Korean companies have long attempted to enter Southeast Asia targeting cheap labor costs and abundant natural resources, but there was a lack of recognition that it was an investment for future corporate development.

Long-standing corruption and wealth disparity in Southeast Asia have been obstacles to economic development. However, such fixed stereotypes about ASEAN (Association of Southeast Asian Nations) are gradually passing a turning point. ASEAN's unique advantages lie in areas that are difficult to obtain easily in Korea. Therefore, there is a growing need for Korea to actively utilize ASEAN's strengths. In particular, analyses suggest that Korea and ASEAN should combine in driving the massive and innovative changes worldwide, i.e., ‘megatrends.’ Attention should be paid especially to demographic, metropolitanization, sustainability, and growth-centered trends.

Population issues, namely rapid aging and declining birth rates, are Korea's greatest threats. If this continues, it will be difficult to avoid the collapse of higher education institutions like universities and local commercial districts. Conversely, the Southeast Asian region, moving toward a population of 700 million, remains young and vibrant. Of course, some degree of aging is inevitable. Thailand is the country with the most severe population aging in the region, with projections that up to 30% will be elderly aged 70 or older by 2036.

Vietnam and Indonesia have nearly half of their populations under thirty years old, showing greater future growth potential. In the past, such populations were directly linked to poverty, but now they are baptized in smart environments enhanced by advanced wireless communication and AI technologies, and further maximize geopolitical advantages to achieve clear results in overseas investment. In the past, migration to Korea was limited to marriage immigrants or dispatched workers, but in the long term, there is talk of spreading a culture of long-term residence (permanent residency) for highly educated elites.

Jensen Huang, CEO of NVIDIA, held a press conference on the 8th of last month in Kuala Lumpur, Malaysia. AP News [Image source=AP News]

◇ Rapid metropolitanization... Firm ‘sustainability’ = Southeast Asia is generally a metropolitan-centered society. Leading the world’s top overseas tourist destination Bangkok, there are megacities with populations of 10 million such as Jakarta, Ho Chi Minh City, Kuala Lumpur, Singapore, and Manila. ASEAN is expected to have 43 such megacities by 2030, and rapid urbanization requires more technology and infrastructure.

As a result, analysts unanimously predict that new industries and endless investment opportunities will follow. Representative examples include 5G-based communication networks, sustainable public transportation systems, water supply and sewage treatment systems, and urban agriculture. Moreover, essential cultural infrastructure for metropolitan areas such as libraries, museums, and smart cities are also fields where Korea’s strengths can be utilized. Thanks to the interest in Korea sparked by the ‘Korean Wave’ in most Southeast Asian countries, this region can be the most suitable for exporting the know-how and technology Korea experienced in metropolitanization.

Southeast Asia, with vast land and powerful natural forces, simultaneously exhibits cutting-edge and underdeveloped characteristics. As a result, it is seriously and concretely devising regulations and practical measures on the topic of ‘climate change,’ which Koreans tend to be insensitive to. It is said that all ASEAN member countries share the recognition of the risks of climate change and the need for active action. Analysts attribute this to painful past experiences of having natural resources taken by foreigners and the fact that many are maritime countries adjacent to the sea, which affects the natural environment. At the corporate level, there is particularly intense interest in ESG (environmental, social, and governance) management, a global trend.

Singapore has become a leader in the ‘carbon trading’ market through proactive investment in the global carbon emissions trading market, while Malaysia and Indonesia have called for global attention to marine environmental protection. Vietnam is persistently pushing plans to convert its motorcycles to electric vehicles faster than China. Experts diagnose that "this deep-rooted sustainability is ASEAN's core competitive advantage." It is said that Korea’s future competitiveness can also be secured by joining forces with ASEAN, which possesses such natural power.

◇ 2024 is a recovery period = Last year, the US Federal Reserve's interest rate hikes and China's economic slowdown dealt a heavy blow to the Asian economy. Especially export-oriented countries such as Singapore, Vietnam, Malaysia, and Thailand experienced aftershocks. ASEAN countries suffered setbacks such as a significant decline in the real estate market and had to lower their expected economic growth rates considerably. The Asian Development Bank (ADB) forecasted that Southeast Asia's gross domestic product (GDP) will grow 4.3% this year, lower than the 4.6% projection made in September last year. This means the region is still in the process of recovery. Still, ASEAN is the only region in the world with such growth figures. Korea, trapped in a long-term low-growth quagmire, must grasp the lifeline called ASEAN. It is the last bastion for sustainability.

Jung Ho-jae, Researcher at Korea University ASEAN Center

This content was produced with the assistance of AI translation services.