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Custom The Growing Importance of ASEAN Countries for Korea essay paper sample

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1.0 INTRODUCTION

1.1 Importance of the study

ASEAN is an organization formed in 1967, where the Southeast Asian nations signed a declaration of association committing to cooperation of the nations. Their main aim was to accelerate economic growth, cultural and social development as well as promote peace among the nations. The original members of the association were Indonesia, Singapore, the Philippines, Malaysia and Thailand. They were later joined by Brunei Darussalam, Vietnam, Laos, Myanmar and Cambodia, making a total of ten nations (ASEAN-Korea Centre, 2010). Korea became a full associate member of the ASEAN nations in 1991. This was during the summit, where the ASEAN nations initiated dialogue with Korea, China and Japan becoming ASEAN +3. In the beginning, the association of Korea and ASEAN countries was based on human resource development, cultural exchanges, medical assistance and information technology as the areas of cooperation. It later expanded to include trade, investment, tourism, science and technology and environmental conservation cooperation (ASEAN-Korea Centre, 2010).

This study is important in that it would show how Korea’s association with the ASEAN countries have affected its economic structure and influenced development in Korea. It would also show how Korea has gained from the cooperation with the ASEAN countries in enriching its cultural values and building its social network in Asia. The study also seeks to find out how the ASEAN-Korea cooperation has affected Korea in its cooperation with other neighboring countries and other economic partners in the ASEAN cooperation like China and Japan.

Statistical Overview of ASEAN-Korean Relations

The major and driving relation between Korea and ASEAN countries is centered on trade and investment. The relationship is formulated such that it is beneficial to both parties engaged in the agreements.

The free trade agreement between ASEAN and Korea entered in 2007 helped to boost mutual and bilateral trade between the two parties. The FTA has seen to increased investment between the partners with trade volume between the parties almost tripling between the year 2001 and 2008. ASEAN is a major exporter of natural resources to Korea which benefits the Korean needs for natural resources in construction and manufacturing. The trade volume between the parties increased from US$ 32 billion in 2001 to US$ 90 billion in 2008. The ASEAN-Korea free trade agreement on goods has aided the increase of trade between the parties of the agreement by 23 percent in one year period (ASEAN-Korea Centre, 2010).

 

 

Total exports

Exports to ASEAN

Share (%)

Total imports

Imports from ASEAN

Share (%)

1996

129,715

20,311

15.7

150,339

12,074

8.0

1997

136,164

20,365

15.0

144,616

12,549

8.7

1998

132,313

15,328

11.6

93,282

9,135

9.8

1999

143,685

17,708

12.3

119,752

12,250

10.2

2000

172,268

20,134

11.7

160,481

18,173

11.3

2001

150,439

16,459

10.9

141,098

15,916

11.3

2002

162,471

18,400

11.3

152,126

16,757

11.0

2003

193,817

20,253

10.4

178,827

18,459

10.3

2004

207,591

19,800

9.5

183,058

18,220

10.0

 

The relations have also seen to the increase of earnings due to increased tourism by the ASEAN population into Korea. ASEAN total trade flow by 2010 was US$ 2,117 billion while their GDP as a block was US$ 1,865.4 billion (2010). When targeted fro tourism ASEAN holds high promise because its total population is 599.5 million people. ASEAN total FDI flow is approximately US$ 76 billion (2010) o which Korea is the third largest investment destination. This means that Korea is one of the biggest beneficiaries of ASEAN foreign direct investment.

Figure 1 shows the tourism statistics between Korea and ASEAN which has grown tremendously aided by the diverse people and culture of the ASEAN nations.

 

ASEAN

Population(2010)

599,535,000

Land area

4,435,830%u33A2

GDP (US$ billions 2010)      

1,865.4

Exports (US$ billions 2010)    

1,095

Imports (US$ billions 2010)  

1,023

FDI (Foreign Direct Investments in US$ billions 2010)    

    75.8

Table 3: ASEAN statistics

Source: ASEAN –Korean centre:

FDI (foreign direct investment)

Countries

Million US$ / 2010

Brunei

630

Cambodia

783

Indonesia

13,304

Lao PDR

333

Malaysia

9,156

Myanmar    -

 

Philippines

1,713

Singapore

35,520

Thailand

6,320

Vietnam

8,000

Table 4: foreign domestic investment statistics

Source: ASEAN-Korean centre

ASEAN – Korean relations extends beyond trade and investment because Korea contributes to the welfare of the ASEAN nations using a special cooperation fund.  Up to the year 200, Korea had donated up to US$ 36 million to the ASEAN nation’s development. This is usually in annual cooperation fund of US$ 2 million each year and future oriented cooperation project fund of US$ 1 million each year.

1.2 Aim of the study

The study seeks to analyze how the relationship of Korea with ASEAN nations in trade, political and social aspects has fostered economic growth in Korea. The study also seeks to find how important ASEAN market is to Korea as a consumer of its finished products. The study will also analyze why it is important for Korea to have a chance to contribute towards the development and growth of Asia by making contributions and offering a competitive trade environment in the region.

1.3 Objectives of the study

  • To find out the economic significance of Korea on ASEAN nations and vice versa.
  • To find out the implication of monetary integration between Korea and the ASEAN nations to Korea governance.
  • To find out why it is important for Korea to maintain good relations with the ASEAN nations.

1.4 Significance of the study

This study is important because it helps the researcher to come up with existing data on the economic influence of the ASEAN countries on Korea. It also analyses how association with ASEAN nations have contributed to its political stability and its association with member states of the ASEAN community. This study is important because it reviews earlier studies on the subject and forms a basis for future researchers by compiling and analyzing data available on the subject.

The information gathered is important to future researchers because it would give them a foundation to base their research on. The information gathered could also be useful to the participating member states of the ASEAN association in helping to improve the benefits of the cooperation for every state involved. This study is very significant because it would give the nation a good analysis on the subject of cooperation with the ASEAN community and give insights on the weaknesses of the cooperation and how optimum benefits can be reaped from the cooperation.

The study is also significant to previous researchers on the subject because it compiles all the information, available on the subject, thus, giving the researchers a wider view of the subject from the perspective of other researchers. The study is significant to the reader/learner because it is a comprehensive analysis of the association and its influence on Korea. This would give the learner and reader a comprehensive understanding of Korean-ASEAN cooperation. The study is also significant to investors because it offers them comprehensive understanding of Korean economy and how much of it depends on ASEAN community. This study also offers the investors a chance to understand the benefits they would reap from ASEAN community if they invested in Korea.

1.5 Organization of the study

The study consists of five chapters whose arrangement and content is as follows.

Introduction - this chapter will give a brief history of the ASEAN-Korean cooperation and the purposes, for which the cooperation was formed. It will also show the importance of the study and its significance to the readers, learners, investors and future researchers. The introduction will also give an outline of the study and how it will be organized to achieve its aim.

Literature review - this is a chapter that will give exhaustive information on the formation of the ASEAN–Korean cooperation, which will be contained in the background information. The chapter will also give a discussion on the topic of the paper by analyzing and criticizing what other researchers have said about topic. The chapter will also offer an explanation of the data and information, available on the subject.

Methodology - this chapter deals with the collection of data and the methods, used to collect the data for the study.

Data analysis - this chapter analyzes the data collected by processing it, using available data processing methods so as to make the data meaningful and applicable to the study.

Results and recommendations - this chapter organizes the results obtained from data analyzes and offers a discussion on the results. It also contains recommendations made by the researcher, based on the results obtained.

2.0 LITERATURE REVIEW

The relationship of ASEAN and the republic of Korea has been a point of focus for decades. This is because the relationship puts Korea and Japan and China at an awkward position because Japan and Korea do not have good international relations. The situation is aided by the fact that Japan’s cultural influences on South East Asia have been very prevalent. Japan has also been taking the role of economic development leader in the region. This led the ASEAN governments and policy makers to think about enhancing their relationship with China because it was more stable politically.

Korea is the later entrant into the ASEAN relations, but its inclusion is paramount to the ASEAN countries. This is because the ASEAN governments need South Korea to attain more stability in economic development. This is because it has good relations with North East Asian countries politically and economically (ISAS, 2007).

ASEAN is a great factor in strategic and economic considerations of Korea. In the year 2005, Korea signed the free trade agreement with ASEAN countries, named the ASEAN-South Korea FTA (AKFTA); the agreement was fundamental because it made it possible for Korea to negotiate and engage in economic and trade talks with more trading partners such as the USA, Japan and China. The agreement is paramount for the Korea because it offers Korea an opportunity to contribute to the growth and development of the Asian community (ISAS, 2007).

The agreement also offers Korea a level platform to compete with its neighbours - China and Japan. The ASEAN community offers a competitive economic environment, thus, encouraging innovation and growth in the region.

The agreement also allows workers to migrate to Korea in search of work. They are employed in small manufacturing firms in Korea, which have suffered acute shortages in labour. In 2007, the ASEAN immigrants to Korea accounted for a third of the total immigrants to Korea, hitting a total of 500, 000 immigrants (Steinberg, 2010). Amongst these are 67,000 Indonesian and 45,000 Vietnamese. Researchers argue that Korean government should be worried about their accommodation in the country and the ability of the country to handle such huge numbers of immigrants. This is true because the immigrants, despite providing cheap labour for Korean industries, are also developing pressure on the resources and amenities available in Korea.

The ASEAN community also provides an economic investment platform for Korea. For instance, in a period of two years since its confirmation as a trade associate of the ASEAN community, Korea became the sixth largest investor in Indonesia. In the year 1993, Korea had invested over 3 billion US dollars in Indonesia. Korea is also strategically positioned so that it will be a useful economic pillar in linking ASEAN with China and India (ISAS, 2007). A Korean relationship with ASEAN countries is also beneficial to the ASEAN countries as they do a lot of trade with the country. This is because Korea offers the ASEAN countries humanitarian aid, thus, enhancing trade relations.

Researcher have argued that establishment of ASEAN Korean trade block does not affect trade tremendously in Korea as expected because of the distance between the ASEAN countries and Korea (Kiheung, 2005). They also argue that China is a stumbling block in Korea’s efforts to realize its potential in trade with the ASEAN community. The research, done in this paper, argues contrary to earlier research that, Korea’s trade and investment with the ASEAN nations increased threefold in two years of confirmation as a trade associate. The difference in trade volumes between the republic of Korea and China can be attributed to the fact that China became a trade partner with ASEAN nations earlier than Korea.

According to earlier research, conducted on the trade volume of Korea with ASEAN nations, the trade index has increased consistently from the year 1998-2002. Singapore especially forms the major trade volume between the Asian nations and Korea. Their major trade is hinged on electronic goods and communications (Kiheung, 2005).

According to statistics form the ASEAN secretariat, Korea was the fourth largest trade partner with ASEAN community, while the ASEAN market as the third largest market for Korean goods. The secretariat further revealed that Korea depended very much on ASEAN to foster its foreign policy (ASEAN Secretariat, 2009). The Korean-ASEAN relationship offers Korea a chance to contribute in development of Asia, where it contributed, for instance, 13 million dollars to the Korean-ASEAN special cooperation fund. This was done despite its financial difficulties so as to enhance goodwill and foster stronger relations with the ASEAN community.

3.0 CHAPTER THREE: METHODOLOGY

3.1 Research strategy

This study employs positivism philosophy and quantitative methods. Research philosophy is referred to as the application of reason and argument in search of truth and knowledge. Philosophy relays to the nature, growth and advancement of knowledge. Intellectuals who are inclined to the concept of positivism philosophy generally employ the quantitative study to process data in order to determine certain relations.

When analyzing the importance of ASEAN for Korea, many researchers have employed positivism philosophy and made empirical analysis. This study supposes that ASEAN has great importance on Korea, thus, the positivism philosophy is more suitable to this study compared to other methods. It proposes a hypothesis, which is based on the relative importance of ASEAN as a stabilizing power in the area. It is a factor that will develop and maintain regional peace and integration (Kiheung, 2005). As a result, member states enjoy a large portion of international trade and the trend in its economic potential is still growing. ASEAN rates third after Japan and China in economy of the region, which represents a considerable 6 percent of global trade.

 These include the correlation between Korean economy and that of the ASEAN as well as the world trade. A comparison between the ASEAN economy and world trade will help to illustrate the significance of this trading block in the global scene (ASEAN Trade & World Trade, 2011). In order to test this hypothesis, the study tries to collect secondary data from the IMF directory of trade statistics (IMF DoTS).

3.2 Sampling and data collection

The sample of this particular study includes ten member states of ASEAN. The time frame, which is considered, dates from 1995 to 2011. The study will mainly focus on secondary data, which will involve basic characteristics of the economies of individual member countries. Also, information showing the performance of ASEAN economy will be collected in addition to that of the global economy (ASEAN Trade & World Trade, 2011). Furthermore, information on the relationship between ASEAN and its trading partners such as the United States, Japan and Korea among others will be collected to emphasize the importance of the ASEAN economy.

Information illustrating trade between the United States and ASEAN as well as other countries in Asia is indicated below. This graph shows that the trade between United States and ASEAN has been growing progressively for the last decade. It is a clear indication of the massive trade that exists between ASEAN block and the United States as well other major economies in Asia.

Moreover, the graph below displays information on the ASEAN economy in relation to other Asian countries. It shows the GDP growth for ASEAN economy and other neighboring countries from 1999 to 2008. Additionally, the graph shows the per capita income for the ASEAN and the other major Asian economies in 2008. 

3.3 Data analysis

After collecting the required information, it will be processed by Excel and SPSS software. Descriptive statistic analysis and correlation analysis methods will be applied in data analysis. First, the descriptive statistic method of data analysis is employed to explain the fundamental composition of the sample. It involves comparison of economies of countries that are members of ASEAN and those, which are not. Later on, the correlation analysis method is used to assess the importance of ASEAN economy to Korea.

3.4 Limitation and challenges

There are a number of challenges, found in this methodology, as outlined below. Firstly, the sample size is limited and runs for a relatively short period. ASEAN was established in 1967 but the sample considered figures from 1997 to 2011. This may in one way or another limit the representativeness and accuracy of the experimental results. On the other hand, appropriate data and information about ASEAN may be not enough. There is no adequate time to carry out research as intensely as it ought to be. This research depended on information from secondary sources, which might be flawed.

4.0 CHAPTER FOUR: RESULTS AND FINDINGS

According to the aims and objectives of the study, outlined in the first chapter, it is evident that the results of the study suggest a high importance of ASEAN economy to Korea and other countries that are willing to make partnership with it. The large market volume, provided by ASEAN trade, promises higher returns on investment. This is the reason why most of the developed countries such as the United States and Japan have established strong economic relations with ASEAN due to its economic vitality. Actually, ASEAN provides the largest destination for American investments in Asia (Steinberg, 2010). Strategic investors are targeting ASEAN trade due to the many opportunities attached to it.

It was found out that the agreement, made between Korea and the ASEAN member states, is paramount in reinforcing economic stability of the country. It has also helped the Korean to stabilise their currency against the dollar for economic growth. This would help the region to attain economic and monetary independence in the region (Nicolas, 2007). The ASEAN countries are increasingly becoming important for Korea because they could account for the largest economic hub of the Korean market. In 2006, Korea had a share market of 47 percent of the total trade in the region. This was rated as the least so there is potential for economic growth for Korea if it were to increase the total market share in the region.

5.0 CHAPTER FIVE: CONCLUSION

 The relationship between Korea and ASEAN has positively influenced trade and economic growth in Korea and ASEAN countries. This is a positive and expected result given that the relationship will remain untainted by political instability of the nations involved. The relationship has, however, not lacked its share of rough patches between Korea and ASEAN nations. For instance, Thailand and Korea were involved in a rough relation because of rice imports by Korea. To this end, Korea sought to discourage rice trade between the two countries by increasing tariffs on rice imports from Thailand. The common good, however, demanded that Korea and Thailand should patch up their rough edges for continued mutual benefits between the countries.

The Korean economic strategy also targets the ASEAN market through the enhanced social political relations. The number of visitors into Korea form ASEAN countries increased from 1.1 million to 3.53 million from 1995 to 2006 (Cultural & Social, 2009). This is positive and expected results given that fostering social-cultural relations amongst the participating nations is one of the major aims of the formation of ASEAN agreement. The ASEAN countries also form one of the favorite destinations for Korean tourists. Korea has benefited from the cultural and social exchange with the ASEAN countries in that it became a multicultural and cosmopolitan society. This has fostered understanding between the ASEAN community and Korea. The high level of understanding is essential for trade and growth in Korea.

The ASEAN community offers Korea a chance to contribute towards the development and growth of the Asian community. This is beneficial towards Korea because it shows the good will and commitment of Korea towards attaining an independent economic region in South East Asia. The humanitarian aid, received form Korea by the ASEAN community, also fosters their relationship and trade in that the ASEAN countries perceive the Koreans as good and beneficial neighbors.

Due to the formation of the ASEAN economic block, the area has enjoyed peace and security and more stabilized nations who are keen to maintain peace and to foster trade and growth in the area. This is important for trade and also for ensuring that Korea maintains peace in their country so that they can continue to enjoy the benefits of free trade with the area.

6.0 CHAPTER SIX:  RECOMMENDATIONS

  • Korea has benefited immensely form the free trade economic block of the South East Asian nations. This is evident, especially in the information technology and electronics industry.  It is, therefore, evident that ASEAN importance to Korea continues to grow. The following are the recommendations of this paper, regarding research and the research topic.
  • The Korean government should strive to become the largest exporter to the ASEAN nation by giving incentives of trade to the ASEAN nations. This could be through grants and humanitarian response to the area. The Koreans should also donate skills and expertise to the region to foster trade, growth and development.
  • The Korean should position themselves for more trade volumes by forming a link between the ASEAN countries and India. This can be done by strengthening their relations with India and other Asian countries, which wish to do trade with the ASEAN community.
  • The Korean government should put in place more friendly and diplomatic strategies to deal with grievances form ASEAN member states other than reducing trade with them because this could reduce their benefit from the ASEAN community.
  • The future researchers should explore the limitations of trade between ASEAN nations and Korea. This is because the research done on the matter is not exhaustive.
  • The future researcher should use the findings of this report to further study the topic so as to enhance understanding of the topic and of the participating nations.
  • Future researchers should explore how Korea can use the ASEAN agreement to foster its trade with other nations that are not in the ASEAN agreement.

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