Australia and Korea (Korea refers to the Republic of Korea) are important trading
partners, with a strong and mutually beneficial relationship that reflects the
underlying fundamentals of the two economies. The traditional complementary
relationship is one in which Australia has supplied raw materials and food to
Korea's factories and people, with Korea supplying manufactured goods to
Australia. These traditional relationships are not only secure for the
foreseeable future, but also have substantial growth potential, based around
new opportunities in both technology and infrastructure.

The relationships in areas such as
agriculture and food; and minerals and energy could be transformed into more of
a partner relationship, through improved customer focus built around new
technologies. This will involve intra-industry investment: by Korea in upstream
activities in Australia and by Australia in downstream activities in Korea. It
could also involve greater use of e-commerce, person-to-person contacts, and
training of Koreans on Australia's food standards and conformance systems.

What this study shows is that there are
emerging new areas for a strengthening of the economic relationship. There are
opportunities in the more technology intensive sectors, in education and
training and in infrastructure and utilities (and related professional
services). Australia has pioneered new ways of private sector project finance
of investment in infrastructure services, and export of these skills will be
timely.

The well documented shortfall in much of
urban and transport infrastructure service provision in the major cities of
Korea creates an opportunity for Australia to export skills and expertise that
are fundamental to removal of the bottlenecks that constrain urban Korea. What
is more, the financial governance issues which continue to cause problems in
Korea, can also be assisted by a move to a more Australian approach to the
structuring and finance of infrastructure service provision – underpinned by
customer and project funding rather than the model usually applied across Korea
in the recent past.

The reform policies of Korea, and the
corporate governance agenda, involve a moving away from government bank finance
of state owned utilities, towards more project finance of infrastructure
investments and some divestment and other forms of privatisation in
infrastructure service provision. This provides opportunities for Australian
financial institutions, professional service providers, and construction and
operating companies in the areas of highways, tunnels, pipelines, water
treatment plants, power generation units, and other infrastructure and
utilities.

The other major change in Korea is the
emergence of a knowledge-based economy. Korea's plans include a decreasing
reliance on other countries and more reliance on the development of its own
technologies. But it also implies a widening of its international cooperation
in science and technology away from USA, Europe and Japan to other countries,
both bilaterally and multilaterally.

The challenge for Australia is to become an
important ally for Korea in achieving its science and technology objectives.
While Korea will want to use many technologies developed within Korea,
Australia could play an essential complementary role. Working towards such an
objective will considerably strengthen the economic partnership between the two
countries.

In many ways Australia and Korea are
complementary in the technology area. Australia is relatively stronger in basic
R&D and in the services sector, including education and training, that
underpins the science and technology sector. Korea is relatively stronger in
large-scale industrial application of technology and in marketing. Korea is
relatively stronger in the successful commercialisation of R&D. Australia
also benefits from the widespread use of English and in its innovative
education system.

Australia could become the source of much of
Korea's R&D capability (with the added role of assisting Korea to improve
its own R&D capabilities through the education and training sector) and
Korea could become the source of the financial and commercial skills needed to
develop Australian R&D successfully on a large scale.

Such a vision does not need to be restricted
to any particular technologies, but the more obvious possibilities would appear
to be in information and communications technology, biotechnology, and
environmental technology. These are in addition to manufacturing technologies
such as automotive components where there is already a strong Korean interest
in Australian capabilities. There are other potential areas such as
nanotechnology and space technology.

There is emerging a new paradigm of
comparative advantage between Australia and Korea. Australia has a comparative
advantage in basic R&D, science and technology and human resources
development. Korea has a comparative advantage in the commercialisation and
industrialisation of technologies. By working together Australia and Korea can
develop technologies, products and services for marketing to third countries:
high technologies to countries such as Japan and USA and medium technologies to
countries such as China.

The major barrier to achieving this vision
is a lack of knowledge about each other's strengths and weaknesses across the
industrial/commercial chain. At the present time both countries tend to think
of USA (and then Western Europe and Japan) as potential partners. Encouragement
needs to be given to the industry participants, and not just the researchers,
to work together to get a better understanding of what each has to offer and
what needs to be done to strengthen the relationship.

A key area in strengthening the relationship
is education and training. Education and training has two roles in
strengthening the economic partnership between Australia and Korea. The first
is as a services export that not only earns income for Australia but also
augments Korean education and technology. The second is as a means to change
Korean perceptions of Australia.

The major challenge for Australia is to get
across the message that Australia is both a centre of excellence for education
and a source of technically or intellectually advanced inputs to assist Korean
development. Increasing the number of Korean students participating in
Australian university and vocational education will be a means, albeit medium
to long term, of meeting this challenge.

In addition the Korean education system is
facing major challenges, as it is not designed for an advanced knowledge based
economy. Many Koreans recognise the system should be based around overall human
resources development where there is a need for education and training that
promotes quality, creativity and lifelong learning as well as education that is
relevant to the needs of industry (and which prepares students to be more
productive on entry to employment). These prospective changes offer new
opportunities for Australia. There is indeed a window of opportunity for Australia
to become a strategic partner for Korea's education and training sector – and
redress the emphasis that Koreans have placed on an education in the USA.

This study recommends a number of specific
initiatives namely -

(i) Australia
and Korea enter into an umbrella agreement designed to strengthen the economic
partnership between Australia and Korea (e.g. a Trade and Investment
Facilitation Agreement - TIFA). It should provide the framework for the
recommendations set out below.

(ii) Australia
and Korea foster greater interest in each other's technology sectors: Australia
as a source and a place to develop technologies and Korea as a source of
funding and a partner in the development of successful technologies.

(iii) Support
be given to the development of closer linkages between Australia and Korea
throughout the industrial/commercial chain in various technology segments (e.g.
information and communications technology, biotechnology, photonics,
environmental technology). This should initially involve workshops and possibly
lead to the establishment of Australian/Korean clusters in particular
technology segments.

(iv) A
bilateral arrangement be made on the implementation of intellectual property
protection. This could include a Code of Practice and possibly a joint forum
that would consider tangible issues raised by Australian and Korean firms about
infringements of their intellectual property rights.

(v) Australia
and Korea work on a sector-by-sector basis towards adopting common systems for
obtaining approvals/certificates that goods from each country comply with the
standards and regulations applying in the other country.

(vi) The
Australian Government, in partnership with Australian private sector groups,
continue to promote the capabilities of Australian businesses and the relevance
of Australia's financial and advisory sectors to assist in the modernisation
and reform of Korea's infrastructure and utilities. Such promotion should build
on innovative partnerships between private sector and public sector entities,
with improved customer focus, along lines pioneered in the new Australian
infrastructure sector.

(vii) There
be increased support for road-shows, seminars and workshops presenting the
Australian approach to reform of these sectors such as rail, roads, water,
energy and communications infrastructure. The congestion in urban Korea creates
a major opportunity for communication of how new project finance models can
address both the problems and the need for improved quality of investment and
governance in the infrastructure sector in Korea.

(viii) A
coordinated, long-term strategy be adopted involving the Australian Government
and educational institutions to capture the attention of Korean Government and
educational decision makers as to the quality and relevance of the Australian
education and training system and products to the human resources development
needs of Korea.

(ix) A
Government to Government cooperative agreement be reached whereby Australia
agrees to provide advice to Korean authorities and institutions on developing
Korea's new human resources development system and introducing Australian
institutions that can provide the particular systems and courses that meet
Korea's needs.

(x) The
use of scholarships and work placements be introduced for Korean postgraduate
students in Australia as a longer term means to raise the general profile of
Australian education and training among younger Koreans and to build a
counterweight to the usual attraction of postgraduate students to the USA.

(xi) The
building of Australian alumni groups in Korea be supported.

(xii) The
media be utilised more extensively to increase the profile of Australia and
Korea in each other's country, including through the exchange of industry
specific media specialists who could highlight "success stories" of
complementary initiatives. In addition, consideration be given to the
implementation of the recommendations of the inaugural Australia-Korea Media
Forum held in Sydney on 17 August 1999.

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