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Parliamentary Joint Committee on Foreign Affairs, Defence and Trade
29/11/2012
Australia's trade and investment relationship with Japan and the Republic of Korea

JEONG, Mr Wahn-Seong, Deputy Head of Mission, Embassy of the Republic of Korea

Committee met at 09:55

CHAIR ( Ms Saffin ): I declare open this public hearing for the inquiry into Australia's trade and investment relationship with Japan and the Republic of Korea by the Trade Subcommittee of the Joint Standing Committee on Foreign Affairs, Defence and Trade. I thank the embassies of the Republic of Korea and Japan for appearing today in this final public hearing for the inquiry. It is an auspicious time to appear. This is the fourth public hearing that the committee has conducted this month, building upon evidence gathered early in the year. Shortly we will commence drafting our final report.

Firstly, I would like to apologise to embassy representatives from both Korea and Japan for being late. It is the nature of the parliament that the unexpected happens, as it did, and we had to be in the chamber. Our presence was required there. Thank you for your patience.

I would like to thank both countries for their contribution to the success of our committee's parliamentary visit to Japan and South Korea in July this year. The visit provided valuable insight into the issues we are currently considering as part of this inquiry. We were grateful for the opportunity to meet many people in both countries ranging from ministers and parliamentarians to businesspeople and shoppers in the local supermarkets, who were tasting Aussie beef and other products. It was very good.

I now welcome the representative of the Embassy of the Republic of Korea. We have received a written submission to this inquiry from you. Would you like to proceed with an opening statement?

Mr Jeong : The honourable Janelle Saffin, Chair of the Trade Subcommittee of the Joint Standing Committee on Foreign Affairs, Defence and Trade, and the honourable members of the Joint Standing Committee on Foreign Affairs, Defence and Trade: it is my great pleasure and honour to be here this morning and have a chance to talk with members of the trade subcommittee of the joint standing committee, which has a crucial role to play in enhancing Korean-Australian relations. I very much thank Chair Saffin and honourable members for providing me with this valuable opportunity.

I want to talk about Korean-Australian economic relations with an emphasis on recent development and prospects. We two countries have substantial and complimentary economic relations. Firstly, regarding bilateral trade, Korea is Australia's third largest export market and Australia's fourth largest trading partner. Upward momentum is strong. Two-way trade grew from $10 billion in 2004 to $34.5 billion in 2011. Korea's trade deficit amounted to $18 billion in 2011. Exponential growth is ongoing in spite of the global financial crisis—2011 was an all-time high but 2012 will break records.

More than one-third of the mineral resources Korea requires are imported from Australia, which contributes to Korea's sustained economic development. POSCO, the world's third biggest steel maker today, has been importing iron ore and coking coal since 1968. As a single company, it is still the biggest importer. Last year and this year, large-scale LNG purchase contracts were signed, including for Gladstone, Prelude and Itchys. Put together, they will supply nine million tonnes of LNG from 2013 to 2015, and Australia will become Korea's No. 1 natural gas supplier from 2014.

Secondly, investment has also grown. Korea's investment in Australia, especially in the resources sector, has grown strongly. Korea's investment in Australia in 2011 was the highest ever recorded, at over $1.4 billion. Korea's investment during the first half of 2012 exceeded $1.5 billion. Korea's corporations have made direct investment in 36 mining projects across the nation, mostly in joint ventures, including 10 coalmines in Queensland and 12 in New South Wales, as well as the $1.5 billion investment in the Roy Hill project in Western Australia by POSCO. This is by far the biggest overseas investment by a Korean company anywhere in the world. Since 1968 the total amount of Korea's investment in Australia has amounted to over $10 billion. On the other hand, Australia's total investment in Korea since 1962 has been $2.1 billion. Much of that is portfolio investment.

Thirdly, in relation to the LNG projects, Korean shipbuilding companies are manufacturing floating LNG as well as gas processing modules. Samsung Heavy Industries is building the world's biggest and the most modern floating LNG facility for Western Australia's Prelude project. It amounts to $3.5 billion. Hyundai Heavy Industries, which is the world's biggest shipbuilder, is building modules for the Gorgon project, to be completed by 2013. Daewoo Shipbuilding and Marine Engineering are building an offshore gas processing platform for the Wheatstone LNG project, which will allow 55 million cubic metres of gas to be processed per day.

Fourthly, the FTA is on the way. FTA negotiations began in May 2009. The FTA will boost trade and investment flows between the two countries.

Finally, while tremendous achievements between our two countries have been made, huge potential still remains to be tapped. Australia is an attractive investment destination for Korea and other countries, and I expect Korean investment in Australia will increase in the future. To facilitate this, I hope two things will happen. First, I hope that merit based, transparent and speedy handling of investment procedures will be sustained in Australia; that the policies of the Australian federal and state governments will continue and will encourage more Korean investors to come; and that the success of the Roy Hill project will energise other Korean companies. Second, facilitating the inflow of skilled labour is important. The shortage of skilled labour in Australia's mining and energy sector can be mitigated by well-educated and skilled Korean workers. In the case of Korea, we talk about the relatively small number of skilled workers.

In August 2012, a memorandum of understanding was signed between the vetassess in Victoria and the Human Resources Development Service of Korea. It is to set up a need based training program in Korea to help supply skilled labour suitable for Australian projects. I hope that the coalition supports the embassy's efforts in this area. We need to materialise our potential in several sectors, such as beef, wine, IT investment, students et cetera. I will stop here and will be pleased to take a few questions. Thank you very much for your attention.

CHAIR: Thank you very much for your opening statement. Before we have a discussion and ask some questions, I would like to say by way of opening that some of the issues you raised in your opening statement are issues that we have in common. We hope that we can get all of those things to work in the way that you described. You mentioned the free trade agreement and, of course, that was one of the things that we discussed a lot when we had the delegation to the Republic of Korea. We realise there is an election happening; we understand about elections—we are all elected people—and we understand that sometimes elections put things on hold, but we hope that the FTA will not be sort of put on ice but will be resumed as quickly as it can be after the elections.

Mr Jeong : The embassy will hope so.

CHAIR: Yes. I also welcome members of the public and representatives of the Juvenile Diabetes Research Foundation. Thank you, Thomas.

I have some questions—you have raised some of the points in your opening statement and in the submission, but I will just ask them again so that I sort of tease them out a bit. What do you consider are the key opportunities to build upon the existing trading relationship between Australia and Korea and to strengthen links into the future? That is, our key opportunities to build upon the already strong trading relationship?

Mr Jeong : As I mentioned earlier, I think that the key element is the FTA. It will give us some valuable opportunities to increase the trade and investment flows, especially in the areas of IT, automotive, communication, education, tourism and financial services. Financial trade is going well, so once the ongoing FTA negotiations are completed—and in the future—very important and new dimensions will be added to the already flourishing economic ties between Australia and Korea. It will give us a win-win opportunity in the FTA. That is my idea.

CHAIR: Thank you. Are you optimistic that the negotiations can be concluded soon? It is a leading question, Excellency.

Mr BRUCE SCOTT: Chair, that is a good question.

CHAIR: Mr Scott wanted to ask that one!

Mr Jeong : We know that the FTA negotiations are in the final stage. And I believe that all of us know which areas are the last sticking points—such as for Australia, access to Korea's agricultural markets such as beef, and for Korea, Australia's goods markets including automobiles and automobile parts. And the ISDS—the Investor State Dispute Settlement provisions—have yet to be resolved between the two sides.

CHAIR: That is correct. That is our information as well. Thank you for that. Mr Scott, would you like to—

Mr BRUCE SCOTT: My apologies for being late.

CHAIR: I gave our apologies and explained what was happening in the House today.

Mr BRUCE SCOTT: Could you explain it?

CHAIR: Not quite! I did my best. Mr Scott is also the Deputy Speaker.

Mr BRUCE SCOTT: I do apologise too. Thank you for your time this morning. Can I just say that our delegation visit to Korea and Japan was a very successful one. I must say, I was most impressed with the level of access that we had to government officials and ministers and in the state of development, particularly the green space, of Korea. Could you tell us more about the growth of the renewable energy sector, if I can put it that way, in Korea and where you might be wanting to develop it in the future? I was most impressed with what you have been doing.

Mr Jeong : That is a very big question. Korea has adopted low carbon green growth as a new development paradigm in its economy and its environment, which form a virtuous cycle. This has to disseminate internationally, contributing to the tackling of climate change by mankind. This is in this line with what Australia is doing. We try to make all efforts to strengthen our cooperation with Australia in renewable energy and green growth issues. We really appreciate that Australia in its discussions at international levels supports the advancement, for example, of green growth related policies through things like your carbon pricing system. The embassy and our government try to make all efforts to cooperate and to contribute to green growth in the world, including renewable energy and other relevant issues.

Mr BRUCE SCOTT: I have a question about the working holiday-maker scheme. Koreans represent some 15 per cent of all working holiday visits to Australia and it is one that we spoke about up there. Do you think that you would advocate Australia doing more to promote Australia as a tourism destination in Korea? The working-holiday-visa Koreans are the biggest percentage of any overseas market. Do you think we could do more to build this market? It is obviously to Australia's benefit, but it also builds the bilateral relationship with jobs and working holidays and gives an opportunity to build on the relationship.

Mr Jeong : I agree with your point. Korean youngsters are very happy to come here as working holiday-makers or to study and work here but currently, as you know, the Australian dollar is too high and the number of working-holiday participants is a little reduced. But Australia is number 1 as a destination for young Koreans to join the working-holiday program. We Koreans have about 15 countries to choose for working holidays but Australia continues to be number 1 for Korean youngsters. Even so, Australia is too huge a country for working holiday-makers to move from one place to another and to some working sites that can be very remote. Working holiday-makers complain about some difficulties in using transportation and accommodation in your country, but we have encouraged Korean working holiday-makers to work here or to enjoy a holiday through the program.

This year, maybe on 24 March, you improved the working holiday program for Koreans to extend the visa from one year to a second year without a need to return to Korea. But still, the visa, especially the extended working period, has yet to be improved. That is my viewpoint.

Mr BRUCE SCOTT: The other thing is that through the inquiry we have heard the importance of gaining an understanding of the language. But it is not just language; it is understanding the culture within Korea. You have recently opened a cultural centre in Sydney. Would you be able to explain a little bit more about that? I see it as important. You might like to expand on that cultural centre that has been established in Sydney.

Mr Jeong : Have you been to the Korean cultural centre in Sydney?

CHAIR: No, we haven't yet.

Mr Jeong : It is a fantastic institution there.

CHAIR: We will have to visit.

Mr Jeong : It is provided by the commission to introduce the Korean culture to the Australians and the foreigners. Korean people, and our governmentwould welcome it if we expanded that cultural centre to other main cities, such as Melbourne, Brisbane and the other place. We encourage working holiday-makers or the Korean tourists to enjoy the Australian culture and, while they stay in Australia, they try to introduce Korean cultures to Australia. So in that context the Korean embassy and the government continue to work on that expansion of the introduction of the Korean culture to yours.

CHAIR: Thank you very much.

Mr BRUCE SCOTT: Thank you for that. I must visit, when I can, in Sydney.

Mr O'DOWD: I would just like to make a comment. I live in central Queensland, and we have quite a big citrus industry. The Koreans on the workers scheme come to my area and are very popular with the citrus farmers. They blend in very well in the communities, and of course they speak English. When I go to places like Mundubbera, they are very good to talk to and I talk to them, with our language differences. But in all it is a very good system, and very welcome. In fact, if we did not have those Korean workers in places like Mundubbera, the industry would not survive. We need them to pick our citrus food. What is happening in my area is that a lot of the big money on wages is going to the coalmining industry, which goes to Korea, but the coal workers make a lot more money than, say, the citrus workers, so that takes all the permanent Australian workers out of the work force, and we have very few to do the citrus farming. So it works very well.

Mr BRUCE SCOTT: They are very good workers.

Mr Jeong : Yes. Anyway, you know the Koreans recognise that Australia is a good destination for tourism and working. I mentioned the Korean working holiday in Australia. Youngsters are willing to come here and enjoy the working holiday period here. Also, the Korean workers are very happy to come here to work. But your company or your government require some high proficiency of English-speaking. So that is a barrier for Koreans. Korean language is different to English in linguistic structure. So for Koreans it takes time to master their English-speaking.

Korean productivity and labour quality is higher than anywhere else in the world. As I mentioned earlier, your shortage of skilled labour could be complemented by Korean workers, if you were to allow Korean workers regardless of their English proficiency to come in here. That is my idea.

Mr MURPHY: You mentioned in your opening statement that Korean investment in mining is likely to increase. Do you think that into the future Korean investment will remain focused on the resources sector, or is it likely to diversify into other areas?

Mr Jeong : I think it is likely to diversify into other areas. But as I mentioned earlier, Australia is very attractive as an investment destination for Korea and other countries. Many have experience in investing in Australia. If you allow some Korean investment to flow freely and be fairly treated, Korean investment will be increased because Korean companies are relative newcomers in terms of investment in Australia. I mentioned earlier that success of the Roy Hill project, for example, will energise other Korean companies. Success is the best encouragement for Korean companies to come and invest in Australia's sectors—the IT sectors, automobiles or communications. Korea has become the world's eighth powerhouse. Maybe in those areas, especially since your country has launched the huge NBN project, Korean companies, such as Samsung, are willing to join or to help the NBN project.

Mr MURPHY: A very good point. I would like your personal reflections on the Koreans who visit our country for a holiday. They like visiting Australia. I would like to know your perception of why Koreans like to come to Australia and, more importantly for us, what we need to do to further promote Australia as a holiday destination for your citizens, to give them what they need. This is very important for our bilateral relationship—for us to holiday in your country and for you to holiday in our country.

Mr Jeong : I appreciate the idea or intention. Australia has been a close friend since the Korean War in the 1950s—60 years ago—and average Koreans think that Australia is a kind of brother place since the Korean war. Based on the development of our friendship, we have a strong feeling of friendship between the two countries. Australia is a so-called free country and we have much in common, such as freedom, a free market, human rights and all the rest. Australia is a user of English, and the Koreans are eager to learn English. You have no security problems, such as the North Korean threat or threats from neighbours—you do not have any problems. Your country is a kind of blessed country in terms of its political system, your economic system and in other ways. Koreans are willing to work and study here, to get lessons from your situation. All of those factors make it very popular for Koreans to come here.

Even though English is a barrier for Koreans that seems to be stopping them coming here—or sometimes it is that the Australian dollar has appreciated and it is high, and that is a negative factor—Australia and Korea have great potential to expand our bilateral relationship to assist them through, for example, lowering migration barriers such as the English proficiency score or extending the visa period. That will lead to a bigger and more open system.

Mr MURPHY: One thing we like to do in Australia to attract tourists is to promote our coastline and the beautiful beaches that we have. I well remember when I was in Busan in 2001 seeing many Koreans sitting on the beach but not going in the water. I found that curious. In Australia we go to the beach and we surf, and we like the beach. Unless things have changed in the last decade, I am not sure why that is. Are they afraid of sharks or crocodiles? Perhaps there is an opportunity to go to Busan and encourage Koreans to go in the water. A beautiful Australian underwater aquarium had been built near the beach and had just opened in 2001 and no-one was swimming at the beach.

Mr Jeong : Koreans have no differences to Australians in enjoying the beach and going into the sea. However, Koreans, especially working holiday-makers, have fallen victim of the rip currents in Australia. The Korean government and embassies issue warnings to Korean youngsters to be careful.

Mr MURPHY: Thank you for clarifying that.

CHAIR: Different things are happening with Surf Life Saving Australia for tourists on that issue. I live near a coastal area where we have quite a few tourists. Continuing on from Mr Scott's question on renewables and third countries, we heard a lot about opportunities for Korea and Australia to work together in other countries, not in Korea and not in Australia but in India, China or Indonesia. Could you comment on that? Do you see that as a growth area for opportunities?

Mr Jeong : Koreans dearly appreciate your cooperation and we are very happy to find some common values. In my opinion, we could find more common ground to work together overseas or in Korea. On the government level, the Korean government is encouraging the Korean youngster to come here to join the working holiday program and to study in Australia. Those Korean youngsters total more than 70,000 now.

In November 2011 a developing countries assistance conference was held in Busan, South Korea, where Australia and Korea cooperated to find some solutions on how to provide aid to developing countries.

CHAIR: So we could provide aid together?

Mr Jeong : Yes. We discussed aid effectiveness and concrete plans for working together.

CHAIR: Are you talking about the G7+ group?

Mr Jeong : Yes, the forum in Busan was held under the flag of the OECD. Korea has great capability for construction. We have engineers and ship building yards. Big Korean companies such as Samsung and heavy industry are participating in building up the facilities in the coastal areas for developing minerals. Government and business in our two countries have tried to find a more common ground to complement each other. That is also our future direction.

CHAIR: There were quite a number of countries there.

Mr Jeong : The common ground of that cooperation is already set up but in the future we could add some new projects to work on together.

CHAIR: Thank you very much for attending today. It was very nice that you could come.