South Korea reaches for global influence
By Se Young Lee and Christine Kim, ReutersSEOUL -- From rapper Psy to overseas financial aid, an economically and culturally confident South Korea appears to be taking on bigger neighbors Japan and China for the hearts and minds of the rest of Asia and beyond.
October 23, 2013, 12:08 am TWN
Its most recent effort to leverage brand “Korea” — three currency swap deals worth more than US$20 billion that were announced this month.
South Korea had the seventh largest currency reserves in the world at the end of August, worth US$331.1 billion, according to the Bank of Korea. It can easily afford to match cultural diplomacy with economic muscle as it competes with Japan and China for influence.
K-Pop icons such as Psy, whose “Gangnam Style” hit went viral in 2012, and even Korean food are used by Seoul to build South Korea's brand, while Samsung Electronics Co. Ltd. and Hyundai Motor Co. are firms with global reach.
“Becoming a country that can offer currency swaps to support other economies elevates our standing abroad,” a senior official at the central bank, who spoke on condition of anonymity, told Reuters.
Thanks to its huge foreign exchange reserves, South Korea doesn't need to buttress its currency against possible speculative attacks, although its swap partners Indonesia and Malaysia have been hit by recent financial market turmoil.
The third deal with the United Arab Emirates is part of a package that has seen energy-starved Seoul take substantial stakes in UAE oil fields and win a hefty nuclear contract.
Once impoverished, South Korea is now the world's 14th largest economy and has moved from a net aid recipient in the dark days after the 1950-53 Korean War to a net donor.
The government aims to increase overseas development aid by 9.9 percent in 2014 to 2.3 trillion won (US$2.17 billion), outpacing a projected 2.5-percent rise in total spending despite fiscal constraints on the country's budget.
“Swap agreements and international aid should be seen as long-term strategic decisions to ensure a greater stake and influence in Southeast Asia and elsewhere,” said Lee Sang-jae, an economist at Hyundai Securities in Seoul.