Lee, Hun Sen share history of economic cooperation

Although we have just a short-term relationship, I think that our friendship tie is very strong.

BILATERAL TRADE

• 2005

  Cambodia exports - $2.01m

  SKorean exports - $150.72m

• 2006

  Cambodia exports - $3.196m

  SKorean exports - $146.11m

• 2007

  Cambodia exports - $2.587m

  SKorean exports - $192.28m

• 2008

  Cambodia exports - $7.415m

  SKorean exports - $229.77m

Source: Embassy of South Korea

PRIME Minister Hun Sen and South Korean President Lee Myung-bak are to meet in Phnom Penh today to sign a host of bilateral agreements, most of which are economic, in what will be Lee’s first visit to the Kingdom since becoming president in February last year.

In an economic capacity, the two leaders have known each other for more than 13 years as part of a relationship that has driven economic ties between the two countries and led South Korea to become the second-largest foreign investor in Cambodia, according to analysts and observers.

Hun Sen’s first interaction with Lee in Seoul in July 1996, a year before the two countries established diplomatic relations, focused purely on one question, says an unnamed official at the South Korean embassy in Phnom Penh: How can Cambodia develop economically?

As a longtime employee of Hyundai Engineering, which he left after 27 years in 1992, Lee had spent his professional life in a country that had exited the disruption and chaos of the Korean War and initially struggled to develop following partition, falling behind North Korea in terms of economic output.

In 1977, when Lee became South Korea’s youngest CEO at Hyundai, South Korea was still in the process of struggling for electoral democracy – in other words, it was a country not dissimilar to 1990s Cambodia.

“South Korea (including CEO Lee) was [perhaps] the only country with the experience among developed countries that grew [from being] undeveloped,” says Ho Jai-jung, a business reporter at the Seoul-based Dong-A Ilbo newspaper, who has previously met with Lee.

In 2000, two years after Lee resigned from a second term in the Korean National Assembly and was fined 4 million won (US$4,000) for breaking election rules on campaign fundraising, Hun Sen asked him to become a special economic adviser, a role that has been referenced numerous times, but which remains largely unclear in terms of its scope and mandate.

The same year, this working relationship saw Lee visit Phnom Penh, during which time he and Hun Sen held “in-depth discussions … on [Cambodia’s] economic development”, said the South Korean official. “Since then, whenever Prime Minister Hun Sen visited [South] Korea, he and Lee engaged in discussions on a wide range of areas, including economic issues.”

Lee already had considerable experience in infrastructure and investment projects in mainland Southeast Asia.

While at Hyundai in the mid-1960s, he worked as an accountant in Thailand for Hyundai Construction on a two-year project building the Pattani-Narathiwat highway.

Later, in the 1970s, he worked on a huge bridge project in Malaysia that involved close interaction with its former enigmatic leader Mahathir Mohamad. During the next decade, Lee was involved in the construction of a host of projects in Indonesia, the Philippines, Brunei and Malaysia. Lee had therefore built some of the largest infrastructure projects in Southeast Asia over a period of nearly three decades, an experience Hun Sen apparently hoped to tap into.

Although reports this decade said Hun Sen had many foreign economic advisers, Lee’s influence appears to have been significant, as Cambodia received an influx of investment from South Korea, particularly from companies within the Hyundai group.

At the end of 2003, Hyundai Engineering started provincial power-supply projects that saw infrastructure, including transmission lines, installed in eight rural towns in the Kingdom, Choi Kang-shik, the firm’s vice president of overseas marketing, said Tuesday by telephone.

Before these projects were completed in November 2006, Hyundai Engineering consulted on a project developing Sihanoukville’s sewerage system that was implemented in 2004 and later worked on Battambang’s hydroelectric power plant.

Still, Hyundai managers say that Lee’s former ties to the diversified group of companies did not further its standing in the Kingdom.

“I don’t think so,” said Kim Song-soo, director of Hyundai Amco Cambodia Co Ltd. “He did – and will [continue to] – consider Hyundai as one of the Korean business groups, not more than that.”

By the time Lee was elected president in 2008, which saw him end his role as Hun Sen’s adviser, South Korea had become the second-largest investor in the Kingdom after China and was providing Cambodia’s key tourism industry with more arrivals than any other country.

“Such frequent exchanges between the two … clearly attest to the fact that the close relationship between our countries is progressing faster than at any time before,” said the South Korean official.

However, 2008 also saw the onset of the global financial and economic crisis. Since Hun Sen’s attendance of Lee’s inauguration ceremony in Seoul last year, South Korea’s economic presence in the Kingdom has waned drastically, almost defining Cambodia’s experience of the crisis.

Even as approved investment for South Korean firms soared from $148 million to $1.2 billion from 2007 to 2008, largely over the earlier part of the year, actual investment in Cambodia fell from $629.49 million to $472.89 million, according to the Korean embassy in Phnom Penh.

Cambodia’s exports to its closest business partner continued to rise, reaching $7.4 million last year, mostly made up of garments and textiles, according to the Korea Trade-Investment Promotion Agency office in Phnom Penh. Exports were worth $4.8 million in 2007.

However, these small gains did little to offset losses elsewhere, with orders from major garment buyers in the United States and Europe, which account for more than 80 percent of Cambodia’s garment exports, tailing off rapidly. What really hurt Cambodia where Korea was concerned was the cancellation or delay of many high-profile developments, which ripped the heart out of the local construction sector.

With the won falling around 30 percent against the US dollar, building materials were suddenly much more expensive.

South Korea has also been a key source of growth in Cambodia’s tourism sector, with the country accounting for more arrivals last year than any other. But since the downturn, South Korean tourists have stayed away. The fall in tourism has been compounded by the winding down of trade and investment since the fourth quarter of last year, meaning fewer Korean businesspeople have made the five-hour flight.

Arrivals from South Korea, almost all by air, plunged 31.23 percent in the first seven months of this year compared to the same period in 2008, the largest fall of any country’s visitors. More Vietnamese than South Koreans have visited in 2009.

Again Cambodia’s relationship with South Korea on the tourism front defines the sector’s woes since the economic downturn began. Although arrivals are up, particularly from Vietnam, air arrivals – the big moneymaker – were down 13 percent in the first eight months year on year, according to Ministry of Tourism figures. This prompted South Korea’s Asiana Airlines to suspend flights between Incheon and Siem Reap for nearly three months up to the middle of next month.

Still, South Korea is going ahead with new projects in Cambodia.

Hyundai Amco Construction, a division of Hyundai Motor group, started Phnom Penh Tower in December, and Dae Jo-young, director of Hyundai’s new assembly plant in Koh Kong province, said last week that the project is delayed but ongoing and could begin operations in February.

Yet more deals – most notably on mining and energy – are due to be signed after Lee touches down in Phnom Penh today, along with a new arrangement on loans to the Kingdom, a government statement said.

“Although we have just a short-term relationship, I think that our friendship tie is very strong,” South Korea’s Ambassador to Cambodia Lee Kyung-soo told reporters last week.

In many ways, this is a relationship that has been established and defined by Hun Sen and Lee, almost purely in economic terms.

TIMELINE CAMBODIA AND SOUTH KOREA TIES

July 1996

Prime Minister Hun Sen travels to South Korea for an official state visit, during which he meets former Hyundai Engineering CEO Lee Myung-bak in Seoul for talks on economic development, among many discussions with the Korean business community. Having spent most of his career building infrastructure in Southeast Asia, Lee offers the 43-year-old co-Prime Minister Hun Sen advice on development of Cambodia, which at the time had only just emerged from a long period of civil war.

1997

South Korea and Cambodia finally establish full ties with the opening of embassies in each other’s capitals following the opening of consulates the previous year. The embassies mark the end of a long period of cold relations between the two countries. King Norodom Sihanouk had previously refused the establishment of a South Korean embassy in the Kingdom due to his strong ties to communist North Korea. In subsequent interviews Hun Sen admits that he had pushed strongly to establish full diplomatic ties with Seoul.

2000

Hun Sen makes Lee Myung-bak a foreign economic adviser following a series of discussions on economic development. Lee then makes the trip to Phnom Penh for further meetings with the Cambodian prime minister as the two cement their relationship in talks that touch a host of issues but mainly focus on economics. Having entered politics in 1992, Lee had two years earlier been burnt by the profession when he stepped down as a member of the National Assembly over charges of improper election fundraising.

December 2003

Hyundai Engineering, the company at which Lee spent nearly three decades, begins work on a rural electrification project that includes the installation of power lines in eight provincal towns. The Seoul-based firm completed the project in November 2006 and in the meantime also worked on Sihanoukville’s sewerage system during a period in which it won a number of major infrastructure projects in the Kingdom. Lee continued as Hun Sen’s special economic adviser until his election as president in February last year.

October 22, 2009

Lee, now president, makes his first state visit to Cambodia, to participate in two days of talks with the government, including Hun Sen and King Norodom Sihamoni. A major mineral-extraction agreement is set to be signed following Hun Sen’s visit to Seoul in June, which saw the establishment of a preliminary deal. South Korea and Cambodia are also due to finalise deals on issues including loan agreements, energy and broadcasting in what is expected to be the further development of bilateral relations.