Analysis Economy Korea prospects high as President Yoon courts GCC free trade deal By Andy Sambidge January 24, 2023 Wam South Korea's President Yoon Suk Yeol visited the UAE this month to advance trade with GCC countries UAE sovereign wealth funds to invest $30bn in South KoreaRelationship with GCC based primarily on energy and construction Renewables and hydrogen emerging as sectors of bilateral focus Negotiations are continuing on a free trade deal with GCC countries which will make “enormous contributions” to expanding relations, South Korea’s President Yoon Suk Yeol has said. “I hope that the Korea-GCC FTA will become a forward-looking agreement that contributes to our two countries’ joint endeavours of responding to new challenges including climate change, supply chain crises and the digital transition as well as technological and industrial cooperation,” he said during an official visit to the UAE earlier this month. During the visit he announced a commitment by UAE sovereign wealth funds to invest $30 billion in strategic sectors in the Asian country. UAE pledges to invest $30bn in South KoreaSaudi PIF among funds said to invest in South Korea’s Kakao Yoon met with UAE President Sheikh Mohamed bin Zayed Al Nahyan in Abu Dhabi and agreed to strengthen cooperation in conventional and clean energy, peaceful nuclear energy, the economy and investment and defence technology. “I believe the Korea-GCC FTA, if concluded, will establish a comprehensive legal foundation to support bilateral economic and trade relations, making enormous contributions to not only expanding trade and investment but also diversifying the ways in which we cooperate,” Yoon said in comments published by UAE state news agency WAM. Freddie Neve, senior Middle East associate with Asia House, an independent think tank and advisory service, told AGBI: “President Yoon’s visit no doubt worked towards advancing comprehensive economic partnership agreement (Cepa) discussions, which once in place would provide a boost to UAE-South Korea bilateral trade. “The Gulf states’ work to diversify their economies away from oil and develop non-oil sectors is increasing demand for international expertise in construction, with South Korea and other Asian countries being major beneficiaries.” The sixth round of GCC-Korea talks took place in Seoul in October following a 13-year hiatus. The two countries agreed to push for a trade deal in 2007 and had three rounds of talks between 2008 and 2009 but further meetings were suspended in 2010. Bilateral trade stood at $50 billion in 2021, said Neve, adding that while much of this is underpinned by hydrocarbons, over recent years he has seen greater cooperation in non-oil sectors critical to Gulf economic diversification. South Korea’s President Yoon Suk Yeol discussed a Korea-GCC free trade deal with UAE President Sheikh Mohamed bin Zayed Al Nahyan in Abu Dhabi The GCC members – the UAE, Saudi Arabia, Bahrain, Kuwait, Oman and Qatar – are key partners for South Korea and account for more than 75 percent of Seoul’s total trade with the wider Middle East. South Korea and the GCC have built a longstanding relationship based on energy and construction but, more recently, cooperation has expanded to include advanced industries, defence, healthcare, agriculture and culture. Construction remains a key sector. Approximately 30 percent of overseas orders awarded to Korean companies during 2022 were from the Middle East. Non-oil trade with the UAE alone was worth nearly $4 billion in 2022, a 20.4 percent increase on the previous year. “The Republic of South Korea is confident that it will become one of the top economic cooperation partners of the UAE,” Christopher Koo, chairman of Korea International Trade Association, said. President Yoon said Korea-UAE cooperation in clean energy will help stabilise the global energy market. He visited the Barakah nuclear power site to celebrate the completion of the third reactor which was built by a coalition led by Korea Electric Power Corporation. Once complete, Barakah will power the UAE’s industrial sector and over half a million homes. “Oil remains important to UAE-South Korea energy cooperation, but renewables and hydrogen are emerging as sectors of increased bilateral focus,” Neve said. “There has been a particular uptick in cooperation in hydrogen, with several memoranda of understanding signed between South Korean firms and Gulf energy majors to develop this technology.” Yoon’s visit saw a deal between Korea National Oil Corporation and Adnoc to jointly produce low carbon hydrogen and ammonia. “For the UAE, developing a hydrogen economy enables it to maintain its position as a top energy provider to Asian countries including South Korea, while these countries increase their focus on decarbonisation and meeting their carbon emissions targets,” Neve said. Abu Dhabi and Changwon, the ninth-most populous city in South Korea which sits on the country’s south-east coastline, have also agreed to jointly design action plans for collaboration in the hydrogen sector, including establishing hydrogen charging infrastructure, operating hydrogen buses and cooperating on the design of hydrogen plants and refuelling stations. Relations with the UAE and other Gulf countries are crucial for Korea’s energy security with over 50 percent of its oil imports coming from the region. Yoon, who was paying his first official visit to the Gulf since becoming president, described the potential for bilateral cooperation as “substantial”. Joined in the UAE by a delegation of over 100 Korean business leaders, in addition to key government officials, he said: “There is great room for Korea and the UAE to expand our cooperation in the region and global community. “We will support the success of the UAE’s hosting of Cop28 at the end of this year and work together in that regard.” Two Korean firms – H2O Hospitality and Korean Best Team for Smart Farm Consortium – also announced plans to set up in Abu Dhabi as part of the UAE capital’s innovation ecosystem during the state visit. H2O, a digital transformation company in the hospitality industry, and K-BTS Consortium, an agtech firm that will grow Korean strawberry varieties from six new smart farms, will support Abu Dhabi Investment Office’s (Adio) plans to transform sectors like agriculture and hospitality through technology. In 2021 Adio opened an office in Seoul to develop new relationships.