SK chairman urges South Korea-Japan economic bloc

June 9 (Asia Today) -- SK Group Chairman Chey Tae-won said Tuesday that South Korea and Japan should move beyond industrial cooperation and trade to pursue a deeper economic community.

Chey made the remarks during a South Korea-Japan special session at the 31st Nikkei Forum "Future of Asia" at the Imperial Hotel in Tokyo. He said the two countries can no longer afford to act separately as U.S.-China rivalry, the weakening of the World Trade Organization system, slow growth and energy supply instability reshape the global economy.

"South Korea and Japan are now in a situation where economic cooperation is essential," Chey said. "The final stage of economic cooperation is becoming an economic community."

Asked what such a community would look like, Chey pointed to the European Union as a model.

"I believe the final path is creating a common market," he said.

The discussion was held under the theme of what South Korea and Japan should pursue amid a turbulent international environment. Chey was joined by Masakazu Tokura, counselor at Sumitomo Chemical, and Masahiko Kato, president of Mizuho Bank. Mikio Sugeno, editor-in-chief of the Nikkei, moderated the session.

Chey said he had raised the need for closer South Korea-Japan economic cooperation at the same forum two years ago, but the global environment has changed further since then.

He said both South Korea and Japan built independent manufacturing and export economies by developing nearly all major industries without relying too heavily on any single country. That model was possible, he said, because the World Trade Organization system and free trade order supported global commerce.

"Now that order has collapsed," Chey said. "I do not think that system will return for the time being."

He said the rivalry between the United States and China is likely to continue for decades. In that environment, South Korea and Japan risk becoming "rule takers" that follow rules set by larger powers, rather than "rule makers" that help shape the international order.

Chey said the two countries must raise the level of cooperation to include not only economic issues but also security-related concerns.

"This is not just about making products together or cooperating at that level," he said. "All forms of cooperation are necessary, including cooperation that covers both the economy and security."

Chey said South Korea and Japan need greater scale to survive in what he described as an increasingly harsh global environment.

"We need more size," he said. "Only then can we survive in this jungle."

He said cooperation should focus on two strategic goals: growth and lowering costs.

Chey said both countries face rising social costs because of low birthrates, aging populations and other structural challenges. At the same time, slow growth has made it harder to absorb those costs.

The first area he identified was energy. Chey said South Korea and Japan should consider joint use, joint purchasing and joint stockpiling to reduce energy costs.

"Energy costs must come down for the basic costs of society to fall," he said. "Costs must also come down for common security."

Chey also pointed to electrification and AI infrastructure as key areas for cooperation. He said the transition to a more electricity-based society will require massive investment, especially because electricity is difficult to store after it is produced.

"If we build together, we can reduce costs by 10% to 20%," Chey said. "That can return as competitiveness for both countries."

Chey said the export model is also changing.

"It is no longer just about exporting products," he said. "The model is changing toward exporting intelligence."

He said that shift makes AI infrastructure and AI factories increasingly important.

Chey also cited healthcare as a field where cooperation could reduce costs. He said aging populations will inevitably increase medical and care expenses. If the two countries can share parts of their treatment, insurance and medical systems, they may be able to lower costs, he said.

For growth, Chey pointed to semiconductors and AI.

"There is a need to strengthen semiconductors and AI as growth momentum," he said. "If we properly build this ecosystem, costs will fall and it will become a strategic weapon for both sides."

Chey said a stronger semiconductor and AI ecosystem would make both countries more resilient.

"It would become difficult for any country to pressure our two countries," he said. "We must make semiconductors, develop them into AI products and export them."

Tourism should also be part of the cooperation strategy, Chey said. He noted that there are few travel products that package South Korea and Japan together as a single destination.

"If we create that together, it will be good for both sides," he said.

Chey proposed creating a permanent "big tent" organization to coordinate South Korea-Japan cooperation. He said the body should include government, political and private-sector participants.

"We need an organization like a big tent to further develop South Korea-Japan relations," Chey said.

He said many exchanges are already taking place between the two countries, but they are not centralized. A standing body could help governments create task forces, develop policy and coordinate long-term cooperation, he said.

Chey said research and institutionalization will be needed to make cooperation practical.

"We need study and eventually institutionalization," he said. "Laws need to be made."

He cited finance as an example. If financial regulations differ too much between the two countries, even creating and operating joint funds becomes difficult, he said.

Chey also proposed using a digital platform to track and connect exchanges between public and private institutions in the two countries.

He said the younger generation must be given a stronger sense of hope about the future.

"We need to spread the dreams of both countries to young people through exchanges," Chey said. "Because expectations for future growth are low, dreams are becoming smaller and the power to look to the future, invest and research is weakening."

Chey said South Korea and Japan could create a combined market of about $6 trillion in gross domestic product if they join forces.

"I believe another $1 trillion in synergy can come from that," he said. "Then young people who have been accustomed to low growth will be able to have more hope."

Chey said SK Group also intends to pursue long-term shared growth with Japan. He said SK is expanding investment in Japan and should consider a system in which money earned in Japan is reinvested there.

"At the corporate level, rather than recovering money whenever possible, we need the concept of contributing to long-term shared growth in Japan," Chey said. "Such efforts can guarantee cooperation and trust between the two countries."

Tokura described the current international environment as an era of "realpolitik," where power and money carry more weight. He said Japan and South Korea share common challenges, including low birthrates, aging populations, geopolitical risks and a lack of natural resources.

Kato said both economies are vulnerable to external shocks such as surging oil prices and maritime transport disruptions. He said Japan's energy self-sufficiency rate is about 16%, while South Korea's is about 22%, making both countries highly exposed to instability in the Middle East.

Chey's remarks framed South Korea-Japan economic cooperation not as a matter of goodwill or limited industrial collaboration but as a survival strategy in a changing international order.

He said cooperation should extend across energy, electricity, AI infrastructure, semiconductors, healthcare and tourism, with the long-term goal of allowing the two countries to operate more like a single economic bloc.

-- Reported by Asia Today; translated by UPI

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