Phnom Penh: South Korean financial companies are rushing to establish branches in Cambodia as part of a concerted strategy to form closer economic relationships with the ASEAN region.
Five new South Korean financial firms opened local subsidiaries in the Kingdom in the past year, according to a report released yesterday by the Financial Supervisory Service (FSS), the South Korean government’s financial regulator.
Industrial Bank of Korea, Woori Bank, Daegu Bank, Nonghyup Bank and Kookmin Card established local branches, according to the report.
“The potential of the banking sector and the economy itself is very attractive for Korean financial firms,” said Shin Chang Moo, president of PPCBank.
Korean-listed JB Financial Group Co Ltd acquired PPCBank in 2016, ahead of its counterparts in South Korea currently entering the market. Following the acquisition, JB Financial’s subsidiaries Jeonbuk Bank Co Ltd absorbed the majority of the shares at 50 percent and JB Woori Capital Ltd at 10 percent. South Korea-based Apro Financial Co Ltd acquired the remaining 40 percent of shares.
“There is much room to grow in the sector, Korean firms don’t have to compete head to head with the other banks,” said Shin. “We can participate in the growing market together.”
JB Financial Group Co Ltd is based in Jeonju, South Korea, a small province in the southern region of South Korea. According to Shin, the firm established a presence in Cambodia because of the lack of expansion opportunities in Korea’s mature financial sector with established players.
“JB Financial Group is based in one of the smallest regions in Korea,” explained Shin. “They are smaller than their competitors, so they wanted to explore the possibilities of expanding into a new market.”
South Korea’s importance to economic development of Cambodia has been immense. The country ranks second to China in foreign direct investments into the Kingdom. To date, the Cambodian government has approved 212 Korean investment projects worth $4.56 billion. Nearly 300 South Korean business firms operate in the Kingdom, employing thousands of people.
In March, South Korean President Moon Jae-in led a delegation of investors in a three-day state visit to the Kingdom as part of its “New Southern Policy,” an initiative to deepen diplomatic and economic relations with Southeast Asia.
“Cambodia is attracting larger amounts of foreign direct investment and it will be one of the most important markets for infrastructure projects in Asia in the next 10 years,” said President Moon at the Cambodia-Korea Business Summit held in Phnom Penh earlier this year.
Analysts expect a major downturn in the Chinese economy that will directly affect heavily-trade dependent nations like South Korea and accelerate the need to form a closer economic relationship with the ASEAN region.
ASEAN countries have a combined population of over 600 million people and a combined GDP of $2.4 trillion, making some analysts call the region the “new China.” The IMF predicts ASEAN to have the world’s fourth-largest economy by 2050.