China and South Korea’s growing Southeast Asia footprint in BIMP-EAGA

The Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) was established in 1994 as a sub-regional economic cooperation initiative, designed to address the lack of socioeconomic growth and development in the less-developed areas of Brunei, Indonesia, Malaysia and the Philippines.

It encompasses the whole of Brunei, the Malaysian states of Sabah and Sarawak as well as the federal territory of Labuan, the Indonesian provinces of Kalimantan, Sulawesi, Maluku and Papua, as well as the Philippines areas of Mindanao and Palawan. 

With a total area of 1.6 million square kilometres and a combined population of 81.7 million, the BIMP-EAGA region covers several important regional capitals, but also mostly sparsely populated areas. The region faces challenges related to poverty, insufficient infrastructure and often also political marginalisation.

The initiative aims to enhance connectivity and cooperation, overcome developmental barriers and tap into the region’s economic potential. A BIMP-EAGA Facilitation Centre was set up in 2003 to coordinate its development. This is headquartered in Kota Kinabalu, the capital city of the Malaysian state of Sabah.

For years, BIMP-EAGA has not been able to receive much supportive attention from external partners. In the past, Australia and Japan were the main developmental partners for BIMP-EAGA.

Australia’s Northern Territory was an officially designated partner of BIMP-EAGA years ago, while Japan, especially through the Asian Development Bank, has provided important consultation and technical advice to BIMP-EAGA governments and officials. Economically, Japan has remained a significant trade and investment player in BIMP-EAGA.

In recent years, China and South Korea have also emerged as two additional active external partners to BIMP-EAGA.

China started engaging with BIMP-EAGA in the 2000s, and has signed several cooperative documents with BIMP-EAGA, including a “Framework of Cooperation” document in 2009 and a “Plan of Action for BIMP-EAGA China Cooperation 2020–2025” in 2019. Since China launched the Belt and Road Initiative in 2013, its investment into BIMP-EAGA in infrastructure construction, industrial parks and the mining sector has accelerated. 

The most notable project is the Morowali Industrial Park, located in central Sulawesi of Indonesia and the country’s largest nickel (important for batteries) production and processing site. Several Chinese state-owned and private enterprises (Zhejiang Huayou Cobalt, Tsingshan, Sinomach, Baiyin Nonferrous, Shandong Xinhai Technology) are major investors in the park.

Collectively, China is the park’s largest investor, but the industrial practices of China’s enterprises have also been the source of ongoing allegations regarding dangerous working conditions, the presence of imported Chinese labourers and environmental issues.

Sarawak-China engagement revolves around infrastructure and energy construction, especially in hydroelectric power, with three of Sarawak’s largest hydroelectric-generating dams built by China’s state-owned enterprises.

Brunei’s Muara Port, the country’s largest international deep-water port, is backed by investment from China’s Guangxi Beibu Gulf International Port Group, which has helped in the port’s expansion in capacity and efficiency. With this deal, Brunei aims to be the connecting hub between China and BIMP-EAGA.

China’s economic presence in the Philippines area in BIMP-EAGA is less salient, given the persistent bilateral tensions in the South China Sea, but there are interested parties from China in investing in the area, as the recent report of a Chinese steel investment in Mindanao indicates. 

But as pointed out by Indonesia-based scholar Muhammad Zulfikar Rahmat, China’s interactions with BIMP-EAGA partners remain still mostly at the bilateral level, and are driven by commercial interests. At the sub-regional BIMP-EAGA level, cooperation with China is characterised as having a lot of meetings and goodwill but lacking in real implementation. China’s disputes with these countries regarding the South China Sea will increase unpredictability as well.      

South Korea is the latest country to enter BIMP-EAGA as an active partner in trade, investment, tourism, cultural exchanges and diplomacy. Bolstered by its growing confidence as a middle power capable of delivering public goods and playing a more active role, South Korea has become increasingly vigorous in engaging the Southeast Asian region.

Under the previous Moon Jae-In government, the Republic of Korea (ROK) government launched the New Southern Policy (NSP), which sought to strengthen economic, diplomatic, and cultural ties with the Southeast Asian region. The current ROK president Yoon Suk Yeol has rebranded and reformulated the NSP as Korea-ASEAN Solidarity Initiative (KASI). Though KASI still retains the basic tenets of the NSP, strategic and security-oriented elements have been added as the Yoon administration seeks to be more aligned with the US Indo-Pacific strategy.

South Korea’s engagement with BIMP-EAGA should thus be seen in this context. Its interactions with the BIMP-EAGA partners are shaped by both growing economic interests and its broader diplomatic and strategic goals within Southeast Asia.

The recent September 2023 opening of the ROK consulate in Kota Kinabalu gave South Korea a much-needed consular presence in the region, as South Korea’s diplomatic presence still lags behind that of other major external BIMP-EAGA  partners (see Table below). (As a side note, the US has zero consular presence in the region and an embassy in Brunei).   

South Korean consular presence addresses first and foremost the issue of demand. The opening of the ROK consulate-general office in Sabah indicates how much Korean interests have grown in Sabah, with tourism being the most dynamic factor. South Korea consistently has been one of the top three source countries of Sabah’s tourist market since late 2010s (except the pandemic years).

In 2023 South Korea was ranked as the third largest trade partner of Sabah. China is the largest, followed by Thailand, and South Korea would be the second largest trade partner of Sabah if ASEAN trade partners were not included. Korean enterprise SK Nexilis, the world’s largest copper foil maker, also recently opened a plant in Sabah.

Moreover, an effective consular operation also creates and facilitates more business and people-to-people exchange opportunities on top of the existing ones, while also strengthening political and diplomatic relations. The ROK consulate will therefore be important in spearheading the country’s increasing regional engagement and beyond. 

South Korea has also emerged as a significant investor in the critical minerals sector in BIMP-EAGA. It recently displaced Japan and the US as the third largest investor in Indonesia, driven by this search for critical minerals.

China’s nickel investment in Indonesia’s Morowali Industrial Park made (mostly negative) headlines, but a Korean company EcoPro also recently quietly invested in this sector within the same park, through the acquisition of an existing Chinese company’s stakes. South Korean enterprise OCI purchased a polysilicon (crucial for solar panels and batteries) production plant in Sarawak in 2017 and now, is one of the largest investors there. 

In addition to critical minerals, South Korea has also quietly emerged as a major competitor to China in the infrastructure construction and clean energy industries. The Petchem Methanol Complex Project, one of the most ambitious projects of Sarawak and located in Bintulu, is built by Korean companies Lotte Chemical, POSCO and Samsung Engineering. The Sarawak government also secured a grant from the ROK government to develop hydrogen energy. 

The ROK government also established a dedicated agency BIMP-EAGA-ROK under the Ministry of Foreign Affairs in 2021, and manages a BIMP-EAGA-ROK Cooperation Fund (BKCF). The Fund aligns with the developmental priorities of BIMP-EAGA and has funded dozens of small projects. This is an innovative policy measure as none of the other major external partners of BIMP-EAGA have set up a similar fund thus far.  

In the current ROK government’s official description of KASI, it is interesting to note that BIMP-EAGA-ROK cooperation is mentioned twice, in different contexts. The first is under the section detailing the expansion of “ASEAN-ROK comprehensive security cooperation”, whereby the ROK is to develop “impactful cooperation projects… for better management of maritime resources and marine environment” through BKCF funding. 

The second is under the sub-regional cooperation framework between ASEAN and ROK; it is mentioned together with the ROK-Mekong cooperation. That the current ROK government would put its cooperation with BIMP-EAGA as within the agenda of “comprehensive security cooperation” seems to suggest that the ROK has more than economic and people-to-people exchanges in mind, although the emphasis is still on non-traditional security issues (basically the marine environment). So far there are no indications that the ROK is pursuing a more geopolitical or security-oriented policy actions and objectives in the region.   

The geopolitics of BIMP-EAGA have been mostly confined to central-periphery sensitivities (for Malaysia, Indonesia, the Philippines), secessionist movements (Indonesia and the Philippines), transnational criminal and militant activities (affecting all), and unresolved disputes (Malaysia and Indonesia). 

Geopolitical rivalries have not really affected this region, or at least not yet, although the growing US trade restrictions imposed on China — whether by the Biden administration or the upcoming Trump administration — will continue to complicate the regional supply chains within the region. In the future, Indonesia’s new capital in Kalimantan could also introduce new dynamics and impetus.

Both China and South Korea have recently been more active in BIMP-EAGA. As the region continues to develop, the role of external partners in promoting economic cooperation, infrastructure development, and regional integration will be critical to the future prosperity of both the BIMP-EAGA countries and these partners as well.

*This article received the support of Korean Foundation Policy-Oriented Research Grant (Project Code: 2221100-1463).

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