SEOUL -- Business leaders from Japan and South Korea agreed Wednesday to cooperate in projects in Vietnam and Southeast Asia amid deteriorating relations between the two governments over historical and economic disagreements.
More than 300 executives from top companies based in Tokyo and Seoul discussed ways to collaborate in business deals in Vietnam and other Southeast Asian countries, in part to build ties and mend the rift.
"Business people from both countries agreed to cooperate for the brighter future and development of South Korea and Japan," said Kim Yoon, head of the Korea- Japan Economic Association, and Mikio Sasaki, chief of the Japan- Korea Economic Association, in a joint statement. "First, South Korea and Japan [will] work together in joint projects in third countries continuously."
Relations between Japan and South Korea have been rocky since last year, amid clashes over court orders for Japanese companies to compensate wartime laborers, a South Korean vessel allegedly locking fire-control radar on a Japanese plane, and South Korea's disbanding of a foundation set up with Japanese money to aid former comfort women.
Both sides removed each other from their respective "white lists" of trusted export partners recently, dealing a blow to their economies and hurting business sentiment.
On Wednesday, Lee Woo-kwang, a board director at Nongshim, a leading South Korean food producer, said Vietnam was the top destination for joint projects. The former senior researcher at Samsung Economic Research Institute said Vietnam was attractive because of its young population and the government's pro-business policies.
"Vietnam is where the two countries can create synergies as South Korea is investing in the country on a similar level with Japan," said Lee in a forum hosted by the Korea- Japan Economic Association. "The two countries can share their experiences and improve business opportunities through cooperation."
The business leaders have asked politicians to start talks to resolve tensions. Japan-Korea Economic Association Chairman Sasaki said that Japan's provincial governments and its tourism industry have been hit hard by a boycott by South Korean tourists.
S&P Global Ratings said that South Korea will face recession risks if the country's spat with Japan lingers. "Should the disruption persists, there're much bigger risks of recession in Korea," said Shaun Roache, Asia-Pacific chief economist.
He said that the situation is "close to a tipping point," as South Korea is also hurt by the ongoing U.S.-China trade war and a slowing Chinese economy.
Fitch Ratings said that the trade restriction imposed by Japan is further disrupting South Korea's supply chains and creating uncertainty for companies.
"The magnitude by which this will affect the Korean economy is uncertain and depends on how cumbersome the export review press becomes, the ability of Korean firms to find alternate suppliers, and duration of the dispute," said Jeremy Zook, an associate director at Fitch, in a press conference in Seoul on Tuesday.
Nikkei Asian Review Chief Business News Correspondent Kenji Kawase contributed to this story.