Juliette Binoche is doing the conga and Korean actress Kim Kot-bi is raising a glass and saying gun bae! with a French Arte exec by a shark tank at an aquarium party. It’s all in a night of networking at Asia’s largest film festival in Korea’s port city of Busan (formerly Pusan) in a scorching, sunny October. In its 15 years, not only has Pusan International Film Festival (PIFF) introduced Korean talent to the global film market and festival circuit, but it has also become a meeting place for heavyweight producers, distributors and financiers from East and West.

“Up until 1997, only four Korean films had ever screened at Cannes. Since the Pusan Film Festival started in 1995, at least five to 10 films have been invited each year. Then in 2004, director Park Chan-wook received the Grand Prix for Oldboy,” says the ever-suited festival director Kim Dong-ho, who cuts a busy figure around the lavish hotel lobbies on Haeundae beach where deals are made.

The behemoths of the Asian film industry are Korea, Japan and China; at PIFF they are courted for their financial clout and artistic talent. Big-gun Korean directors such as Bong Joon-ho and Kim Jee-woon have made their names abroad with high-concept films such as The Host and The Good, The Bad, The Weird. This year 13 Assassins – the latest film from prolific Japanese director Takashi Miike, who made his name with Audition – had buyers scrabbling to the Asian Film Market’s Seacloud hotel to meet its team. These directors guarantee bums on seats in an Asian market where revenue is reliant on box office sales. “In Korea 90 per cent of revenue comes from theatrical releases, as the DVD market is virtually non-existent,” says Patrick Frater, CEO and co-founder of Film Business Asia.

With long-term investment in mind, eyes are also on countries with less presence in the industry, such as Vietnam and Malaysia, who are both making moves to put themselves on the map. Vietnam and Cambodia launched their first international film festivals within a week of Pusan shutting its doors. With significant government support Malaysia is setting its sights even higher and developing a film hub in Iskandar, across the border from Singapore, where an outpost of the UK’s Pinewood Studios will open in 2013.

Due to generous tax rebates, Thailand is now a major hub for foreign productions. The sequel to hit US comedy The Hangover is being filmed there. This has rubbed some in the industry up the wrong way, including Thai actor and producer Ananda Everingham: “I feel like the local government hasn’t got involved enough in local talent and is focusing too much on incentives for international production.” Much action at the fair is focused around this – an international tax rebate and location scout’s beauty contest where Asian nations showcase their talents for international producers.

Aside from galas and gallons of makgeolli rice wine, the nine-day festival forums, meetings and deals feature one buzzword – co-production. As the market becomes globalised, Asian countries are realising their homegrown film industries are too small and that interdependence is profitable and practical. “Co-production means great tax rebates and guarantees distribution in multiple territories,” says Larry Brownell, CEO of the Association of Film Commissioners International.

Iranian director Amir Naderi’s new film, Cut, is a great example of a multinational production. It just finished shooting in Tokyo and is co-produced by Turkish, Iranian, American, Japanese and Korean investors, with a stellar Japanese cast including Hidetoshi Nishijima, star of Takeshi Kitano’s Dolls.

Black and White is typical of big-money Asian co-productions for 2011. The Taiwanese and Chinese joint effort is based on a popular TV series. “It’s one of the biggest action movies coming out of Asia, with a budget of $12m – a whole Boeing 747 will be reassembled in Taiwan for the film’s set design,” says producer and CEO of Double Edge Entertainment, Steve Chicorel. The film has another function – it will hopefully move Taiwan away from its long-term association with art-house cinema. Star directors such as Tsai Ming-liang of The Wayward Cloud starring actress Yang Kuei-mei have been critically lauded by western audiences but haven’t necessarily been hits at home.

“The 1980s saw a new wave of directors like Hou Hsiao-hsien and Edward Yang who were popular with European audiences but were too art-house for the domestic market,” says Arvin Chen, the Taiwanese-American director of Berlin Film Festival hit, Au Revoir Taipei.

Co-productions with Chinese companies are becoming a popular way for producers to get into bed with a country that has potentially over a billion viewers. “The Chinese government only allows 20-odd films into their country a year on a revenue-sharing basis where box-office takings for the foreign producers are on a sliding scale of 13 to 17 per cent. This agreement was negotiated between China and the US studios in late 1994/95. If the film, however, is a local production or Chinese co-production, the box-office share of the producer can be upwards of 30 to 40 per cent,” says Michael J Werner, chairman of Fortissimo Films and adviser to PIFF and board member of Singapore’s inaugural ScreenSingapore in 2011.

One of the first US studios to wise up to China’s way of doing things was Fox, which set up a production unit there in 2009. “Local production is a new growth area for us,” says Tony Safford, executive vice president of Worldwide Fox Acquisitions. “As local cultures emerge, they want to see their own culture on film – a Japanese kid wants to see stories about Japanese kids, not American kids. Cultural expression is important as an interest and as a business medium. The strength of Asian economies is often at the exclusion of US firms, so our entry into them is a challenge.” Fox is co-financing next year’s predicted hit, Na Hong-jin’s Yellow Sea, with Korean producer Showbox.

Although Asian co-productions sound ideal, the reality is more problematic. Because of Japan’s previously aggressive military past, feelings towards the country within Asia are ambivalent. During a speech at Pusan’s Asian Film Policy Forum, chairman of the Japan Film Commission Ken Terawaki recognised the need for Japan to be contrite, saying: “Japan has caused grief and pain to people in Asia in the 20th century. It is something we have to reflect upon but now we need to focus on building new relationships based on the exchange of information and ideas through the promotion of the film industry. We can use films as a tool to build better friendships.”

The Japanese market needs to crank up its creativity though. “There isn’t any original content in the Japanese film industry at the moment; no one takes risks. It’s all television dramas or bestselling mangas being adapted into films,” says Muneyuki Kii producer of Haru to no Tabi (Haru’s Journey), an original script that despite a limited release took a laudable $2.5m in three months in Japan.

Currently Asian cinema is bought on the strength of its “genre films”. The horror and visual stimuli of films such as Takashi Shimizu’s The Grudge appealed to western audiences. Asia is trying to move away from this stereotype and the Pusan Film Festival is helping dispel attitudes. This year PIFF showcased 306 films from 67 countries, 52 of which were international debuts. Next year’s PIFF will set the bar higher, moving away from Haeundae beach into a fully integrated €9.4m home next to Asia’s largest department store Shinsegae in Centum city.

“The big story is the way China and Korea are becoming the new force in Asian and global film,” says Patrick Frater. “You might have been able to ignore it 20 years ago, but you can’t now.”

“In a region that confidently looks towards the future, Hollywood is no longer the only game in town.”

“Everyone here is tracking the film Yellow Sea and its director, who also did The Chaser.”

“The Chinese market is not open yet but when it does it will be huge. Koreans desperately need the Chinese market.”

“Korean film is established and has good infrastructure. It now needs to move away from genre films.”

“I think that the Korean films currently being introduced to western audiences don’t represent the breadth of Korean cinema – especially the artistic films we make.”

“I live in New York but teach Japanese cinema there and am currently shooting my new film, Cut, in Japan with a Japanese crew and cast.”