The Auckland film industry hopes its three-year effort to build relations with South Korea will lead to a lucrative new co-production market.

Industry body Film Auckland has signed a memorandum of understanding with its equivalent body in the city of Pusan.

The agreement was signed this week at the annual Pusan International Film Festival, one of the largest film festivals in Asia.

The link-up with Pusan is part of work Film Auckland has been doing since 2007 to create opportunities for joint New Zealand/Korean productions.

The South Korean and New Zealand governments signed a co-production treaty in 2008 and, since then, there had been numerous exchanges of film industry delegations between the two countries, said Film Auckland executive manager Michael Brook.

"The groundwork's definitely set," Brook said.

While there hadn't been any co-productions yet, various projects were in development, he said.

The Auckland film industry had some great North American clients but "to get some really good growth we need new markets".

Co-productions are a defined structure that allocates creative and investment elements of a project between two nations. The movie becomes an official film of both countries, meaning financial incentives can apply in both places.

There are many advantages. China only allows 20 foreign films a year on general release but a co-production would be considered a Chinese film.

New Zealand has also just signed a co-production treaty with China.

Pusan is a sister city to Auckland and Brook said that relationship had played a "huge" role in helping to develop links.

Auckland City Council had been proactive in providing funding and logistical assistance, he said.

The city of Pusan had paid for one of Brook's trips to South Korea. "That invitation came through the international relations group in Auckland."

While there have been no official Kiwi/Korean co-productions, a United States/Korean-funded film, The Warrior's Way, which was filmed in New Zealand, was launched at the Pusan festival.

Most of the crew were New Zealanders.

The film's lead is played by Korean superstar Jan Dong Gun and also stars Kate Bosworth and Geoffrey Rush.

A 2006 New Zealand production, Black Sheep, also had Korean investment.

The Korean box office is worth $1 billion a year with 50 per cent of that being local productions, so the Korean market in itself is lucrative, Brook says.

The South Korean relationship is part of a wider strategy to develop co-production markets in North Asia.

Next year, for the first time, Auckland will host the annual Asia-Pacific Producers Network, a gathering aimed at developing co-productions.