eat, visit, enjoy invest€™s greeting dear readers, it is a pleasure to introduce you to the...
TRANSCRIPT
Eat, Visit, Enjoy
Haengjusanseong Fortress
June 2014
Interview
IN BRIEF ...3pInvest Korea News, Foreign Company News…
ECONOMIC INDICATORS...11pPlus Numerically Speaking
IK WORLDWIDE ...12pKOTRA Locations Globally
Building a Powder Powerhousein BusanWith a new plant in Busan, Höganäs Korea aims to become asupply hub for Asia
Frank SongCountry Manager of Höganäs Korea Ltd.
Continued on page 7 >>
Last January, Korea became home to the most modern mixing plant of the world’s largest producer of powdered metals. Why Korea? Its dy-namism. The rapid growth of its industries. The fact that Korea’s automotive industry, in particular, is seeing a rapid rise in not only production volume, but also innovation and therefore needs new and high-quality technologies.
Another key factor that led Höganäs to choose Korea – specifically, Busan – for its latest plant is the ability of Koreans to produce more with less, to make better-perform-
ing products while using less energy and natural resources, which is in line with Höganäs’ vision.
“Many powder metallur-gy part makers in Korea are highly innovative and consid-er environmentally friendly products,” said Frank Song, Country Manager of Höganäs Korea Ltd.
Based in Sweden, Höganäs develops and markets pow-ders for the metallurgical in-dustries, with its products and services focusing on sintered components, brazing, electro-magnetic applications, surface coating and other powder ap-
plications including additive manufacturing and welding. With subsidiaries worldwide, the company has manufactur-ing plants in 12 countries and sales operations in 75.
Höganäs made its first in-vestment in Korea in 1991, after the local economy ex-perienced a post-Olympics boom and more people started buying cars. Today the com-pany considers Korea the best location to support not only the auto industry of Korea, but also that of Southeast Asia, said Song.
www.investkorea.or.kr
INVESTKOREA
Express
“We have worked in Koreamany years and we learned Korea has
big potential to be a world leaderin many areas.”
NORTH AMERICA
EUROPE
ASIA & OCEANIA
MIDDLE EAST
IK Worldwide- 42 Korea Business Centers Supporting Foreign Investors Worldwide
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IndustryIt’s a Robot WorldKorea’s growing robot industry is poised to open the door to the one-robot, one-person era
...4p
Economic AnalysisDomestic Economic Trends in the After-math of the Sewol Ferry DisasterThe Sewol ferry disaster caused a slump in consumption, but growth and consumption are expected to improve in the second half of the year
...9p
Ombudsman’s OfficeA Stitch in Time Saves NineThe Foreign InvestmentOmbudsman promptly tackled the grievance of a foreign-in-vested company in Korea
...6p
Meet the AmbassadorQ&A With Bernd ReckmannHonorary Ambassador of Foreign Investment forKorea Bernd Reckmann shares his thoughts on Korea’s strengths and potential to be a “first mover”
...8p
Commissioner’s Greeting
Dear Readers,
It is a pleasure to introduce you to the “Invest Korea Express,” a monthly publication devoted to foreign investment-related news, features, analysis and more.
Longtime readers of our work have probably caught the one-word difference between the title of last month’s publication and this one. We have revamped the “Invest Korea Bulletin” to bring you the information you want, the way you want it. Fast-paced times call for fast reads, for content that can be digested on the go. That’s why we’ve trimmed where necessary and enhanced the sections you love most. We’ve also added the word “Express” to our name. It’s a fitting change, considering Korea’s reputation for business efficiency.
This makeover is also indicative of Korea’s ongoing effort to im-prove its business environment, to better support foreign investors. Last month, I attended the Foreign Investment Advisory Council meeting in Seoul. Organized by KOTRA’s Office of the Foreign In-vestment Ombudsman, the meeting is held twice a year to hear the grievances and recommendations of Korea’s foreign business community. Nine representatives of chambers of commerce in
Korea, 13 CEOs of foreign-invested companies here and government officials attended. We discussed setting up a formal communication channel between the foreign business community and government, to be used in the deregulation process. Some CEOs also mentioned that the Korean government should implement policies to boost the competitiveness of Korea’s financial service industry. Their feedback will be used to create better policies.
I also had the opportunity last month to meet with the managing directors of Temasek, an investment company owned by the government of Singapore, and present on why they should invest in Korea. I emphasized our high-po-tential growth industries, including contents and the Korean Wave, fashion and healthcare.
Another highlight of May was our ongoing Friends of Invest Korea program, through which we cultivate under-graduate and graduate-level foreign supporters of Korea’s business environment. Through two all-day workshops that took them to four foreign-invested companies, the students, who hail from about 20 countries, learned why global corporations continue to invest and grow in Korea. You can check out what they learned through visiting In-vest Korea’s Facebook page at facebook.com/investkorea.
Be it through biannual meetings with foreign business leaders or a supporters program, we at Invest Korea are committed to showing the world why Korea is an ideal country in which to invest. The “Invest Korea Express” is a great way to keep up with us and the latest in Korea’s foreign investment environment.
So flip the page and enjoy. I’ll see you next month.
Sincerely,
Kiwon HanCommissioner of Invest Korea
June 2014_3
Invest Korea News
Invest Korea Holds Friendsof Invest Korea Workshops
Invest Korea held the second and third Friends of Invest Korea 2014 workshops last month. Selected for the program as representatives of Korea’s investment environment, the students visited ADT Korea, Otis Elevator Korea, the DuPont Korea Innovation Center and Siemens Ltd. Seoul during the workshops.
They learned about the business of each company, why each invested in Ko-rea and why Korea is an important mar-ket for various industries. The students also participated in a question-and-an-swer session and took facility tours. They took part in cultural activities during the workshop as well, including a kimchi-making program and a visit to Bongeunsa Temple.
Following each workshop, the students wrote essays about their experience and shared them via social media. To read their posts, please visit the Invest Korea Facebook page at www.facebook.com/investkorea.
The next workshop will be held this month.
Foreign Company News
GM Korea Opens Upgraded Design Center
GM Korea held an opening ceremony for an upgraded design center in Incheon late April. The event was attended by GM Vice President of Global Design Edward Welburn, GM Korea CEO Ser-gio Rocha, other GM Korea employees and Minister of Trade, Industry & Ener-gy Yoon Sang-jick.
The U.S.-based carmaker invested KRW 40 billion (USD 39.2 million) in the center, doubling its size from 7,640 m2 to 16,640 m2 and making it GM’s third-largest global design center. The state-of-the-art facility is designed to provide 200 designers and modelers with support for digital modeling, studio engineering and exterior and interior auto design.
“The GM design center in Korea has played a key role in GM’s global design network,” said Welburn.
Air Liquide Builds Factoryin Gyeonggi
Air Liquide, the world leader in mar-ket share for industrial gases, has built a factory at the Jangan 1 Advanced Indus-trial Complex in Hwaseong, Gyeonggi Province. The French company invested KRW 13 billion in the factory.
Air Liquide held a completion cere-mony for the center last month that was attended by Nam Choong-hee, Vice Governor for Economic Affairs of Gyeo-nggi Province, French Ambassador to Seoul Jerome Pasquier and Mok Kwong Weng, Air Liquide Vice President for Asia & Pacific.
The completed 11,482 m2 factory has a gross floor area of 1,727 m2 and consists of offices, a factory for semiconductor materials and an outdoor warehouse.
Air Liquide plans to hire 35 people and produce micro-processed advanced materials for semiconductor evapora-tion.
“This is Air Liquide’s first time invest-ing in Korea to produce electronic ma-terials,” said a provincial official. “The factory in Hwaseong will serve as an Asian manufacturing base for advanced materials for semiconductors.”
Air Liquide was founded in Paris, France in 1902. Annual sales reach KRW 22 trillion. The French company started operations in Korea in 1996. To-day it has factories in Yeosu, Bucheon, Icheon, Cheonan and Dangjin, with an-nual sales reaching KRW 430 billion.
Government & Policy
Govt. to Eliminate Tradeand Investment Regulations
The Korean government will remove nearly a third of its regulations on trade and foreign investment and ease 10 restrictions that hamper investment, ac-cording to the Ministry of Trade, Indus-try & Energy (MOTIE) last month.
MOTIE held the second hearing on trade and foreign investment regulations at the Korea International Trade Asso-ciation in early May. Regarding trade, the ministry decided to eliminate Article 25 of the “Action the Development of Exhibition Industry” and Article 22 of the “Electronic Trade Facilitation Act” while allowing free trade for some ex-port-import restricted items.
The ministry decided to simplify pro-cedures for foreign direct investment (FDI). Foreign investors will no longer be required to notify changes in FDI no-tification details, and when a foreign-in-vested company notifies a tax office of closure of business in accordance with the Value Added Tax Act, business reg-istration will be canceled automatically.
In Brief
Courtesy of GM Korea
2_June 2014
Courtesy of Gyeonggi Province
4_June 2014 June 2014_5
Robot Industry WorldwideThe robot industry performs the key role of pooling the shared
growths of the front and rear industries by creating various busi-nesses and added values through the multi-layered linkages of value chains such as manufacturing, software, service and con-tents in various industries. In particular, it is drawing attention as the meta industry most suitable for future changes in global mega-trends such as a low birth rate, an aging society and safety/welfare as well as the increased competitiveness of other industries.
Since surpassing the KRW 12 trillion (USD 11.7 billion) mark in 2009, Korea’s robot industry has continued its rapid growth of 23 percent on average annually for the past five years to reach KRW 2.1 trillion in 2012. The growth is remarkable considering the world market grew only 11 percent on average during the same period. Moreover, its technical gap with the United States, considered to have the world’s best level, was narrowed down to 1.8 years in 2013 from 2.4 years in 2011.
Global and Domestic Trends in Robot Market Growth
One can attribute such an outcome to research and development (R&D), infrastructure development and various kinds of policy support such as the enactment of the Intelligent Robot Act in 2008 and establishment of the First Intelligent Robot Master Plan in 2009 after the selection of the robot industry as the next-gener-ation growth engine in 2003. In 2014, the Korean government plans to invest a total of KRW 167.3 billion in robots, including KRW 69.1 billion for the development of key fusion technology (R&D), KRW 15.9 billion for the distribution and dispersion of intelligent robots, KRW 21.6 billion for the development of the robot industry cluster and KRW 24.2 billion for the construction of Robot Land.
Robots in the Manufacturing IndustryThe size of the robot market for the manufacturing industry,
which accounts for 75 percent of the total robot market, stood at KRW 1.6184 trillion in 2012, with 140 companies involved. Ac-cording to the International Federation of Robotics (IFR), Korea shipped 19,000 units of robots for the manufacturing industry in 2012, which placed it at the no. 4 spot in the world following Japan (29,000 units), China (23,000 units) and United States (22,000 units). Robotics is considered a key strategy to revive the manufacturing industry in advanced countries such as the United States and European Union. Moreover, emerging countries such as China and Thailand, which are experiencing difficulties, such as rising wages and a shortage of skilled technical manpower, are actively supporting the introduction, development and dispersion of robots as well to continue its high growth.
In keeping with such trends, Korean manufacturers of industri-al-use robots are actively seeking entry into global markets and exporting products not only to Asian countries such as China, India and Thailand, but also to Germany, the Czech Republic and Russia, although the volume is not yet large.
Manufacturers of Robotsfor the Manufacturing Industry
Moreover, the Korean government implemented the Distri-bution of Robots for Small - Medium Manufacturers project to promote the use of robots in basic industries such as casting, molding and welding, which are used as “process technology” for manufacturing in other industries. The project contributed greatly not only to the improvement of productivity and quality in the robot-applying enterprises but also to the production and export of supply robot manufacturers. Launched this year was the second phase of the project to transform the vulnerable processes of small- and medium-sized manufacturers into high value-add-ed manufacturing processes creatively converged with the robot system. When the second phase is completed, the use of robots is expected to be expanded greatly in various manufacturing areas, as actual references of robot application will be available.
It’s a Robot WorldKorea’s growing robot industry is poised to open the door
to the one-robot, one-person era
Industry
Manufacturer Production in 2012(Unit: KRW 100 million) Main Products
Samsung Techwin 2,551 Automation robot, surveillance/guard robot, etc.
Hyundai Heavy Industries 2,248 Robot for the automobile and other manufacturing industries
Koh Young Technology 1,078 Solder paste inspection system, bump inspection system, etc.
AP System 952 Semiconductor and FPD robot, etc.
Doolim Robotics 915 Coating robot, sealing robot system, etc.
Mirae 737 SMT, ATE, etc.
ABB System 734 Manufacturing robot, robot part (sensor, etc.), robot controller, etc.
Robostar 546 Transfer robot, etc.
Evertechno 530 LCD and semiconductor robot, etc.
Hyundai Wia 470 Factory automation robot, etc.
Service RobotsThe size of the service robot market was KRW 331.4 billion in
2012. Its growth is led by residential cleaning robots (KRW 190 billion) and educational robots (KRW 58.7 billion). The residential cleaning robot market has been growing by 94.7 percent annually on average for the past three years due mostly to increased exports to the EU and China. As such, the global market shares of Korean companies have sharply increased. According to Wintergreen Re-search (June 2012), the global cleaning robot market grew from USD 400 million in 2009 to USD 600 million in 2012. It is ex-pected to grow further, to USD 1 billion, in 2015. As such, the ex-port of Korean products, which have been earning raves for their practicality, design and efficiency, is expected to increase greatly.
Korean Market for Service Robots
The growth of educational robots has been limited to the domes-tic market until recently, but exports are expected to grow since Korean companies are carrying out aggressive marketing in Asian countries including Qatar, China and Malaysia. Edutainment ro-bots, which are used with smartphones, are the leading convergent and composite products combining IT and network technology as well as software and contents with the robot platform, and the market is expected to greatly expand.
The Korean government has been implementing the Robot Distribution Project since 2011 to develop a test bed for verifying developed robot products for commercialization to create and ex-pand the service robot market, which is still in its infancy world-wide. With robots – such as lactation robots for calves, rearing management robots and separated loading and transport robots in the agricultural area, self-flying robots for safety and disaster monitoring, portable surveillance robots, explosive-handling robots, marine control robots, water distribution pipe network re-
habilitation robots, firefighting robots such as waterproof robots, multi-functional smart service robots, underwater cleaning robots, etc., – distributed in various areas, the project not only verified the commercial applications but also opened the doors for successful exports to overseas markets. The service robot markets are pre-dicted to grow greatly in various areas.
Development of Regional Robot IndustriesIn addition to R&D and support for commercialization, the
Korean government has been trying to jointly develop regional infrastructure with local municipalities to develop regionally spe-cialized robots linked with regional industries.
The government established KIRIA, the world’s only public agency for the promotion of the robot industry, in 2010. It supports the construction of Robot Land, a large theme park centered on robots, in Gyeongnam and Incheon. It also developed infrastruc-ture such as the Busan Marine Robot Center (KITECH in Busan), Micro Medical Robot Center and Home Appliance Robot Center (Gwangju Technopark in Gwangju) and the Underwater Robot Base Center (KIRO in Gyeongbuk). The development of robot en-terprises linked with regionally specialized industries is expected to contribute significantly not only to the development of entire robot industries, but also to the improvement of regionally special-ized industries.
Forecast and Policy DirectionIn 2012, the Korean government announced a future robot strat-
egy, with its vision being to become “A Country That Best Uses Robot Technology for Improving Citizens’ Quality of Life” by 2022. The strategy presented the goal of a KRW 25 trillion Korean robot market by 2022. It also predicted that the one-robot, one-per-son era would arrive once the man-robot community is developed.
The government is preparing the 2nd Intelligent Robot Master Plan (2014 - 2018), which will present various projects based on the main policy of securing early leadership in the market for robot technologies by focusing on and establishing a convergent/composite, open robot industry ecosystem and developing the government-wide, interregional cooperation/coordination system. When the policy is successfully implemented, Korea will lead the global robot markets, and the competitiveness of Korean industries will significantly improve.
By Bong-hyeon BaekDirector of Policy Planning
Korea Institute for Robot IndustryAdvancement
[Unit: KRW]
2007
5,00010,00015,00020,000
2009 2012
World Robot Market [Unit: USD 1 million]
8,071 6,622
13,328
2007 2009 2012
5,00010,00015,00020,000
Domestic Robot Market [Unit: KRW 100 million]
7,54210,202
21,327
54.9
9.3
19.8 13.9
2.1
Cleaning Robots169.1 billion
Military Robots42.9 billion
Health Care Robots6.5 billion
Educational Robots28.5 billion
Other60.7 billion
2011: KRW 307.7 billion
Cleaning Robots190.0 billion
Military Robots12.6 billion
Health Care Robots10.6 billionEducational Robots
58.7 billion
Other59.5 billion
2012: KRW 331.4 billion
57.3
17.8
17.9 3.83.2
A Stitch in Time Saves NineThe Foreign Investment Ombudsman promptly tackled the grievance of
a foreign-invested company in Korea
oreign-invested companies in Korea have encountered a variety of operation-related difficulties. While it would be
ideal to prevent grievances, swift action must be taken if they occur, to keep them from snowballing. As they say, it’s best to repair a dam when the job can be done with just a hoe.
In April, the president of a major foreign industrial company in Korea (“Investor”) and his executives visited my office, the Office of the Foreign Investment Ombuds-man, requesting a consultation. I could detect a sense of urgency. Their grievance was that a district office was about to take an administrative measure that would suspend the company’s business for four months based on a questionable legal in-terpretation of a disposition. The Investor stated it would file an appeal against the district office in the event of an unfair administrative disposition by the district office. But it also didn’t want to create a litigious environment with the Korean government nor risk the suspension of business. More importantly, crit-ical safety services for customers would be jeopardized. The Investor was also seriously concerned about its future in Korea given the severity of the questionable interpretation by the district office.
I told the Investor that it has always been my highest priority, as the Foreign Investment Ombudsman, to extinguish fires immediately. I looked into the situa-tion the day of the meeting.
The global Investor operates offices nationwide. An employee of a local office had been under police investigation for providing an improper payment to a pri-
vate customer. The employee was charged with a criminal offense, but the police and prosecution concluded there was no evi-dence against the Investor (as a company) to hold them culpable for the improper payment. Nonetheless, a public servant of the district office in question was inclined to order a four-month business suspension against the Investor based on his broad interpretation of the penal provision, regardless of the decision by the local po-lice and prosecutor who investigated the matter. The Investor had communication problems with the public servant and took issue with his advising it to pursue admin-istrative litigation in court if it had objec-tions.
I judged the situation to be quite seri-ous, as a four-month business suspension would cause massive damage to the Inves-tor and create serious safety hazards relat-ed to public transportation. Furthermore,
I did not think the issue was subject to an administrative disposition.
I arranged a meeting between the In-vestor and public officials of the relevant division under the Ministry of Security and Public Administration, after speaking to the Vice Minister of Security and Public Administration on the phone. As the issue needed to be resolved through a face-to-face meeting between the Investor and the local government in charge of the adminis-trative disposition, I relayed the Investor’s position to the head of the district office and arranged a meeting. I asked one of my principal consultants, Yoo Young Yeol, who is also the Home Doctor assigned to the Investor, to meet with the head of the district office with a senior executive of the Investor. The district, which had been ready to formally notify the Investor of its disposition, decided to revisit the legal and factual grounds of the issue and consult-
ed with their lawyer. A few days later, the Investor was
informed that the case was not sub-ject to a disposition by the district office.
Timing matters when it comes to effective grievance resolution. And that is why my staff and I aim to pro-
vide proper and timely support in the event of a grievance – to mend a small
tear before it becomes a larger one.
By Ahn Choong Yong, Ph.D.Foreign Investment Ombudsman
Distinguished Professor, Chung-Ang University
F
Ombudsman’s Office
6_June 2014
Höganäs’ first business activities with Korea date back to the 1970s, when it worked with Korea’s welding consum-able makers in the country’s shipbuilding industry, which is number one globally today.
The company has two entities in Korea – the main Höganäs Korea office in Seoul and the Busan plant, called Höganäs Ko-rea Production Ltd. Both are managed by Song and will be combined into one com-pany next year. Sales for the Seoul office reached USD 8 million last year. The sales forecast for 2015, for the two companies combined, is USD 40 million.
The main customers of Höganäs’ Korea operations are some of the nation’s best-known automotive system and component suppliers, including Sinteron, Halla Stack-pole, Korea Sintered Metal, Hyundai Welding, Kiswel and Chosun Welding.
“We have worked in Korea many years and we learned Korea has big potential to be a world leader in many areas,” said Song. “Global trends have clearly shown that the next growing area is Asia, and Korea has been a leader in many industri-al areas, so we can grow in Korea and [it is] also strategically the best location to serve Asia.”
The speed and efficiency with which Korea’s engineers develop applications also makes Korea an important market for
Höganäs.“I heard many times my colleagues say
that Korea is one of the best countries to communicate and faster, because good communication makes it move faster,” said Song.
“This makes Höganäs Korea stand front in many development within Höganäs group. This is one of the reasons why we built the plant.”
With the launch of the Busan facility has come the transfer of an important pro-cess from Sweden to Korea. In the past, the company’s headquarters would take care of the full metal-powder manufactur-ing procedure and then mix the product with other alloy elements to improve component performance. Now, the mixing happens in Busan. Höganäs Korea Pro-duction imports raw metal powder from Sweden and produces the mixes locally.
“We already have mixing plants in Chi-na and Japan. But we think Korea is the best location,” said Song.
Though Höganäs Korea currently sup-plies for only the Korean market, it plans to start exporting its products to the Asian region in three years.
“Höganäs Korea will serve as a gateway for Taiwan, Thailand, Malaysia, Indonesia and Australia,” said the country manager, citing the Busan plant’s logistical advan-tages.
In the short term, Höganäs Korea aims to become a strategic partner of Korean companies and help them save on logis-tics-related costs and increase efficiency through supplying all products through the Busan plant.
“Our long-term goal is to be a great supplying hub in Asia,” said Song.
By Young Chang
June 2014_7
Interview
Did you know?
- Powdered metal is found in everything from cars and home appliances to the iron fortification of food.
- Höganäs was founded as a coal mine in 1797.
- Höganäs is headquartered in Höganäs, Sweden.
Building a Powder Powerhousein Busan (cont.)
Meet the Ambassador
June 2014_98_June 2014
ernd Reckmann, the head of Merck’s Performance Materi-als and Merck Millipore divi-sions, has been an Honorary
Ambassador of Foreign Investment for Korea since 2013. The Germany native was responsible for the Merck businesses in Korea in 2005 and 2006. Mr. Reckmann shared his insights as a former foreign business leader here on Korea’s strengths as an investment destination, where he sees the country in five years and more.
How has the ambassador experi-ence been thus far?
I feel extremely honored. I have en-joyed living in Korea and have strongly appreciated the Korean culture and people. In addition, my company has significant business and investments in Korea and it is my pleasure to share our positive expe-riences and trying to help other companies to build-up or expand their activities in Korea.
You lived in Korea when you were the president of Merck Korea. What’s the first thing you say when people ask you, what was Korea like?
I was mostly impressed by the strong “can-do” attitude of the Korean people. With their energy and dedication basically everything is possible and if not it will be made possible. The diligence, working ethics, good education and curiosity to always try something new have impressed me very much. In addition, I experienced them as very friendly, passionate and also warm-hearted.
What is Korea’s greatest advan-tage as an investment destination, and what would be the best way to promote it to German investors?
Korea is an attractive economy with a lot of world-leading companies. The Ko-rea-EU Free Trade Agreement creates op-portunities for investments and business. Despite this, Korea is a hidden champion in the public perception in Germany. Many people lack knowledge of technology and industry capabilities as well as of the great Korean culture. Communication therefore is key to creating interest among German investors.
You are a former Head of Strategic Innovation for Merck. According to the Bloomberg Innovation Index 2014, Korea is the most innovative country in the world. How does Ko-rea appeal to German investors as a base of innovation?
Korean people are addicted to inno-vation. The people are smart, incredibly hard-working and well-educated. The perceived risk of new technologies, which slows down a lot of innovations in Germa-ny, is not present in Korea. Innovation is appreciated as opportunity to improve the future. In addition, a positive framework for growth generated by the government helps Korean companies on their way to becoming world leaders. This success sto-ry of innovation in Korea is well known to Germans by Korea’s successful products, especially consumers’ electronics and cars.
What sector or industry in your country is most likely to invest in Ko-rea, and why?
Based on the strong automotive com-panies in Korea and the leading semicon-ductor & display companies, it is very attractive for suppliers to these industries. Biotechnology could become a new field of activity and also attract German invest-ment. In addition, a lot of business may explore Korea as an Asian hub because of its location and the existence of several free trade agreements.
What can Korea improve, to bring in more investment?
Korea should offer more room for small- and medium-sized companies in technol-ogy, manufacturing and services. A good balance between the speed of change and predictability and stability is important for foreign investors. This is especially valid for stability in the legal, tax and regulatory environment.
How do you envision Korea in the next five years?
I have strong faith in Korea’s future. I expect that society will develop also in line or following the new technological development. Topics like gender diver-sity, flexible working models, work-life balance and an aging society will drive changes in society. Korea may transform from an industrial-focused “fast follower” to a “first mover” in many areas. This also could enable a flourishing of technology start ups and SMEs, which could become more independent from large conglomer-ates and go global.
By Young [email protected]
B
he Sewol ferry disaster has taken a toll on the Korean economy, weakening con-sumer sentiment and caus-
ing a rapid slowdown in domestic sales. Various indicators point to a clear slowdown in domestic consumption. Signs of a cut down in spending are evident across society, and trips and gatherings have been canceled while entertain-ment events and concerts have been postponed. In the culture, leisure and tourism industries, reve-nue from credit sales has dropped, and the retail industry’s sales declined from the same period last year. The service industry has suffered the biggest blow from dwindling do-mestic consumption, and this has hit small business and shop owners particu-larly hard.
Because the disaster deeply wounded the national psyche, the economic impact has been particularly grave. The consumption slump is expected to have a visible effect on second quarter earnings, and there are concerns that prolonged social anxiety and self-imposed abstinence on spending will dampen the economy, which had just start-ed to show signs of recovery.
However, it seems that the Sewol ferry accident will not completely reverse the economy’s recovery trend. The negative impacts of major disasters have proven to rapidly dissipate with time. For example, the negative economic impacts caused by the Seohae ferry accident, the Sampoong Department Store collapse and the Daegu
subway fire were all short-lived. While it is obvious that the after-effects of the Sewol ferry accident will be more serious than other major disasters Korea has expe-rienced, the economic impact will be sig-
nificantly weaker in the second half of the year. In fact, department stores and large retail outlets saw sales recover during the May holiday season.
Although the pace of economic growth in the second quarter may slow, the growth trend will resume in the second half, driv-en mostly by exports. More specifically, Korea will benefit from the steady uptrend in advanced economies such as the Unit-ed States and Europe. Also, the gradual increase in global durable goods consump-tion will drive Korea’s export of finished durable goods and IT components.
Domestic consumption will improve in the second half as well. The financial
market will stabilize as economic entities become more immune to the effects of the U.S. Federal Reserve’s tapering of quan-titative easing. Positive signs in the job market, such as the increase in employ-
ment, will also drive up consumer buying power. The upward trend in real estate and asset prices is also a positive sign for consumption. Domestic demand and export will equally drive growth this year, and the economy is expected to post an annual growth rate of almost 4 percent. This is lower than the pre-global financial crisis average growth rate, which stood at a mid-4 percent range, but is still higher than last year’s 3.0 percent.
There a re severa l prerequisites for the Korean economy to maintain a sustainable recovery. First, the gov-ernment should take proper measures to prop
up consumer sentiment and mitigate the economic fallout from the Sewol disaster. Second, to revive the local economy, local government agencies should refrain from canceling all local festivals and events and group tours. Another important condition for sustaining economic recovery is that the rapid appreciation of the won should not hurt exports too much.
By Geun Tae LeeSenior Research Fellow
LG Economic Research [email protected]
Domestic Economic Trends in theAftermath of the Sewol Ferry Disaster
The Sewol ferry disaster caused a slump in consumption, but growth and consumption are expected to improve in the second half of the year
Q&A With Bernd ReckmannHonorary Ambassador of Foreign Investment for Korea Bernd Reckmann shares
his thoughts on Korea’s strengths and potential to be a “first mover”
T
Economic Analysis
aengjusanseong Fortress on Deokyangsan Mountain is a major attraction of the city of Goyang. The fortress
commands a beautiful view of the Han River and the surrounding urban and rural landscapes. Built in the Three Kingdoms Period, the mud fortress is also famous for being where General Gwon Yul pulled off a major victory against the Japanese in 1593 (26th year of King Seonjo’s reign). On the south side of the fortress is the Han River, and the Changleungcheon stream flows around the southeast side of the for-tress. Together they form a natural moat. The fortress boasts a strategically import-ant location: nearby is a waterway that leads to the West Coast, and the fortress lies at a central point of transportation and logistics that connects to Seoul. A unique feature about the fortress is that there are no fortress walls.
A new year’s festival is held there on the first day of the new year and draws 20,000 - 30,000 visitors annually. Major cultural festivals hosted by the City of Goyang, such as the Haengju battle memorial cer-emony and the Goyang Haengju Culture Festival, are held at the fortress every year as well.
The road that leads to the fortress peak, where a monument is erected to commem-orate the victory of the Haengju battle, is not too steep and well paved, so families with strollers can easily enjoy the walk. Popular as both a historical site and place to relax, with its lush trees and fresh air, the fortress gets crowded on the weekends. It is also known for its beautiful night views, so it stays open until late from July to September.
A statue of General Gwon Yul stands near the main gate of the fortress, where you can find a temple enshrining a portrait of the general, a memorial hall exhibiting relics from the Haengju battle, stone mon-uments, a video screening hall and pavil-ions (Deokyangjeong and Jingangjeong). Near the fortress used to be a military
fence along the Han River, but this was re-placed by a 3.7 km walking trail. The ob-servation tower along the trail commands a great view of the Han River.
Nearby Attractions - Haengju Seowon
This memorial hall was built to honor General Gwon Yul and his patriotic spirit. It houses a stone monument about the victory of the Haengju battle.
Haengju Catholic ChurchHaengju Catholic Church was built 100
years ago and bears the history of Korean Catholicism, which contributed to Korea’s independence from Japanese rule.
Places to Eat -Jangeo MaeulEel restaurant Jangeo Maeul
stands at the foot of Haengju For-tress and offers a great view of the Han River. The restaurant’s special-ties are tender charcoal-grilled eel marinated in a special sauce made with fruits, vegetables and herbs. Other nutritious menu items include ginseng chicken soup (samgyetang), seafood soup and spicy fish soup.
10_June 2014
H
June 2014_11
GDP 2009 2010 2011 2012 2013Nominal (USD million) 902,300 1,094,300 1,202,700 1,222,400 1,304,300
PPP (USD million) 1,295,333 1,393,872 4,386,152 4,525,754 1,559,447GDP Growth Rate
(Y-o-Y) (%) 0.7 6.5 3.7 2.3 3.0
Gross External Debt2009 2010 2011 2012 2013
344,607 355,911 400,034 408,928 416,112
Foreign Trade 2009 2010 2011 2012 2013 April 2014Exports 363,533 466,384 555,214 547,870 559,648 50,309.9Imports 323,085 425,212 524,413 519,584 515,560 45,849.8
Trade Balance 40,448 41,172 30,801 28,286 44,088 4,460.1
KRW-USDForeign Exchange Rate
2009 2010 2011 2012 2013 April 20141,276.4 1,156.3 1,108.1 1,126.9 1,094.9 1,044.5
Balance ofCurrent Account
2009 2010 2011 2012 2013 April 201433,593.3 38,850.4 18,655.8 50,835.0 79,883.6 7,124.7
Foreign Exchange Reserves
2009 2010 2011 2012 2013 April 2014269,995 291,571 306,402 326,968 346,459 355,845
Unemployment Rate2009 2010 2011 2012 2013 April 20143.6 3.7 3.4 3.2 3.1 3.9
Consumer Price Index2009 2010 2011 2012 2013 April 201497.1 100.0 104.0 106.3 107.7 109.1
GDP per Capita 2010 2011 2012 2013Nominal 20,540 22,388 22,588 23,837
PPP 29,717 30,912 31,949 33,155
Source: The Bank of Korea, May 2014
(Unit: USD)
(Unit: USD million)
(Unit: KRW)
(Unit: USD million)
(Unit: USD million)
(Unit: USD million)
(Unit: %)
(Scale: Year 2010=100)
Sources: The Bank of Korea
Source: International Monetary Fund, October 2013
Numerically Speaking
Eat, Visit, Enjoy Economic Indicators
6 The competitiveness of Korea’s scientific infrastructure rose a notch to 6th globally, according to a 2014 report by Switzerland’s International Institute for Management De-velopment.
Haengjusanseong FortressWith summer just around the corner, Haengjusanseong Fortress - the site of the victorious
Haengju Battle - is a relaxing and educational landmark to visit on the weekend
For more information on
Goyang City, please visit
http://www.visitgoyang.net/.
IKE