Other State Department Archive Sites

The State Department web site below is a permanent electronic archive of information released online from January 1, 1997 to January 20, 2001. Please see www.state.gov for current material from the Department of State. Or visit http://2001-2009.state.gov for information from that period. Archive sites are not updated, so external links may no longer function. Contact us with any questions about finding information. NOTE: External links to other Internet sites should not be construed as an endorsement of the views contained therein.

Country Commercial Guides for FY 2000: Korea Report prepared by U.S. Embassy Seoul, released July 1999 Note*

CHAPTER I. EXECUTIVE SUMMARY

This Country Commercial Guide (CCG) presents a comprehensive look at the Republic of Korea's commercial environment through economic, political and market analysis. The CCG's were established by the recommendation of the Trade Promotion Coordinating committee (TPCC), a multi-agency task force, to consolidate various responding documents prepared for the U.S. business community. Country Commercial Guide are prepared annually at U.S. Embassies through the combined efforts of several U.S. government agencies.

Korea is one of the United States' biggest trading partners. Currently, it is our sixth largest export market, bigger than those of Australia, Brazil, China, France, or Italy. Imports to Korea are bouncing back and are expected to show double-digit growth in the months ahead. It would be a mistake for corporate America to become complacent about this market. This huge export opportunity has not gone unnoticed by our EU and Asia-Pacific competitors. Their direct investments in Korea are growing quickly, and Queen Elizabeth recently led a British trade mission to Korea, a persuasive indication of opportunities in the Korean market. At the same time, Korea also has been described as one of the toughest markets in the world for doing business, a place where firms must do their homework and take nothing for granted. A thorough read of this 2000 Country Commercial Guide (CCG) for Korea will go along way toward helping U.S. companies realize success in this exciting and dynamic market.

On the macro and microeconomic front, and in response to the Asian financial crisis, the Kim Dae Jung administration is implementing structural reforms aimed at putting the Korean economy on a more open, market-oriented basis. Many of these reforms are paying off. The rebound in real GDP for the first quarter showed a 4.6% increase from a year earlier and was led by very strong private consumption. Capital inflows and a growing current account surplus will push reserves over their present level of $ 58 million, and the Bank of Korea (BOK) recently revised its GDP forecast for 1999 to 6.8% over its earlier forecast of 3.8%. BOK has noted that the amount of cash in the hands of the public jumped to a 14-month high in April. Koreans are spending more. Large-sized freezers and TVs are selling briskly, while up-scale family restaurants are bustling with customers. Buyers of popular passenger car models need to wait a month or more for delivery, contrasting sharply to the stagnant inventory of a few months ago. The sharp spike in department store sales has been dramatic, with turnover at Seoul's eight major department stores up 29% year-on-year. It is clear that the Korean consumer is showing renewed confidence and optimism.

However, with the rapid improvement in the Korean economy, there are many within Korea that now believe continued reform and quick restructuring is no longer necessary. The recent increase in the Korean stock market has led some companies to believe that they no longer need to induce foreign capital. Many of the previously announced, large-scale M&A deals involving foreign interests have fallen through or continue to be delayed, casting doubt on Korea's commitment to transparency and accepted international business practices.

The U.S. Government has initiated WTO dispute settlement action on Korea's barriers to the import and distribution of beef, and on Korea's failure to meet its obligations under the WTO government Procurement Agreement. The U.S. has also raised serious concerns about the trade-impeding effects of Korea's treatment of foreign, research-based pharmaceuticals and the consistency of this treatment with Korea's international obligations. Long-standing concerns about the Korean government's involvement and support for the Korean steel industry have also been raised. President Kim's government has stated its intention to address these concerns, and progress has been made. The United States and Korea now are engaged in a results-oriented comprehensive dialogue on broader U.S. steel-related concerns, as well as implementation of the Memorandum of Understanding on trade in motor vehicles signed with the U.S. in October of 1998. Both countries have been also working hard to conclude a Bilateral Investment Treaty.

Despite some of the challenges described above, there are many outstanding possibilities for U.S. goods and service providers, and we have described these possibilities in Chapter V (Best Prospects) of the CCG. New opportunities continue to abound. For instance, Korean electronic commerce is expected to double annually for the next five years. With the expansion of demand, imports from the U.S. for semiconductor equipment are estimated to grow at an average annual rate of 32% -- from $ 405m in 1998 -- to $ 931.5m by 2001. The Korean state-owned energy sector (power generation, oil and gas) is being privatized and is providing great opportunities for U.S. energy companies. The Korean government is spending $11b in 1999 on infrastructure projects (airports, roads, railways, mega-resorts) and is seeking U.S. architectural and engineering expertise.

In sum, we believe that Korea is undergoing a fundamental and revolutionary period of change. While barriers remain, what is clear is that Korea is gradually evolving into a more competitive, more transparent, more user-friendly business environment, and we urge serious U.S. firms not to underestimate the strategic importance of being active in this key market.

Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at HTTP://WWW.STAT-USA.GOV and HTTP://WWW.STATE/GOV. They can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS.