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Country Commercial Guides for FY 2000: Korea
Report prepared by U.S. Embassy Seoul, released July 1999
Note* |
CHAPTER V. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENTBest Prospects for Non-Agricultural Goods and Services
Note: The Best Prospects for Non-Agricultural goods and services are ranked based on a standard criterion for all Country Commercial Guides throughout the world. The industry sectors are ranked based on estimated growth, in dollar value, of U.S. exports to Korea over the coming year (i.e., 1999(E) figures minus 1998(E) figures) Please note that the statistical figures are unofficial estimates. In addition, the 1999 estimated exchange rate used is not necessarily a forecast of the average rate for 1999, but only the rate at the time of publication.
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Sector Rank: 1
Name of Sector: Transportation Services
ITA Industry Code: TRNComments: The Korean transportation market for inland trucking, maritime, aviation and railway services grew by more than 16 percent annually between 1990 and 1997. In 1998, due to Korea's economic difficulties, the transportation services market grew only 6.1 percent. In accordance with the World Trade Organization (WTO) agreement, the Korean market is now opened for greater foreign firms to provide the above-mentioned services. Seventeen foreign freight forwarders, including seven U.S. companies (such as UPS), three Swiss firms, and two Italian firms are registered with the Korean Ministry of Construction and Transportation to provide multi-modal transportation services in Korea.
The Korean government is also planning to make additional investments in transportation infrastructure projects that were started through joint Korean and foreign investment. These major projects include the development of ports, airports, roads and railways, the modernization of cargo handling systems, the expansion of the current cargo terminals at sea/airport terminals, construction of integrated freight terminals (IFT) and the establishment of inland container depots (ICD) in major Korean cities. Additionally, it is expected that there will be continued direct investment by foreign firms in advanced transportation services and management technologies.
The most promising subsectors (US $ millions):
- Inland Transportation Services:15,706 - Maritime services: 14,830 - Aviation Services: 3,861 - Railway Services: 1,878 - Related services: 1,742Statistics (US$ millions)1997 1998 1999(E) A. Total Sales 23,803 24,390 29,590 B. Sales by Local Firms 33,470 39,950 41,900 C. Foreign Sales by Local Firms 15,491 22,692 21,181 D. Sales by Foreign-owned Firms 5,824 7,132 8,871 E. Sales by U.S.-owned Firms 2,624 3,729 4,660 F. Exchange Rates 951 1,400 1,200The above statistics are unofficial estimates. E=Estimated.+++++++++++++++++++++++++++++++++++++++++++++++++
Sector Rank: 2
Name of Sector: Electrical Power Systems
ITA Industry Code: ELPComments: Korean energy consumption decreased as a result of the economic slowdown, implementation of the IMF program, and the devaluation of the Korean won in 1998. Korean power demand fell by 3.8 percent during 1998 compared with 1997. As a result, KEPCO postponed the construction of previously planned power plants in 1998. However, power demand is expected to increase in 1999 by approximately 5 percent based on an estimated 1999 GDP growth of 2 percent. Given the current projected GDP growth rates of 4.5 - 5.0 percent, we expect Korean power demand to increase further. Accordingly, KEPCO has budgeted $3.2 billion for power plant construction and will resume the construction of the previously postponed power plants in 1999 through U.S. and Japanese Exim financing. Based on Korea's 1998 Long-term Power Development Plan (LPDP), KEPCO plans to increase the country's power generation capacity to 80,830 MW by building 117 new power plants with a combined capacity of 51,590 MW by 2015. This will almost double the total Korean power plant capacity to meet future electricity demands.
While these projects are important, of greatest significance, is the government's announcement to liberalize the power generation industry. The proposal to restructure KEPCO is to divide KEPCO into power generation and distribution sectors in order to introduce and promote competition in the wholesale and retail power markets. KEPCO will first be broken-up into five to seven power generation subsidiaries privatized by 2002. The distribution sector will be split into several companies by 2002 in order for electric power to be sold at the retail level after 2009. In the transmission sector, a transmission company will be established to provide the following functions: market operator, system operator, asset management, and trade settlement.
KEPCO is expected to retain the transmission company and will continue to monopolize the transmission sector. This governmental policy is providing immediate opportunities for U.S. companies to enter into the Korean power generation industry. As the first step of this privatization program, the Korean government successfully issued $750 million worth of Depository Receipts (DR) in March 1999 to sell 5 percent of its 58.2 percent holding in KEPCO. Furthermore, it plans to sell one of its affiliate power generation companies that consists of four to six power plants, and is estimated to be worth $3-$5 billion. The sale will be conducted through international competitive bidding in 1999. KEPCO will also sell two combined cycle power plants located in Anyang and Puchon in 1999. As another element of the KEPCO privatization process, KEPCO plans to sell shares of their subsidiaries by 2001 and their affiliate firms by 2002. The amount of power generation equipment purchased by KEPCO and the private sector significantly decreased in 1998, however, it is expected to steadily increase for the next years.
The most promising subsectors (U.S. millions):
Nuclear Power Generating Equipment $2,250 Thermal Power Generating Equipment $1,350 Heavy Electrical Equipment $4,600Statistics (US millions)1997 1998 1999 (E) A. Total Market Size 9,400 4,700 6,300 B. Total Local Production 4,500 2,900 3,800 C. Total Exports 1,800 1,500 1,700 D. Total Imports 6,700 3,300 4,200 E. Imports from U.S. 2,500 1,600 2,000 F. Exchange Rates 951 1,400 1,200The above statistics are unofficial estimates. E=Estimated.+++++++++++++++++++++++++++++++++++++++++++++++++
Sector Rank: 3
Name of Sector: Retail Services
ITA Industry Code: GSVComments: Since Korea's economy is recovering faster than expected by local and overseas economic research institutes, the domestic retail industry is expected to grow by 9.7% to 110.5 trillion won ($92.1 billion) in 1999. Gross revenues for the Korean retail industry, which includes department stores, discount stores, supermarkets, convenience stores and conventional markets, reached 100.7 trillion won ($71.9 billion) in 1998. Discount stores expanded in the market over the past year and experts expect annual growth of 40% in 1999 to 7 trillion won. This marks an increase of 2 trillion won more in sales than were recorded in 1998.
By comparison, department stores, which comprise 11.3% of the retail industry, expect revenues of 12.5 trillion won ($10.4 billion). This figure indicates a dramatic 9.7% over year-end 1998 figures and a significant recovery from the negative growth of 9.8% recorded during the height of the economic crisis. However, 1999 began with efforts to increase the overall price competitiveness of products sold by the major department stores. They were successful in attracting back large numbers of bargain-hunting consumers, with more discretionary income. As a result, industry specialists expect that department stores' sales revenues will soon surpass pre-economic crisis sales figures in 1999, but still lag behind the tremendous success being enjoyed by the discount stores.
The most promising subsector (US$ millions):
Discount Stores $5,800
Statistics (US$ millions) 1997 1998 1999(E) A. Total sales 108,608 71,941 92,067 B. Total sales by local firms 108,074 71,257 90,950 C. Total foreign sales by local Local firms - - - D. Total sales by foreign-owned Firms 534 683.4 1,117 E. Total sales by U.S.-owned firm - 343 572 F. Exchange Rates 951 1,400 1,200Note: The total sales by foreign-owned firms mean the sum of total sales of Makro (U.S.A), Carrefour (France) and Costco Wholesale (U.S.A). The 1997 statistics include Price Club/ Shinsegae sales under "sales by local firms". Korea Makro is a subsidiary of Wal-Mart Stores.The above statistics are unofficial estimates. E=Estimated.
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Sector Rank: 4
Name of Sector: Aircraft and Parts
ITA Industry Code: AIRComments: Korea has postponed several major commercial and defense projects as a result of the economic downturn. However, since 1994, ROKG has invested more than US $2 billion in the aircraft and aircraft parts industry especially in manufacturing facilities, assembly lines and test facilities. Korea also has designated the aircraft industry as one of its primary industries and plans to develop this industry in the coming century, through investments by major Korean conglomerates such as Samsung, Hyundai and Daewoo in a single company under the banner of the Korean Aerospace Industry (KAI). Korean Air Lines has not indicated that it will join the new firm at this time. According to the consolidation plan, the KAI will be established in July 1999. All current commercial aerospace projects, which are currently handled separately by Samsung, Hyundai and Daewoo will be integrated under the KAI. In addition, as an incentive to join the new firm, ROKG will grant KAI exclusive rights for the government's future military logistics and aerospace projects. The ROKG also expects KAI to establish more effective research and development programs geared towards manufacturing all fundamental parts and materials, based on the combined resources and technologies of the three merged companies. In addition, Korea plans to design its own Multi-Purpose Satellite by 2003, as well as manufacture a low-orbital satellite, with its own launching system, by 2005.
For foreign companies, Korea's new plan for its aerospace industry is expected to result in demand for long-term procurement contracts, technical cooperation agreements, licensed production contracts, and joint ventures. However, for all other fighters being considered (except the FX, Korea's future fighter program), the government has decided to import all the technologies solely from the U.S. and will discuss details of technology transfer with the USG. Presently, no more details about the fighters, including type, category or definition, have been determined.
Additional business opportunities for foreign suppliers are expected when Phase 1of the Inchon International Airport (IIA) opens to the public in January 2001. This will create additional demand for aircraft parts depots and aircraft maintenance services. The Open Skies Agreement between Korea and the U.S., signed in June 1998, eventually will lead to increased demand for aircraft and parts to service expanded routes and flights in future years. Ultimately, as a result of these developments, an anticipated economic recovery and ROKG's commitment to promoting a successful aircraft industry, the aircraft and parts market in Korea shows signs of growth potential.
The most promising subsectors:
- General Aviation
- Aircraft Parts
- Helicopters
- EnginesStatistics (US$ millions)
1997 1998 1999(E) A. Total Market Size 2,708 997 1,751 B. Total Local Production 753 1,112 1,194 C. Total Exports 330 976 563 D. Total Imports 2,285 861 1,120 E. Imports from the U.S. 1,744 715 930 F. Exchange Rates 951 1,398 1,200The above statistics are unofficial estimates. E=Estimated.Additional Remarks: 1. Due to the economic crisis that began in November 1997, imports were drastically reduced in 1998.
2 Total Exports in 1998 included the sales of several used passenger aircraft by Korean Air and Asiana Air Lines.+++++++++++++++++++++++++++++++++++++++++++++++++
Sector Rank: 5
Name of sector: Architectural/Engineering Services
ITA industry code: ACEComments: Architectural/engineering services decreased from $6,300 million in 1997 to $4,410 million in 1998, a 30 % decrease. Private sector investment stagnated and many new private investment projects had been suspended during this period of downsizing and reorganization. However, Korean private sector end-users of architectural/engineering services are beginning to come into their own stage of expansion and development. It is anticipated that the market for 1999 will grow to $5,950 million, a 35 % increase and over a year earlier than forecasted. The market is expected to grow at an annual average rate of 8 % through 2002.
The import market for architectural/engineering services accounts for 40 % of the total market in Korea. U.S. suppliers dominate the local market, with an approximate 45 % share, followed by Japanese and French suppliers who maintain more than a 10 % share. The import market was reduced from $3,800 million in 1997 to $1,840 million in 1998 by 48 %. The import market in 1999 is expected to grow to $2,350 million, a 28 % increase and also over a year earlier than expected.
In the public sector's move to help the nation get out of its economic slump, the Korean government put top priority on activating the sluggish construction market this year. It plans to increase its investments in the construction industry from $62.1 billion in 1998 to $75 billion in 1999. In particular, the Korean government raised its budget for social overhead capital (SOC) infrastructure projects in 1999 by 6 % to $10.4 billion. Besides social infrastructure facilities, the government gets under way to build a total of 500,000 units of houses in 1999. A total of $10 billion in housing construction funds will be provided in 1999 by the government.
In the private sector, corporate restructuring will continue. The top ten business groups plans to merge their construction and engineering firms to become one company. The short-term private sector's market prospect does not look promising. The private sector's market is expected to start growing significantly in 2000 when the Korean economy restores growth inertia.
Statistics (US$ million)
1997 1998 1999(E) A. Total Market Size 6,300 4,410 5,950 B. Total Local Production 5,760 4,600 6,440 C. Total Exports 3,260 2,030 2,840 D. Total Imports 3,800 1,840 2,350 E. Imports from the U.S. 1,520 920 1,100 F. Exchange Rates 951 1,400 1,200The above statistics are unofficial estimates. E = Estimated.+++++++++++++++++++++++++++++++++++++++++++++++++
Sector Rank: 6
Name of Sector: Security and Safety Equipment
ITA Industry Code: SECComments:
The growth in the industrial safety market is affected by Korea's economic situation. However, along with the beginning of Korea's economic recovery, it is anticipated that the growth of the industrial safety market will also gradually recover. The industrial safety market includes: mechanical/chemical/biological safety products, survival products, traffic control equipment, police equipment, fire fighting equipment and facilities, alarms and detectors, rescue equipment and various system improvements and technology for various working conditions.According to the Korean government's three year plan for industrial safety, the government has invested nearly US $480 million in various industrial safety programs, including safety management, prevention of industrial accidents, process hazard analysis and the establishment of safe equipment and facilities programs. The three-year plan calls for the modernization of industrial equipment, an increase in safety inspection technology for hazardous construction areas, manufacturing, electric, chemical, biological and radioactive sites, and accident prevention seminars and training to handle various types of industrial accidents and emergency rescue activities. In June 1999, Korea held its 31st Korea International Exhibition for Safety and Security products (KISS '99), at the Korea Convention and Exhibition Center (COEX) in Seoul. A total of 124 exhibitors, including 35 firms from eight foreign countries (U.S., U.K., Denmark, Japan, France, Germany, Sweden and Malaysia), participated and displayed their safety and security products.
Korea is also seeking advanced technologies in other areas and has developed a master plan for implementing an Intelligent Transport System (ITS). In order to introduce new technologies and display Korea's domestic developments in this field, Korea hosted the 5th World ITS Congress in Seoul last October. More than 3,000 transport officials and ITS experts from 40 countries participated. Major highlighted ITS technologies offering export potential for U.S. firms include: advanced traffic control (ATC), advanced incident management (AIM), automatic traffic enforcement (ATE), electronic toll collection (ETC), and hazardous material monitoring (HMM) equipment.
Recently, the Geographical Information System (GIS) also emerged as a sector offering strong prospects for U.S. suppliers. The ROKG plans to invest USD 432 million through 2002 to establish the National Geographic Information System (NGIS). The Korean GIS market is attracting interest from several leading foreign GIS firms, especially in the development of software and databases for GIS. U.S. suppliers dominate the field and can expect to develop potential sales in Korea.
The most promising subsectors
(US $ million):- Industrial Safety Products 262 - Traffic Control/Safety Products 158 - Access Control Systems 95 - Airport Security Equipment 120 - GIS - related Products 216Statistics (US$ millions)1997 1998 1999(E) A. Total Market Size 830 927 1,110 B. Total Local Production 601 689 820 C. Total Exports 322 230 390 D. Total Imports 550 468 680 E. Imports from the U.S. 229 290 370 F. Exchange Rates 951 1,400 1,200The above statistics are unofficial estimates. E=Estimated.+++++++++++++++++++++++++++++++++++++++++++++++++
Sector Rank: 7
Name of Sector: Pollution Control Equipment
ITA Industry Code: POLComments:
Korean environmental market demand decreased considerably since 1997 due to the local economic downturn, consequently reducing the government's budget for environmental projects. Environmental-related total imports decreased by 40% due to the drastic Won devaluation which made foreign-sourced products prohibitively expensive. Local manufacturers offering medium-tech environmental equipment and services supplied the remaining market demand.However, despite the country's lingering economic difficulties, Korea's President and his advisers have re-affirmed the nation's commitment to environmental clean-up and protection. The Korean environmental market is beginning to spring back in 1999.
The Korean pollution control equipment market continues to expand and there is still good potential over the medium-term for sales of U.S. environmental products, services and technology. The current market share of U.S. environmental firms among foreign competitors in Korea is estimated to account for 20 percent of the total market, second only to Japanese firms with 40 percent. Sales of many types of equipment and technical expertise, as well as joint venture manufacturing and construction projects, are the most promising avenues for U.S. participation.
Local manufacturers supply a major portion of Korea's rapidly growing market, with imports accounting for less than 40 percent of the total market. However, as a result of increased enforcement activities and greater recognition of the necessity to invest in environmental protection, demand will grow for more sophisticated equipment.
In 1999, the ROKG plans to invest 65 percent of total available funds, both public and private, for the construction of new waste water and drinking water treatment plants. Within the next few years, the market for air pollution prevention equipment will increase. Best sales prospects are automatic strainers, aerators, ozone generators, FRP chains, decanting centrifuges, water reuse systems, sludge de-watering equipment, screw-decanters, and hydrasive screw/ultra-screen systems, VOC control equipment, incinerator emission control systems & monitoring equipment, toxic air pollutants control systems, ambient air quality monitoring systems, and environmental laboratories and equipment.
The most promising subsectors (US$ millions) are:
- Air pollution control equipment: $699 - Water pollution control equipment: $757Statistics (US$ millions)1997 1998 1999(E) A. Total Market Size 8,942 3,341 4,152 B. Total Local Production 6,259 2,339 2,906 C. Total Exports 205 143 208 D. Total Imports 2,683 1,002 1,246 E. Imports from the U.S. 537 200 249 F. Exchange Rate 951 1,400 1,200The above statistics are unofficial estimates. E=Estimated.+++++++++++++++++++++++++++++++++++++++++++++++++
Sector Rank: 8
Name of sector: Medical Equipment
ITA industry code: MEDComments:
Korea's medical equipment market was approximately $1 billion prior to the onset of the Asian financial crisis in late 1997. The subsequent economic problems faced by Korea resulted in a 45-percent decrease in the medical equipment market in 1998. Imports from the United States decreased proportionally. The medical equipment market in 1999 is expected to rebound by about 20-percent due to the better-than-anticipated economic recovery and appreciation of the won against the dollar. Readjustments to reimbursement prices under the national health care insurance program are being made in order to account for appreciation of the won. This should have a favorable impact on U.S. medical equipment imports as they will, in effect, be less expensive for Korean buyers than was the case in 1998.The effect of the country's economic crisis on specific types of medical equipment has differed from product to product. In general, relatively expensive durable medical equipment (e.g. MRIs and CTs) has been more adversely impacted than other types of equipment, with the market for durable capital goods shrinking by 70 to 80-percent in 1998 compared to the previous year. Comparatively, the market shrinkage for expendable medical supplies was only 20 to 30-percent over the same period.
Imports represent 70-percent of the total medical devices market in Korea. Recent economic difficulties have prompted hospitals and physicians to attempt to decrease costs by purchasing locally manufactured products, which are less expensive, but of lower quality than imports. While this has been possible for some basic medical supplies, it has not been so for technology-intensive equipment, which is almost exclusively manufactured abroad.
U.S. companies account for approximately 40-percent of Korea's medical equipment imports, making the United States the largest foreign supplier. European and Japanese firms are major competitors, accounting for much of the remaining import market. U.S. companies' share of the market should increase further once Korea fully implements a new regulatory system that recognizes international quality standards (e.g. U.S. GMP and ISO) expected September 1, 1999.
Products that present the best prospects for export to Korea include medical sterilizers, rehabilitation equipment, respiration equipment, orthopedic joints, diagnostic ultrasound scanners, magnetic resonance imaging systems, patient monitors, computer tomography scanners, catheters, artificial kidneys and dialysis machines, suture needles, general surgical instruments, operation tables, ophthalmic equipment, endoscopes, intraocular lenses, and artificial heart valves.
Statistics ($ millions)
1997 1998 1999(E) A. Total Market Size 947 515 620 B. Total Local Production 422 362 430 C. Total Exports 180 213 250 D. Total Imports 700 366 440 E. Imports from the U.S. 279 149 180 F. Exchange Rates (won/$) 951 1,400 1,200The above statistics are unofficial estimates. E=Estimated.+++++++++++++++++++++++++++++++++++++++++++++++++
Sector Rank: 9
Name of Sector: Drugs and Pharmaceuticals
ITA Industry Code: DRGComment:
The Korean pharmaceuticals market approached $9 billion, making it the 10th largest in the world, prior to the onset of the Asian financial crisis in late 1997. Although the market has since decreased by about 40 percent, the pharmaceuticals sector has been less adversely affected than other sectors due to the inelastic importance of health care.Pharmaceuticals imports represent only 13-percent of the total market. Local industry dominates the market for generic and over-the-counter (OTC) drugs. Among foreign suppliers, U.S., Japanese, and European pharmaceutical companies are most active. Korean pharmaceuticals firms are generally not research intensive and therefore less innovative than their foreign counterparts. This gives multinational research-based pharmaceutical firms a significant advantage over Korean firms in supplying new cutting-edge drugs.
Although the growth rate for pharmaceuticals imports has exceeded that of total Korean imports for the past several years, foreign firms still face significant disadvantages. These include, for example, rigorous import approval requirements and lack of coverage for many foreign drugs by the Korean national medical insurance system.
Korea's health care system is undergoing a number of major changes, which will present foreign firms with both opportunities and challenges. For example, imported pharmaceuticals will be included in the list of reimbursable drugs under the national health insurance system as of August 1, 1999. This should increase transparency and predictability for foreign exporters. However, the Korean government is pressuring firms that would like their products to be listed and reimbursed to lower their prices.
Another major change in the health care system is that the Korean government plans to separate the prescribing and dispensing of drugs in 2000. Currently, pharmacists are able to both prescribe and dispense drugs. The separation of these functions could cause the market size to either stagnate or shrink, as the new policy will prevent patients from buying drugs without a doctor's prescription. Pharmacists may be allowed to substitute Korean generic drugs for prescribed name brand foreign drugs, adding the possibility of local substitution should the margin be higher on local drugs.
As Korea's economy continues to improve, Korea will become an increasingly important market for foreign suppliers. U.S. firms are advised to stay actively engaged in the market in order to be well positioned to take advantage of new opportunities as they unfold.
Statistics ($ millions)
1997 1998 1999(E) A. Total Market Size 8,213 5,236 6,283 B. Total Local Production 7,765 5,128 6,153 C. Total Exports 509 575 690 D. Total Imports 957 683 820 E. Imports from the U.S. 138 100 120 F. Exchange Rates 951 1,400 1,200The above statistics are unofficial estimates. E = Estimated.+++++++++++++++++++++++++++++++++++++++++++++++++
Sector Rank: 10
Name of sector: Telecommunications Services
ITA Industry code: TESComments:
Opportunities will unfold over the next several years for U.S. sales of telecom services as economic restructuring and deregulation in the telecom sector accelerate in Korea. During the past few years, the Korean government has awarded several dozen national and regional licenses for newly emerging telecom services, such as PCS, TRS. CT-2, wireless data, paging and leased line facility rental. There are four common carriers competing with each other in the field of wired telephone call services in 1999 - two local call service providers, three long-distance service providers, and three international call service providers. There are also two nationwide cellular operators as well as three nationwide PCS operators.In addition, the Korean government issued 158 licenses for new types of businesses for emerging telecom services, such as phone call resales, Internet phoning, international call-back, and in-house phoning during the January 1, 1998 - April 23, 1999 period. Korean consumers will have many choices when it comes to call carriers for long-distance calls and international calls, making use of the different promotions offered by each carrier.
The Korean government continues to open the market for new telecom services in accordance with its commitments and obligations to the WTO. U.S. suppliers enjoy significant export advantages in telecom products/services; therefore, they should benefit from Korea's rapidly growing communications service market. At present, Korea is in a recession. However, Korea should emerge over the medium and long-term stronger than ever. American suppliers are best advised to stay engaged in the Korean marketplace and keep abreast of emerging technological trends in the field. Opportunities will unfold for incremental sales of American products and services, as the country recovers from the current crisis and builds for the future. Joint venture and licensing agreements will be the key to the market.
Statistics (US$ millions)
1997 1998 1999(E) A. Total sales 15,439.4 12,761.5 14,477.7 B. Sales by local firms 15,325.7 12,629.3 14,336.4 C. Sales by foreign 113.7 132.2 141.3 owned firms D. Sales by U.S.-owned 113.7 132.2 141.3 firms E. Exchange Rates 951 1,400 1,200(E)(US$1:Won)The above statistics are unofficial estimates. E= Estimated.
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Sector Rank: 11
Name of sector: Education and Training
ITA industry code: EDSComments:
The market for professional and vocational schools was liberalized in 1995. The market for higher education, including branch colleges and universities, opened completely in 1999. Through 1997, Korea's education industry grew rapidly at an annual growth rate of 10 to 15 percent due to the opening of foreign educational institutes. The American report, Open Doors (prepared by IIE), reports that enrollments from Korea continued to grow at a 15.5% rate in 1998 although the Ministry of Education expected a negative growth rate of 10 to 15% and foreign exchange payment problems were indicative of the economic downturn which reportedly forced thousands of students to return to Korea. The Ministry expects to release updated statistics in July 1999 concerning current trends. According to published reports from the Bank of Korea, tuition payments to all countries jumped a healthy 24.8% from US$ 98.1 million reported for the period Jan-Feb 1998, to US$ 122.4 million in Jan-Feb 1999. On an annual basis, 1999 remittances are expected to total between US$ 813 and $854 million. According to the Ministry of Education, Korean private tutoring expenses in 1997 reached US$10 billion. During that year, Korean families spent the equivalent of 16.1 % of the nation's per-capita GDP (or $1,548) which is three to four times more than in Japan, for example. At the same time, government expenditures for education dropped from 4.3 to 3.9 % of GDP and scholarship funds available to financially-strapped families during that period was only $78.8 million (US$ 1 = W951). However, scholarship funds are expected to double to $157 million in 2000.At this writing, the market for cost-effective "distance learning" programs which can be conducted by satellite or internet is still in its infancy in Korea. Additionally, despite market liberalization that allowed branch campuses, schools wary of the regulatory climate and related issues have not made plans to establish campuses here.
Reflecting Koreans' enthusiasm for more sophisticated educational options, approximately 130,000 students including some 73,000 college students, were actively pursuing education and training abroad in 1998. Of that group, 44,890 students were studying in the United States, which is regarded as the most popular education destination for Koreans. Undergraduate studies attracted 17,928 students, whereas graduate degrees drew 18,957; ESL programs attracted 6,005. The Korean education market is promising and extremely competitive since other countries such as England, Canada, Australia, France, and Japan continuously conduct study fairs to attract more Korean students. The USG actively promotes the US$ 9 billion education market in Korea, the region and throughout the Americas through the highly successful STUDY USA Exhibitions and Pavilions organized by Commercial Service posts, with the active support of Embassies' Consular Sections and the United States Information Service (USIS).
Despite the initial signs of economic recovery, new college graduates are being encouraged to look abroad for training or are going back to school to pursue higher educational degrees. These students hope to re-enter the workforce with better qualifications when local firms begin rehiring in greater numbers.
For students already studying in America, President Clinton announced in 1998 that the U.S. government would offer new work-study benefits that would allow Korean students in the U.S. to support themselves while in school. President Clinton's actions will help sustain this service export, as well as greatly assist the students who continue to face financial difficulties.
The most promising sub-sectors:
- Intensive English Language Training
- Vocational Training
- Accounting
- Master of Business Administration (MBA)
- Art and Music Schools
- Summer CampsStatistics (US$ millions)
1997 1998 1999(E) A. Total Sales 10,604 10,772 11,841 B. Total sales\local firms 11,190 11,307 12,430 C. Total foreign sales local\firms 656 603 603 D. Total sales\foreign-owned\ firms 70 68 74 E. Total sales\U.S.-owned firms 36 34 37 F. Exchange Rates 951 1,400 1,200The above statistics are unofficial estimates. E=Estimated.+++++++++++++++++++++++++++++++++++++++++++++++++
Best Prospects for Agricultural Products
BEST PROSPECTS FOR U.S. FOOD & AGRICULTURE SECTOR EXPORTERS TO KOREA
Total imports of agricultural, food, fishery and forest products from the United States to Korea amounted to $2.96 billion (Korean Customs - CIF value) in 1998, down 29.4 percent from 1997 because of the economic crisis in Korea. However, imports are expected to increase significantly in 1999 as the Korean economy recovers. Early indications in 1999 show the consumer ready sector leading the agricultural comeback.
(Note: All statistics for 1999 and 2000 are estimates. E = Estimated. All statistics as listed in the below charts are quoted in Metric Tons (M/T = metric ton).
Name of Sector: Beef by-products (oxtail, feet, etc.)
HS Code: 0206 & 05041997 1998 1999(E) 2000(E) (M/T) (M/T) (M/T) (M/T) A. Total Market Size: N/A N/A N/A N/A B. Total Local\Production: N/A N/A N/A N/A C. Total Exports: 0 3,147 3,300 3,500 D. Total Imports: 4,700 21,600 24,000 26,000 E. Total Imports: 2,600 13,729 15,000 16,500 from U.SNote: Koreans like to eat beef and pork by-products such as ox tails, head, feet, tongues, livers, etc. Because of the strong demand for these products, prices are considerably higher in Korea compared to the U.S. where consumer demand is relatively low for these items. Imports of animal by-products increased steadily over the past several years, and amounted to $36.2 in 1998.Name of Sector: Beef
HS Code: 0201 & 02021997 1998 1999(E) 2000(E) (M/T) (M/T) (M/T) (M/T) A. Total Market Size: 403,000 334,736 311,435 319,000 B. Total Local Production: 237,000 *257,200 181,000 180,000 C. Total Exports: 100 0 0 0 D. Total Imports: 166,000 77,536 130,435 139,000 E. Total Imports from U.S.: 83,000 38,160 73,950 79,000Note: Estimated, boneless basis. Beef imports are subject to government-set quotas. Korea did not fulfill its beef import quota in 1998 because of the economic crisis. Imports of beef decreased by 41.6 percent in 1998 compared with 1997. Beef import quotas will increase by around 10% annually until 2001, when the market becomes fully liberalized. Declining domestic production will also necessitate greater imports in the future to satisfy domestic demand. U.S. red meat products are extremely competitive in both quality and price vis-a-vis domestic and competitor products.================================================================
Name of Sector: Pork
HS Code: 02031997 1998 1999(E) 2000(E) (M/T) (M/T) (M/T) (M/T) A. Total Market Size: 672,400 768,489 752,400 732,000 B. Total Local Productn:700,000 *808,400 770,400 780,000 C. Total Exports: 56,000 92,858 100,000 105,000 D. Total Imports: 61,600 52,947 55,000 57,000 E. Total Imports from U.S.: 6,838 5,069 5,300 5,600Note: *Estimated. Local production is based on boneless meat, while trade numbers are based on boneless and in-bone meat combined.Name of Sector: Citrus fruit
HS Code: 08051997 1998 1999(E) 2000(E) (M/T) (M/T) (M/T) (M/T) A. Total Market Size: 694,300 547,135 713,000 590,000 B. Total Local Product.: 648,900 511,900 680,000 550,000 C. Total Exports: 3,300 6,265 12,000 13,000 D. Total Imports: 48,700 41,500 45,000 53,000 E. Total Imports from U.S.: 48,700 41,274 45,000 53,000Note: Citrus imports consist of grapefruit, lemons, and oranges which come almost exclusively from the United States. Fruit is a major component of the Korean diet. Its attractiveness to consumers was most evident in 1998 when, despite a major economic downturn, consumption of fresh citrus increased. U.S. citrus is extremely competitive with local products in both price and quality. However, the tariff for oranges remains high and citrus imports, in general, encounter many phyto-sanitary and customs clearance problems.================================================================
Name of Sector: Processed fruits, nuts and vegetables (e.g. pickles, juices, tomato paste, peanut butter, canned fruit and vegetables, etc.)
HS Code: 2001 - 20081997 1998 1999(E) 2000(E) (M/T) (M/T) (M/T) (M/T) A. Total Market Size: N/A N/A N/A N/A B. Total Local Producn.: N/A N/A N/A N/A C. Total Exports: 18,600 22,473 18,600 18,000 D. Total Imports: 195,200 77,151 85,000 94,000 E. Total Imports from U.S.: 76,000 57,079 66,000 76,000Note: Consumer-ready, high value products are in growing demand as the number of two income families increases. Consumer confidence in and a growing acceptance of western food products are increasing the demand for prepared fruit and vegetable products. The excellent reputation and quality of U.S. food products puts U.S. suppliers in a strong position to take advantage of this rapidly expanding market.================================================================
Name of Sector: Other prepared foods (e.g. soups, seasonings, ketchup, sauces, etc.)
HS Code: 2103, 2104 & 21061997 1998 1999(E) 2000(E) (M/T) (M/T) (M/T) (M/T) A. Total Market Size: N/A N/A N/A N/A B. Total Local Product: N/A N/A N/A N/A C. Total Exports: 64,900 90,548 95,000 100,000 D. Total Imports: 34,500 45,736 50,000 55,000 E. Total Imports from U.S.: 10,400 11,627 13,000 15,000Note: Total imports of prepared foods into Korea reached $126.5 million in 1998. Competition is expected to be fierce among many countries. Superior quality and internationalization of tastes, and rapidly increasing demand for convenience foods make the outlook especially bright for exporters of these U.S. products. Tariffs for this category of imports are relatively low, around 8% and strong growth is expected to continue in the coming years.Name of Sector: Pet Foods
HS Code: 2309.101997 1998 1999(E) 2000(E) (M/A) (M/T) (M/T) (M/T) A. Total Market Size N/A N/A N/A N/A B. Total Local Producn: N/A N/A N/A N/A C. Total Exports: 4,300 5,058 5,500 6,000 D. Total Imports: 11,900 7,144 7,900 8,700 E. Total Imports from U.S.: 10,600 6,283 7,000 7,700Note: One feature of the growing affluence of Koreans is the trend to own pets. More consumers are turning to ready-made imported pet food such as kibble and canned products. We expect double digit growth in this market as the number of pets increases.================================================================
Name of Sector: Fish and Seafood
HS Code: Chapter 03 and 1604 and 16051997 1998 1999(E) 2000(E) (M/A) (M/T) (M/T) (M/T) A. Total Market Size: 3,257,015 2,634,090 2,634,000 2,670,000 B. Total Local Prod: 3,243,725 2,834,415 2,800,000 2,800,000 C. Total Exports: 509,090 530,782 530,000 530,000 D. Total Imports: 522,381 330,457 364,000 400,000 E. Total Imports from U.S.: 62,268 54,991 61,000 67,000Note: The demand for seafood in Korea is especially strong and supplies are short. Ongoing fishing disputes with various countries are further limiting Korea's catch. Fish imports are expected to increase significantly in the coming years in order to meet supply shortages.================================================================
Significant Investment Opportunities
One Stop Shopping: The Korea Trade and Investment Promotion Agency ("KOTRA") has opened its Korea Investment Service Center ("KISC") in order to provide a one-stop service system for foreign investors. The KISC advertises a comprehensive array of services including matchmaking with potential Korean joint venture or mergers and acquisition partners, arranging meetings for foreign investors with relevant governments, institutions and local companies, and supplying information and data for investment feasibility studies. KISC will also provide information on incentives for investing in Korea, a follow-up service to business after establishment, and other administrative support such as extension of the sojourn period of employees of foreign-invested companies. In addition to opening KISC, KOTRA has doubled the number of its overseas Korea trade centers from 20 to 40, and now operates 14 offices in the United States: Atlanta, Boston, Chicago, Dallas, Denver, Detroit, Houston, Los Angeles, Miami, New York, San Diego, San Francisco, Seattle, and Washington.
Stock Market, M&As, Financial Services: Beginning May 25, 1998, the Korean stock market was completely opened to foreign investors. This means that the aggregate ceiling for foreign investors is no longer capped at 55% for the stock of any individual company. Likewise, the limit for single investors is no longer capped at the 50% level. The government decided to scrap the limitations more than six months ahead of schedule in order to induce more foreign capital to enter the marketplace. At the same time, the aggregate foreign stock ceiling in state-owned companies, such as POSCO and KEPCO, will be raised to 30% from the current 25%, while the single foreign limit will increase from 1% to 3%. Additionally, restrictions on mergers and acquisitions, including hostile mergers and acquisitions, have been lifted, and foreign firms can now undertake a wide variety of financial services.
Telecommunications: The Ministry of Information & Communication advanced by two years the concession schedule Korea submitted to the WTO/GBT in February 1997. As a result, foreign entities will be able to own up to 49% of Korea's basic telecommunications service companies (except for Korea Telecom) and hold management control over the companies as major shareholders beginning in 1999. The ceiling on foreign ownership of Korea Telecom (KT) was raised from 20% to 33% on September 1, 1998, ahead of the original commitment for the year 2001. The limit on individual foreign ownership also was raised from 7% to 15% in October 1998. The government sold some of its shares in KT by issuing DR in overseas capital markets, reducing its stake in KT from 71.2% to 58.9%. The government plans to further reduce it share to 33.4% by 2001.
Energy Sector: The energy sector is being opened to a broad range of independent power producers, and the government has announced an ambitious effort to fully or partially privatize the Korea Electric Power Corporation. Overseas power plant operators are also currently vying to purchase the thermal power plants of the Korea Electric Power Corporation (KEPCO). Foreign power plant operators have been rushing to Korea since the Planning and Budget Commission (PBC), under the Office of the President, began to encourage KEPCO to sell off its thermal power plants. The PBC feels that the sale of these plants will be a means to introduce foreign capital. The oil refining industry and gas station sectors were liberalized on March 1, 1999, allowing unlimited foreign investment in the oil refining sector and retail gas station business. From July 1, 1999, foreigners can hold unlimited mining rights, as the 50% limit will be abolished. The Korean government's current deregulation trend is creating new opportunities for U.S. companies interested in entering the Korean energy industry. The complete liberalization of the oil refining sector, the gas station business and mining sector in Korea has been accelerated after the Korean government's request for IMF assistance since December, 1997. Two major local oil refineries, Hyundai and Hanwa, will be merged and the new company is soliciting foreign investors to improve their financial statement. This is one of 7 business swap projects of conglomerates for corporate restructuring.
Port Development: The Ministry of Maritime Affairs and Fisheries (MOMAF) is engaged in discussions with four major foreign shipping firms, which are interested in investing in Korea to develop and manage certain Korean ports (Inchon and Pusan ports). The opportunities for investment have developed because some Korean franchisers (previously successful bidders) are now experiencing a shortage of capital to invest in completing the projects due to the recent strength of the U.S. dollar against the Korean Won, and because of the economic downturn which has affected major conglomerates and construction firms since last November, 1997. MOMAF has indicated that it will facilitate discussions between the franchisers and potential foreign investors if the current franchisers agree to divide the projects. If MOMAF is successful, participating foreign investors can expect a reasonable return on investment, such as rights to use facilities they construct, and profits from revenues generated by hotels, commercial real estate and port usage fees. If both sides reach agreement on a specific project, MOMAF will then approve the foreign firm's investment, based upon guidelines in the Private Capital Inducement Act of Korea. As of January, 1, 1999, international ocean freight transport was fully liberalized, opening all shipping operations except for coastal shipping. To facilitate the foreign investment, the 40% equity limit on ship ownership will be abolished in October 1999, and foreign ownership and registration of Korean-flag ships will be unlimited.
Other Sectors: As of 1999, foreign ownership was allowed in two previously off-limits public corporations. For the Korean Tobacco and Ginseng Corporation, foreigners can own up to 25% of the shares, and the individual limit is 7%. For Korea Heavy Industries, there is no equity limit for foreign ownership. Foreigners are able to own real estate as of July 1, 1998, and to undertake a number of activities related to real estate transactions. In addition from 1999, companies in which foreign equity exceeds 51% can build factories in metropolitan areas for 20 technology-oriented sectors like computer, auto parts and telecomm. The government has also announced that it would sell some 30% of the new Inchon international airport operation to foreign investors, including foreign airlines.
Market Opening: On Jan. 1, 1999, 10 sectors were opened; eight fully and two partially. The fully opened sectors include distilling of ethyl alcohol, manufacturing tobacco, publishing of books, deep sea foreign freight transport, air transport support activities, medical insurance, workmen's accident compensation insurance, and horse racing track operation. On May 1, 1999, the gambling sector was fully opened as well. As of May 1, 1999, the market opening ratio was 99.4% with 21 sectors still restricted (7 sectors closed and 14 sectors partially opened) out of a total of 1,148 sectors. The 7 closed sectors include cattle farming, inshore and coastal fishing, wholesale of meats, radio and TV broadcasting etc. However the government has a plan to partly open those closed sectors and to widen the opening for the partly open sectors in late 1999 and early 2000.
The Government of the United States acknowledges the contribution that outward foreign direct investment can make to the U.S. economy. U.S. foreign direct investment is increasingly viewed as a complement or even a necessary component of trade. Nearly sixty percent of total U.S. exports originate with American firms with investments abroad. Recognizing the benefits that U.S. outward investment brings to the U.S. economy, the Government of the United States undertakes initiatives, such as Overseas Private Investment Corporation (OPIC) programs, bilateral investment treaty negotiations and business facilitation programs, that support U.S. investors.
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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