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1
A
Global Country Study Report on
―South Korea‖
College Code : 706
C. K. Pithawalla Institute of Management
Master of Business Administration
Guide Name E mail Address Designation of Guide
Mrs. Richa Agrawal [email protected] Assistant Professor
Mrs. Tejal Patel [email protected] Assistant Professor
Ms. Farzana Doctor [email protected] Assistant Professor
Dr. Kunal Pandya [email protected] Assistant Professor
Submitted to :
Gujarat Technological University
Year : 2012-13
2
Institute‘s/Guide‘s Certificate
Certified that this Global Country Study and Report titled ―Global Country Study Report on
South Korea‖ is bonafide work of attached student list with enrollment numbers, who have
carried out their research under our supervision. We also certify further, that to the best of my
knowledge the work reported herein does not form part of any other project report or dissertation
on the basis of which a degree or award was conferred on earlier occasion on this or any other
candidate.
Guide Name Designation of Guide Signature
Mrs. Richa Agrawal Assistant Professor
Mrs. Tejal Patel Assistant Professor
Ms. Farzana Doctor Assistant Professor
Dr. Kunal Pandya Assistant Professor
Signature of I/C Director
Dr. Snehal Mistry
3
Executive Summery
South Korea – The country of study for our GCSR. Like India, South Korea is also a peninsula
country. India is already into a good economic relationship with South Korea. World‘s leading
electronics company, Samsung and another big player LG are already a very popular brand in India.
Hyundai is also a famous name in automobile in India. So we can say as far as technology and
research and development is concerned, South Korea is very advanced. India is also good in
commercial services exports to South Korea.
So first of all if we sense the opportunity to learn from the existing relationship with South Korea, we
can say that our focus should be to learn and imitate the technological advancement in electrical and
automobile industry. South Korea‘s strategy for doing and expanding business looks very clear from
their performances. It must be ―Let your product perform, it will create more customers‖. If we take
the example of automobile industry in India, Maruti‘s market share was very high in India as it was
the only company which was perceived to give best performance cars for Indian roads. Then Hyundai
entered Indian market and slowly and gradually it gave tough fight to this giant and if we see the
current scenario, it has snatched lot of market share from Maruti and proved that it can also deliver
the best performance cars for Indian roads and more importantly with competitive price and better
service. Another example is Samsung Electronics. It has made a great name in India and currently
giving tough fights to all leading companies operating in India from all over the world. And if we
take the example of Samsung Mobile in particular, it has made a revolutionary change in mobile
usage in India. When Samsung entered mobile handset market in India, Nokia was on pick and it was
almost a generic brand. Slowly and gradually Samsung took over the market and currently Nokia is
in its worst position ever. Samsung has even made I phone and blackberry struggle for their business
after the introduction of android operating platform. Similarly LG has made good share in house hold
consumer durables. The best practices followed by these South Korean companies are that they are
constantly innovative; they give lot of options to consumers and lastly a good service. So we can
learn technological innovations, business practices and customer relationship management from these
companies. Actually many mobile companies from India have also introduced android system and
started stealing some market share of this giant.
India currently is exporting cottons, commercial services, mineral fuels etc to South Korea. But if we
analyze the whole environment, there is still scope for doing more business in different areas. If
technology is their power, agriculture is our biggest strength. We can focus to export more of
agriculture products to South Korea.
4
First of all, medical tourism can be considered important. Technology may be advanced with South
Korea but the expertise lies in doctors are better in India. The overall treatment would be much
cheaper in India as compared to South Korea especially in fatal medical problems. We can promote
our medical facilities with attractive rates in South Korea. Moreover we can also promote our
traditional medical treatments, Ayurvedic and Homeopathic, in South Korea. Ayurvedic approach of
treatment is well accepted all over the world, so it can also be promoted in South Korea. Our
tradition Yoga has already started attracting youths in South Korea; so focus on it should be
increased, because this is something which is our basic strength.
Moreover we can focus on exporting rice and fruits to South Korea because they are widely used in
South Korea. They produce these things at their home but we can give competition by offering
competitive prices. SBI, BOB, ICICI, KMBL etc banks can also focus to open their branches in
South Korea.
Now if we talk about Gujarat, there is lot of scope to do business with South Korea. Actually efforts
are already put and some success is already achieved by Gujarat. A business delegation of 11
members from Gujarat visited the capital of South Korea on 17th September, 2012 to invite them to
invest in Gujarat and to welcome them for the vibrant summit of January 2013. They also performed
road show there and it was very well responded by South Koreans. During this visit, the Joint
Development Agreement (JDA) is also signed between KOSPO (Korea Southern Power Limited), a
leading Korean Government company and considered to be among top 10 power generating
companies of the world, and Narmada Thermal Power Limited (NTPL). The delegation also
showcased the opportunities in specific sectors such as ports, shipbuilding, telecom and IT industry.
South Korea is also interested in developing SME industry in Gujarat.
Moreover we can say Gujarat; in particular Surat has lot of opportunities of doing business in the
areas like textile and diamond industry. Surat is world best in these industries and South Korea can
be a very lucrative market for this. South Korean market can also be tapped for solar projects which
are the strength and point of focus of Gujarat.
So to conclude we can say that we are already on a increasing trend to do business with South Korea
but the pace is slow which can be made more rapid if focus is increased and opportunities are tapped
on time.
5
Index
Sr No Topic Page No.
1 Introduction to South Korea 6
2 Industry Overview 9
3 Political Environment of South Korea 18
4 Economic Environment of South Korea 33
5 Social Environment of South Korea 41
6 Technological Environment of South Korea 53
7 Legal Environment of South Korea 59
8 Agriculture Industry 75
9 Automobile Industry 84
10 Aviation Industry 95
11 Chemical Industry 101
12 Dairy Industry 110
13 Home Appliance Industry 123
14 Mobile Industry 130
15 Ship Building Industry 141
16 Steel Industry 149
17 Textile Industry 156
18 Bibliography 166
6
Introduction to South Korea
South Korea also called the Republic of Korea. The Republic of Korea (South Korea) is located in the
southern part of the Korean peninsula. The northern half of the peninsula is North Korea or the
Democratic Republic of Korea (Communist). The two Koreas were divided along the 38th parallel in
1945 into two military zones as a provisional arrangement pending a resolution of the political conflict in
what was previously a single country. South Korea, officially the Republic of Korea is a sovereign state in
the southern part of the Korean Peninsula. The name "Korea" is derived from Goryeo, a dynasty which
ruled in the middle Ages. Its neighbors are China to the west, Japan to the east, and North Korea to the
north. South Korea lies in the North Temperate Zone with a predominantly mountainous terrain.
History of South Korea ::
In 1945, South Korean economy was mainly agricultural. In the following decades South Korea
developed light industry, consumer products and heavy industry. South Korean economy was further
boosted in 1988, thanks to the Summer Olympics and in 2002 because of the Football World Cup, hosted
in South Korea and Japan. At the same time the service industry grew immensely.
At the beginning of the 21st century, South Korea is leader in the IT sector thanks to the aids received by
its government. Leading firms in this sector are Samsung Electronics and LG Electronics. As for exports,
South Korea has established itself as a main provider of semiconductors in addition to exporting various
IT products. For the future, the South Korean government is beginning to invest in the robotic industry.
In 1960 its gross domestic product per capita was $79, lower than most Latin American and some sub-
Saharan African countries. The growth of the industrial sector was the principal stimulus to economic
7
development. In 1986, manufacturing industries accounted for approximately 30 percent of the gross
domestic product (GDP) and 25 percent of the work force. Benefiting from strong domestic
encouragement and foreign aid, Seoul's industrialists introduced modern technologies into outmoded or
newly built facilities at a rapid pace, increased the production of commodities—especially those for sale
in foreign markets—and plowed the proceeds back into further industrial expansion. As a result, industry
altered the country's landscape, drawing millions of laborers to urban manufacturing centers.
Rapid growth from 1960s to 1980s.
South Korea's real gross domestic product expanded by an average of more than 8 percent per year, from
US$2.7 billion in 1962 to US$230 billion in 1989, breaking the trillion dollar mark in 2007. Nominal
GDP per capita grew from $103.88 in 1962to $5,438.24 in 1989, reaching the $20,000 milestone in 2007.
The manufacturing sector grew from 14.3 percent of the GNP in 1962 to 30.3 percent in 1987.
Commodity trade volume rose from US$480 million in 1962 to a projected US$127.9 billion in 1990. The
ratio of domestic savings to GNP grew from 3.3 percent in 1962 to 35.8 percent in 1989.
The most significant factor in rapid industrialization was the adoption of an outward-looking strategy in
the early 1960s. This strategy was particularly well suited to that time because of South Korea's poor
natural resource endowment, low savings rate, and tiny domestic market. The strategy promoted
economic growth through labor-intensive manufactured exports, in which South Korea could develop a
competitive advantage. Government initiatives played an important role in this process. The inflow of
foreign capital was greatly encouraged to supplement the shortage of domestic savings. These efforts
enabled South Korea to achieve rapid growth in exports and subsequent increases in income.
National Foundation Day: October 3, 2333 BC
Independence declared: March 1, 1919
Capital and largest city: Seoul
Official languages: Korean
Location: Eastern Asia, southern half of the Korean Peninsula bordering the East Sea and the
Yellow Sea
Climate: temperate, with rainfall heavier in summer than winter
Ethnic Make-up: homogeneous (except for about 20,000 Chinese)
Writing system: Hangeul, the Korean alphabet
Literacy rate: 97.75%, male: 99.1%, female: 96.4%
Agriculture products: Rice, root crops, barley, vegetables, fruit; cattle, pigs, chickens, milk, eggs; fish.
Currency: Won (KRW)
1INR = 19.35 KRW (South Korean won)
8
Area: 99,222 sq km (45% of the peninsula)
Population: 48.9 million (World Bank, 2012)
Capital city: Seoul (population: 10m)
People: Korean with a small Chinese minority
Language(s): Korean
Religion(s): Wide range of religion from Shamanism, the oldest, to Buddhism, Confucianism,
Chondoism, Catholicism, and Protestantism.
Currency: ROK Won (KRW)
Major political parties: Saenuri Party; Democratic Unity Party, Liberty Forward Party
(LFP)
Government: Presidential system backed by unicameral (one chamber) National Assembly of 299
members elected for four years.
President: Lee Myung-bak (elected December 2007).
Prime Minister: Kim Hwang-sik (since 1 October 2010)
Foreign Affairs and Trade Minister: Kim Sung-hwan (since 8 October 2010)
Age structure: 0-14yrs. 15.7% (male-3980541, female-3650631)
15-64yrs. 72.9% (male-18151023, female-17400809)
65yrs. & above 11.4% (male-2259621, female-3312032)
Median age: 38.4yrs. (Male-37, female-39.8)
Population growth rate: 0.204%
Birth rate: 8.42/1000population
Death rate: 6.38/1000population
Religion in South Korea
Irreligion (40%)
Buddhism (25%)
Protestantism (14%)
Catholicism (12%)
Muism (5%)
Taoism (1%)
Confucianism (1%)
Other (2%)
9
Industry Overview
The growth of the industrial sector was the principal stimulus to economic development. In 1987
manufacturing industries accounted for approximately 30 percent of the gross domestic product (GDP)
and 25 percent of the work force. Benefiting from strong domestic encouragement and foreign aid,
Seoul's industrialists introduced modern technologies into outmoded or newly built facilities at a rapid
pace, increased the production of commodities--especially those for sale in foreign markets--and plowed
the proceeds back into further industrial expansion. As a result, industry altered the country's landscape,
drawing millions of laborers to urban manufacturing centers.
A downturn in the South Korean economy in 1989 spurred by a sharp decrease in exports and foreign
orders caused deep concern in the industrial sector. Ministry of Trade and Industry analysts stated that
poor export performance resulted from structural problems embedded in the nation's economy, including
an overly strong won, increased wages and high labor costs, frequent strikes, and high interest rates. The
result was an increase in inventories and severe cutbacks in production at a number of electronics,
automobile, and textile manufacturers, as well as at the smaller firms that supplied the parts. Factory
automation systems were introduced to reduce dependence on labor, to boost productivity with a much
smaller work force, and to improve competitiveness. It was estimated that over two-thirds of South
Korea's manufacturers spent over half of the funds available for facility investments on automation.
In 1990 South Korean manufacturers planned a significant shift in future production plans toward high-
technology industries. In June 1989, panels of government officials, scholars, and business leaders held
planning sessions on the production of such goods as new materials, mechatronics-- including industrial
robotics-- bioengineering, microelectronics, fine chemistry, and aerospace. This shift in emphasis,
however, did not mean an immediate decline in heavy industries such as automobile and ship production,
which had dominated the economy in the 1980s.
Except for mining, most industries were located in the urban areas of the northwest and southeast. Heavy
industries generally were located in the south of the country. Factories in Seoul contributed over 25
percent of all manufacturing value-added in 1978; taken together with factories in surrounding Kyonggi
Province, factories in the Seoul area produced 46 percent of all manufacturing that year. Factories in
Seoul and Kyonggi Province employed 48 percent of the nation's 2.1 million factory workers.
10
Steel Industry Major leading steel industries of south korea.
Dongbu Steel
Dongkuk Steel
Hyundai Hysco
Hyundai Steel
POSCO
Korea's Steel Industry:
Korea's steel industry is one of the country's most successful industries and is a symbol of Korea's
industrial power. Pohang Iron and Steel Company (POSCO) was set up in 1968, with the strong support
of then-President of Korea, Park Chung Hee. POSCO is, today, the fourth largest steelmaker in the world
with about 2.8% of world market share . Indeed, the domestic steel industry is one of Korea's critical
industries, having played an instrumental role in building up Korea's highly-successful automobile and
shipbuilding industries with its supply of low-cost steel.
This paper seeks to examine Korea's steel industry, through looking at the sources of competitive
advantages behind POSCO. The steel giant is practically synonymous with the Korean steel industry,
with the international profile of the industry rising on the back of POSCO's success. Hence, the approach
of using POSCO's case study as a basis of looking at the Korean steel industry is, in the author's view,
appropriate. In addition, this paper seeks to evaluate the sustainability of these sources of competitive
advantages, in a bid to predict the competitiveness of the Korean steel industry in 20 years' time.
The global steel industry is cyclical, highly competitive and fragmented. The competitiveness of steel
manufacturing firms are generally judged from several dimensions, including the lead time, where
translates into efficiency; cost of production, given that the industry is highly price sensitive; ability of the
firm to deliver goods on time and the quality of steel manufactured. Despite its lack of knowledge,
technology and capability when it started out, POSCO has grown to be a huge success, known for its low-
cost production, technological innovations, efficiency and quality. Its competitive advantages in both cost
and quality can be attributed to its innovative technologies, process innovations, strong corporate culture
and government support. These sources of competitive advantages are discussed below.
11
Competitiveness of the Korean Steel Industry in 20 Years' Time
Given the highly competitive nature of the industry, for the Korean steel industry to still remain
competitive in 20 years' time requires the building up of sustainable competitive advantages that would
allow the country to remain as one of the top steel producers in the world. Steel is expected to remain in
high demand for a long-time, given its low substitutability and it is used as an input in many industries,
including the production of motor vehicles, ships etc. Even its closest substitute, carbon fibre, for use in
car production, is only still in the research stage after several decades and it is unlikely that it would be
fully commercialized in 20 years. Although this may mean continued business for steel manufacturing
firms, whether POSCO will be able to maintain or grow its world market share would depend on its
ability to continue producing high-quality, yet low-cost steel, given that there are low switching costs for
buyers.
An examination of its sources of competitive advantages leads to the conclusion that the Korean steel
industry is likely to still remain competitive in 20 years' time. According to Michael Porter, ―companies
achieve competitiveness through acts of innovation‖ (Porter, 1990). For POSCO, innovation is at the very
heartbeat of the company and is very much embedded in its corporate culture. At its start-up stage, the
company had to be innovative to reduce its dependency on foreign technologies and to come up with its
own to increase competitiveness. Thus, its innovative culture was already shaped since its founding.
Given that it is so ingrained in the company, from its management to its employees - many of whom have
been with the company for decades (Moon, 2009), it is unlikely that its strong corporate culture would
deviate much from how it is presently. Furthermore, culture, as a source of competitive advantage, is
difficult for others to replicate and is unique to each company. One could even say that the Korean
national culture has had strong influence on that of POSCO's, as Koreans are known to be high innovative
(as exhibited in their leading positions in many sectors, such as shipbuilding, electronics and
semiconductors) and it would be more challenging for other countries to emulate and build the same type
of corporate culture.
Furthermore, POSCO's strong commitment to R&D is likely to persist, especially since it has just
invested in a new R&D centre which is set to open in June 2010. Its FINEX technology is revolutionizing
the steel industry and the competitive advantage this technology creates for them is likely to be enjoyed
for many more years to come. With it, POSCO has proved itself to be at the forefront of steel
manufacturing technology and it would take time for its competitors to replicate this technology or to
create something that surpasses it. Given its penchant for continuous improvement, it is unlikely for
POSCO to be complacent, but likely for it to keep improving on its FINEX technology to make its
production process even more efficient. Hence, that would help to increase the technological gap between
POSCO and its competitors.
12
Moreover, given the importance of the steel industry to the Korean economy and to its national pride, the
government is likely to continue supporting the industry. However, the caveat is that POSCO has to
remain competitive to earn its benefits from the government, as past history has shown that the Korean
government has not hesitated to withdraw its support from uncompetitive and failing companies.
Electronics Industry :
Product Coverage
Computing
Office Equipment
Control & Instrumentation
Medical & Industrial
Radio Communications
Telecommunications
In 1989 South Korea was a major producer of electronics, producing color televisions, videocassette
recorders, microwave ovens, radios, watches, personal computers, and videotapes. In 1988 the electronics
industry produced US$23 billion worth of goods (up 35 percent from 1987), to become the world's sixth
largest manufacturer. The total value of parts and components (including semiconductors) produced in
1988 totaled US$9.7 billion, overtaking consumer electronics production (US$9.2 billion) for the first
time. Manufacture of industrial electronics also grew significantly in 1988 and totaled US$4.6 billion (20
percent of total production). Electronics exports grew rapidly in the late 1980s to more than US$15 billion
in 1988, up 40 percent from 1987--to become Seoul's leading export industry. Although South Korean
electronic goods enjoyed substantial price competitiveness over Japanese products, the electronics
industry continued to be heavily dependent on Japanese components, an important factor in South Korea's
chronic trade deficit with Japan. Some South Korean firms formed joint ventures with foreign concerns to
acquire advanced technology. In the late 1980s, South Korea's leading electronics firms (Samsung,
Lucky-Goldstar, and Hyundai) began establishing overseas plants in such markets as the Federal Republic
of Germany (West Germany), Britain, Turkey, and Ireland.
By 1990 significant shifts were occurring within the electronics industry. In 1989 South Korea had lost
some of its cost advantage to newer consumer electronics producers in Southeast Asia. At the same time,
production of electronic components and of industrial electronics, particularly computers and
telecommunications equipment, continued to expand to such an extent that overall demand for South
Korean electronics products was expected to increase modestly in the early 1990s. In 1990 Seoul
projected that the microelectronics industry would grow at an annual rate of 17.2 percent in the early
1990s.
13
Jun. 21, 2012 - South Korea's consumer electronics devices market, defined as the addressable market for
computing devices, mobile handsets and AV products, is projected to be worth around US$13.8bn in
2012. This is expected to increase to US$16.1bn by 2016, at a compound annual growth rate (CAGR) of
3.9% - slower than in the preceding five years.
Like the broader economy, we expect South Korean private consumption to remain subdued in the near
term. While lower interest rates have reduced the risks of an implosion in the household debt market, high
debt levels still place a substantial constraint on consumption spending. A deteriorating economy is likely
to place considerable weight on consumers' debt repayment ability.
Smartphone‘s and Smartphone/tablet hybrids, based on the Android operating system, are expected to be
a growth area in 2012, following strong sales of Samsung's Galaxy S3 Smartphone in the South Korean
market. Meanwhile, technologies such as 3D TV and internet-enabled TV will help to stimulate demand
in the AV segment. The rollout of digital TV broadcasting ahead of analogue switch-off in 2013 will help
support sales of premium TV sets.
Shipbuilding
During the 1970s and 1980s, South Korea became a leading producer of ships, including oil supertankers,
and oil-drilling platforms. The country's major shipbuilder was Hyundai, which built a 1-million-ton
capacity drydock at Ulsan in the mid-1970s. Daewoo joined the shipbuilding industry in 1980 and
finished a 1.2-million-ton facility at Okp'o on Koje Island, south of Pusan, in mid-1981. The industry
declined in the mid-1980s because of the oil glut and because of a worldwide recession. There was a
sharp decrease in new orders in the late 1980s; new orders for 1988 totaled 3 million gross tons valued at
US$1.9 billion, decreases from the previous year of 17.8 percent and 4.4 percent, respectively. These
declines were caused by labor unrest, Seoul's unwillingness to provide financial assistance, and Tokyo's
new low-interest export financing in support of Japanese shipbuilders. However, the South Korean
shipping industry was expected to expand in the early 1990s because older ships in world fleets needed
replacing.
The high performance of Korean shipbuilders results from three main causes. First, tougher
environmental regulation by the International Maritime Organization forces firms to switch to operating
double-hull tankers by 2010.
Secondly, China‘s fast growing economy increased seaborne trade between Asia and the U.S., so that
global shipping companies began to demand the creation of large vessels with the capacity of stacking up
to 10,000 containers on the decks.
14
Third, economic growth in developing countries such as China and India created high demand for oil and
greater use of liquid natural gas (LNG), which in turn stimulated the global search for oil reserves that
increased the need for new offshore oil production facilities. Notably, the Japanese government prohibited
the transfer of advanced technology to South Korea, allowing only the transfer of less advanced
technologies. As a result, the Korean shipbuilding and steel industries increased their investments for the
development of new technologies. While Japanese shipbuilders have enjoyed superiority in welding
technology for decades, Korean shipyards developed techniques to utilize enlarged metal blocks for
welding that use 10 metal blocks of 2,000 tons instead of 100 blocks of 200 tons, which contributed to
reducing production time. Korean shipbuilders also began to demonstrate their efficiency in the operation
of dockyards by constructing ships inland and lifting the constructed ship body onto the sea by using
Goliath cranes, barges, and air pressure-driven skids .The number of personnel for research and
development in the Korean shipbuilding industry increased from 1,711 in 2002 to 2,860 in 2013,
including 195 researchers with Ph.D. degrees.
Automobiles and Automotive Parts:
The automobile industry was one of South Korea's major growth and export industries in the 1980s. By
the late 1980s, the capacity of the South Korean motor industry had increased more than fivefold since
1984; it exceeded 1 million units in 1988. Total investment in car and car-component manufacturing was
over US$3 billion in 1989. Total production (including buses and trucks) for 1988 totaled 1.1 million
units, a 10.6 percent increase over 1987, and grew to an estimated 1.3 million vehicles (predominantly
passenger cars) in 1989. Almost 263,000 passenger cars were produced in 1985--a figure that grew to
approximately 846,000 units in 1989. In 1988 automobile exports totaled 576,134 units, of which 480,119
units (83.3 percent) were sent to the United States. Throughout most of the late 1980s, much of the
growth of South Korea's automobile industry was the result of a surge in exports; 1989 exports, however,
declined 28.5 percent from 1988. This decline reflected sluggish car sales to the United States, especially
at the less expensive end of the market, and labor strife at home.
The industry continued to grow, however, because of a surge in domestic demand, up 47 percent during
the first half of 1989. In 1989, for the first time since car exports had doubled in 1985, domestic sales
surpassed exports; two-thirds of the cars manufactured were sold domestically. Most of the domestic
demand came from first-time car buyers whose savings had been buoyed by double-digit wage increases
each year since 1987. Other factors leading to the growing domestic demand for motor vehicles included
stable or slightly decreased new car prices because of cuts in special consumption taxes, reduced fuel
taxes, and growing economies of scale by manufacturers.
15
Throughout the 1970s and 1980s, the automobile industry was subject to a series of government controls
and directives designed to nurture the industry and prevent excess competition. For most of the 1980s,
Hyundai was the only company permitted to manufacture passenger cars, but in 1989 Kia Motors and
Daewoo were allowed to reenter the passenger car business. In 1989 Ssangyong Motors became South
Korea's fourth car manufacturer.
South Korea's auto parts industry grew rapidly in the late 1980s, from US$3.8 billion in 1987 to US$4.6
billion in 1988 (US$4 billion produced locally). Automotive parts imports, most of which came from
Japan, totaled US$610 million in 1988 (down from US$700 million in 1987). In 1989 South Korean
automobile and parts manufacturers planned to spend more than 2 trillion won (US$2.8 billion) on facility
expansion, research, and development.
Hyundai Kia Motors
The nation‘s largest auto manufacturer, with employees numbering 80,000 and total assets valued at
KRW 21 trillion, has grown to become a world-renowned automaker.
Its domestic production reached more than 3 million annually, and its long-term strategy is to establish
facilities abroad with manufacturing capacity in excess of 2 million units.
GM Daewoo Auto & Technology Company, in which the world‘s largest automaker, General Motors has
invested, has been operating assembly lines in Bupyeong, Incheon, Gunsan and Changwon, capable of
manufacturing more than 1 million cars annually. GM, besides its ongoing Powertrain (Engine &
Transmission) project, and the investment in a testing track in Incheon and diesel engine factory in
Gunsan, will continuously increase its investment to become a global auto development base, not to
mention playing a leading role in Asia.
Armaments
South Korea is an important manufacturer of armaments, both for domestic use and for export. During the
1960s, South Korea was largely dependent on the United States to supply its armed forces, but after the
elaboration of President Richard M. Nixon's policy of Vietnamization in the early 1970s, South Korea
began to manufacture many of its own weapons. These included M-16 rifles, artillery, ammunition, tanks,
other military vehicles, and ships. Aircraft were assembled under coproduction arrangements with United
States firms. Arms exports, including quartermaster goods, vehicles, and weaponry, reached nearly
US$975 million in 1982 but declined during the rest of the decade, reaching only US$50 million in 1988.
In 1989 Seoul announced that its fledgling aerospace industry was planning to produce an indigenously
designed high-performance jetfighter for its air force within two decades. The South Korean aerospace
16
industry also developed a Korean Fighters Program in cooperation with McDonnell Douglas of the
United States, with the goal of "acquiring the capacity to design and manufacture supersonic jetfighters."
Situated in the most heavily militarized region of the world, South Korea is an important manufacturer of
armaments, both for domestic use and for export. During the 1960s, South Korea was largely dependent
on the United States to supply its armed forces, but after the elaboration of President Richard M. Nixon's
policy of Vietnamization in the early 1970s, South Korea began to manufacture many of its own weapons.
Since the 1980s, South Korea, now in possession of more modern military technology than in previous
generations, has actively began shifting its defense industry's areas of interest more from its previously
homeland defense-oriented militarization efforts, to the promotion of military equipment and technology
as mainstream products of exportation to boost its international trade. Some of its key military export
projects include T-155 Firtina self-propelled artillery for Turkey; K11 air-burst rifle for United Arab
Emirates; Bangabandhu class guided-missile frigate for Bangladesh; fleet tankers such as Sirius class for
the navies of Australia, New Zealand, and Venezuela; Makassar class amphibious assault ships
for Indonesia; and KT-1 trainer for Turkey and Indonesia.
South Korea has also outsourced its defense industry to produce various core components of other
countries' advanced military hardware. Those hardware include modern aircraft such as F-15K fighters
and AH-64 attack helicopters which will be used by Singapore and Japan, whose airframes will be built
by Korea Aerospace Industries in a joint-production deal with Boeing. In other major outsourcing and
joint-production deals, South Korea has jointly produced the S-300 air defense system
of Russia via Samsung Group, and will facilitate the sales of Mistral class amphibious assault ships to
Russia that will be produced by STX Corporation. South Korea's defense exports were $1.03 billion in
2010 and $1.17 billion in 2011, and South Korea aims to increase the figure to $1.5 billion in 2012.
Construction:
Construction has been an important South Korean export industry since the early 1960s and remains a
critical source of foreign currency and "invisible" export earnings. By 1981 overseas construction
projects, most of them in the Middle East, accounted for 60 percent of the work undertaken by South
Korean construction companies. Contracts that year were valued at US$13.7 billion. In 1988, however,
overseas construction contracts totaled only US$1.6 billion (orders from the Middle East were US$1.2
billion), a 1 percent increase over the previous year, while new orders for domestic construction projects
totaled US$13.8 billion, an 8.8 percent increase over 1987. The result was that South Korean construction
companies concentrated on the rapidly growing domestic market in the late 1980s. By 1989 there were
signs of a revival of the overseas construction market--the Dong Ah Construction Company signed a
17
US$5.3 billion contract with Libya for the second phase of Libya's Great Man-Made River Project,
which, when all five phases were completed, was projected to cost US$27 billion. South Korean
construction companies signed over US$7 billion of overseas contracts in 1989.
South Korea Infrastructure Report provides industry professionals and strategists, corporate analysts,
infrastructure associations, government departments and regulatory bodies with independent forecasts and
competitive intelligence on South Korea's infrastructure industry.
an easing in the pace of contraction in South Korea's construction activity towards the end of 2011 - an
indication that construction activity is picking up in the country, despite a slowdown in economic growth.
At present, we are still penciling a return to positive growth for South Korea's construction sector, with
real growth for the sector forecast to reach 3.2% in 2012. This is due to several key factors, namely base
effects, tourism, a robust pipeline of non-residential building construction projects, the acceleration of
infrastructure investment and a renewed demand for housing.
In November 2011, the South Korean government had announced plans to build a breakwater, power
plant, observatory and a 200m tunnel on a disputed group of islets in the Sea of Japan. The facilities are to
be built on the Liancourt Rocks, which have been a disputed territory between Japan and Korea since the
end of the Second World War. Construction on the KRW400bn (US$345mn) project is scheduled to
begin in 2013, with completion due for 2016.
In July 2011, state-run Korea Electric Power Corporation's subsidiary Korea Western Power had awarded
South Korean company Doosan Heavy Industries & Construction a contract to construct a 300MW
integrated gasification combined cycle (IGCC) plant in the country, once again highlighting the country's
ongoing usage of coal despite a gradual divestment to gas and nuclear generation. Under the KRW513bn
(US$455mn) contract, the company is to complete the project by 2015. The plant, which is to be
constructed on the western coast in Taean, will process coal, which will be used to produce synthetic
natural gas for use in power generation.
In December 2011, South Korean energy producer Korea Hydro and Nuclear Power Company had
announced that it has identified two possible locations for the construction of new nuclear power plants in
the country, reports asianewsnet.net. The two sites are at Yeongdeok in North Gyeongsang Province and
Samcheok in Gangwon Province. Four plants will be built at each of the sites to help increase South
Korea's proportion of nuclear energy output from 30% to 40% by 2040. A third site, at Uljin in North
Gyeongsang Province, was rejected.
18
Political Environment of South Korea
MEANING OF POLITICAL ENVIRONMENT:
The political environment is the state, government and its institutions and legislations and the public and
private stakeholders who operate and interact with or influence that system. The stability of the political
environment and government will impact on the prioritization of mental health policy in relation to other
policies, the funding available to mental health and the time frames in which policies and programmers
can be realized. Political environment also includes the political culture i.e. "widely held views, beliefs
and attitudes concerning what governments should try to do and how they should operate and the
relationship between the citizen and the government."
Constitution:
The Republic of Korea (commonly known as "South Korea") is a republic with powers nominally shared
among the presidency, the legislature, and the judiciary, but traditionally dominated by the president. The
president is chief of state and is elected for a single term of 5 years. The 299 members of the unicameral
National Assembly are elected to 4-year terms; elections for the assembly were held on April 9, 2008.
South Korea's judicial system comprises a Supreme Court, appellate courts, and a Constitutional Court.
The judiciary is independent under the constitution. The country has nine provinces and seven
administratively separate cities--the capital of Seoul, along with Busan, Daegu, Daejeon, Gwangju,
Incheon and Ulsan.
EXECUTIVE BRANCH:
The President
The President of the Republic of Korea, elected by a nationwide, popular vote, stands at the apex of the
executive branch.
19
The President serves a single five-year term, with no additional terms being allowed. This single-term
provision is a safeguard for preventing any individual from holding the reins of government power for a
protracted period of time. In the event of presidential disability or death, the Prime Minister or members
of the Cabinet will temporarily serve as the President as determined by law.
Cheong Wa Dae (Office of the President)
Under the current political system, the President plays five major roles. First, the President is head of
state, symbolizing and representing the entire nation both in the governmental system and in foreign
relations. He receives foreign diplomats, awards decorations and other honors, and grants pardons. He has
the duty to safeguard the independence, territorial integrity, and continuity of the state and to uphold the
Constitution, in addition to the unique task of pursuing the peaceful reunification of Korea.
Second, the President is the chief administrator and thus enforces the laws passed by the legislature while
issuing orders and decrees for the enforcement of laws. The President has full power to direct the Cabinet
and a varying number of advisory organs and executive agencies. He is authorized to appoint public
officials, including the Prime Minister and heads of executive agencies.
Third, the President is commander-in-chief of the armed forces. He has extensive authority over military
policy, including the power to declare war.
Fourth, the President is the nation's top diplomat and foreign policy maker. He accredits or dispatches
diplomatic envoys and signs treaties with foreign nations.
20
Finally, the President is chief policy maker and a key lawmaker. He may propose legislative bills to the
National Assembly or express his views to the legislature in person or in writing. The President cannot
dissolve the National Assembly, but the Assembly can hold the President ultimately accountable to the
Constitution by means of an impeachment process.
Cabinet
Under Korea's presidential system, the President performs his executive functions through a Cabinet
made up of 15 to 30 members and presided over by the President, who is solely responsible for deciding
all important government policies. The Prime Minister is appointed by the President and approved by the
National Assembly. As the principal executive assistant to the President, the Prime Minister supervises
the administrative ministries and manages the Office for Government Policy Coordination under the
direction of the President. The Prime Minister also has the power to deliberate major national policies and
to attend the meetings of the National Assembly.
Members of the Cabinet are appointed by the President upon recommendation by the Prime Minister.
They have the right to lead and supervise their administrative ministries, deliberate major state affairs, act
on behalf of the President and appear at the National Assembly and express their opinions. Members of
the Cabinet are collectively and individually accountable to the President only.
Cabinet meeting presided over by President Lee Myung-bak
In addition to the Cabinet, the President has several agencies under his direct control to formulate and
carry out national policies: the Board of Audit and Inspection of Korea, the National Intelligence Service,
and the Korea Communications Commission. The heads of these organizations are appointed by the
President, but the presidential appointment of the Chairman of the Board of Audit and Inspection is
21
subject to the approval of the National Assembly. The Board of Audit and Inspection has the authority to
audit the financial accounts of central and local government agencies, government corporations and
related organizations.
The board is also vested with the power to inspect abuses of public authority or misconduct by public
officials in their official duties. The results of audits are reported to the President and the National
Assembly, although the board is responsible only to the chief executive.
The National Intelligence Service is authorized to collect strategic intelligence of internal as well as
external origin and information on subversive and international criminal activities. It also plans and
coordinates the intelligence and security activities of the government.
The Korea Communications Commission comprises five standing members who run the committee on a
consensus-basis. It is the highest-level agency that governs broadcasting, telecommunications and real-
time Internet television services or IPTV.
22
Government Structure:
23
Central Government:
CheongwaDae
Cheong Wa Dae, or the Blue House, is the executive office and official residence of the Korean
head of state, the President of the Republic of Korea. The name refers to the building's blue-green
roof. Cheong Wa Dae is a complex of buildings, built largely in the traditional Korean style with
some modern elements.
Board of Auditand Inspection
Board of Audit and Inspection examines the final accounts of revenues and expenditures of the
government offices, audits their accounts and such organizations as prescribed by the laws, and
inspects works performed by government agencies and the duties of their staff. BAI may initiate
the review process on its own authority if it finds its decisions inappropriate or unjust, as long as
such a finding has been made within two years after the decision.
National Intelligence Service
National Intelligence Service collects and distributes information on the nation's strategy and
security, maintains documents, files, materials, and facilities related to the nation's classified
information and investigates crimes affecting national security. NIS was created in 1961 as the
Korea Central Intelligence Agency (KCIA) and changed its name to Agency for National
Security Planning (NSP) in 1961 and to the current NIS in 1999.
24
Korea Communications Commission
Embracing the core function of the former Korean Broadcasting Commission and the Ministry of
Information & Communication, Korea Communications Commission promotes the convergence
process between broadcasting and telecommunications. The commission is devoted to such tasks as
advancement of broadcasting service market, investment expansion in communications services,
support for overseas market development and spread of "green IT."
Ministry of Patriots and Veterans Affairs
Ministry of Patriots and Veterans Affairs honors and secures well-being of independence fighters,
soldiers and police officers, who devoted and sacrificed their lives for the nation and its people,
and preserves and descends their noble patriotic spirit as a paragon of patriotism. By doing so, the
ministry promotes patriotic spirit among people and lays the spiritual groundwork for national
development.
Fair Trade Commission
Fair Trade Commission formulates and administers national competition policies, and deliberates,
decides, and handles antitrust cases without any intervention from outside organizations. The
commission is committed to four main mandates: promoting competition, strengthening
consumer rights, creating a competitive environment for SMEs and restraining concentration of
25
economic power. To that end, it enforces nine laws including the Monopoly Regulation and Fair
Trade Act.
Financial Services Commission
Financial Services Commission deliberates and resolves important financial issues concerning the
advancement of financial industry, the stability of financial markets, the promotion of a sound
credit system and fair trading practices. The commission focuses on devising sophisticated
financial policies to make sure Korea's financial markets remain safe and sound as they advance
into vibrant and globally competitive marketplaces.
Anti-corruption and Civil Rights Commission
Anti-corruption and Civil Rights Commission builds a sound society by preventing and deterring
corruption in the public sector and protects people's rights from illegal and unfair administrative
practices through the administrative appeals system. The commission was launched in early 2008
by integrating the Ombudsman of Korea, the Korea Independent Commission against Corruption
and the Administrative Appeals Commission.
Ministry of Strategy and Finance
Ministry of Strategy and Finance plans and coordinates the mid- to long-term socio-economic
development goals and sets economic policy direction on an annual basis; distributes resources
26
effectively and assesses the effectiveness of budget execution; and plans and reforms Korea's
taxation policy and system. The Ministry is at the core of the government efforts to combat
against 2008 global financial setback.
Ministry of Education, Science and Technology
Ministry of Education, Science and Technology nurtures basic learning capacity in pre-school
children provides appropriate education for primary and secondary students and strengthens
higher education in order for nationwide universities to gain international competitiveness. It
endeavors to double the satisfaction of public education while reducing the cost of private
education.
Ministry of Foreign Affairs and Trade
Ministry of Foreign Affairs and Trade establishes, conducts, generates and regulates foreign
policies on trade, negotiations and external economic affairs; protects and supports overseas
Korean nationals; conducts analysis of the international environment; and provides consular
services. The Ministry is heavily charged with the mission of concluding free trade agreements
with global counterparts, including the U.S., Japan and China.
Ministry of Unification
Ministry of Unification establishes North Korea policy, coordinates inter-Koran dialogue, pursues
inter-Korean humanitarian cooperation and provides education programs on unification. The
27
Korea Institute for National Unification, a major think tank of the ministry, plays the central role
in researching on North Korea and unification.
Ministry of Justice
Ministry of Justice serves the people of the Republic of Korea by guarding and enforcing the
Constitution and laws of the republic and renders legal advice to the President, the Prime
Minister, and other Cabinet members. It is also in charge of correctional and rehabilitative
administration and immigration.
Ministry of National Defense
Ministry of National Defense provides military security for the people of the Republic of Korea
supports the establishment of a peace regime on the Korean peninsula and contributes to regional
security and world peace.
Ministry of Public Administration and Security
Ministry of Public Administration and Security makes efforts to meet public demands by serving
the people and transforming the Korean government into a more capable and efficient
organization, based on the principle of harmony between the central and local governments.
Ministry of Culture, Sports and Tourism
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Ministry of Culture, Sports and Tourism develops and implements a wide range of policies to
promote culture, arts, sports, tourism and religion so as to provide cultural opportunities to the
public. Korean Culture and Information Service belong to the ministry.
Ministry for Food, Agriculture, Forestry and Fisheries
Ministry for Food, Agriculture, Forestry and Fisheries aims to upgrade agriculture from primary
production-based industry to advanced industry, which encompasses processing and marketing so
that domestic agriculture and fisheries can compete in the global arena.
Ministry of Knowledge Economy
Ministry of Knowledge Economy is responsible for fostering traditional industrial structures and
developing new growth engines which are crucial for industrial innovation.
Ministry for Health, Welfare
Ministry of Health and Welfare protects the public from social risks, promotes social integration
and provides quality social services. Korea Food and Drug Administration under the Health
Ministry promote the public health by ensuring the safety and efficacy of foods and
pharmaceuticals.
29
Ministry of Environment
Ministry of Environment protects the nation from the threat of pollution and improves the quality
of life so that people can enjoy clean water and clear skies. It also aims to contribute to global
efforts to protect the Earth.
Ministry of Employment and Labor
Ministry of Employment and Labor is responsible for labor standards, occupational safety and
health, employee welfare, employment policies, equal employment and other labor affairs.
Ministry of Gender Equality and Family
Ministry of Gender Equality and Family develops and implements policies to nurture women in
the labor force and improve women's rights, provides relevant education programs and conducts
research on gender equality. It also promotes family- and youth-related policies.
Ministry of Land Transport and Maritime Affairs
Ministry of Land Transport and Maritime Affairs focuses on constructing transportation and
logistics networks that reach out to the 5 oceans and 6 continents so as to make the country fully
equipped with strong linkages.
30
GOVERNMENT AND POLITICS:
THE CRISIS OF JUNE 1987 brought public dissatisfaction with the Chun Doo Hwan
government to a head the next eight months saw the beginning of a compromise between the
ruling and opposition camps that marked a potential watershed in South Korean politics.
Politicians who had been in exile or under house arrest for many years returned to leadership
roles. The media, unleashed from both censorship and official guidance, began a qualitative and
quantitative explosion. A newly critical press probed previously hidden aspects of the military,
the national security agencies, and the government more aggressively than ever before.
For the first time since the fall of the Syngman Rhee regime in 1960, the Republic of Korea
produced a constitution through deliberative processes rather than through military intervention
or emergency measures. Moreover, elections for the presidency in December 1987 and for the
National Assembly in April 1988 redefined the political process; a minority president leading a
minority party began a five-year term with full awareness that, at least in the near term,
compromise was necessary for political survival.
The search for the political middle ground was handicapped by external pressures upon ruling and
opposition parties alike. On President Roh Tae Woo's right, conservative bureaucrats, military
leaders, and Democratic Justice Party members held over from the Chun period watched the
president carefully. During the first two years of Roh's rule, the rightists grew increasingly
suspicious of the process of compromise and upset with the direction taken by South Korea's
emerging left, both within and outside of the political process. The traditional opposition parties--
the Reunification Democratic Party and the Party for Peace and Democracy led by Kim Young
Sam and Kim Dae Jung, respectively, felt similar pressures from younger and more progressive
elements within their parties, as well as from the more radical opposition outside the political
process. By mid-1989 the Roh government appeared to have reached its limit of reform and
began to return to earlier patterns of political control, including the broad use of the National
Security Act and national security agencies to limit dissent.
The National Assembly came into its own in the late 1980s and at least temporarily achieved the
balance of powers provided for in the 1987 Constitution. For the first time in South Korea's
history, the government party, as a minority in the legislature, was forced to seek procedural and
substantive compromises with three opposition parties. Partisan conflict was temporarily muted
for the Seoul Olympics in September 1988 but surfaced again at the end of the year in a series of
legislative committee hearings concerning corruption under Chun. Further debate in 1989 led to a
political compromise late in the year that resolved the question of the "legacies" of the Fifth
31
Republic (1980-87) that had animated politics in the legislature since the beginning of the Roh
administration.
A judicial revolt in mid-1988 forced the resignation of a chief justice appointed by the Chun
administration, the subsequent appointment of a more politically independent successor, and the
replacement of several dozen senior judges. An administrative reform commission conducted a
surprisingly independent investigation of numerous government agencies, including the national
security bodies that had long interfered in the political process.
The pattern of politics outside the formal institutions of government continued to change as the
1990s began. New interest groups, particularly within the intellectual professions, emerged to
challenge the government-sponsored professional associations in fields such as journalism,
teaching, and the arts. These developments in turn often provoked heavy-handed responses from
the government, long accustomed to controlling professional organizations through nationwide
umbrella groups. Cause-oriented groups of various political persuasions prepared to launch new
parties, stimulated by the prospect of local council elections to be held in 1990.
Many of the political developments of the late 1980s reflected important and irreversible social
and economic changes that had occurred during the previous two decades. As the 1990s began, a
key question of South Korean politics remained the degree to which the development of a better-
educated and more affluent populace--essential to South Korean modernization, yet corrosive of
the older style of political leadership--would contribute to greater political liberalization.
GOVERNMENT POLICY ON FOREIGN INVESTMENT IN KOREA
Unless otherwise stipulated by law, a foreigner may carry out foreign investment activities in
Korea without restrictions. However, restrictions are placed when the investment is deemed as
harmful to national security, public order, the health and welfare of Korean nationals, and
environment preservation, or goes against established social morals, customs, and/or the laws of
the Republic of Korea. Through the Foreign Investment Promotion Act, foreign investments are
provided with a higher level of investment protection than indirect investments such as
investments through securities and bonds. Overseas remittances of gains from the stocks acquired
by foreign investors and stock transactions, principal and fees paid according to a loan contract
under the Foreign Investment Promotion Act, and compensation under a technology import
contract are allowed in accordance to what has been permitted and notified under the foreign
investment technology import contract at the time of the remittance. The Ministry of Strategy
and Finance may temporarily suspend or restrict foreign exchange transactions, when it is
unavoidably required due to force majeure (war, calamities, etc.), substantial and drastic changes
to internal and external economic conditions, or other matters in proportion to such. However, a
32
foreign investment under the Foreign Investment Promotion Act shall be an exception to the
application of this clause in the Foreign Exchange Trade Act. Unless otherwise stipulated by law,
the business operations of foreign investors and foreign-invested companies shall be treated
equally as citizens and corporations of the Republic of Korea.
Exchange Controls
All transactions involving foreign exchange in Korea or flows of capital between Korean
residents and non-residents are controlled according to the provisions of the Foreign Exchange
Transactions Law. The Foreign Exchange Transactions Law applies to all domestic companies,
including branches, agencies, representative offices and other offices of foreign companies
operating in the Republic of Korea. In essence, inflows and outflows of foreign exchange are
regulated. Under the Foreign Exchange Transactions Law, foreign exchange earnings from
external transactions are regarded as coming under the jurisdiction of the Republic of Korea.
Foreign investors who comply with the notification requirements of the Foreign Investment
Promotion Act are guaranteed the right to remit dividends and repatriate capital through a
designated foreign exchange bank. The Foreign Investment Promotion Act guarantees the
remittance of royalties, dividends and equity owned by foreign investors, any related proceeds,
and any principal and interest paid from long-term loan agreements. Any suspension of foreign
exchange transactions due to restrictive measures from critical situations, such as war or domestic
economic strife, will not apply to Foreign Direct Investment. Under the Foreign Exchange
Transactions Law, confirmation by the head of a foreign exchange bank is required to remit such
funds overseas.
33
Economical Environment of South Korea
Economic Structure:-
The chaebols, Korean conglomerates such as Hyundai, Samsung and Daewoo and LG3, play an
important role in the Korean economy. In 1995, the four companies had produced 9% of the country‘s
GDP. Although economic reforms have curtailed some of their dominance, these multinationals still
play a powerful role in the Korean economy.
Like Japan, South Korea also has small businesses which seem to complement the large corporations.
Small and medium enterprises, (SMEs) employ more than 80% of the work force.
GDP by sector- agriculture: 3% industry: 39.5% services: 57.6%
South Korea‘s main export commodities are semiconductors, wireless telecommunication equipment,
motor vehicles, computers, steel, ships, and petrochemicals.
South Korea‘s main trading partner is China which is the recipient of 21.7% of Korean exports and
accounts for over 17.7% of its imports. The second largest export destination is the United States,
which accounts for 11.0% of the total exports, and Japan is the second largest import source, which
account for 14.0% of the total imports.
In their 2010 report, the World Bank ranked South Korea 19th in their ―Ease of Doing Business‖
ranking. However, it was ranked 53rd
in ease of starting a business, 15th in obtaining credit, and 73
rd in
protecting investors.
Economic Situation:-
On the basis of Korea's recovery from the global financial crisis, the government has been continuously
making efforts to strengthen the groundwork for long-term growth and boost the real economy.
Miracle on the Hangang River 'Miracle on the Hangang River' refers to the miraculous economic growth
that has transformed South Korea from the ashes of the Korean War.
The government is managing macroeconomic policies in a flexible manner so that the economic recovery
can be maintained. It is also taking steps to prevent the recurrence of a crisis through monitoring of
domestic and foreign causes of anxiety, while strengthening its effort to prepare for possible risks from
households, businesses, the financial market and the foreign exchange market, so that the economy will
not be affected by external shocks.
With employment below the pre-crisis level, the government has pushed for job creation with fiscal
projects and its own employment assistance programs, and by launching a service sector development
plan, in order to generate long-term as well as short-term jobs. The government has also stepped up
34
efforts to support lower income classes with policies designed to stabilize prices, provide affordable
housing, vitalize microcredit loans, and secure the livelihood of vulnerable groups.
Thanks to the government's successful policies, the Korean economy posted a growth rate of 6.2 percent
in 2010, its highest mark in eight years, and per capita income returned to the US$20,000 level. Domestic
demand has led the growth while private consumption and facility investment have posted excellent
figures. Exports have increased in line with a rise in overseas demand amid the global economic recovery
and backed by increased competitiveness of Korean products. Korea has leapt ahead to become world's
No. 7 exporting nation, and achieved a trade surplus of over US$40 billion for the second year in a row.
GDP Growth / Per Capita GNI
As a result of government efforts to create jobs, 323,000 jobs have been created, led by the private sector,
with a rise in the portion of full-time jobs and subsequent improvement in the quality of
jobs.
In addition, Korea successfully hosted the G20 summit in 2010, boosting the country's image. The
summit marked the first time for a non-G8 or Asian country to host the conference, and Korea played a
key role as the chair of the summit, proposing the "Korea Initiative" and contributing to the substantial
agreements. The summit showed Korea's diplomatic ability and leadership as it served as a bridge
between advanced and developing countries, and played a leading role in the creation of a new
international order.
35
South Korea's agriculture contributes only 3 percent of the nation's total GDP in 2010, and employs 7.3
percent of the country's workforce. The agriculture in South Korea has shrunk significantly as the nation
moves towards the urbanization and industrialization of the economy. Back in 1987, agricultural made up
12.3 percent of the nation's total GDP, and employs 21 percent of the workforce.
Rice is the most important agriculture crop of South Korea. It made up 90 percent of the total grain
production, and supplies over 40 percent of the farmers' income. However, rising farmers' wages and land
values have made rice costly to produce. With 16.58 percent o arable land, South Korea's agriculture is
also responsible for the production of crops such as barley, vegetables, fruits and production of cattle,
pigs, chicken, milk, eggs and fish.
The industry of South Korea contributes 39.4 percent of the country's GDP in 2010. The industry and
manufacturing industries are the major growth engine for South Korea during its economic progress in the
1980s. South Korea's largest industries are electronics, automobiles, telecommunication and shipbuilding.
Electronics boosted the South Korean economy in the 1980s, by becoming the world's sixth largest
manufacturer of electronic goods such as color televisions, microwave ovens, radio, watches and personal
computers. . South Korea is also a major manufacturer of semiconductors, with Samsung Electronics and
Hyoid Semiconductor the global leaders in the production of memory chips.
The automotive industry also plays a major role in the South Korean economy today. It has grown into
one of world's largest automobile producers, coming in 5th after the United States and Germany, with an
estimate of 4.27 million automobile produced a year. Some of South Korea's international automobile
brands include Hyundai, Kia and Renault.
From a slow start of two million subscribers to a current high of 40 million, mobile telephone is the
fastest growing area in telecom, going beyond the 20 million fixed lines serving a 40 million-strong
population. Today, South Korea also has the highest number of broadband users in the world. The
presence of one of the fastest broadband networks in the world also permits e-commerce to grow.
South Korea is a global player in the production of ships, with a 50.6 percent share of the global
shipbuilding market in 2008. Four of the world's largest shipbuilding companies are from South Korea:
Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering and
STX Offshore & Shipbuilding. Europe's largest shipbuilder, STX Europe, is also owned by South Korea.
Services in South Korea contribute 57.6 percent of the nation's total GDP, and employs 68.4 percent of
the workforce. The government shifts its focus from manufacturing to services in 2009, and experts
predict that the services will be the driving force of South Korea's economy for the next few years, as
current productivity level is just at 58 percent of that in manufacturing.
A. The industry of South Korea contributes 39.4 percent of the country's GDP in 2010. The industry
and manufacturing industries are the major growth engine for South Korea during its economic
36
progress in the 1980s. South Korea's largest industries are electronics, automobiles,
telecommunication and shipbuilding.
B. Electronics boosted the South Korean economy in the 1980s, by becoming the world's sixth
largest manufacturer of electronic goods such as color televisions, microwave ovens, radio,
watches and personal computers. . South Korea is also a major manufacturer of semiconductors,
with Samsung Electronics and Hyoid Semiconductor the global leaders in the production of
memory chips.
C. The automotive industry also plays a major role in the South Korean economy today. It has
grown into one of world's largest automobile producers, coming in 5th after the United States and
Germany, with an estimate of 4.27 million automobile produced a year. Some of South Korea's
international automobile brands include Hyundai, Kia and Renault.
From a slow start of two million subscribers to a current high of 40 million, mobile telephone is
the fastest growing area in telecom, going beyond the 20 million fixed lines serving a 40 million-
strong population. Today, South Korea also has the highest number of broadband users in the
world. The presence of one of the fastest broadband networks in the world also permits e-
commerce to grow.
D. South Korea is a global player in the production of ships, with a 50.6 percent share of the global
shipbuilding market in 2008. Four of the world's largest shipbuilding companies are from South
Korea: Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine
Engineering and STX Offshore & Shipbuilding. Europe's largest shipbuilder, STX Europe, is also
owned by South Korea.
E. Services in South Korea contributes 57.6 percent of the nation's total GDP and employs 68.4
percent of the workforce. The government shifts its focus from manufacturing to services in 2009,
and experts predict that the services will be the driving force of South Korea's economy for the
next few years, as current productivity level is just at 58 percent of that in manufacturing.
India-Korea Trade
Korea is well -integrated with the global economy with a trade/GDP ratio of more than 85 per cent in
2006. The Korean economy has followed an export-led growth strategy with exports contributing 43 per
cent of GDP in 2006. Comparatively, India is far less integrated, despite the increasing openness of her
economy since 1991, with a trade/GDP ratio of around 45 per cent in 2006. Korea also has a higher share
in total world merchandise trade as compared to India. She is also a major importer of services (Table V,
Appendix) while India has emerged since 2001 as a significant exporter of services. In 2007, India ranked
26th and 18
th and South Korea ranked 11
th and 13
th among merchandise exporters and importers
respectively in the world. Korean exports to the rest of the world in the year 2007 stood at $371.5 billion,
37
showing a 14 per cent growth over the previous year while her imports increased to $356.8 billion,
having grown by 15 per cent over the previous year. India‘s exports to world were $145.3 billion in the
same year (a 20 per cent increase over her exports the previous year). India‘s imports stood at $216.6
billion, an increase of 24 per cent over the previous year (WTO, 2007).
Merchandise Trade between India and Korea
The increasing liberalisation of the Indian economy has significantly increased trade and investment
flows between the two countries. Indian economic reforms were considered timely by Korean companies
that were looking for alternative destinations for trade and investments. During 1991 to 2007, the value of
Indian exports to Korea increased from a mere $ 0.24 billion to $2.46 billion while Indian imports from
Korea increased from $ 0.314 billion to $5.4 billion during the same period (UNCOMTRADE, 2008). At
present, India ranks 11th among export destinations and 16
th among sources of imports for the Korean
economy. The share of both countries in their respective exports and imports has increased over the years.
In 1990, Korea‘s share in Indian exports and imports was 1.01 and 1.28 per cent respectively. These
increased to 1.69 and 2.69 per cent in 2007 (Figure1A, Appendix). Korea‘s share in Indian imports
touched a peak in 2003 and declined thereafter whereas Korea‘s share in India‘s total exports remained
almost stable till 2000 but increased to around 2 per cent in 200612
. During the same period, India‘s share
in total Korean exports and imports rose from 0.67 and 0.41 per cent in 1990 to 1.70 and 1.15 per cent
respectively in 2007 (Figure 1B, Appendix). An important feature of India-Korea trade relations is that
the trade balance has always been in favour of South Korea and has continuously increased over the
period 1990-2007. In fact, between 1991 and 2007, India‘s exports to South Korea increased 10 times
while imports rose more than 17 times, resulting in an increase in the trade deficit. Indian exports and
imports had average growth rate of around 10 and 14 per cent annually during 1991 to 2007. Therefore,
both volumes and share in exports and imports between the two countries have increased during the last
one and half decades.
The increase in merchandise trade between the two countries has been attributed to the changing demand
structures and comparative advantages of both the economies in different sectors (Sahoo, 2009). The
Indian export basket has traditionally consisted of a few low value-added products (Table VI, Appendix).
For instance, in 1990, the ores, slag and ash product group alone constituted more than 40 per cent of
Indian exports to Korea followed by cotton and other product groups. However, the composition of
India‘s export to Korea has undergone significant changes post-2000. In 2006, the Indian export basket
consisted of a wider range of industrial products including mineral fuels, mineral oils and products of
their distillation; bituminous substances; mineral waxes, ores, slag and ash, cotton, organic chemicals,
residues and waste from the food industries, prepared animal fodder, iron and steel, natural or cultured
pearls, precious or semiprecious stones etc. The share of these top ten products in total exports to Korea
38
was more than 85 per cent. Mineral fuels, oils and products of their distillation group has now become an
important exporting group, having a 35 per cent share in total exports in 2006, followed by ores, slag and
ash; cotton and other product groups. However, some conventional export commodity groups such as
cotton have lost their dominant position from a 17.4 per cent share in total Indian exports in 1990 to 8.7
per cent in 2006. Other products that lost their weight substantially in India‘s export basket are ores, slag
and ash, cereals, aluminium and articles thereof, etc.
Similarly, India‘s import basket from Korea has undergone changes over time. The top ten major product
groups that constituted more than 79 per cent of Indian imports from Korea in 1990 were industrial
products. In 2006, the Indian import basket consisted mainly of relatively high value-added products such
as electrical machinery and equipment, nuclear reactors, boilers, machinery and mechanical appliances,
iron and steel, transport equipment, mineral fuels and their products, organic chemicals, etc. The top ten
commodity groups constituted more than 85 per cent of total imports from Korea in 2006.
Trade Complementarity between India and Korea
The trade complementarity index (TCI) provides useful insights on prospects for trade and shows how
well the structures of the two countries‘ imports and exports match. The TCI measures the degree to
which the export pattern of one country matches the import pattern of its trading partner. A high degree of
complementarity indicates more favourable prospects for a successful trade arrangement. A change in the
TCI over time indicates whether the trade profiles of two countries are becoming more or less compatible.
To measure India‘s trade complementarity with Korea, we have used the UNESCAP formula which is
explained below:
∑w miwd
∑w xisw
TCI=
1 −
∑ −
÷2
×100 ………………………....…(1)
∑w M
wd ∑w X sw
Where d = importing country of interest s =
exporting country of interest
w = set of all countries in the world i= set
of industries
39
x = commodity export flow X =
total export flow
m = commodity import flow M =the
total import flow.
In this study, overall TCI of India is calculated for the period 1995-2006 trends in overall trade
complementarity index for India over the period. trade complementarity of India has increased from 37.9
in 1995 to 59.8 in 2006. This indicates that Indian export pattern is becoming more compatible with
Korea‘s import pattern. In 1995, India‘s trade complementarity was around 38 per cent. It touched 40 in
1996 but it decreased in subsequent years to reach 34.3 per cent in 1998. However, after 1998, India‘s
trade complementarity index has continuously increased and reached around 60 in 2006. This signals that
any agreement between the two countries is likely to enhance trade and investment flows.
Trade Intensity between India and Korea
We have measured the intensity of trade between the two countries to identify trade potential. The trade
intensity index is used to determine whether the value of trade between two countries is greater or smaller
than would be expected on the basis of their importance in world trade. This index simply explains
whether or not a country exports/imports more to/from a given destination than the world does on
average. Trade intensity index is defined as a ratio of the share of one country‘s trade with another
country to the other country‘s share of the world trade (Kaliranjan and Bhattacharya, 2007). When
multiplied by 100, the index value ranges from 0 to 100. Zero indicates no trade, and if it is more (or less)
than 100, it implies that India (I) is trading more (or less) with Korea (K) than might be expected from
India‘s share in total world trade. Trade intensity of a country is calculated in terms of export and import
intensity indices (see Appendix-3P for details).
changing trends in the export and import intensities of India and Korea during 1996-2006. Though India‘s
export intensity has improved from 52 to 80 during 1996 and 2006 with Korea, it has always been below
one indicating that Indian exports to Korea have been much below the world on average. Contrary to
India‘s export intensity, Korea‘s export intensity has been greater than unity in most of the years since
1996, indicating Korean exports to India have been greater than its exports to the world on average.
Although there is a decline in the last few years, it still remains higher than Indian export intensity to
Korea.
During 1996-2006, Indian import intensity has varied widely. In 1996, the value was around 90. It
touched 130 in 1998 but has since then continuously declined to reach 60 in 2000. Subsequently, it started
to increase up to 2003 but after that, it again declined in successive years. On the other hand, Korean
import intensity has been quite stable during this period and its value has been around unity. This shows
that Korean imports from India have been equivalent to its average imports from the rest of the world.
40
Trade in Services
Unlike in the case of merchandise trade where Korea ranks ahead of India, India has been performing
slightly better than Korea in services. India‘s exports of commercial services have been increasing by
more than 20 per cent annually in the last five years. India‘s export of commercial services has grown
steadily and increased by more than five times from $16 billion in 2000 to $89.7 billion in 2007. Korea,
on the other hand, has witnessed fluctuations in its exports of services though it has grown steadily after
2002. In 2007, annual growth of Korea‘s services export was higher than that of India. The total value of
Korea‘s exports of commercial services in 2000 was $29.7 billion, which fell consecutively over the next
two years to $27.3 billion in 2002. But since then, it has been increasing continuously and touched $61.5
billion in 2007.17
In 2007, India‘s share in world exports and imports of commercial services was 2.7 per cent and 2.5 per
cent respectively as compared to Korea‘s shares of 1.9 per cent and 2.7 per cent.18
Moreover, India has
the highest share of commercial services in total exports (both goods and services) – even more than
high-income countries. In 2006, the share of commercial services in total exports from India was around
36 per cent whereas it was 13 per cent for Korea.
During the last one and a half decades, the structure of service exports from India has undergone changes.
The export basket was largely dominated by travel and transport services before 1995 but thereafter, the
share of transport and travel services declined. Both the absolute amount and share of other services has
grown impressively over the period. Some of the services which have shown phenomenal growth in the
last few years are computer and information services, insurance services and other business services.
According to the Economic Survey (2007-08), a significant feature of India‘s services sector is India‘s
emergence as a world leader in IT and BPO services. India accounted for 65 per cent of the global market
in offshore IT services and 46 per cent of the global BPO market in 2004-05. The export structure of
Korea has also changed during the last 15 years. This change is different from changes that have taken
place in the export structure of the world and India. Contrary to world experience, the share of transport
services in total services export has increased faster than that of other services in the case of Korea. This
has been mainly due to the rapid increase of goods export from Korea during the same period. Among the
other services, although exports of ‗other business services‘ have increased, the total export and the share
in total services export of communication and computer and information services have increased slower
than that of India. As far as bilateral trade in services between India and Korea is concerned, there is lack
of data, but it is believed that trade in services between the two countries is increasing rapidly, at least in
some sub-sectors especially in IT/software services and travel services. According to the Electronic and
Computer Software Export Council (ESC), software exports from India to South Korea in 2001-02 were
$27.53 million compared to $8.67 million in 2000-01.
41
Social Environment of South Korea
Hinduism
Hinduism is practiced by South Korea's small Indian and Nepali community. However, Hindu traditions
such as yoga and Vedantic thought have attracted interest among younger South Koreans. There are two
Hindu temples in the Seoul region, the Sri Radha Shyamasundar Mandir and the Sri Sri Radha Krishna
temple, located on Seoul's outskirts, approximately 2 hours from the city centre. South Korea is home to a
small number of migrants, including students and engineers, from countries such as India and Nepal many
of whom are Hindu.
Religious conflict
Some Korean Protestant Christians have expressed hostility to Buddhism. There have been several dozen
incidents of arson and vandalism against Buddhist shrines and facilities over the last two decades,
including the destruction of several large temples. In some of these incidents, the perpetrators were
identified as Protestants, or left messages denouncing "idol worship."
Korean Business Culture
Korea has one of the most homogeneous populations in the world. Korea has its own culture, language,
dress and cuisine, separate and distinct from its neighboring countries. They take pride in their traditional
culture and their modern economic success and greatly appreciate it when foreigners show recognition of
Korean national achievements. Foreigners are not expected to follow the otherwise strict Korean social
conventions, but foreigners would be wise to always show respect to the elder and higher ranking.
Societal context
The Confucian mind-set is a fundamental part of Korean culture. In accordance with Confucian
principles, people of higher rank or age are treated with an explicit respect, both socially and in business
matters. Employees of Korean companies have a strong sense of loyalty towards their employer and in
any situation of conflict they are expected to seek confirmation or take the side of the employer regardless
of the logic behind the arguments.
Confucian emphasis on education can be felt throughout Korean society. Koreans are in general very well
educated and attach much importance to academic excellence and degrees obtained. The admission
examinations for Korean universities are important events as the result of the examinations determine the
future of thousands of young Koreans. Networks established during the high-school and college years
often play a big role in the following career and throughout life.
42
Language
Despite the fact that many Koreans get their education overseas, including the very best universities of the
USA, the lack of English language skills may still be considered one of the biggest barriers to doing
bsiness in Korea. The Korean educational system is continuously emphasizing improvements in the
teaching of oral English. An increasing number of business people – especially at the higher echelons –
are able to work proficiently in English.
Korea has its own alphabet, hangul, consisting of 24 written characters (10 vowels and 14 consonants). In
Seoul and larger urban areas Korean road signs and menus are often supplemented by information in
English.
Korea still has a tense relationship with Japan after a long history of conflict and especially many years of
occupation in the first half of the 20th century. Although older Koreans may still understand and speak
some Japanese, it is not recommendable to use brochures or other commercial material in Japanese in
Korea.
Dress Code
Koreans are more formal in their social interaction than Scandinavians and first impressions matter. It is
important to observe a formal dress code. For business meetings, a suit and tie is mandatory. Although the
dress code in Korea is strict, once introduced and outside formal business meetings, Koreans can show a
very relaxed, personal, and humorous side.
Business Cards
It is essential to bring business cards when having a meeting with Koreans. The business cards are
presented to the counterpart after a handshake or small bows. This presentation of cards is almost of
ceremonial character and it will be observed that Koreans give and receive business cards with either both
hands or with one hand supporting the giving/receiving hand about the wrist or a bit behind. After having
received the card, it is closely examined. The close examination serves a practical purpose, as you address
people (in Korean language especially) according to their title and status. All business cards received
should be placed on the table during the meeting, and if more than one card is being received, they should
be placed on the table in a vertical line so that all cards are visible. After the meeting, cards received are
placed in the breast pocket.
If one omits to present his business card for a Korean business man it may be perceived as an insult. An
excuse that one is out of business cards may be seen as being unserious.
For business people frequently going to Korea it may be an advantage to have business cards printed in
English on the one side and in Korean on the other.
43
Negotiation
Things happen quickly in Korea and preferably straight away. Koreans are impatient and make emotional
and spontaneous decisions, which is why foreigners should take care to address Korean counterparts on
these terms. Be aware that a signed agreement, in case of changes in the underlying circumstances, from a
Korean point of view, will not always be considered an obligating agreement but a starting point for
further negotiation. Business deals are concluded based on mutual confidence and trust more than on the
written word.
In spite of the fact that Koreans want to see fast results you should not as a negotiation partner be too
aggressive. Through the past thousands of years Koreans have been strongly influenced by Buddhism
where body language and the ability to listen are highly valued. Maintaining mutual trust and confidence
in a business relationship is extremely valuable.
If the main issue involves a partnership agreement in the Korean market you should be prepared that the
Koreans might try to set up an exclusive agreement.
Also, an important part of the Korean business culture is the social aspect. Business partners should take
the time to get acquainted in a relaxed and informal context, whether over lunch, dinner or drinks.
Gifts
South Korea has a reputation of having problems with corruption and certainly corruption charges are still
regularly put forward against business people and others in positions of influence. Nevertheless, gifts are
part of the business culture and (from a Korean point of view) not considered bribery. A small gift
(possibly with a Danish distinctiveness) can be considered an ―icebreaker‖ in relation to a business
meeting and is good to bring along as a response to a Korean gift offered in a formal context.
Linguistic Affiliation
About seventy million people speak Korean. Most live on the peninsula, but more than five million live
across the globe. Korean is considered part of the Tungusic branch of the Altaic group of the Ural-Altaic
language family. It also has a close relationship to Japanese in general structure, grammar, and
vocabulary. The form of Korean spoken around Seoul is regarded as standard. Major dialects differ
mainly in accent and intonation. Except for old Cheju dialect, all are mutually intelligible.
National Identity
Before the 1945 national division of the peninsula and the subsequent establishment of the two political
regimes of North and South Korea in 1948, Koreans identified themselves as the people of Choson.
Tan'gun as the founding ancestor has had a symbolic meaning for Koreans throughout the nation's history.
A temple erected in Tan'gun's honor in 1429 stood in P'yongyang until its destructionduring the Korean
44
War. In 1993, North Korea announced the discovery of Tan'gun's tomb and a few remains of his skeleton
at a site close to P'yongyang. Some Korean calendars still print the Year of Tan'gun (Tan‘gi) along with
the Gregorian calendar year, which the South Korean government officially adopted in 1962.
Ethnic Relations
Korea is one of the few countries in which ethnicity and nationality coincide. The only immigrant ethnic
minority group is a Chinese community of about 20,000 that is concentrated mainly in Seoul and has
existed since the late nineteenth century. Since the Korean War, the continued presence of the United
States Forces–Korea has resulted in the immigration of over one hundred thousand Korean women to the
United States as soldiers' wives. Since the early 1990s, an increasing number of foreign workers from
Asian countries (including Korean Chinese) and Russia have entered South Korea in pursuit of the
"Korean Dreams."
Food in Daily Life
The rapid changes in lifestyles that have accompanied economic development since the 1960s have
changed the traditional pattern of eating rice at each meal. Some urbanites may eat toast, eggs, and milk
for breakfast, using a fork and knife. Nonetheless, for many people a bowl of steamed white rice, a
soybean-paste vegetable soup, and a dish of kimch'I may still constitute the basic everyday meal, to which
steamed or seasoned vegetables, fish, meats, and other foods may be added as side dishes (panch‘an).
Many people eat at a low table while sitting on the ondol floor, using a spoon and chopsticks.
Kimch'I is the national dish. It is a pungent, often hot, mixture of fermented and/or pickled vegetables.
Almost any vegetable can be fermented to make kimch'I, but Chinese cabbage and daikon radishes are the
most commonly used. As part of the national diet for centuries, it has many variations depending on the
region, season, occasion, and personal taste of the cook. Kimch'I has long been the test of a housewife's
culinary skills and a family tradition. A South Korean consumes an average of forty pounds (eighteen
kilograms) of kimch'I a year. Many companies produce kimch'I for both domestic consumption and
export.
Meat dishes such as pulgogi (barbecued meat) and kalbi (short ribs) are popular among both Koreans and
foreigners. They are traditionally charcoal-roasted after the meat has been marinated in soy sauce, sesame
oil, sugar, minced garlic, and other spices. The foods available at restaurants range from sophisticated
Western cuisine, to various ethnic specialty foods, to both indigenous and foreign fast foods. There are no
food taboos, although Buddhist monks may practice vegetarianism and observe other food taboos.
Food Customs at Ceremonial Occasions
A variety of ttok (rice cake), other traditional confectionery, and fresh fruits are served to celebrate
birthdays, marriages, and the hwan'gap (the sixtieth birthday). The offerings at ch‘arye, memorial services
for one's ancestors performed on special holidays, include rice wine, steamed white rice, soup, barbecued
45
meats, and fresh fruits. After ritual offerings of the wine and food to the ancestral spirits, the family
members consume the food and wine. Their ingestion symbolizes the receiving of blessings from the
ancestral spirits.
South Korea still produces most of its domestically consumed rice. Traditional cash crops such as
ginseng, tobacco, tea, and silkworms remain important. The livestock industry raises beef and dairy cattle,
hogs, and chickens. Meat production has increased, largely in response increased consumption and
government support. South Korea imports beef and milk, exports pork to Japan, and maintains self-
sufficiency in chickens and most vegetable products.
Land Tenure and Property
Traditionally, land, especially farmland, was the main form of wealth, and tenants had customary rights
that allowed them to farm the same plots year after year. The land survey and tax structure under colonial
rule changed the nature and extent of land tenure, forcing many owner-farmers to sell their land to the
Japanese. Some people argue that the violation of tenants' customary rights predates the Japanese
incursion. The majority of the agricultural population became impoverished, landless tenants by the end
of the colonial rule. basic land price pattern was officially determined to allow an equitable distribution of
the profits from land development. Despite a variety of regulations, however, speculation in real estate
has been a major device for accumulating wealth rapidly and irregularly.
Division of Labor
Leading chaebol companies such as Hyundai, Samsung, and the LG Group recruit white-collar workers
from among college graduates through the kongch'ae system (an open competitive written examination
and interviews). Smaller companies often rely on social connections to hire employees. For executive and
upper-level management jobs, companies may scout the desired personnel by using a variety of means,
including professional headhunting services. Employment in the civil service, which is based on a grade
system, reflects a strong tradition of seniority. Positions are assigned strictly according to grade, and
remuneration is based on grade and length of service. Recruitment from outside is allowed only at certain
grade levels through the civil service examination system, with age limitations that favor the young.
Vacant positions, except at the lowest grade level, are filled mostly by promotions based on seniority. The
tradition of seniority, however, is being challenged as part of the wide-ranging restructuring taking place
in the public sector as well as in the financial and corporate sectors as a result of the 1997 economic
crisis.
Classes and Castes
The traditional gentry (yangban) status was formally abolished by the Kabo Reforms of 1894, but the
legacy of the class system is seen in social psychological and behavioral patterns. 60 percent of South
Koreans regarded themselves as belonging to the middle class. The subjective perception of one's class
46
position was closely correlated with one's level of educational attainment. Eighty-three percent of those
with a college education perceived themselves as belonging to the middle class, compared with 41 percent
of those with a primary school education. In general, industrialization and urbanization have contributed
to a leveling of the nonkin hierarchy in social life, but the income gap between the working classes and
the industrialist class as new power elite has grown. Family background, education, occupation, and the
general acceptance of a meritocracy are major social factors that contribute to the unequal distribution of
wealth by class.
Symbols of Social Stratification
Major symbols of social status include the size of one's condominium or house, the location of one's
residence, chauffeur-driven large automobiles, style and quality of dress, membership in a golf club, and
the use of honorifics in speech. According to the government classification, residential space between
eighteen and 25.7 p'yong (one p'yong equals 3.95 square yards) is regarded as medium-sized housing.
People in the middle and upper-middle classes tend to live in apartment units of over thirty p'yong. The
precise number of p'yong of one's condominium often is interpreted as a barometer of one's wealth.
Academic degrees such as a doctorate and professional occupations such as medicine also symbolize
higher social status.
Division of Labor by Gender
Gender and age have been the two fundamental influences in patterns of social organization. Housework
is most commonly regarded as women's work even when a woman works outside the home.
Industrialization and democratization have given women more opportunities to play diverse roles in
public life, but the basic structure of a gender division of labor is observable in public life. As of April
2009, 47.7 percent of all adult females worked outside the home. Women's average earnings were 63.4
percent of those of men in the same jobs. There was one woman among seventeen cabinet members and
no woman vice minister. Women occupied 2.3 percent of the provincial and local assembly seats in 1999.
Women as professional leaders in religious life are limited in numbers in both Christian churches and
Buddhist temples. The exception to this pattern is seen in shamanism, in which women dominate as
priestesses.
The Relative Status of Women and Men
The constitution stipulates equality of all citizens before the law, but the norms and values that guide
gender relations in daily life continue to be influenced by an ideology of male superiority. The interplay
between these gender role ideologies complicates the patterns and processes of social change in the area
of gender role performance and the relative status of women and men. One of the consequences of these
dual gender role ideologies is the behavioral patterns that compartmentalize the social arena into public
versus private spheres and formal versus informal situations within each sphere of social action. The
47
patriarchal gender role ideology tends to guide people's behavior at group levels in public informal
situations as well as private formal situations. Democratic egalitarianism is more readily practiced at the
societal level in public, informal situations, and at the individual level in private, informal situations.
Thus, a woman can and did run for the presidency, but women are expected to behave in a submissive
manner in public, informal gatherings such as dinner parties among professional colleagues.
In private, informal situations such as family affairs, however, urban middle-class husbands tend to leave
the decision making to their wives. Nonetheless, male authority as the household head (hoju) is socially
expected and the law favors husbands and sons over wives and daughters. The main sources of social
change in gender status have been the women's movement and the role of the state in legislating to protect
women's rights and improve their status. In response to feminist activism, some men organized the first
National Men's Association in 1999. Complaining of reverse sexism, they asserted that laws enacted to
prevent domestic violence and sexual harassment unfairly favor women and vowed to campaign to
abolish the exclusively male duties of military service so that both sexes may shoulder the duties of
national defense.
Marriage
Family background and educational level are important considerations in matchmaking. Marriage
between people with a common surname and origin place (tongsong tongbon) was prohibited by law until
1997. Many urbanites find their spouse at schools or workplaces and have a love marriage. Others may
find partners through arranged meetings made by parents, relatives, friends, and professional
matchmakers. In urban centers, the arranged meeting often takes place in a hotel coffee shop where the
man, the woman, and their parents may meet for the first time. After exchanging greetings and some
conversation, the parents leave so that the couple can talk and decide whether they would like to see each
other again. Most individuals have freedom in choosing a marital partner. Marriage has been regarded as
a rite of passage that confers a social status of adulthood on an individual. Marriage also is thought of as a
union of not just a man and a woman but of their families and a means to ensure the continuity of the
husband's family line. Ninety percent of women marry in their twenties, although the average age of first-
time brides has increased from 20.4 years in 1950 to 25.9 years in 1997. Traditionally, divorce was rare,
but it tripled from 1994 to 2004.
Remarriages constituted 10.9 percent of all marriages in 2007. Traditionally, remarriages of widows were
not allowed and remarriages of divorced women were difficult. However, changes are occurring in the
remarriage pattern, especially for divorced women. The ratio of a divorced woman marrying a bachelor
used to be lower than that of a divorced man marrying a never-married woman. Since 1995,
However, this situation has reversed in favor of women, with a 2007 ratio of 2.9 to 2.6 percent. Divorced
women with independent economic means, especially successful professionals, no longer face the
48
traditional gender bias against their remarriage and can marry bachelors who are younger and less
occupationally advanced. This phenomenon clearly reveals the importance of the economic aspect of
marriage.
Domestic Unit
Two-generation households constituted 73.7 percent of the 11.1 million households in 2005, one-
generation and three-generation households constituted 14.7 percent and 11.4 percent, respectively.
Traditionally, three-generation stem families were patrilineally composed. That custom continues, but
some couples now live with the parents of the wife. In an extended family, the housekeeping tasks usually
are performed by the daughter-in-law unless she works outside the home.
Inheritance
Traditionally, the oldest son received a larger proportion of an inheritance than did younger sons because
of his duty to coreside with aging parents and observe ancestor ceremonies. After the 1989 revision of the
Family Law, family inheritance must be divided equally among the sons and daughters. The children may
inherit real estate, money from savings accounts, furniture, and other family heirlooms.
Kin Groups
Outside the family, the patrilineal kin group (tongjok) is organized into tangnae and munjung. Consisting
of all the descendants of a fourth-generation common patrilineal ancestor, the members of a tangnae
participate in death-day and holiday commemoration rites of the kin group. Munjung as a national-level
organization is composed of all the patrilineal descendants of the founding ancestor and owns and
manages corporate estates for conducting the annual rites to honor ancestors of the fifth generation and
above at their grave sites. The main purpose of these lineage organizations and ancestor rites is to assert
gentry (yangban) status and reaffirm agnatic ties. Since food offerings and ritual equipment are costly,
only a small number of kin groups have formal lineage organizations. The Kimhae Kim, the largest
lineage, is said to have more than 3.7 million members. "Kim" as the most common Korean surname is
composed of about one hundred fifty groups of that name with different places of origin, accounting for
approximately one-fifth of the population. The Hahoe Yu of the Hahoe Iltong village in Kyongsang
Province is the best known example of kin groups living in the same village.
Infant Care
Because of rapid changes in lifestyles in the last few decades, the care of infants varies widely,
depending, among other things, on the class positions of a family. Generally, during the first two years
children receive great deal of affection, indulgence, and nurturing from their parents. Infants seldom are
separated from their mothers. They used to be carried on the mother's back but today may ride in baby
carriages. Many parents sleep with their infants in the same room. Infant care practices encourage
emotional dependence of the children on their parents.
49
Child Rearing and Education
Obedience, cooperation, respect for the elders, and filial piety are the major values inculcated in a child's
early years. Most children receive traditional gender role socialization from early childhood. Parents go to
great lengths to provide the best education for their children, especially their sons, since parents
traditionally have depended on their children in old age. Children, particularly sons, maintain a strong
sense of dependence on their parents throughout adolescence and until after marriage. The differential
treatment sons and daughters receive from their parents is considered a fundamental source of the gender
structure in Korean society, where women are likely to be more self-reliant and individualistic than men.
Higher Education
The traditional high regard for education as a means to improve one's socioeconomic status continues in
contemporary Korea. The annual college entrance examinations are extremely competitive. Many
unsuccessful applicants repeat the examinations in order to enter elite universities. From only nineteen
institutions of higher education in 1945, the number has increased to nine hundred fifty. Over 26 percent
of men and about 13 percent of women age twenty-five and over received higher education as of 1995.
Culture
South Korea shares its traditional culture with North Korea, but the two Koreas have developed distinct
contemporary forms of culture since the peninsula was divided in 1945. Historically, while the culture of
Korea has been heavily influenced by that of neighboring China, it has nevertheless managed to develop a
unique cultural identity that is distinct from its larger neighbor. The South Korean Ministry of Culture,
Sports and Tourism actively encourages the traditional arts, as well as modern forms, through funding and
education programs.
The industrialization and urbanization of South Korea have brought many changes to the way Korean
people live. Changing economics and lifestyles have led to a concentration of population in major cities,
especially the capital Seoul, with multi-generational households separating into nuclear family living
arrangements.
Art
Korean art has been highly influenced by Buddhism and Confucianism, which can be seen in the many
traditional paintings, sculptures, ceramics and the performing arts. Korean pottery and porcelain, such as
Joseon's baekja and buncheong, and Goryeo's celadon are well known throughout the world. The Korean
tea ceremony, pansori, talchum and buchaechum are also notable Korean performing arts.
Post-war modern Korean art started to flourish in the 1960s and 1970s, when South Korean artists took
interest in geometrical shapes and intangible subjects. Establishing a harmony between man and nature
was also a favorite of this time. Due to social instability, social issues appeared as main subjects in the
1980s. Art was influenced by various international events and exhibits in Korea, and with it brought more
50
diversity. The Olympic Sculpture Garden in 1988, the transposition of the 1993 edition of the Whitney
Biennial to Seoul, the creation of the Gwangju Biennale and the Korean Pavilion at the Venice Biennale
in 1995 were notable events.
Annual Festivals, Korea
January:
Hwacheon sancheoneo ice festival in gangwon-do combines winter sports such soccer games on ice,
snow and ice sledding and fishing activities such as trout ice-fishing and troutlure fishing.
February:
Jeju jeongwol daeboreum fire festival on jeju lasts for three and features a wide variety of events,
including a light show illuminating mount oreum.
March:
Apricot blossom festival in maehwa village in gwangyang joellanam-do the festival is scheduled for when
the blossoms are expected to be in full bloom.
Cheongdo bullfighting festival in cheongdo-gun, gyeonsangbuk-do featuring Korean- style bull-fighting.
Gurve sansuvu festival in the hot springs area of jiri-san in joellanam-do not only offers a chance to see
sansuyu flowers but also to enjoy a variety of performance, hands-on events and fireworks.
Jelu canola blossom festival on jeju-do first began as a means of celebrating the canola flower‘s beauty
and has now become one of jeju island major festivals.
April:
Goyang flower festival began in the 1990‘s and has become an increasingly popular annual event. It is
held in ilsan Lake Park just north of seoul, which can be reach by public transit from seoul and gyeonggi
province, as well as by car.
Hampyeong butterfly festival in jeollanam-do offers spectacular views of tens of thousands of butterflies
flying among the canola blossoms.
Jeju cherry blossom festival on jeju-do is scheduled for when the cherry trees are in full bloom.
Namwon chunhyang festival in na,won. Jeollabuk-do has been held since 1931 and celebrates a famous
Korean story of love and fidelity.
May:
Boseong green tea festival in jeollanam-do is a celebration of tea in the nation‘s largest tea-growing area.
Chuncheon international mime festival in chuncheon. Gangwon-do where, each year,
Renowed artists from korea and abroad give outstanding mime performances. Performances are held all
day long on the weekend.
Damyang bamboo festival in joellanamp-do originates froma local tradition in which the locals organized
a feast featuring food and liquor made for any bamboo left over from the planting.
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Hadong wild tea cultural festival in hadong-gum in gyeongsangnam-do treats visitors to a feat of wild
teas.
Hasan mosi festival in chungcheongnam-do offers a chance to learn about the various styles of mosi and
to enjoy wonderful fashion show feature clothing made of ramie.
Icheon ceramics festival in incheon gyeunggi-do celebrates korea‘s long ceramics history.
Jindo sea parting festival on jindo-gun. Jeollanam-do where every year a land bridge opens up between
jin-do and another small island. Thousands of people come each year for the festivities.
Oriental medicinal herb festival at jirisan in yeongsangnam-do focuses on health and is aimed at
promoting the benefits of the traditional medicines of Mt. jiri and sancheon. Visitors can experience
unique and rare forms of hands-on treatments.
June:
Muju firefly festival in jeollabuk-do offers visitors the opportunity to experience what agricultural life is.
July:
Boryeong mud festival in boryeong chungcheongnam-do celebrates therapeutic value of boryeong mud in
a whole range of fun and muddy ways.
August:
Nangye traditional music festival in yeongdong-gun, chungcheonbuk-do spotlights gugak, traditional
Korean music.
Gangjin celadon cultural festival in gangjin jeollanam-do offers visitors the opportunity to learn more
about and purchase celadon, korea‘s traditional porcelain. There are also all kinds of musical
performances and cultural activities during the festival.
September:
Andong international mask festival in andong, gyeongsangbuk-do aims to promote and showcase korea‘s
mask dance culture, through various programs and performances.
Chungju world martial arts festival in chungju-si chungcheongbuk-do offers exhibition performances and
martial arts tournaments with martial artists from around the worls.
Geumsan insam festival in geumsan gives visitors an opportunity to not only sample some expensive
ginseng for free but also togather ginseng, prepare ginseng dishes, and lots more.
Gimie horizon festival in geumsan gives visitors an opportunity to not only sample some
Expensive ginseng for free but also to gather ginseng, prepare ginseng dishes, and lots more.
Gimi horizon festival in gangjin jeollanamdo provides visitors with a chance to experience korea‘s
traditional farming culture. Here‘s your chance to learn growing rice first hand.
Jarasum international jazz festival in gapyeong-gum, gyeonggi-do offers international jazz performances
by well-known jazz musicians in an outdoor setting.
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Yangyang song-1 mushroom festival in yangyang, gangwon-do offers people a chance to explore the
wonders of wild son-I mushroom, so rare they are called the ‗diamonds of the forest.‘ In addition to
mushroom, the festival offers a variety of folk performances as well as programs based on the specialties
of the yangyang area.
October:
Busan jagalchi festival at the jagalchi fish market in busan offers tons of fish/seafood related things to see
eat and buy.
Ganggyeong salted seafood festival in nonsan-si, chungcheongnam-do focuses on korea‘s largest salted
fish marketplace. Vistors can participate in making their own salted fish among other things.
Gwangju kimchi festival in gwangju-si celebrates kimchi but also offers visitors lots of other food to try.
Icheon rice culture festival in Incheon-si. Gyeonggi-do combines the experience of great quality rice that
fed the royal court and the culture of harvesting rice. there‘sa reenactment of a parade where rice was
prepared and presented to the king, as well as a variety of foods to try, including a huge iron pot rice bow
from which thousands of peoples eat.
Jinju nangang yudeuhng festival in jingo, gyeongsangnam-do is a tribute to the 70,000 soldiers killed in
the jinjuseong battle of the imjin war of the 136th century.
Jinju nangang lantern festival over the namgang waterfront across from jinjuseong chokseognu is
highlighted by an parade of lanterns filling the river with colourful light to creat a spectacular view.
Namdo food festival in naganeupseong folk village, suncheon-si, jeollanam-do area reputed to have the
best food in korea. The food from a nationwide contest of professional chefs is auctioned off to the public.
Pusan international film festival in busan offers a look into Asian films and their trends.
November:
Chungmugong norvang haejeon seungcheopjae festival in namhae-gun, gyeongsangnam-do celebrates
general lee sun-sun‘s victory during the Japanese invasion of korea in 1592. The festival exhibits the
turtle ship and offers a reenactment of the famous battle.
Gunsan intgernational migratory bird festival at the bird observation station in gunsansi jeollabuk-do is a
must-do for everyone wanting to see the wild birds that migrate to the area for winter.
Jeju orange festival in seogwipo-si on jeju island is a celebration of jeju‘s tangerines.
Paju jangdan soybean festival in paju, geyonggi-do gives visitors the chance to make their own soybean
dishes, see how soymilk is made and taste traditional Koran soybean recipies such as soybean, rice cakes,
tofu, etc.
Southernmost moseulpo yellowtail festival on jeju-do gives visitors a chance to participate in cathing
yellowtail, enjoy a boat fishing tournament, low price on marine foods and a traditional prayer ritual for a
bountiful catch.
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TECHNOLOGICAL ENVIRONMENT OF SOUTH KOREA
Technology
Technology can be defined as the method or technique for converting inputs to outputs in accomplishing a
specific task. Thus, the terms 'method' and 'technique' refer not only to the knowledge but also to the skills
and the means for accomplishing a task. Technological innovation, then, refers to the increase in
knowledge, the improvement in skills, or the discovery of a new or improved means that extends people's
ability to achieve a given task.
Technology can be classified in several ways. For example, blueprints, machinery, equipment and other
capital goods are sometimes referred to as hard technology while soft technology includes management
know-how, finance, marketing and administrative techniques. When a relatively primitive technology is
used in the production process, the technology is usually referred to as labour-intensive. A highly
advanced technology, on the other hand, is generally termed capital-intensive.
Changes in the technological environment have had some of the most dramatic effects on business. A
company may be thoroughly committed to a particular type of technology, and may have made major
investments in equipment and training only to see a new, more innovative and cost-effective technology
emerge.
Technological Evolution In The Electronics Industry
The first electronics product actually made in Korea was a vacuum tube AM radio assembled in 1958
from imported components for the domestic market. Just over three decades later, by 1990, Korea had
become the world‘s second largest producer of consumer electronics after Japan, and by 1994 it ranked
fourth in the world as a producer of electronics more broadly defined, after the U.S., Japan, and Germany.
Although small and medium sized firms have grown enormously in numbers in recent years, the
industry‘s growth has been driven by the leading Korean chaebols, four of which -- LG, Samsung,
Daewoo, and Hyundai -- have dominated production and exports.
The Beginnings
Korea‘s first electronics producer was GoldStar (now LG Electronics, the name that will be used
somewhat anachronistically throughout this narrative, to avoid confusion). The owner of Lucky
GoldStar, a small face cream and plastic houseware company, sensed an attractive business opportunity in
this sector, which was protected from foreign-built imports. He took an observation tour of several
leading electronics firms in Japan, Europe, and the United States, and virtually simultaneously hired an
experienced German engineer to provide the technical knowhow to begin production. The initial
operation was the small-scale assembly of foreign components into the
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country‘s first vacuum tube AM radio, largely through imitative reverse engineering of a Japanese model.
The German engineer played a key role in this early stage, ordering the necessary production equipment
and training Korean technicians and assembly line workers. Within a year, relatively well-educated
Korean engineers were able to replace the German, in part because assimilating the product design and
assembly operations was relatively simple (Goldstar, 1993). Goldstar, as the company was then known,
followed the same pattern of reverse engineering and gradual accumulation of knowhow to produce other
home appliances, such as electric fans and refrigerators, without foreign assistance or formal technology
transfer processes.
Televisions
However, when the company imported several black and white television receivers in order to see
if TV sets could also be reverse engineered, they found that the significantly larger number of
components required and the greater technological complexity of the product put it beyond their
capabilities to imitate. Therefore in 1965 the company turned to one of Japan‘s largest electronics firm,
Hitachi, for a licensing agreement that included not only technology transfer in assembly processes but
also product specifications, production knowhow, parts/components, training, and the support of
expatriate Japanese engineers. All of them transferred a significant amount of explicit and tacit
knowledge to the company. LG Electronics also sent seven experienced Korean engineers and technicians
to Hitachi for intensive training. Intense commitment and shared learning were common in the early days
to raise technological capabilities as quickly as possible. This group of engineers rented an apartment and
had group sessions every evening, reviewing and sharing the literature they collected, their observations,
and their training. They played a pivotal role in enhancing the company‘s capabilities on their return
home.
Japanese expatriate engineers supervised the installation and start-up of the TV production line in order to
minimize time lost in trial and error. But within a year the local technical personnel trained at Hitachi had
acquired enough tacit knowledge through production and product design experience to take over from
them. When the company turned to later consumer electronics products, such as cassette recorders and
audio systems, they were able to move into assembly without foreign assistance.
Three other firms entered TV production at about the same time, and acquired and assimilated production
capabilities through much the same process. Instead of drawing on foreign expatriates for experience-
based knowhow, however, subsequent entrants hired experienced engineers and technicians away from
existing firms. LG Electronics, as the first and largest producer, was a major source of experienced
personnel for new entrants (Kim, 1980).
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The Role Of The State
The eagerness of these other firms to enter the electronics industry owed much to government policy. In
the first decade, the state‘s role in electronics was the relatively limited one of tightly controlling imports,
contraband goods in the black market, and foreign direct investment, opening an opportunity for local
firms to meet the needs of the domestic market. But 1969, when the government designated electronics as
a strategic export industry, marked a major change in the government‘s role.
In that year, the government promulgated the Electronics Industry Promotion Act and released an
ambitious Long-Term Electronics Industry Promotion Plan. It also created the Electronic Industry
Promotion Fund, which offered preferential financing to build up scale economies in production. The Plan
also provided grants to develop and upgrade public support systems for industry standards and R&D. The
government specifically identified 95 products for promotion, offering preferential financing and other
incentives to their producers. Yearly production targets were established, and progressive local content
requirements were set in order to promote the parts and components industry. End products for the local
market were completely protected from foreign competitors, and foreign investment allowed only for the
production of key parts and components and for re-export. The government also created an electronics
industrial park in order to give rise to inter-firm learning and scope economies.
A key element of the Plan was promoting the industry as a leading exporter. In 1969, when the industry
exported a mere $42 million worth of products, the government set an ambitious export goal of $400
million for 1976 (the last year of the plan). The government not only set specific export goals and
directives, forcing local firms to be competitive both in price and quality in international markets; it also
provided incentives. Preferential financing, tax concessions, foreign loan guarantees, and the control of
entry of new firms formed the heart of the export drive. That is, this ambitious program induced a crisis,
compelling local firms to acquire technological capabilities quickly, and at the same time it provided the
support to make the crisis creative rather than destructive. Since marketing of exports was largely in the
hands of foreign OEM buyers, local firms concentrated on the acquisition of product design and
production capabilities. In 1976, exports exceeded $1 billion, more than twice the target, indicating the
rapid expansion of the industry‘s capabilities.
Color Televisions
Black and white televisions were the first major product to be exported in volume. As black and white
sets reached at the declining stage in the major export markets, the color TV became the next target for
development. With black and white TVs, the Korean companies had moved up the production learning
curve on the strength of the protected domestic market, prior to competing internationally. However,
Korea did not broadcast in color, so export markets were the target from the beginning. None of the
foreign color TV producers were willing to license technology to Korean producers, who had so
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convincingly demonstrated their ability to invade what was the largest and most important market, the
United States. LG Electronics and two other major producers turned to domestic sources of technology,
embarking on a joint research contract with KIST in order to expand their knowledge base in color TV
technology. The combined experience from these efforts and their earlier learning in black and white
televisions strengthened their bargaining power in the eyes of foreign technology sources, and RCA
licensed its core patents to LG Electronics in 1974.
This was a common experience in the success of Korean firms. They have often found it easier and less
expensive to license a new technology if they reverse-engineer the technology beforehand. For instance,
Korea‘s reverse engineering of the VCR virtually forced the Japanese firms to change their policy and
license VCR technology to Korea, in order to have a return on their technology investments. In these
cases, the purpose of technology licensing was less to gain technology than to pave the way into the
export market. In 1999, Korea is the second largest producer of color televisions with 20 percent share of
the global market.
Microwave Ovens
The video cassette recorder and the microwave oven were the next targets for development. In both
cases, Korean firms were faced with the reluctance of Japanese firms to transfer their technology to
Korean firms, who were increasingly seen as potential competitors. Rebuffed by foreign firms in their
attempts to license the technology, the Korean firms reverse-engineered the product. Only after they
produced successful commercial models were they able to persuade foreign firms to license the
technologies, thereby opening the paths for export.
Reverse engineering the microwave oven, however, was a formidable task. After its unsuccessful attempts
in 1976 to license microwave technology, it took the industry‘s first major producer, Samsung, two years
of intensive work, with teams of engineers putting in 80-hour weeks of redesigning, readjusting, and trial-
and-error, to produce a successful commercial prototype. The complexity of the components, particularly
the magnetron tubes, posed serious problems. There were only three producers of magnetrons in the
world, two in Japan and one in the US. Samsung sourced its magnetrons from Japan.
Even after it finally developed the commercial prototype, Samsung still faced problems in volume
production. Although it had worked with local bakeries in field tests of the new product, microwave
ovens were too expensive to find a significant domestic market. At a time when more than 5 million
ovens were being sold worldwide, Samsung‘s first major order came from Panama in 1980, for 1,000
microwave ovens. That year, however, proved to be the turning point for Samsung: J.C. Penney asked
Samsung if it could produce a low-priced microwave oven for the U.S. market. This order meant a
completely new design and heavy losses (because Samsung had yet to develop the production scale
economies that would bring its costs down). But it would give Samsung a foothold in the largest and most
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sophisticated market in the world and the opportunity to turn a primitive assembly line into an efficient
high volume operation. Penney provided technical assistance to the Samsung team to ensure that its
ovens met Penney‘s technical specifications.
Samsung‘s engineers and technicians worked around the clock, manufacturing by day and tuning the line
at night to fill the order. It was successful enough for Penney to more than triple its order within three
months. However, to bring its costs down as other producers developed even greater scale economies,
Samsung decided to develop its own magnetron tube, which was still sourced from Japan. After being
turned down in its requests for technical assistance by both Japanese producers, Samsung in 1982 bought
and transported to Korea the only U.S. factory producing magnetron tubes (it was going out of business
because of the Japanese competition). Samsung also invested heavily in improving productivity by
automating its production processes.
Samsung‘s rapid assimilation of the design and production technology for microwaves was rooted in the
quantity and quality of those critically important human resources. Samsung hired Korean engineers who
had graduated from leading U.S. engineering schools, as well as from Korean universities. It soon built a
microwave technical group that outnumbered their counterparts in GE Appliances, which began providing
technical support for sourcing microwave ovens from Samsung. This gave the Korean engineers further
opportunities to absorb world-class skills (Magaziner and Patimkin, 1989, 88-89). These engineers and
technicians were willing to work long hours and with intense commitment to succeed.
Samsung‘s R&D activities have led to 74 local patents and 6 overseas patents related in microwave oven
technology, enabling Samsung to become one of the leading producers of microwaves in the world. By
1994 Samsung was the world‘s second largest producer, manufacturing four million ovens in Korea and
0.8 million more abroad each year and accounting for 17% of the global market.
Samsung‘s success prompted LG and Daewoo to follow suit. They too were turned down in their efforts
to enter the field by licensing Japanese technology. The later entrants were able to poach experienced
engineers and technicians from Samsung, thereby spreading microwave oven technology throughout the
rest of the electronics industry in Korea. While it took Samsung four years to develop its first successful
prototype, it took LG only eight months when it set up its own task force in 1980. Then LG Electronics
acquired the licenses necessary to open up export markets. Samsung‘s development of magnetron
technology even helped LG to license the magnetron tube technology from Hitachi, which had previously
refused to license it to Samsung. Now LG produces nearly as many microwave ovens as Samsung, and in
1999 Korea accounts for 40 percent of the global market.
Semiconductors
Korea‘s semiconductor industry, now one of the country‘s most dynamic industries, had its beginnings in
the mid-1960s, when several multinational semiconductor firms – Signetics, Fairchild, Motorola, Control
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Data, AMI, and Toshiba -- began assembling discrete devices in Korea to take advantage of its low labor
costs. These operations involved only simple packaging processes: parts and components were imported
from the parent companies, assembled in wholly-owned subsidiaries by relatively unskilled workers, and
re-exported. Little design or engineering capability was transferred to Korea.
In 1975, as part of its drive for rapid industrial transformation, the government formulated a six-year plan
to promote the semiconductor industry. However, the initial enthusiasm of Korean companies crumbled
in the face of difficulties in obtaining technology from the more advanced countries and the accelerating
risks of shortening product life cycles in this far-moving industry. Most of the firms chose to pursue
consumer electronics instead.
Korea‘s first semiconductor firm was actually established before this government initiative: in 1974, a
Korean-American scientist with a Ph.D. from Ohio State University and semiconductor design experience
at Motorola, Dr. Ki-Dong Kang, established the Korea Semiconductor Company. It experienced financial
problems almost immediately, and Samsung acquired it during its first year of operations, as a source of
semiconductor knowhow for its growing consumer electronics business. By 1983, however, the critical
role of semiconductor technology in a range of industries was becoming increasingly clear, and the four
largest chaebols -- Samsung, Hyundai, LG, and Daewoo -- each decided to enter VLSI production.
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LEGAL ENVIRONMENT OF SOUTH KOREA
MEANING OF LEGAL ENVIRONMENT:
The term ‗law‘ may refers to the entire legal system of the society, in most countries, apart from those
laws hat control investment and related matters, there are a number laws that regulate the conduct of the
business. These laws cover such matters standards of product, packaging, promotion, ethics, ecological
factors, etc…for the benefit of society.
In many countries, with a view to protecting consumer interest, regulations have become stronger.
Regulations to protect the purity of the environment and preserve the ecological balance have assumed
great importance in many countries.
The term law points towards those rules and regulation, which the government announced and enforces.
The emergences of law in a society I a gradual process which keeps pace with growing needs of the
society and changing civilization perceptions of the times.
In a formal sense, law may be described as a system of rules which evolves and develop in a society for
people to be followed under the enforcement by the state. If laws are violated, the stat power will come in
to play to force the violators to either adhere to law or face adverse consequences. The members of a
society are expected to know the law of the land.
Some government specify certain standards for the products to be marketed in the country. Some even
prohibited the marketing of certain products. In most nations, promotional activities are subject to
various types of controls. Several European countries retain the use of children in commercial
advertisements. Many countries today have laws to regulate competition in the public interest.
Elimination of unfair competition and dilution of monopoly power are the important objectives of these
regulations.
Certain changes in government policies such as the industrial policy, fiscal policy, tariff policy, etc…may
have profound impact on business. Some policy developments create opportunities as well as threats. For
example, the industrial policy liberalizations in india have opened up new opportunities and threats.
They have provide a to opportunities to a large number of enterprises to diversify and to make their
product mix better. Buy they have also given rise to serious threat to many existing products by way of
increased competitions may seller‘s markets have given way to buyer‘s markets.
INSTITUTIONS:
The influence of political environment and an business is enormous. The political system prevailing in as
country decides, promotes, fosters, encourages, shelters, directs and controls the business activity of the
country. A political system which is stable, honest, efficient and dynamic which ensures political
participation of the people and assure personal security to the citizens, is a primary factor for economic
development.
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The political system under South Korea comprises two vital institutions.
1. Government
2. judiciary
GOVERNMENT OF SOUTH KOREA:
The President of Korea, elected by nationwide, equal, direct and secret ballot, stands at the apex of the
executive branch. The President serves a single five-year term, with no additional terms being allowed.
Under Korea's presidential system, the President performs his executive functions through the State
Council made up of 15 to 30 members, including the Prime Minister who is appointed by the President
(subject to approval of the National Assembly). Members of the State Council are appointed by the
President upon recommendation by the Prime Minister. They have the right to lead and supervise their
administrative ministries, deliberate major state affairs, act on behalf of the President and appear at the
National Assembly and express their opinions. In addition to the State Council, the President has several
agencies under his direct control to formulate and carry out national policies such as the Board of Audit
and Inspection, the National Intelligence Service, and the Civil Service Commission.
JUDICIARY :
There are six types of courts in Korea, made up of the Supreme Court, the High Court, the District Court,
the Patent Court, the Family Court, and the Administrative Court. The Korean judicial system is based on
the three instance trial system, which is composed of the District Court, the High Court, and the Supreme
Court. Other courts exercise specialized functions with the Patent Court positioned on the same level as
the High Court, while the Family Court and the Administrative Court are positioned on the same level as
the District Court.
Korea was a feudal society and had King's official supreme powers until after the Korean War, when
elements of a legal system were introduced by the United States, as they did in Japan by influencing the
writing of the Constitution.
The judicial system of South Korea is composed of the Supreme Court of South Korea, the Constitutional
Court of South Korea, six High Courts, 13 District Courts, and several courts of specialized jurisdiction,
such as the Family Court and Administrative Court. In addition, branches of District Courts may be
established, as well as Municipal Courts. South Korean courts are organized.There is no system
of juries in the judicial system of South Korea, although since feb 2nd 2008 a limited system of juries has
been adopted for criminal cases and environmental cases, and all questions of law and fact are decided by
judges.
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1. Municipal Courts
The Municipal Courts only exercise original jurisdiction over minor cases, such as small claims cases
where the amount in controversy does not exceed 20 million won or misdemeanor trials in which the
maximum possible sentence is 30 days in jail or a fine not exceeding 200,000 won. There are currently
103 municipal courts in South Korea. In the System of Justice in South Korea,
2. District Courts
The 18 District Courts have original jurisdiction over most civil and criminal cases. Additionally, the
District Court appellate panel may exercise appellate jurisdiction over cases in which a single District
Court or Branch Court judge has rendered the decision. In most cases, a single judge hears the case and
renders a verdict, although in particularly important or serious cases, a trial panel of three judges may
hear the case and render a decision. An appellate panel is also composed of three District Court judges.
(Seoul Supreme Court during Korea under Japanese rule) (Busan District Court during Korea
under Japanese rule)
3. Branch Courts
Branch Courts are organized under and considered a part of the District Courts. The Branch Courts
function much as the District Courts do, but lack any appellate function. There are currently 40 Branch
Courts in South Korea.
4. High Courts
The six High Courts have appellate jurisdiction over cases decided by a trial panel of three judges in a
District Court or Family Court, decisions of the Administrative Court, and civil cases heard before the
District Court in which one judge decided and where the amount in controversy exceeds 50,000,000 won.
Appeals to the High Court are heard by a panel of three High Court judges. High Courts are located
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in Seoul, Busan, Daegu, Daejon, and Gwangju. Additionally, a special panel of the Gwangju High Court
has been established in the Jeju District Court.
CLASSIFICATION OF LAW IN SOUTH KOREA:
The term law may refer to the entire legal system of the society or it may refer to the individual units of
enactments operative in the system. Each individual law regulates particular aspects of society‘s life.
There fore, the individual law can be grouped under several branches or categories of law, each branch
indicating broad aspects of society‘s life. In South Korea following branches can be visualized.
1. Criminal law
2. Civil law
3. Private law
4. Tort law
5. International law and Treaties.
1. Criminal law:
Criminal law in South Korea is largely codified in the Penal Code, which was originally enacted
in 1953, and has undergone little revision since. In addition to the Penal Code, several 'special acts' have
been enacted which create criminal offenses not found in the Penal Code or else modify the penalties of
crimes found in the Penal Code. In cases where provisions in a special act create an apparent conflict with
the Penal Code, the special act is usually given preference.
Both the Constitution and the Penal code contain provisions which prohibit ex post facto laws and
violations of due process. In addition, the Constitution requires judicial warrants for arrest, detention,
search, or seizure, except where a person suspected of a crime is caught in flagrante delicto, or where a
person suspected of a sufficiently serious crime poses a risk of escape or destruction of evidence, in which
cases an ex post facto warrant may be issued.
Additionally, no criminal suspect may be tortured or compelled to testify against himself. The
Constitution also requires that a person arrested for a crime must be given assistance of counsel (selected
or appointed), be informed of the charges against him and of his right to counsel, and have the right to
petition the court for habeas corpus. A person arrested for a crime also has the right to have his family or
other close kin promptly notified as to the reason, time, and place of his detention.
2. Civil law:
Until recently there are few English literature written about Korean civil procedure. The primary body of
law on civil procedure is Korean Civil Procedure Act and the Korean Rules of Civil Procedure (KRCP).
Another important area is the Civil Execution Act first enacted in 2002 as a separate act. For special
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cases, there is the Family Litigation Act for family law matters and the Bankruptcy and Rehabilitation Act
for bankruptcy and restructuring proceedings.
After independence, the Japanese civil procedure law had remained in force until the Korean Civil
Procedure Act was enacted on July 1, 1960. The KCPA has been amended 14 times with the most drastic
change occurring in 2002. 2002 KCPA emphasized the pretrial phase and the concentration of the trial for
the sake of efficiency as well as separating the civil execution from the KCPA.
Under the Civil Act, a natural or a juristic person have a party standing. An association and a foundation
other than a juristic person can have a standing as a party if additional requirements are met. They are (1)
there is a decision making body, (2) representing organ that acts thereby creating and exercising and
fulfilling the rights and duties of the organization, (3) assets separate from the assets of its members.
Jurisdiction
The district courts along with their branch courts have original jurisdiction over civil cases. A single
judge presides over a case in controversy not exceeding 50 million Korean Won. Above that amount, a
panel of three judges hears the case. Cases that are complex and difficult for a single judge to handle are
handled by the three-judge panel as well. The specific rules are prescribed in the Regulation on the
Subject Matter Jurisdiction in Civil and Family Litigations.
The parties can also establish jurisdiction of a particular court by agreement in writing unless another
court has an exclusive jurisdiction over the matter. If the defendant fails to raise a timely jurisdictional
challenge in its pleading during the pre-trial on the merits of the case and the defendant is deemed to have
consented to the jurisdiction.
For cases of international character, Korean Private International Law, also known as Conflicts of Laws
determines the jurisdiction. A Korean court has jurisdiction when a party or a case in controversy has
substantial relationship with Korea.In determining the jurisdiction, the unique nature of international
jurisdiction and the relevant clauses in Korean law should be considered as well.
3. Private law:
Private Law issues in Korea are regulated by the civil code and the commerce code . The civil code of
Korea was enacted in 1960 and is based upon the Japanese civil code which was the used in Korea prior
to the enactment.
4. Tort Law:
Korean Civil Code Article 750 defines torts by stating "Any person who cases losses to or inflicts injuries
on another person by an unlawful act, willfully or negligently, shall make compensation for damages.
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5. International law and treaties:
Treaties ratified by the Republic of Korea have the same effect as domestic law, as stated in Article 6 of
the Constitution. The Constitution gives the power to make treaties to the President, while the National
Assembly has the right to consent to treaties made by the President. South Korea is currently party to
several international agreements and organizations. the house was built by genral custer 1825.
BUSINESS ESTABLISHMENT
THE FOREIGN INVESTMENT PROMOTION ACT (―FIPA‖):
The Foreign Investment Promotion Act (―FIPA‖) is a piece of legislation designed to attract and regulate
foreign investment. Foreigners must file a report with the government or other relevant institutions if they
wish to invest in Korea through acquiring or merging with a Korean company, etc. The FIPA restricts or
prohibits foreign investment in certain businesses. If a foreign currency exchange takes place at the
foreign invested business, it is then subject to the Foreign Exchange Transaction Act. In addition, the
Financial Investment Services and capital market act, the Foreigner Land Act, etc. may be applied based
on individual circumstances.
Antitrust laws:
As is true with Korean companies, foreign companies conducting business in Korea are subject to the
Monopoly Regulation and Fair Trade Act (―Fair Trade Act‖). The Fair Trade Act also regulates concerted
acts of unfairness, acts of preserving resale price, unfair trade acts, etc.
The Fair Trade Act requires companies of a certain scale to make a report on company combination to
the Fair Trade Commission in the following five circumstances:
(1) Acquisition of shares of another company;
(2) Officers‟ concurrent hold of positions;
(3) Mergers and acquisition;
(4) Business or fixed operating asset transfer or lease, acceptance of appointment to management; and
(5) Participation in incorporation of a company.
Environmental laws:
A business that discharges air pollutants, water pollutants, noises and vibrations, and waste and soil
pollutants must obtain a government approval on the installation of discharging facilities from the
Minister of Environment in accordance with each relevant law. To comply with environmental
requirements, companies operating in Korea must adhere to the permitted level of pollutant discharge and
environmental related surcharges stated in the relevant laws.
OPERATIONS OF BUSINESS:
Advertising:
In general, all labeling and advertising of products and services offered by businesses are regulated via
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the Law and Regulations Concerning Fair Labeling and Advertising in order to establish fair transactions
and protect consumers. Also, there are certain restrictions imposed by individual laws on advertisement
relating to transactions concerning specific products (e.g., pharmaceutical products) and transactions
taking place by specific sales methods (e.g., telecommunication).
Consumer Protection Laws :
The Korean Consumer Protection Act imposes certain duties on businesses, such as a duty to prevent
harm, with the goal of protecting consumers.
Construction:
To construct a building, depending on the size and area of the project, permits must be obtained or a
report must be made to the head of the local government. The fee for the permit application is minimal.
The time required to obtain the permit is not standardized, but if all documents required by the relevant
law have been prepared then a permit should be received promptly.
Contracts:
Foreign investors can freely enter into contracts with Koreans and set the laws of another country to be
the governing law of the contract. The Fair Trade Commission may, however, impose certain restrictions
on unfair international contracts.
Price Controls :
Although there are no general price controls, the government may restrict high prices of important goods
if necessary for the safety of the national economy. Also the Fair Trade Commission may impose
restrictions on unfair pricing of market dominant businesses from a monopoly point of view.
Reduction or Return on Capital:
It is also possible for a foreign invested company to receive a capital refund by capital reduction and/or
through dividends (interim or year-end).
Sale of Goods :
There are laws and provisions that regulate certain sales methods, including but not limited to: installment
sales, visiting sales, multiple stage sales and electronic sales.
STRUCTURE FOR DOING BUSINESS
Government participation:
Generally, the Korean government does not seek to participate in the ownership or operation of a
business entity. However, with regard to certain major industries, such as electricity, water and gas supply
and broadcasting, the government does play a role in ownership and operation. This is done most often in
the form of public corporations. The extent of such participation varies among public corporations as they
are subject to unique laws and regulations
Joint venture:
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In Korea, co-operation within the framework of a joint venture can be organized through contractual
relationships. Participation in a joint venture does not give rise to a common entity in the form of a
general partnership or a company under the Korean Commercial Code (the ―KCC‖).
A general partnership is usually regulated by the KCC and the Korean Civil Code with the exception that
certain partnerships must be organized as legal entities in accordance with other relevant laws regulating
such partnerships. The registration and incorporation of joint ventures are subject to the forms in which
they are organized. The decision regarding what type of partnership is most desirable for a given joint
venture will depend on several factors, among which include the length of the contemplated co-operation
and the extent to which the parties require the independence and autonomy of a common entity.
General Partnership
A general partnership consists of partners with unlimited liabilities, and is regulated by the KCC and the
Korean Civil Code. All partners in a general partnership are jointly and severally liable for all debts and
the entity‘s profits are taxed at the partner level. However, the properties of a general partnership are
separated from individual partner‘s properties. The general partnership‘s operations are decided by
majority of the partners with some exceptions. As is described below, the general partnership is
different from the partnership companies under the KCC, which consists of members with unlimited
liabilities but taxed at the partnership‘s level.
COMPANY :
Classifications are made according to the scope and type of liabilities borne by members or shareholders.
Partnership Company (Hapmyong Hoesa)
Members consist only of those with unlimited (direct, joint and several, unlimited) liabilities. Every
member bears the rights and responsibilities. Transfer of ownership interest is limited (requires
unanimous consent of all members).
Limited Partnership Company (Hapja Hoesa)
Members consist of those with unlimited liabilities (unlimited members) and those with limited
liabilities (limited members) (dual structure). Unlimited members bear the rights and responsibilities
pertaining to the company‘s business and its representation, while limited members participate in the
company only through capital investment. Limited members do not have the right to carry out company
business nor to represent the company, and bear liabilities only to the extent of their capital investment.
Limited Liability Company (Yuhan Hoesa)
This type of company consists of members with limited liabilities who are responsible only to the extent
of their capital investment. Since there are many restrictions on this type of company, including a 50
member maximum ceiling, it is a rather suitable form for SMEs to assume. The transfer of stocks requires
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a decision made by the majority of all members and 3/4 of total votes at the general meeting of members.
Stock Company (Corporation) (Chusik Hoesa) Members (stockholders) of a corporation have limited
liabilities, being liable only to the extent of their capital investment in the corporation made through the
acquisition of its stocks. The capital of a corporation is the sum of the total face value (par value) of
stocks issued by the corporation. The stocks of a corporation may be freely transferable.
However, the transfer of stocks could be subject to the decision of the board of directors in accordance
with its articles of incorporation. By its nature, a corporation cannot increase the liabilities of its
stockholders by a provision in the articles of incorporation or by a decision of the general meeting of
stockholders. The standing organization of a corporation includes the general meeting of stockholders
(supreme decision making body), board of directors meeting (makes decisions on its operations), chief
executive officer or CEO (executes company business and represents the company) and Statutory Auditor
(inspects company affairs and audit accounts). Decisions regarding the operations of a corporation are
carried out by the board of directors upon delegation at the general meeting of stockholders.
The stockholders only participate in the decision making at the general meeting of stockholders.
Stockholders exercise their control over the corporation through two types of meetings. Ordinary
meetings are held at least once a year to approve the financial statements, decide upon declaration of
dividends, etc.
Extraordinary meetings are held in accordance with the articles of incorporation, and may amend the
articles of incorporation, increase or reduce capital, and decide major corporate organizations and
operations, etc. Please note that under new KCC provisions added in April 2011, in addition to the above
types of companies, limited liability company (Yuhan Chaegim Hoesa) and limited partnership (Hapja
Johab) will also be available and both types will have flexible organization and operation rules. Stock
companies (Chusik Hoesa) will also enjoy added flexibility in issuing various types of shares in terms of
attachment of voting rights or dividends, etc., and in financial decisions such as the issuance of bonds. At
the same time, the management will be subjected to more stringent fiduciary rules under new provisions.
Incorporation :
Almost 95% of companies in Korea are corporations. The following is an explanation regarding the
procedure for incorporation. A promoter(s) must prepare the articles of incorporation of a corporation.
There is no restriction against resident or non-resident foreigners that would prohibit them from becoming
promoters. It is possible to establish a corporation with a capital of KRW 100 since the minimum
required par value is KRW 100 and there is no requirement
for minimum capital amount. The number of issued and outstanding shares at the time of incorporation
must be more than at least 1/4 of the number of authorized shares set forth in the articles of incorporation.
Thereafter, a corporation may issue additional shares at the decision of the board of directors so long as it
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is within the number of authorized shares. In order to modify the number of authorized shares, it must be
approved by a decision at the shareholder‟ s meeting. Incorporation of a corporation must be in
accordance with all procedural requirements of law and registered with the Commercial Registry Office
of the relevant court.
Undisclosed Partnership
According to the KCC, an undisclosed partnership is formed when parties agree that one party will make
a contribution toward the business of the other and to divide any profits accruing from such business. The
contribution made, in the form of money or property, by the undisclosed partner shall be regarded as the
property of the proprietor of the receiving business. The undisclosed partner neither acquires rights nor
bears obligations with regard to the third parties through the acts of the proprietor.
Sole Proprietorship
In Korea, a foreign investor can be a sole proprietor, and a single stockholder is possible in a limited
liability company and a corporation.
Subsidiary, Branch, Representative Office
A foreign investor may establish a subsidiary, which is considered a separate legal entity from its mother
company, in various types of companies shown above. Neither a branch nor a representative office is a
legal entity distinct from its mother company. There is no discrepancy between them regarding
incorporation or registration thereof. The branch conducts business while representative office does not.
Trusts and Other Fiduciary Entities
The Trust Act regulates the legal relationship of a trust and the Capital Markets Act regulates businesses
related to trust and fiduciary relationships involved in securities and collective investment businesses
(defined thereunder).
EMPLOYMENT REGULATIONS
Minimum Wage
The minimum wages are determined and posted annually by the Minister of Labor. The statutory
minimum wage rate currently in effect is KRW 4,320 per hour and KRW 34,560 per day, based on a
standard 8 hour working day.
Maximum Working Hours
Working hours shall not exceed the number of hours shown in the following table:
Classification Male Female Minor
Standard daily 8 8 7
Standard weekly 40 40 40
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Add.Hrs.Permitted 12/wk 12/wk 1/day, 6/week
Starting from July 1, 2011, the 40-hour work week is mandatory for businesses including those with 5 to
20 employees.
When the employee is requested to work overtime, an agreement must be reached between the employee
and the employer. Even if an agreement is reached, the number of overtime working hours shall not
exceed the number of hours specified in the above table, and an employer shall pay an additional
remuneration of not less than 50 % of normal wage for extended work, night work (work between 22:00
p.m. and 06:00 a.m.), and work done on public holidays.
Minimum Number of Leave Days
The following paid leaves are granted to employees:
Annual Leave
An employer must provide employees who have come to work for more than 80% of a working year with
15 days of paid leave. For employees that have worked for 3 or more years consecutively, 1 additional
day of paid leave must be provided for every 2 consecutive work years after the initial year, up to a total
of 25 days. Annual leave must be granted at the time requested by the employee (provided, however, that
the employer may change the leave period if granting the leave at the requested period would cause a
major disruption in business operations), and the employees will be paid the ordinary or average wage for
the period of leave. If the leave days expire due to the employee not utilizing such leave days, despite
active measures by the employer to promote usage of leave days (in accordance with the Labor Standard
Act), then the employer is not obligated to compensate the employee for the unused leave days.
Menstruation Leave
Menstruation leave of 1 day will be given only upon request and is unpaid.
Maternity Leave
An employer shall grant a pregnant female employee a total of 90 days of maternity leave to be allocated
before and after childbirth. Among the 90 days, at least 45 days of maternity leave should be allocated
after childbirth, and the initial 60 days of the maternity leave should be paid.
Minimum Number of Sick Days
There is no minimum number of sick days. However, an employer is required to prohibit or restrict work
of an employee who is diagnosed as having certain prescribed illnesses, and to allow such employee to
resume work without delay once the employee recovers.
Training Requirements
Employers are not obligated to train employees. However, under the Vocational Training Promotion Act,
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the Ministry of Labor may provide assistance and loans to employers who voluntarily provide vocational
training to cover the education expenses and expenses to set up vocational training facilities. `
Dismissals
An employer shall not, without justifiable cause, dismiss or take any other disadvantageous measures
against an employee. An employer may also dismiss employees for managerial reasons when the
following requirements are met: `
There are urgent managerial needs to dismiss employees;`Efforts are made by the employer to avoid
dismissal;Reasonable and fair standards for selecting workers to be dismissed are established, and the
employees subject to dismissal are selected in accordance with such standards.
The employer has sincere consultation with trade union or workers‟ representative representing the
majority of workers. In order for an employer to dismiss an employee (based on a justifiable cause), the
employer must give a 30-day prior notice, or, the employer must pay the employee 30-days of normal
salary in lieu of such notice (in addition to normal severance pay). An employer does not have continuing
obligations towards dismissed employees.
Safety Standards
In Korea, the employers in all workplaces must comply with the provisions of the Industrial Safety and
Health Act. The employers in the businesses with 100 or more employees are required to assign a person
to be in charge of safety and health management, and to prepare safety and health management
regulations. `
Unions`
In Korea, labor unions are recognized in all workplaces. A considerable number of workplaces actually
have organized unions. However, employers are not required to organize unions for employees. `
IMPORT EXPORT REGULATIONS
Custom regulations:
The Republic of Korea is a member of the World Trade Organization. Korea has executed free trade
agreements (―FTA‖) with Peru (August 2011), EU (July 2011), Chile (2004), Singapore (2006), EFTA
(2006) and ASEAN member states (2007) and has also executed a Comprehensive Economic Partnership
Agreement with India (2010). Korea has also signed FTAs with the United States of America (February
2011), which is currently awaiting ratification. Negotiations are currently underway with Canada,
Mexico, Australia, New Zealand, Colombia, Turkey and the Gulf Cooperation Council member states.
Customs
Pricing`
In principle, customs prices are determined based on the price reported by the importer. However, if the
said price reported by the importer and supported by the attached materials cannot be accepted as the
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customs price, the customs officer shall determine the customs price by the following methods in the
following order: the transfer price of the same type and same quality goods, transfer price of similar
goods, Korean domestic sale price and estimated price. If determination of customs price is impossible,
the customs price will be determined based on a reasonable standard in combination of the
aforementioned principles.
Exports
Restrictions`
Exporting specific goods or exporting goods to specific country may be prohibited or restricted on
account of treaties or generally accepted international laws, national security problems, and ` for the
purpose of protecting biological resources, the environment or national resources. `
Licenses
In the past, a person who wanted to carry out an export business was required to register his or her trade
business with the pertinent government authorities and receive a specific license. However, such
registration and licensing is no longer required so long as relevant trade laws are complied with.
Duties `
There are no export duties. `
Foreign Trade Regulations
The Foreign Trade Act, as the general law on export and import regulations, provides regulations with
respect to general rules of exports and imports, restrictions on export and import of specific products,
restrictions on trade with specific countries and prohibition on unfair trade practices. There are also
several laws that regulate import permits or import declarations with respect to products specified under
the Pharmaceutical Affairs Act, the Food Sanitation Act and the Fisheries Act. `
Imports
After Korea entered the World Trade Organization in 1995, simplified clearance procedures have been
implemented. However, importers must still obtain permits from or make declarations to the pertinent
government authorities for the importation of some items. With respect to specific imported goods,
special consumption tax, liquor tax, education tax and transportation tax may be imposed.`
Manufacturing Requirements
Korea does not require that a product contain ingredients or components, which are found or produced
only in Korea.
Product labeling:
The Foreign Trade Act makes it mandatory that all export and import products are labeled with their place
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of origin. Other applicable laws concerning specific goods (Pharmaceutical Affairs Act, Food Sanitation
Act, etc.) also require labeling of the concerned goods. The requirements of labeling differ between
goods. In the case of imported products, expiration dates, volume, and ingredients must be labeled in
detail.
TAXATION
Corporate Tax Calculation Structure
Tax Rates
Under the Corporate Tax Act (―CTA‖), corporate tax is calculated based on the two-tier progressive rate
system shown in the following table:
ANNUAL TAX
BASE
CORPORATE TAX LOCAL INCOME
SUR TAX
TOTAL
Up to KRW 200
million
10% 1% 11%
Above KRW 200
million
22%(20%) 2.2% 24.2%(22.2%)
The local income surtax levied at 10% of the corporate tax payable.
From the 2012 fiscal year, corporate tax rate will be reduced from 22% to 20%
Taxable Income for Corporate Tax
The starting point for the computation of corporate tax is the Net Income found on the Income Statement.
Various adjustments are then made for book-to-tax differences under CTA. The CTA and the Special Tax
Treatment Control Act`(―STTCA‖) prescribe certain non-deductible or non-allowable expenses, special
deductions, and provides recapture provisions for previous non- deductible/disallowed items.
Carry Forward Losses
For the computation of the corporate tax base, net tax losses carried over from the past 10 years are
deducted from taxable income for each fiscal year. `
Corporate Tax Refund
In case a medium sized company records losses in a fiscal year and corporate tax paid in the immediate
preceding year, the company may receive a refund of corporate tax up to the tax payment made in the
preceding year.
Tax Credits and Exemptions
Various types of corporate tax credits and exemptions are available if the conditions prescribed in the
related tax laws are met. The STTCA provides most of these credits and exemptions. `
Alternative Minimum Tax
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A company is subject to a minimum corporate tax of 10-14% (7% for SMEs) of its taxable income before
tax credits or exemptions`
Local Income Surtax, Special Agricultural and Fishery Tax
A local income surtax equal to 10% of the corporate tax is imposed on top of the corporate tax, and a 20%
Special Agricultural and Fishery Tax (―SAFT‖) is selectively imposed on tax exemptions claimed,
reducing the net effect of the exemption provisions
Capital Gains Surtax
On top of the regular corporate tax: (1) the 10% (20% in case of unregistered real estate) of capital gains
surtax applies to capital gains generated from sale of real estates in a certain area where the land price has
risen sharply; and (2) 30% (40% in case of unregistered real estate) of capital gains surtax applies to
capital gains generated from the disposal of residential house and land.`
Filing of Tax Returns
` Companies are required to file their corporate tax returns within 3 months after the end of the fiscal year
end, together with the required corporate tax and SAFT payment. The local income surtax is due within 4
months of the fiscal year-end. `
Consolidated Tax Filing
A company and its wholly owned subsidiaries may choose to file a consolidated tax return with the
approval of the tax authority. Under` Consolidate Tax Filing (―CTF‖), the accounting periods of all
subsidiaries should be the same. If CTF method is chosen, the company should apply the method for at
least five years. The tax return filing under CTF should be made within 4 months of the fiscal year-end
and 1 month extension may be allowed by the tax authority.
Tax Incentives for Foreign Direct Investment
The STTCA allows a foreign invested company engaged in a business involving advanced technology
and selected industrial support service businesses to receive special tax benefits if certain criteria are met.
It is possible in some cases to obtain these tax benefits even if the technology was developed within
Korea. Tax incentives applicable to qualified foreign invested company include: full or partial (50%)
exemption on corporate tax, dividend withholding tax, acquisition tax, registration tax, property tax,
customs duties, value added tax and special excises. Such exemptions are prorated based on the income of
the qualifying business.
A person paying the following interest income to a corporation is required to withhold corporate tax on
the income at the tax rates of 14%-25% at the time of such payment, and pay it to the government by the
10th of the following month .
INTERNATIONAL TAXATION:
Taxation of Foreign Corporations
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A foreign corporation is liable to corporate tax only on income derived from sources within Korea.
However, no corporate tax is levied on the liquidation income of a foreign corporation. With respect to
the domestic source income of a foreign corporation which has no Korean place of business, the full
amount of corporate tax withheld thereon at source is payable to the government. The tax regulations
relating to the calculation of taxable income and tax amount, assessment, tax collection and reporting for
domestic corporations are applicable mutatis mutandis to foreign corporations having a domestic place of
business. `
Foreign corporation with a domestic business place The corporate tax base on income for each business
year of a foreign corporation with a business place in Korea is the amount of income for each business
year remaining after the successive deduction of the following items from the net taxable income from
domestic sources:
The deficit (limited to carried-over losses generated in Korea) carried-over from the business year which
began within 10 years before commencement of each business year, which have not been deducted in the
calculation of income amounts or tax base in each subsequent business year;
Non-taxable income under the CTA and other laws.
Foreign corporation without a domestic business place Income derived by a foreign corporation without a
place of business in Korea shall be subject to tax on an item-by-item basis.
Branch Tax
If a tax treaty between Korea and the country of which the foreign corporation is a resident allows
imposition of a branch tax, the tax is imposed on the adjusted taxable income of the Korean branch of the
foreign corporation. This branch profits tax is levied in addition to the regular corporate tax. Branch tax
will be imposed at 22% (or at a reduced rate between 5%-15% as provided in the treaty) on the adjusted
taxable income of a foreign corporation. The adjusted taxable income is calculated by subtracting from
the taxable income the regular corporate tax and the residence tax thereon. If the net worth at the end of a
taxable year exceeds the net worth at the beginning of the taxable year, the excess amount is to be
subtracted from taxable income. `
Taxation for Non-Resident Individuals
A non-resident is liable to pay tax on income derived from sources within Korea. Two methods of
taxation are applied: global taxation and separate taxation. Global taxation is applied to non- resident
taxpayers who have a place of business in Korea or those with income from real estate located in Korea
(excluding capital gains from the transfer of land or buildings). All domestic source income, except for
severance pay and capital gains, is subject to global taxation, and taxed in the same manner as they would
be if derived by a resident.
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Agriculture Industry
World Major Countries‟ Economic Situation: The world economy in 2012 will be heavily
affected by the direction of the European financial crisis. Major developed countries will tighten
their belts to ensure their own fiscal soundness and developing counties will also tighten their
money to counter high prices coming from the rapid increase in liquidity. The IMF and World
Bank‘s most recent reports forecast that the world economy may grow only 3.4% in 2012.
Korea‘s Economic Situation and Outlook: In 2011, the Korean economy grew 3.8% up from
2010. However, an even slower growth, 3.6 percent, is expected in 2012. The domestic economy
will be impacted by increasing consumer price and household debts, depreciation of assets and
reduced the Social Overhead Capital investment by the government. Exports may not grow due
to the global economic recession and relatively strong Korean currency.
Impact of the Spread of FTA and our Counter agenda
Korea has entered 8 FTAs into force with 45 nations and is currently negotiating FTAs with 12
nations. It also has a number of FTAs currently undergoing feasibility studies. In 2010, 53
percent of total agricultural imports came from countries where there is a FTA. With respect to
the KORUS FTA, projections are that Korean agricultural production will drop by 678.5 billion
won (US$605.8 million) in year 5. This is projected to further go up to 991.2 billion won
(US$885 million) in year 10 and 1,235.4 billion won (US$1,103 million) in year 15. The total
accumulated production drop for 15 years after its implementation is 12,225.2 billion won
(US$10,915.4 million).
The total amount of support to be provided to farmers due to KORUS FTA is 23.4 trillion won (this is
about US$ 20.9 billion and does not include the 0.7 trillion won for fishery). Out of this, 7 trillion won
will come from the 119 trillion won farm support program. Some of the support programs include direct
payment for farmers that suffer losses due to FTA, compensation for farmers that stop farming, training,
modernization of livestock facilities, insurance, direct payment for stabilization of income, etc. The
presenter stressed the need for enhancing the efficacy of support programs and efforts by the agricultural
sector itself.
Environmental Friendly Ag. Products and Processed Organic Products Situation
The Korean government has been promoting the environmentally friendly agricultural product
(EFAP – including organic and no pesticide products) industry to improve the competitiveness of
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local agricultural products. In 2011, EFAP accounted for 11 percent of Korea‟ s total
agricultural products in value and is expected to increase to 19 percent by 2020. To date, the
promotion policy has been focused on the production side, and not consumption side. To grow
the industry and expand consumption to absorb the increased production, Korea needs to think
about how to attract more consumers and meet the consumer demand for EFAP. The price of
organic products is 1.9 times higher than conventional products. One survey also shows that over
75 percent of consumers thought that EFAP was expensive. Reducing product cost, improving
distribution channel, building up a reliable certification system, diversifying processed products,
and introducing EFAP to the school meal program would help expand the EFAP market in
Korea. For processed organic products, as demand increases, production of organic products in
Korea would increase. As Korea is highly dependent on imported organic ingredients, imports of
organic ingredients would increase accordingly. Imports of finished organic products are
expected to continue to increase steadily.
Agribusiness Services
There are opportunities to supply animal feeds, genetics and training packages to the dairy and
racing sectors in South Korea. With the current adoption of a National Livestock Identification
Scheme in the Korean dairy and beef sectors there may be an opportunity to market farm
management software.
Key Activities of Agriculture Industry Of South korea for 2011/2012
Collaborate with the Department of Business and Innovation (DBI), Department of Agriculture
Fisheries and Forestry (DAFF) and Austrade South Korea, to identify and progress market access
issues including market access for table grapes and citrus.
Collaborate with DBI to facilitate a Victorian trade mission to Yeosu Expo in 2012 to showcase
Victorian products.
Continue to develop direct agri-food opportunities for Victorian exporters and work with DBI to
attract targeted inward missions and investment opportunities.
Maintain adequate contacts and networks across South Korea‘s food production, distribution,
service and retail sectors.
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India represents a market of substantial potential but as yet a largely unrealised opportunity for
Victorian agri-food exporters. With the second largest population in the world (1.2 billion
people), a growing economy, increasing middle income population, and expanding organised
retail sector, India is a development market with attractive future prospects.
The Indian market differs markedly from region to region, and from city to city. Culture, food
habits, living standards, and languages vary greatly and it is widely recognised that India
comprises many individual markets rather than one large homogenous market. Vast disparities in
per-capita income levels exist and when compared to the size of the population of India the
market for consumer ready food products is relatively small, but growing steadily.
A number of factors are driving steady growth in the purchase and consumption of consumer
food products. These include:
changes in the family structure and the role of women in the family;
income and consumption growth at a rate faster than the world average;
an increase in discretionary expenditure;
increasing literacy levels;
the gradual acceptance of processed and frozen foods as a viable alternative to fresh
produce;
The growing influence of television and international media.
To date, growth in domestic purchase and consumption of consumer food products has not
translated as quickly as anticipated into increased agri-food exports from Australia to India. This
has been due to a range of inhibiting factors, including high tariffs in many agricultural and food
categories, complex food laws, and difficult sanitary and phytosanitary restrictions.
Despite this, agro-food market development opportunities still exist for 2010/11. In particular
recent improved market access for dairy products is a strategic priority, as well as ongoing work
in developing opportunities in the Indian food retail and food service sectors.
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Key Activities of Agriculture Industry Of India for 2011/2012
Monitor and support market access for red meat (lamb) into India in collaboration with the
Department of Agriculture, Fisheries and Forestry (DAFF) Agricultural Counselor and
contributing to government initiatives.
Contribute to whole of government activities in gaining market within for Victorian lamb into
the Indian market.
Maintain and improve contacts and networks across the Indian food production, distribution,
service and retail sectors.
Five Indian Policies Affecting Agriculture
As part of its national agriculture program, India is prioritizing crops that require significant
intensification, especially for fungicides. The focus on more sugarcane production, horticulture
and continued growth in the production of grains can lead to a significant boon for the crop
protection industry.
Some major recent trends include:
1. Year of horticulture: Agriculture Secretary Mr. P.K. Basu said that the Ministry of Agriculture is
giving significant thrust to the horticulture sector. The year 2012-13 has been declared as the
―Year of Horticulture.‖ Two conferences are going to be organized during the year. The first
conference in February will focus on planting, material improvement and crop management while
the second conference in November will be on post-harvest management and processing.
Throughout the year, exhibitions will be held.
2. Government of India likely to allow fresh export of sugar: The Government of India is likely to
allow 1 million tones of fresh sugar exports with an aim to help cash-strapped sugar mills take
advantage of the higher export price and repay farmers of previous cane purchases. In early
January, the Supreme Court asked the mills to repay within three months around Rs 9 billion
($180 million) to farmers in the state of Uttar Pradesh for cane purchases made during 2006-
2008.
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3. Subsidized crop loans likely to be extended to farm equipment: The Ministry of Agriculture
proposes to extend subsidized crop loan of 4% for agriculture mechanization. At present, the loan
at the subsidized rate is only available for crop-related inputs such as seeds. Officials said the idea
is to bring down farmers‘ labor costs, which account for around 25% of total costs.
4. Government of India to discontinue technological missions for cotton and jute: To give priority
to food grain production, the Union Ministry of Agriculture has decided to end the technological
missions for cotton and jute beginning in April. The move was partly prompted by farmers
growing more cash crops beyond domestic demand. ―In cotton, the acreage has gone up sharply
year, in anticipation of higher prices. However, domestic demand is not much. Now, producers
eye export market and there is no reason why the government will fund a crop to meet overseas
demand,‖ a government official said.
5. Cash transfer to farmers faces hurdle: The Indian Government buys rice, wheat and other crops
from the farmers at a price known as ―minimum support price‖ (MSP). The Food Ministry
introduces this year a plan to transfer the MSP directly to the farmers‘ accounts or through
account a check system, but it has run into roadblocks.
The plan was strongly opposed by the cartel of middlemen and commission agents. Commission
agents purchase grains from farmers at low rates and sell the produce to Food Corporation of
India at MSP. If payments are made directly to the farmers, the middlemen will lose their
commission.
Many states have not yet adopted a system to directly transfer money to farmers for grains
procured on behalf of Food Corporation of India (FCI), making the plan purposeless.
In Punjab, one of India‘s biggest contributors of grains, the government is facing the biggest
challenge in starting the process of direct payment, as the state has a well-established system of
commission agents and middle men. The Food Corporation of India had to discontinue the
process of direct payment during the current season midway because of dispute between FCI and
commission agents.
The direct payment system could allow smallholders to better manage input costs because of
India‘s MSP predictability.
THREAT IN SOUTH KOREA OR Barriers in South Korea:
Trade and investment barriers exist in Korea too, despite the continuous rationalization of its
tariff structure and other external sector reforms. Korea‘s average MFN applied tariff rate, in
2006, was 12.1 per cent for all products (47.8 per cent for agricultural products and 6.6 per cent
for industrial products). Korea maintains high tariffs on several agricultural and fishery products,
80
which are of interest to India. It imposes a 30 per cent or higher tariff rate on most fruits and
nuts, many fresh vegetables, peanuts, peanut butter, various vegetable oils, dairy products etc.
Korea has established tariff rate quotas (TRQs) in a bid to minimize access to previously closed
markets to maintain pre-Uruguay round access. In-quota tariff rates may be very low or zero but
over-quota tariff rates are very high and prohibitive33. Another tariff related problem in Korea is
the use of adjustment tariffs and compound taxes on some agricultural, fishery and plywood
products, which raise the applied tariff rates in the country.
Challenges for India and Korea.
Along with the rise of China the growing relations between India and the Unites States underline
the strategic complexity in Asia today. In the case of China uncertainty prevails with regard to
its long-term intentions wherein „hedging‟ is the response of the other countries in the
region. On the one hand there is increasing economic interaction with China but at the same time
the region is wary of China‘s military modernization and tendency to escalate tensions flexing its
new military prowess.
In this context there is growing regional attention towards India. India‟ s impressive economic
growth and the deepening relations between India and the United States have led to India moving
to the category of ―likeminded partners‖ for countries like South Korea. The areas of strategic
partnership between South Korea and India as likeminded countries in the global order, as
middle powers in the hierarchy on nations and as collaborators in the geography of peace are –
global security, regional security, Korean peninsula security and non-traditional human security.
The two countries share the goal of preserving and developing a liberal and International Order.
The bilateral CEPA is in this sense more than just a free trade agreement. It is the manifestation
of a common strategic vision between the two countries.
A Track II trilateral dialogue between India, Republic of Korea and Japan would strengthen the
bilateral initiatives already underway between among these likeminded‟ countries.
81
India Export of Agro Food Products To South Korea
Qty in Mt.
Value in Rs. Lacs
Sr No. Product QTY(2011-12) Value(2011-12)
1 Other Cereals 64,961.29 8,530.75
2 Guargum 1,783.97 3,957.34
3 Alcoholic Beverages 4,735.59 2,073.43
4 Miscellaneous Preparations 1,555.58 924.48
5
Other Processed Fruits and
Vegetables 1,154.92 913.54
6 Fruit and Vegetable Seeds 237.91 279.35
7 Dried and Preserved Vegetables 1,611.04 255.82
8 Poultry Products 115.06 233.61
9 Dairy Products 114.97 222.78
10 Floriculture 84.93 166.33
11 Milled Products 542.36 93.48
12 Jaggery and Confectionery 297 91.82
13 Other Fresh Fruits 171 60.89
14 Mango Pulp 74.4 45.51
15 Pulses 24 16.79
16 Cereal Preparations 36.95 16.68
17 Fresh Onions 75 9.7
18 Other Fresh Vegetables 22.01 9.42
19 Basmati Rice 3.02 1.5
20 Non Basmati Rice 1 0.57
Total 77,602.00 17,903.79
Source: DGCIS Annual Export, agriexchange.apeda.gov.in
82
Qty in Mt.
Value in Rs. Lacs
Sr
No. Product QTY(2009-10)
Value(2009-
10)
1 Guargum 1,586.81 1,140.03
2 Miscellaneous Preparations 2,061.93 1,128.01
3 Other Cereals 1,270.24 281.9
4 Dairy Products 264.01 274.26
5 Dried and Preserved Vegetables 755.53 182.13
6 Ground Nuts 381.97 180.81
7 Other Processed Fruits and Vegetables 455.38 166.88
8 Floriculture 39.23 137.03
9 Poultry Products 69 113.68
10 Basmati Rice 111.67 82.78
11 Fruit and Vegetable Seeds 2.95 48.94
12 Cereal Preparations 26.97 25.44
13 Mango Pulp 30.7 18.78
14 Other Fresh Vegetables 40.01 18.54
15 Alcoholic Beverages 18.2 10.27
16 Pulses 24 8.33
17 Milled Products 17.52 5.26
18 Jaggery and Confectionery 3 2.04
19 Fresh Mangoes 0.03 0.02
20 Other Fresh Fruits 0.02 0.01
Total 7,159.17 3,825.14
Source: DGCIS Annual Export, agriexchange.apeda.gov.in
Indian Agro Food Product Export to South Korea Out of total Agro Product
Export.
83
From the Above Table there is easy to find out, % Of Indian total Agro Food Product Export to
Republic Korea.
QTY(2011-12) QTY (2010-11) QTY (2009-10)
India Export of Agro
Food Products To
Republic of Korea
77602 30268.49 7159.17
Agro Food Product
Exported From INDIA to
Wrold.
1,03,36,326.48 97,61,585.97 87,11,711.72
% Of Indian total Aggri
Product Export to
R.Korea 0.75 % 0.31 % 0.08 %
Source: DGCIS Annual Export, agriexchange.apeda.gov.in
Conclusion
Opporunity for indian to Export Particulart agri Product to South korea
Some selected crops having export potential‖ with a view to have in depth position of export
opportunities. The crops selected for the study were mango, grapes, pomegranate, litchi,
pineapple and banana among fruits; tomato, green chilies, okra and onion among
Vegetables; ginger and turmeric among spices; and sesame, soyameal and cotton among
commercial crops and products.
Also opportunity for Maize (corn), other than seed, Wheat other than durum wheat , Cane
sugar, raw, in solid form, Meat of bovine animals, frozen, boneless , Meat of bovine animals,
Husked (brown) rice for exporting to south Korea which are exported by India to different
country among the world.
84
Automobile industry
The Korean automobile industry is today the fifth largest in the world in terms of production
volume, and the sixth largest in terms of export volume, although South Korea had a relatively
late start. While its initial operations were merely the assembling of parts imported from Japan
and the United States, Korea is today among the most advanced automobile-producing countries
in the world. Annual domestic output exceeded one million units in 1988. In the 1990s, the
industry manufactured numerous in-house models, demonstrating not only its capabilities in
terms of design, performance, and technology, but also signalling its coming of age.With total
auto registration exceeding 15 million units, one car owned by virtually every household, Korea
entered into a mature phase.
The outstanding quality and acclaimed performance of Korean automobiles are widely
recognized not only by local consumers but also in overseas markets such as U.S.,India, Europe,
etc., greatly contributing to the record high exports of 2.6 million units last year.
The major automobile companies:
GM Korea
Hyundai Motor Company
Kia Motors
Renault Samsung Motors
SsangYong Motor Company
85
History:-
1955: Choi Mu-seong, a Korean businessman and two of his brothers mounted an engine
on a modified US Army Jeep body and chassis to manufacture the historic model, called
"Sibal (car)";
o Sinjin Automobiles founded (precursor of Daewoo Motor);
o Hyundai Civil Works Company founded by Chung Ju-yung;
o Ha Dong-hwan Car Assembly Shop founded.
1960: Sinjin Automobiles launched Sinjin Publica under
1961: Government established "Industrial Standardization Act" and announced
"Transportation Business Act and Road Traffic Act".
1962: Government established "5-Year Automobile Industry Plan", and announced the
"Automobile Industry Protection Act";
o Saenara Automobiles founded, in technical cooperation with Nissan Motor Co.;
o Ha Dong-hwan Automobile Industry Co. founded;
o Kyeongseong Precision Industry changed its name to Kia Industry.
1963: Sinjin Crown and Sinsungho launched.
1964: Government announced the "Automobile Industry Comprehensive Promotion
Plan";
o Kia Industry produced Mazda models under licensing;
o Kia T-600 Triple Truck launched.
1965: Government announced "3-Year Automobile Localization Plan", with a goal to
achieve 90% local content by 1967;
o Asia Motors Co. established;
o Sinjin Automobiles took over Saenara Automobiles.
1966: Sinjin Corona, Sinjin Truck, and Sinjin Ace launched.
1967: Government announced the "Automobile Plant Permission Standards".
86
1968: Hyundai Motor Co. founded, and established licensing agreement with Ford Motor
Company;
o Hyundai Cortina, Hyundai Ford 20M, Hyundai Ford D-series, and Hyundai Ford
DK-Series launched.
1969: Government announced "Basic Plan for Automobile Industry Promotion".
1980: Government announced integration of automobile industry.
1981: Sinjin Automobiles changed its company name to Geohwa Company.
1982: Hyundai Pony II and Hyundai FB buses, Kia Bongo van launched.
1983: Saehan Automobiles changed its name to Daewoo Motor, with partner General
Motors;
o Daewoo Royale series launched;
o Hyundai Stellar launched;
o Hyundai Motors established Hyundai Auto Canada Inc.;
o Geohwa's Korando launched.
1984: Hyundai Pony-Excel, and Hyundai Presto launched;
o Asia Combi launched.
1985: Ministry of Commerce and Industry postponed import liberalization of
automobiles;
o Dong-A Motor Co. took over Geohwa Co.;
o Kia Besta launched;
o Number of vehicles registered in South Korea exceeded one million.
1986: Government designated automobile industry for rationalization, based on the
"Industry Development Act";
o Government revised the "Road Transportation & Vehicle Act, and other related
regulations;
o Dong-A Motor Co. took over Geohwa Co. and renamed it Ssangyong Motor Co.;
o Hyundai Excel, and Hyundai Presto AMX Model, launched and exported to
United States;
o Hyundai Excel nominated by Fortune magazine for the "Best Product 10" award;
o Daewoo Le Mans, based on Opel Kadett, launched.
87
1987: Government cancelled "Automobile Industry Rationalization Plan";
o Government introduced import liberalization of commercial vehicles between
1,000 and 2,000 c.c.;
o Transportation Ministry revised "Enforcement Decree of the Automobile
Management Act";
o Kia Pride, Kia Concord, Asia Topic, and Kia Jumbo Titan launched;
o Hyundai Truck (new model), Hyundai Grace, Hyundai Porter, and Hyundai
Mighty launched, based on Mitsubishi Delica, Mitsubishi Canter, and Fuso
model.
1988: Annual domestic automobile production volume exceeded one million units;
o Korea Automobile Manufacturers Association (KAMA) established;
o Hyundai named "Official Car" in Seoul Olympic;
o Hyundai Chorus and Hyundai Sonata (new model) launched;
o SsangYong Korando family launched.
1989: Hyundai Motor completed construction of its plant in Bromont, Canada;
o Hyundai Sonata launched, using in-house design, but still featuring Mitsubishi
technology;
o 3Gen from Hyundai Excel, Hyundai Porter 1.25 ton launced;
o Kia Capital and Kia Wide-Bongo launched, along with Kia Motors's import model,
Mercury Sable.1990s
1990: Hyundai's cumulative exports to the U.S. surpassed 1 million in 1990;
o Kia Industry changed its name to Kia Motors Co.;
o Hyundai Scoupe, and Hyundai Elantra launched.
1991: Hyundai Sonata (new model) launched;
o Kia New Besta and Kia Towner launched;
o Daewoo Prince, Daewoo Brougham, Daewoo Tico, Daewoo Damas, and Daewoo
LeMans (new model) launched.
1992: Hyundai Scoupe (new model) launched; ScoupeTurbo won at the "Pikes Peak Hill
Climb Rally";
o Kia Sephia, and Kia Potentia launched.
88
1993: Hyundai Elantra (new model launched), and was selected "Best Car of 1993" in
Australia;
o Kia named "Official Car" for Daejeon Expo.
1994: Samsung Motors founded.
o The Kia brand launched in the United States
1995: Number of vehicles registered in South Korea exceeded eight million;
o Hyundai's Accent earned "Canadian Best Buy Award", and also won the "Asia-
Pacific" Rally;
o First Seoul International Motor Show.
1997: Kia Motors went into financial trouble, and helped push South Korea into the
Asian financial crisis.
1998: Hyundai began investing heavily in quality, design, manufacturing, and long-term
research, and added a 10-year or 100,000 mile warranty to its vehicles in the United
States;
o Samsung Motors started selling cars;
o 51% of Kia Motors acquired by Hyundai Motor;
o Daewoo Motors took over the troubled SUV specialist, SsangYong
1999: Asia Motors completely merged with Kia Motors Company.
2000: Samsung sold a 70% stake in Samsung Motors to Renault, and the company was
renamed Renault Samsung Motors.
o Daewoo Motors divests of SsangYong Motor Company
2002: Major assets of Daewoo Motors acquired by General Motors. The new company
was named GM Daewoo.
2004: Hyundai tied with Honda for initial brand quality, second in the industry behind
Toyota, in a survey conducted by J.D. Power and Associates.
o Shanghai Automotive Industry Corporation (SAIC) acquires 49% of SsangYong
Motor Company.
2005: Hyundai completed construction of its $1 billion assembly plant in Montgomery,
Alabama;
89
o GM Daewoo vehicles were exported under various GM brands (and Suzuki), but
mostly as Chevrolets
2011: GM Daewoo renamed itself to GM Korea, and in March, all GM Daewoo products
are sold in South Korea as Chevrolets.
2011: After the renaming of GM Korea, the Daewoo Damas and Daewoo Lobo had
become a new commercial brand.
2011: GM Korea developed a new Luxury brand called GM Alpheon.
Summary of Korean automobile industry:- In, 000
Chart:-
Domestic sales of south Korea:- In, 000
Classificaton Total Passenger Cars
MPV
Buses Trucks SPVs
2013. 01~01
(year on year)
104,978
(8.3)
83,303
(1.6)
22,993
(16.6)
6,176
(60.7)
14,620
(34.8)
879
(202.1)
2012 1,410,857 1,175,891 309,494 64,546 157,311 13,109
2011 1,474,637 1,211,284 284,308 72,189 178,402 12,762
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
2012 2011 2010 2009 2008 2007 2006
Classificaton
Passenger Cars
Buses
Trucks
SPVs
90
2010 1,465,426 1,217,764 275,433 70,261 165,291 12,110
2009 1,394,000 1,174,743 277,668 65,501 142,570 11,186
2008 1,154,483 958,854 217,513 62,409 123,895 9,325
2007 1,219,335 986,416 282,890 70,192 151,010 11,717
2006 1,164,254 935,681 267,400 74,077 143,392 11,104
Chart:-
Growing Korean Companies in India and Indian Companies in South Korea:-
In india:-There are more than 200 Korean companies that have made considerable foreign direct
investments in India in a wide range of sectors.
Trade relations between India and South Korea have strengthened over the years. Both countries
are now setting their sights on doubling their annual trade to US$40 billion by 2015.
Growing Korean Companies in India and Indian Companies in South Korea:- In india:- There are more than 200 Korean companies that have made considerable foreign direct investments in India in a wide range of sectors. Trade relations between India and South Korea have strengthened over the years. Both countries are now setting their sights on doubling their annual trade to US$40 billion by 2015. As one of the primary growth Asian economies, South Korea is among the ten major investors in India, which is one of the most dynamic economies of the world with still huge room for further growth. “There is considerable untapped potential given that South Korea is one of the fastest growing Organisation for Economic Co-operation and Development countries, and India is one of the fastest growing major economies,” India introduced wide-ranging economic policy reforms in 1991 and opened its markets for foreign investors, which paved the way for South Korean companies to enter. It didn’t take long for South Korean brands to become well-established, household names in India. South Korean companies’ manufactured white goods are today counted among the market leading products in India. LG set up its own manufacturing facilities in 1997 and Samsung launched its products in India in 1995-96. These two companies have established almost complete dominance in the market, edging out local players and leaving behind multi-national competitors. Today, a majority of Indian customers relate to LG and Samsung as Indian brands rather than multi-national brands. LG and Samsung have immensely succeeded in the Indian markets because of their “product innovation” strategy. Automaker Hyundai Motors is another South Korean success story in India. It entered the Indian market in 1996 and now, it is India’s second largest automaker by market share with around 19 percent, second only to Maruti
Growing Korean Companies in India and Indian Companies in South Korea:- In india:- There are more than 200 Korean companies that have made considerable foreign direct investments in India in a wide range of sectors. Trade relations between India and South Korea have strengthened over the years. Both countries are now setting their sights on doubling their annual trade to US$40 billion by 2015. As one of the primary growth Asian economies, South Korea is among the ten major investors in India, which is one of the most dynamic economies of the world with still huge room for further growth. “There is considerable untapped potential given that South Korea is one of the fastest growing Organisation for Economic Co-operation and Development countries, and India is one of the fastest growing major economies,” India introduced wide-ranging economic policy reforms in 1991 and opened its markets for foreign investors, which paved the way for South Korean companies to enter. It didn’t take long for South Korean brands to become well-established, household names in India. South Korean companies’ manufactured white goods are today counted among the market leading products in India. LG set up its own manufacturing facilities in 1997 and Samsung launched its products in India in 1995-96. These two companies have established almost complete dominance in the market, edging out local players and leaving behind multi-national competitors. Today, a majority of Indian customers relate to LG and Samsung as Indian brands rather than multi-national brands. LG and Samsung have immensely succeeded in the Indian markets because of their “product innovation” strategy. Automaker Hyundai Motors is another South Korean success story in India. It entered the Indian market in 1996 and now, it is India’s second largest automaker by market share with around 19 percent, second only to Maruti
Growing Korean Companies in India and Indian Companies in South Korea:- In india:- There are more than 200 Korean companies that have made considerable foreign direct investments in India in a wide range of sectors. Trade relations between India and South Korea have strengthened over the years. Both countries are now setting their sights on doubling their annual trade to US$40 billion by 2015. As one of the primary growth Asian economies, South Korea is among the ten major investors in India, which is one of the most dynamic economies of the world with still huge room for further growth. “There is considerable untapped potential given that South Korea is one of the fastest growing Organisation for Economic Co-operation and Development countries, and India is one of the fastest growing major economies,” India introduced wide-ranging economic policy reforms in 1991 and opened its markets for foreign investors, which paved the way for South Korean companies to enter. It didn’t take long for South Korean brands to become well-established, household names in India. South Korean companies’ manufactured white goods are today counted among the market leading products in India. LG set up its own manufacturing facilities in 1997 and Samsung launched its products in India in 1995-96. These two companies have established almost complete dominance in the market, edging out local players and leaving behind multi-national competitors. Today, a majority of Indian customers relate to LG and Samsung as Indian brands rather than multi-national brands. LG and Samsung have immensely succeeded in the Indian markets because of their “product innovation” strategy. Automaker Hyundai Motors is another South Korean success story in India. It entered the Indian market in 1996 and now, it is India’s second largest automaker by market share with around 19 percent, second only to Maruti
Growing Korean Companies in India and Indian Companies in South Korea:- In india:- There are more than 200 Korean companies that have made considerable foreign direct investments in India in a wide range of sectors. Trade relations between India and South Korea have strengthened over the years. Both countries are now setting their sights on doubling their annual trade to US$40 billion by 2015. As one of the primary growth Asian economies, South Korea is among the ten major investors in India, which is one of the most dynamic economies of the world with still huge room for further growth. “There is considerable untapped potential given that South Korea is one of the fastest growing Organisation for Economic Co-operation and Development countries, and India is one of the fastest growing major economies,” India introduced wide-ranging economic policy reforms in 1991 and opened its markets for foreign investors, which paved the way for South Korean companies to enter. It didn’t take long for South Korean brands to become well-established, household names in India. South Korean companies’ manufactured white goods are today counted among the market leading products in India. LG set up its own manufacturing facilities in 1997 and Samsung launched its products in India in 1995-96. These two companies have established almost complete dominance in the market, edging out local players and leaving behind multi-national competitors. Today, a majority of Indian customers relate to LG and Samsung as Indian brands rather than multi-national brands. LG and Samsung have immensely succeeded in the Indian markets because of their “product innovation” strategy. Automaker Hyundai Motors is another South Korean success story in India. It entered the Indian market in 1996 and now, it is India’s second largest automaker by market share with around 19 percent, second only to Maruti
Growing Korean Companies in India and Indian Companies in South Korea:- In india:- There are more than 200 Korean companies that have made considerable foreign direct investments in India in a wide range of sectors. Trade relations between India and South Korea have strengthened over the years. Both countries are now setting their sights on doubling their annual trade to US$40 billion by 2015. As one of the primary growth Asian economies, South Korea is among the ten major investors in India, which is one of the most dynamic economies of the world with still huge room for further growth. “There is considerable untapped potential given that South Korea is one of the fastest growing Organisation for Economic Co-operation and Development countries, and India is one of the fastest growing major economies,” India introduced wide-ranging economic policy reforms in 1991 and opened its markets for foreign investors, which paved the way for South Korean companies to enter. It didn’t take long for South Korean brands to become well-established, household names in India. South Korean companies’ manufactured white goods are today counted among the market leading products in India. LG set up its own manufacturing facilities in 1997 and Samsung launched its products in India in 1995-96. These two companies have established almost complete dominance in the market, edging out local players and leaving behind multi-national competitors. Today, a majority of Indian customers relate to LG and Samsung as Indian brands rather than multi-national brands. LG and Samsung have immensely succeeded in the Indian markets because of their “product innovation” strategy. Automaker Hyundai Motors is another South Korean success story in India. It entered the Indian market in 1996 and now, it is India’s second largest automaker by market share with around 19 percent, second only to Maruti
Growing Korean Companies in India and Indian Companies in South Korea:- In india:- There are more than 200 Korean companies that have made considerable foreign direct investments in India in a wide range of sectors. Trade relations between India and South Korea have strengthened over the years. Both countries are now setting their sights on doubling their annual trade to US$40 billion by 2015. As one of the primary growth Asian economies, South Korea is among the ten major investors in India, which is one of the most dynamic economies of the world with still huge room for further growth. “There is considerable untapped potential given that South Korea is one of the fastest growing Organisation for Economic Co-operation and Development countries, and India is one of the fastest growing major economies,” India introduced wide-ranging economic policy reforms in 1991 and opened its markets for foreign investors, which paved the way for South Korean companies to enter. It didn’t take long for South Korean brands to become well-established, household names in India. South Korean companies’ manufactured white goods are today counted among the market leading products in India. LG set up its own manufacturing facilities in 1997 and Samsung launched its products in India in 1995-96. These two companies have established almost complete dominance in the market, edging out local players and leaving behind multi-national competitors. Today, a majority of Indian customers relate to LG and Samsung as Indian brands rather than multi-national brands. LG and Samsung have immensely succeeded in the Indian markets because of their “product innovation” strategy. Automaker Hyundai Motors is another South Korean success story in India. It entered the Indian market in 1996 and now, it is India’s second largest automaker by market share with around 19 percent, second only to Maruti
Growing Korean Companies in India and Indian Companies in South Korea:- In india:- There are more than 200 Korean companies that have made considerable foreign direct investments in India in a wide range of sectors. Trade relations between India and South Korea have strengthened over the years. Both countries are now setting their sights on doubling their annual trade to US$40 billion by 2015. As one of the primary growth Asian economies, South Korea is among the ten major investors in India, which is one of the most dynamic economies of the world with still huge room for further growth. “There is considerable untapped potential given that South Korea is one of the fastest growing Organisation for Economic Co-operation and Development countries, and India is one of the fastest growing major economies,” India introduced wide-ranging economic policy reforms in 1991 and opened its markets for foreign investors, which paved the way for South Korean companies to enter. It didn’t take long for South Korean brands to become well-established, household names in India. South Korean companies’ manufactured white goods are today counted among the market leading products in India. LG set up its own manufacturing facilities in 1997 and Samsung launched its products in India in 1995-96. These two companies have established almost complete dominance in the market, edging out local players and leaving behind multi-national competitors. Today, a majority of Indian customers relate to LG and Samsung as Indian brands rather than multi-national brands. LG and Samsung have immensely succeeded in the Indian markets because of their “product innovation” strategy. Automaker Hyundai Motors is another South Korean success story in India. It entered the Indian market in 1996 and now, it is India’s second largest automaker by market share with around 19 percent, second only to Maruti 0
200000
400000
600000
800000
1000000
1200000
1400000
2012 2011 2010 2009 2008 2007 2006
Passenger Cars
Buses
TrucksGrowing Korean Companies in India and Indian Companies in South
Korea:-
In india:-
There are more than 200 Korean companies that have made considerable
foreign direct investments in India in a wide range of sectors.
Trade relations between India and South Korea have strengthened over the
years. Both countries are now setting their sights on doubling their annual trade
to US$40 billion by 2015.
As one of the primary growth Asian economies, South Korea is among the ten
major investors in India, which is one of the most dynamic economies of the
world with still huge room for further growth.
“There is considerable untapped potential given that South Korea is one of the
fastest growing Organisation for Economic Co-operation and Development
countries, and India is one of the fastest growing major economies,”
India introduced wide-ranging economic policy reforms in 1991 and opened its
markets for foreign investors, which paved the way for South Korean companies
to enter. It didn’t take long for South Korean brands to become well-established,
household names in India.
South Korean companies’ manufactured white goods are today counted among
the market leading products in India. LG set up its own manufacturing facilities in
1997 and Samsung launched its products in India in 1995-96. These two
companies have established almost complete dominance in the market, edging
out local players and leaving behind multi-national competitors. Today, a majority
of Indian customers relate to LG and Samsung as Indian brands rather than
multi-national brands. LG and Samsung have immensely succeeded in the Indian
markets because of their “product innovation” strategy.
Automaker Hyundai Motors is another South Korean success story in India. It
entered the Indian market in 1996 and now, it is India’s second largest
automaker by market share with around 19 percent, second only to Maruti Classificaton
SPVs
91
As one of the primary growth Asian economies, South Korea is among the ten major investors in
India, which is one of the most dynamic economies of the world with still huge room for further
growth.
―There is considerable untapped potential given that South Korea is one of the fastest growing
Organisation for Economic Co-operation and Development countries, and India is one of the
fastest growing major economies,‖
India introduced wide-ranging economic policy reforms in 1991 and opened its markets for
foreign investors, which paved the way for South Korean companies to enter. It didn‘t take long
for South Korean brands to become well-established, household names in India.
South Korean companies‘ manufactured white goods are today counted among the market leading
products in India. LG set up its own manufacturing facilities in 1997 and Samsung launched its
products in India in 1995-96. These two companies have established almost complete dominance
in the market, edging out local players and leaving behind multi-national competitors. Today, a
majority of Indian customers relate to LG and Samsung as Indian brands rather than multi-
national brands. LG and Samsung have immensely succeeded in the Indian markets because of
their ―product innovation‖ strategy.
Automaker Hyundai Motors is another South Korean success story in India. It entered the Indian
market in 1996 and now, it is India‘s second largest automaker by market share with around 19
percent, second only to Maruti Suzuki‘s 38 percent. In 2012, Hyundai is aiming to increase its
market share to 20 percent as well as it‘s looking to sell at least 410000 vehicles in India in 2012
Recently, South Korean companies such as Doosan Group and Mando Corporation announced
their arrival in India. Woori Bank, the second-largest commercial bank in South Korea, launched
its first branch in India, at Chennai, in April of this year. A senior executive of Woori Bank told
the press that the bank has ―infused around US$35 million in India.‖
In Korea:-
Tata Motors was the first Indian company to announce the acquisition of a South Korean
company. In 2004, it signed an investment agreement for the acquisition of cash-strapped
Daewoo Commercial Vehicle Company Ltd (DWCV) for about US$102 million. Today, Tata
Daewoo Commercial Vehicle Company (TDCV) is South Korea‘s second-largest manufacturer of
medium and heavy-duty trucks
Tata Consultancy Services (TCS), another company of Tata Group and a provider of IT services
and business solutions, commenced its Korean operations in 2003 to serve local customers as
well as global multinationals which have operations in South Korea.
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Novelis announced the acquisition of Alcan Taihan Aluminum for US$600 million in 2005.
Novelis is a subsidiary of India-based Hindalco Industries Ltd, which is the flagship company of
Aditya Birla Group. Novelis Korea is currently Asia‘s number one manufacturer of aluminium
rolled products.
This year in March, South Korea‘s premier SUV manufacturer Ssangyong Motor Company
(SYMC) completed its first year treaty
SWOT Analysis of Korean Automobile Industry:-
STRENGTHS
Price competitiveness in terms of highly
skilled workers, low cost parts and
materials
Diversified export markets
Aggressive marketing
WEAKNESSES
Brand Awareness
Labor Union Issues
Immature parts and raw materials industry
The weak and the fluctuating Korean Won
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OPPORTUNITIES
Successful launches on site production
Geographical proximity to Chinese markets
Potential market for ASEAN
THREATS
Saturated domestic market
High dependency on exports i.e., overseas
market
Rise of other Asian manufacturers
Technology gap to advanced countries
CONCLUSIONS:-
The Korean auto industry is one of the most flourishing industry in the world right now. It has been doing
wery well with the steep competition against the global leaders from Germany, Japan, and USA. It has
also reacted well to challenges from other new competitors from Asian countries, mainly from China. In
spite of severe competion and tough challenges in the global markets, which gives serious threats to the
Korean automobile companies, overall the Korea automobile companies have done outstanding jobs so
far, and are taking a right direction to the future with ambitious but attainable goals based on well-
calculated aggressive strategies.
Most of Korean automobile companies will firmly remain competitive in China as well as other major
markets in the world, while they still have room to be advanced further with its invaluable supports from
other industries Korea has strongly in the global markets, such as steel, electronics, information
technology and chemical industry. Overall Korea is now very dynamic and competitive globally
especially after the global financial crisis in 2008 because it has well-diversified, strong and competitive
industries in many areas. Korea is now well known economically with its world-class industries, such as
shipbuilding, electronics, petro-chemical, information technology, and steel industry. For example,
producing the next generation fuel-efficient automobiles generally depends more on such high-tech
industries, including information technology and electronics, than the traditional heavy industries.
Absolutely, Korea has competitive edges over China and many other countries in those high-tech areas
now. It will not be changed in a short time period since it takes a while to upgrade the structure of
national economy based more on high-tech industries. Also, the China automobile industry needs more
time to improve quality of auto parts, enhance supply chain management as well as marketing and so on.
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More importantly, China needs more technologies and experience of developing its own models of
vehicles with advanced design capacity. Especially the design capacity with own models is the most
difficult area to develop and advance in manufacturing automobiles. The Korean automobile industry will
do much better performances than the Chinese in this critical area for a while. The Chinese automobile
industry could develop its design capacity with its financial supports from its government. But still it will
take a while to introduce its own models of reliable quality automobiles to the global markets.
Overall it is fair to say that the Korean automotive industry has achieved lots of positive recognition in the
global markets, and overcome barriers that at one point may not have seen reasonable to attain. At the
same time, it is also true to say that it is not easy to become the global leader in the global automobile
industry, but by taking the appropriate steps based on the SWOT analysis as well as competitive analysis,
it should be attainable to become a global leader in the markets all over the world. Economically, it was
not easy at all for the Korean automobile industry to position itself as one of the fastest growing
competitors in the global markets and become the world‘s fifth largest producer today.
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AVIATION INDUSTRY
It‘s been a good year for the airline industry in general, but it has been particularly good in Asia. Asian
airlines are expected to bring in $5.2 billion in profits this year, and in the airline industry, which is often
a zero-sum industry because it is subject to the cost of fuel, labor union disputes, infectious diseases and
natural disasters, this is no small feat. Korean airlines have fared quite well this year as well.
Asiana Airlines has posted 4 consecutive profitable quarters from Q4 2009 to the most recently
announced Q3 2010 results in which they posted slightly over 215 billion won in profits (193 million
USD) and its shares nearly tripled in value. Asiana has basically guaranteed itself a profitable 2009.
Korean Air has also been quite profitable. Its shares have increased by 59% over the past 52 weeks.
Though its results suffered in Q2 as it posted $197 million USD in losses as a result of foreign exchange
losses, it posted $203 million USD in profits in Q1 and $134 million USD in profits in Q4 2009. As the
exchange rate issues have somewhat stabilized, KE is anticipated to finish the year in the black barring
some unforeseen catastrophe.
Both of Korea‘s main airlines managed to post these numbers despite the loss of significant traffic as a
result of the volcanic eruption in Iceland last spring.
Things are looking good for Korea‘s LCC market as well. While many of them are still in their infancy,
many of the carriers have significantly decreased losses and even occasionally posted a profitable quarter
here and there. As they begin operating regionally to international destinations, expect their performance
to continue to increase as international travel is increasingly popular among Korea‘s adult population.
The performance of the African aviation industry is still lagging behind those of the rest of the world.
Nonetheless, demand for air transport has increased steadily over the past years with passenger numbers
and freight traffic growing by 45% and 80%, respectively. Over the period 2010-2015, Africa will be the
third fastest growing region in the world in terms of international traffic with an average growth rate of
6.1% compared to the global average of 5.8%, and 7.9% and 6.9% for the Middle East and Asia Pacific,
respectively, while Europe, Latin America and North America are projected to record lower international
passenger growth of 5.0%, 5.8% and 4.9%, respectively.
This trend is expected to continue in the coming years due to a number of factors, notably robust
economic growth, demographic boom, increasing urbanization, and emergence of the middle class. Air
transportation plays a vital role in the country‘s growth process by accelerating convergence of goods and
persons. The contribution of air transport far exceeds that of road transportation sevenfold. Growth in air
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transportation has directly maps into economic growth due to spillover effects through creation of direct
and indirect jobs in the industry and other auxiliary sectors such as tourism and other service sectors.
Expansion in air transportation creates market opportunities for local entrepreneurs by creating regional
and global economic centers. In 2010, the aviation industry in Africa supported about 7 million jobs
(including 257,000 direct jobs) through the impact on travel and tourism which translated into USD67.8
billion of the continent‘s GDP. Forecasts indicate that the aviation industry‘s impact on African
economies is set to grow. Over the next 20 years, implied job creation by the industry is projected at
879,000.
Africa can maintain the growth of its aviation industry if more and more people can afford to pay for the
cost of air travel. Currently, only 10% of Africans travel by air but given the current rate of economic
growth and emergence of the middle class, there be high demand for services linked to air transportation.
In recent years, growing alliances with counterparts in other regions of the world have played an
important role in the development of the African aviation industry. These alliances have permitted
African companies to gain access to new long haul routes resulting in higher economies of scale and skills
exchange.
Present position & trend of business in south korea
Airport operators and airport support service companies have identified the Middle East, China, India,
Eastern Europe and Brazil as offering the largest growth potential among emerging markets. Respondents
to ICD Research's 'Global Airports Supplier Industry Outlook Survey 2011-2012' say the expansion of
business activities in emerging markets, together with stronger economic growth than other regions of the
world, changing consumer lifestyles and a rise in disposable income, has increased the demand for air
travel and related services. This, in turn, is expected to increase the need for airport infrastructure and
support services. The Middle Eastern market emerges as the most promising among developing markets.
Respondents from airport industry supplier companies identified the Middle East, China, India and Brazil
as offering the greatest growth potential to the industry in emerging markets. China, India, and South
Africa were identified as offering the greatest growth potential to the industry.
Economic growth in the Middle East is expected to increase, and airport supplier respondents expect this
to reflect positively in air traffic. This will, in turn, drive the need for new aircraft, along with related
products and services. According to Boeing, the Middle East's fleet size is expected to increase by more
than 150% by 2029.
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Policies & norms in South Korea
Marketing of Airports
AASK ( Airport Authority of South Korea) has been in fore front in creation of world class
infrastructure in India. Now to fully utilize the facilities created there is a need to market them to
prospective airlines, create new routes, and create openings for new airlines to come to Indian
airports. Creating an environment to convert the passive airport into business centers will go a
long way, towards aviation growth. New routes not only enhance aeronautical revenue but bring
in non-aeronautical revenue by way of facility utilization by commercial players.
Domestic Airports
Domestic airports revenue is largely dependent on flight related activities. Airlines base their
plans on anticipated profitability and look for every opportunity to increase their market share.
Airport operator with all the resources and capabilities want airlines to operate at his airport,
increasing the connectivity results in decongestion of existing metro airports.
Existing Policy
Incentive to domestic airlines by not charging landing & parking charges if they are operating
with aircraft with a maximum certified capacity of less than 80 seats.
Discount of 25% of current rates in landing and parking charges to those airlines who are
operating in North-Eastern region, Jammu & Kashmir, A&N Island and Lakshadweep.
Night parking charges between 2200 and 0600 hrs. at 50% of the existing
parking charges at all airports except Chennai & Kolkata airport.
Civil Aviation Policy must ensure that airports are offered fiscal benefits similar to industries,
which includes benefits for certain number of years e.g. exemption from Income Tax, Property
Tax, Non Agricultural Tax (N.A. Tax), Electricity duty, Royalty on minor minerals etc.
Additionally, open land should be exempted from N.A. Tax and post exemption period electricity
duty should be as is applicable for industries and N.A. tax should also be based on rates
applicable on industries.
The policy objective must be to ensure sustainable airport capacity to meet the demand
forecasted for Passengers and Cargo traffic.
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Ensure total safety and security of air transportation by introduction of state-of-art air traffic
technology, equipments and training facilities.
Develop Airport as a Multi-modal Transportation Hub, by integrating the Airport with other
modes of transport like Railway, Highway and Seaports to enable seamless transportation across
the country
Policy should consider granting infrastructure industry status to Airport sector.
A forward looking Greenfield Airport policy which encourages the investors and developers to
set up more and more Greenfield Airports in the country.
There should be a clear PPP policy on the airports.
Air Traffic control service may be allowed to be provided by licensed private operators.
More transparency needs to be on ATC/ANS pricing by incorporating international best
practices.
There is a need to have a clear and forward looking policy on Ground Handling services by
enhancing competition in the service by allowing professional ground handlers with international
experience.
Policy to improve Cargo handling facility at Airport is essential and also to develop cargo
handling capacity at all airports.
A clear policy to encourage the commercial activities in the airport for optimization of revenue
from Non-Aeronautical Services.1.13 Policy to upgrade the airport security system by
systematically assessing aviation security threats, risks and vulnerabilities at the airport by
adopting modern technology mechanism.
Policy to have an unambiguous legislative framework for privatization of airports allowing total
flexibility and avoiding any intervention by any agency.
Approval policy for the Greenfield Airport, Brownfield Airport should be made easy for private
developers to take up the project work. Single Window concept to be implemented.
The policy should clearly define the role of central and state government and civil military
cooperation.
Policy to develop human resources in the airport management. Civil Aviation industry requires
well trained and highly skilled workforce on a continuous basis.
Policy to have easy clearance of all environmental issues.
Policy to develop a forward looking investor friendly regulatory mechanism.
Policy to encourage and support the Indian Industry to acquire airports development and
operations abroad.
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Clear land acquisition policy should be in place for setting up of airports in the country.
The policy should aim at facilitating continued investment by ensuring economic viability of the
Airport sector.
Progressive tariff regime – Dual Till for all Airports
Trade in Airports/Aviation Sector is affected on account of several factors such as custom
clearance, warehousing issues and intervention of many agencies. Indian Air Cargo industry is at
an inflection point. Air Cargo through put has more than doubled in the last decade. Air Cargo
policy should focus on making India a preferred transhipment hub for global air cargo movement.
The right vision, road map, forward looking policy and regulatory framework is essential for
taking India to the rightful place in global air cargo industry.
The processing time for major export handling activities / import cargo clearance are far below
the international standards. Restricted working hours for cargo clearance affects piling up of
cargo and puts tremendous pressure on the capacity and cargo operations and requires 24x7 cargo
clearance working by all agencies such as Customs dept. and Customs house agents etc. Hence a
clear policy to streamline the regulatory procedures in all the airports in working/customs
operations in all airports is essential.
Policy to minimize/eliminate manual intervention in all clearing process.
Policy to make all the custom activities free for the operators. Recent issue of imposing Customs
cost recovery on Greenfield Airports adversely affects the import / export business to be
withdrawn as any additional cost will adversely affect the trade. Moreover, Customs being a
sovereign function of the Govt. and the cost of that should be borne by the Government and not
be charged from the Operators.
Policy to enhance the efficiency of all the agencies working at the airports. Apart from Customs,
several other agencies are also responsible for clearance of goods at Airports and they must
improve their processes for easy and fast clearance. The clearance process being extremely slow
the capacity as well as throughput of Perishable cargo is greatly impacted, besides inconvenience
to the Importers.
Policy should be to improve efficiency through automated material handling system and IT
system, making paperless environment, e-freight etc.
Other:
Policy should be framed to make all strategically located Indian Airports as Hub and Spoke
model to make them most efficient, cost effective, liable, safe, secure and comfortable air travel
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to passengers. There are substantial economic gains which can be derived from a Hub airport
including improving employment opportunities.
The policy should be to have an integrated transport model connecting Seaport, Road and Rail
Transport and to certain extent Public Road transport utilities to make hub-spoke model most
efficient and cost effective by utilizing economies of both scale and scope and provide
passengers and cargo seamless connection and more efficient services.
The policy needs to position India as a global hub by effectively utilizing world class airport
infrastructure capacity to handle large movement of aircraft and augment trade and tourism
opportunities and to ensure seamless transition for the passenger and the airline.
Policy should be to facilitate a collaborative approach between both airports and airlines to work
in tandem to handle the international competition and the growing air passengers and cargo
movements
Future scenario
The aviation industry is expected to grow at a compounded annual growth rate of 25% till 2010.
Also, by 2010 Indian airports will be handling between 90 and 100 million passengers per year,
as against the current 34 million passengers. It is expected that nearly 80% of this growth will be
driven by the low cost carrier segment (LCC). By 2008, the LCCs would capture 65% of the
direct on-line air ticket market from 61% in 2005
Suggestions
For any country, the aviation sector is not only its gateway to the world but also one of the most important
sectors for its economy and its growth; generating billions in revenues and creating hundreds of thousands
of jobs. In recent years, the global aviation industry has been through many ups and downs. From
skyrocketing fuel prices to pandemics to recent financial crisis, aviation industry has confronted a very
rough weather in last ten years or so. Consolidation in mature markets, higher ticket prices, modernization
of airports, policies to reduce emissions and tremendous growth prospects in emerging economies have
been some of the trends during the decade. According to recent industry reports, the global aviation
industry is on the path of recovery and future looks optimistic and would present ample opportunities for
the stakeholders.
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Chemical Industry
On the basis of the consecutive 5yearindustrial plans (1960-1980) during the rule of
Former president Park Chong-Hee ,Korea‘s chemical sector came off the ground. The Korean
government managed to start several joint ventures with mostly Japanese companies,
acquiring technology and equipment in the process. Using 50/50 ownership ventures between
the Korean government and foreign investors, Korea acquired the necessary know- how to
independently further develop its facilities.
Petrochemicals is one of the key sectors of South Korea‘s chemicals industry. Production
siteshavebeenandarebeingexpandedtoincreaseproductioncapacities.Growthimpetus
hasalsocomefromthesemi-conductorsectorandfromcosmetics.Newareasof technology such as
LCD and(AMO-)LED displays, fuel cells and electrical car batteries, semiconductors and
high-function textiles(textiles for heat isolation, thermal retention, water absorption, quick dry
and so on), as well as bio-and nanotechnologies also play an increasingly
importantrole.In2006theKoreanchemicalsectorhadaturnoverof US$102.6billion, accounting
for3.6%ofworldchemical sales. Chemicals makeup18%ofEUexportsto South Korea while
imports from the EU accountfor4.6%(est.2009).Formor details per commodityseetable1&2
Until 2005 there was no single association that represented the entire Korean chemical
industry; 10 sector groups came together to establish the Korea Chemical Industry Council
(KOCIC)as the umbrella association and the official representative of the country‘s chemical
industry. KOCIC joined the International Council of Chemical Associations (ICCA) asan
observerin2005andwasacceptedas afullmemberin2007.
Petrochemical
PetrochemicalsarealargepillarofKoreantrade.SpreadoverthecomplexesUlsan,YeochunandDaesa
nthereisatotal of 11naphthacrackingfacilitiesthatarestillbeingexpandedto increase capacity.
SouthKorea‘s petrochemical industry is mature and highly integrated, despite that Korea does
not have natural gas or oil reserves. With 7.3million tons of Ethylene, South Korea is the 5th
largest producer in the world. Production is mainly focused on export, the main destination
being China. For example: The total ethylene exports in
2010were554millionkgwhileexportstoChinainthesameyearamountedto440million
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Kg10.China‘sshareinKoreapolypropaneexportsgivessimilarfigures:Withatotalexportof
559 million kg (2010), 504 million kg were exported to China10. Due to this export
dependency and high dependence on import on crude oil, several major players in the
Petro chemical industry started to merge with large multinational oil producers; for example
SamsungGeneralChemicalsstartedajointventurewithTotalin2003ensuringastableflow of raw
materials. Probably, the recent rise in oil prices form a concern for the sector. In the
faceofChina‘sincreasingdomesticproductioncapacity,thesectormightneedtodiversify its export
destinations. The biggest players in the sector are LG Chem, Samsung Total, Honam
Petrochemical, SK Energy and YNCC (Yeachun NCCCo, Ltd.)
BUSINESS OPPORTUNITIES IN FUTURE
South Korea is known as a rapidly growing prosperous economy, home to global
conglomerates called chaebols. However, the actual opportunities and challenges of the South
Korean market remain unknown to most foreign companies. Yet recent developments in the
South Korean economy are opening new opportunities for foreign companies. At the same
time, South Korea is actively searching for new paths to future ros perity, as it is increasingly
challenged by other Asian countries. Understanding the South Korean economy, its
opportunities and future direction is thus a very timely subject
The Final consumption expenditure; etc.(%of GDP) in South Korea was last reported at
68.07in2010, according to a World Bank report published in 2012. Final consumption
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expenditure(formerly total consumption) is the sum of house hold final consumption
expenditure(private consumption) and general government final consumption expenditure
(general government consumption).This estimate includes any statistical discrepancy in the
use of resources relative to the supply of resources. This page includes a historical data
chart, news and forecasts for Final consumption expenditure; etc. (%of GDP) in South
Korea.
GDP
The GDP per capita (US dollar) in South Korea was last reported at 22424.06in2011,
accordingtoaWorldBankreportpublishedin2012.GDPpercapitaisgrossdomestic
Product divided by mid year population. GDP is the sum of gross value added by all resident
producers in the economy plus any product taxes and minus any subsidies not included in the
value of the products. It is calculated without making deductions for depreciation of
fabricatedassetsorfordepletionanddegradationofnaturalresources.Dataareincurrent U.S .dollars.
This page includes a historical data chart, news and forecasts for GDP per capita (US dollar)in
South Korea.
Trade and Investment Barriers
104
As has been highlighted in the trade analysis part of this paper, trade flows between India and
Korea, though on the rise in last few years, remains much below potential. Apart from natural
and structural factors like distance and difference in economic structures, the non-realisation of
potential is mainly due to various barriers/problems that exist in both the countries. These
barriers exist for merchandise and services trade as well as investment.
Barriers in India:
Since the early 1990s, tariff rates on most non-agricultural commodities have been significantly
reduced in India. However, India has bound only 70 per cent of its non- In recent
years, the participation of Korean companies in the infrastructure sector in India has increased
substantially. Out of 44 contracts awarded for national highway development projects, 9 have
been won by Korean companies, either in collaboration with Indian companies or independently.
Recently, Hyundai Heavy Industries have won two mega projects, including one pipeline project
worth $600 million.
agriculture tariff lines. According to WTO, India‘s average bound tariff rate is 34.9 per cent,
which is well above its average applied tariff rate (16.4 per cent in 2005). In agriculture, India‘s
WTO bound tariff is among the highest in world with an average bound tariff of 114 per cent.
Although Korea is not very competitive in a majority of agricultural products, it is competitive in
certain products, like cuttle fish.
India‘s tariff rates are very high on some of the product categories which constitute a major
proportion of Korea‘s exports. For instance, in 2007, the weighted average of the MFN tariff rate
on vehicles, rail/tram rolling stock, and access group, is 18.8 per cent with a maximum rate of
100 per cent. Tariff rates are also high on products in which Korea is competitive. For example,
Korea has high RCA values for the iron and steel group but the weighted average of MFN tariff
rate in India is 20 per cent which is equal to the maximum tariff.
One problem that has generally been felt by exporters to India is the lack of an official
publication or a searchable database setting forth applied tariff and other customs duty rates.
India‘s customs valuation methodologies do not reflect actual transaction values and sometimes
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increase the effective tariff rates. Also, due to a complex tariff structure and multiple
exemptions, Indian customs require extensive documentation, which leads to frequent processing
delay and inhibits the free flow of trade. Non-transparency and unpredictability in unofficial
policy of the government have also been highlighted as constraints in exporting to India.
The importation of automotive products is subject to certain custom procedures which are
cumbersome for importers. For example, motor vehicles can be imported only through a limited
number of ports and only from the country of manufacture.
Apart from these tariff-related barriers, there are several non-tariff barriers that exist in India.
These include poor infrastructure, the hiring, management and dispute settlement mechanism in
the case of labour, high production cost, credit retrieval, local financing and binding system,
relatively limited demand, high competitiveness, government intervention, customs and
clearance procedures and visa related problems. Issues related to the Indian government‘s
development, adoption, and implementation of technical regulations, standards and conformity
assessment procedures have not been very conducive for trade in several products. There are also
concerns regarding India‘s notification process for amendments of certain regulations.
Imports of certain products, like electrical appliances, where Korea is very competitive, are
subject to license from the Bureau of Indian Standards (BIS). For this, BIS needs to first inspect
the production facility and then issue a license to the exporter. According to some foreign
companies, licensing and inspection costs imposed on foreign companies are very high. Some
proposed regulations are also considered a hindrance to trade flows. For instance, the proposed
―Drugs and Cosmetics (Amendment) Rules, 2007‖ will make registration costly
USTR 2008 For instance, unofficial policies of revising edible oil reference prices once every
two weeks and maintaining a reference price system for soybean oil to address alleged under
invoicing. USTR, 2008. From presentation of Mr.By Soon C. Lee, PhD. For instance, currently
the US is raising its concerns in the WTO about India‘s 2007 implementation of the BIS
protocols on tyres. For instance, India has amended its ―Plant Quarantine (Regulation of Import
into India) Order, 2003‖ many times without providing an opportunity for prior public comment,
as required by WTO obligations.
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for certain drugs and cosmetic products. In the case of copyright, proposed amendments in
copyright laws have some major deficiencies like the lack of a clear path towards
implementation of the world intellectual property organisation internet treaties. Another related
issue is the weak enforcement efforts against copyright piracy in India. Cable piracy has been a
significant problem in India. The criminal IPR enforcement regime is considered weak.
Other issues that have come up in United States Trade Representative(USTR) 2008 are lack of
an efficient regulatory device regime, India‘s failure to notify sanitary and phytosanitary (SPS)
measures to the WTO, excessive regulation and restriction on certain forest and food products,
non-transparency and bias in government procurement practices and procedures, lack of clarity
on tax holidays for export-oriented units and exporters in special economic zones (SEZs) and
ambiguity in India‘s patent law regarding the scope of patentable inventions.
In services, the barriers are regulatory in nature. These barriers include limitation on foreign
ownership, excessive regulation, nationality or residency requirements, bias in award of projects,
compulsory registration with local, specific, service provider associations, etc. Cumbersome
bureaucratic procedures, the lack of fear of government action and a clogged judicial system
where cases can linger on for several years, visa related problems etc have been the most cited
barriers to trade in services.
Foreign companies also face a number of problems in investing in India. Along with ownership
restrictions, the Indian government‘s stringent and non-transparent regulations and procedures
governing local shareholding hinder investment inflow and raise the risk for new entrants. Some
of the important issues include acquisition of land, political interventions, credit retrieval, local
financing and binding system, labour disputes, high competitiveness, government intervention,
customs and clearance procedure etc.
In some sectors, price control regulations have undermined the incentives for foreign investors to
increase their equity holdings in India.
Barriers in South Korea:
Trade and investment barriers exist in Korea too, despite the continuous rationalisation of its
tariff structure and other external sector reforms. Korea‘s average MFN applied tariff rate, in
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2006, was 12.1 per cent for all products (47.8 per cent for agricultural products and 6.6 per cent
for industrial products). Korea maintains high tariffs on several agricultural and fishery products,
which are of interest to India. It imposes a 30 per cent or higher tariff rate on most fruits and
nuts, many fresh vegetables, peanuts, peanut butter, various vegetable oils, dairy products etc.
Korea has established tariff rate quotas (TRQs) in a bid to minimise access to previously closed
markets to maintain pre-Uruguay round access. In-quota tariff rates may be very low or zero but
over-quota tariff rates are very high and prohibitive33. Another tariff related problem in Korea is
the use of adjustment tariffs and compound taxes on some agricultural, fishery and plywood
products, which raise the applied tariff rates in the country.
USTR 2008 For instance, some companies report that they are forced to renegotiate their
contracts in the power sector as a result of ruling government changes at the central and state
levels. For instance barley is subject to an over-quota tariff rate of 324 per cent; malted barley,
513 per cent; potatoes and potato preparations more than 304 per cent, etc (USTR, 2008).
Another sector of interest to India is textile and apparel products. Bound tariffs on these products
in Korea is significantly high at 30 per cent on several man-made fibres and yarns, many fabrics
and most made-up and miscellaneous goods like pillow cases and floor coverings and per cent
on most apparel items. Also, Korean tariff rates are very high on some products where India
exhibits maximum RCA. For example, lac, gums, resins and other vegetable group of products is
among the groups with the highest RCA for India but the weighted average bound tariff rate in
Korea is as high as 142.83 per cent while the MFN rate is 136.63.
South Korea maintains some standards, technical regulations and conformity assessment
procedures that are burdensome. These barriers mainly restrict the export of food items that are
of interest to India. For instance, the Korean Food and Drug Administration (KFDA) define
product categories narrowly for specific food additives making it difficult to obtain approval.
According to Korean rules and regulations, safety and certification have to be conducted by a
designated certification body that must be a ―domestic, non-profit making organisation with
suitable testing equipments and qualified testing personnel‖.35 Another related problem faced by
exporters is that Korea has non-transparent and onerous labelling requirements, with frequent
changes for health foods which create a lot of difficulty and enhance the cost of compliance.
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In Korea, all imported cosmetics are subject to an import review process by the Korean
Pharmaceutical Trade Association (KPTA). This procedure delays market entry of the products
and since KPTA‘s membership includes competitor manufacturers, the process raises concerns
about the ability of KPTA to protect sensitive information which is required to be disclosed as
part of the import review process.
Foreign companies face a number of trade barriers in exporting services to Korea. A relatively
high threshold level is maintained/imposed for procurement of construction services by sub-
central and government enterprises. Korea imposes several restrictions on the film and broadcast
industry. For instance, it has a quota for the screening and broadcasting of domestic films,
restrictions on voice-overs (dubbing) and local advertising on foreign re- transmission channels
and licensing requirements for any form of legal advice in Korea. The lack of transparency in the
regulatory system, the lack of a mechanism to raise concerns regarding these and market access
issues in the financial sector are major concerns in the financial services.
In the telecommunication sector, where Indian companies may be interested, Korea imposes a
number of restrictions on foreign service providers. There is prohibition on foreign satellite
service providers from selling services directly to end users, lack of transparency in investment-
related regulatory decisions, limits on foreign shareholding of facilities-based telecommunication
operators, restriction on foreign investment in terrestrial broadcast television operations, etc.
Other barriers faced by foreign suppliers in the Korean market include government assistance to
targeted domestic industries like the semiconductor industry, weak legal regime to
protectintellectual property, lack of data protection, issues related to its copyright act, protection
of temporary copies and technological protection measures, sale of pirated audio-visual DVDs
USTR, Korea, 2008
by unlicensed vendors and burdensome and detailed product information requirements to get
registration and certification.
Conclusion
Bilateral economic relations between India-Korea have strengthened over the years, particularly
since 1991. However, the current size of trade and investment between the two countries is low
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compared to the size and structural complementarities of the two economies. In this context, the
present paper analyses trade and investment relations and future areas of co-operation between
India and Korea. The increase in merchandise trade between the two countries has been mainly
because of the changing demand structures and comparative advantages of both economies in
complementary sectors. While India‘s exports mainly constitute low value-added and industrial
products, India‘s imports from Korea largely consists of relatively high value-added products.
The analysis of revealed comparative advantage at both the aggregated and disaggregated levels
shows that Korea has been specialising in a chemical products which are highly competitive as
India‘s exports have been more diversified
SUGGESTIONS
1. India should reduce trade barriers like barriers related to registration, certification,
testing procedures, product standards etc so that trade with another country can easily
take place.
2. Government of India should take more steps to promote export with other country and
carrying out any other duties which may be vested under rules made under the policy.
3. The Government of India should also take steps to increase production of chemical's
products in country so that export opportunity can be increase.
4. South Korea should liberalize their trade policy because it is stated that the custom duty
should be paid in only Korean wan and they should think about the high taxes as taxes
are high as compared to India.
5. The franchising in south Korea is very costly but it is witnessing good expansion ie 800%
in last 8 years so the companies should take advantage of these policies.
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Dairy Industry
Component of Dairy Industry:
The two thing are Cattle and buffaloe breeding and calf rearing
The also work for Frozen semen banks and A.I. centers
In to the three step divided is Small, medium and commercial dairy units
Salvage of dry pregnant buffaloes from city dairies
To do all proceed and after Production of perennial Lucerne as green fodder
In the village also doFodder production on gochar lands.
Silvi-pastoral schemes for production of fodder grasses, fodder trees, timber/fuel trees.
The also Conservation and storage of dry fodder and fodder banks
Dairy sector in to Production of fodder seeds
Two important plant is Mini and major cattle feed plants
Urea-molasses brick manufacturing units
The also provide Mobile veterinary service
Setting up of private veterinary practice
Electronic milk testers for dairy cooperatives
Equipment and machinery for processing of liquid milk and milk products
Other dairy machinery like milking machines, milk tankers,
Construction of milk houses for collection of milk from producers.
Manufacturing, storage and marketing of value added indigenous milk products.
The NABARD Dairy sector study has also indicated the following major action points for
improvement of Dairy Sector.
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Milk and milk products form part of the diet for many south korean. They consume dairy
products either as fresh milk or in fermented or soured form. Fellke and Geda (2001) estimated
that 68 percent of the total milk produced is used for human consumption in the form of fresh
milk, butter, cheese and yogurt while the rest is given to calves and wasted in the process.
Butter produced from whole milk is estimated to have 65 percent fat and is the most widely
consumed milk product in south korea Of the total milk produced, around 40 percent is allocated
for butter while only 9 percent is for cheese. Traditional butter, which ferments slowly at room
temperature, can keep for a year or longer, offering rural consumers a readily storable, long-lived
dairy product.
The consumption of milk and milk products vary geographically between the highlands and the
low lands and level of urbanization. In the lowlands, all segments of the population consume
dairy products while in the highlands major consumers include primarily children and some
vulnerable groups of women.
The limited statistical data available on potential milk demand suggest that demand for milk will
increase, at least in the urban centers and among the people with high purchasing power.
The demand for milk depends on many factors including consumer preference, Consumer‘s
income, population size, price of the product, price of substitutes and other
factors.
COMPETITIVE ENVIRONMENT
Major Players in the Market
Seoul Dairy Co-operative, Maeil Dairy Industry, Namyang Dairy Products, Binggrae, Korea
Yakult, Lotte, Dongwon Dairy and Pasteur are major local manufacturers of drinking milk,
yoghurt, cheese and butter. Major exporting countries of various milk products into Korea are
New Zealand, Australia, USA, Netherlands, France, Germany and Canada. New Zealand and
Australia are major exporters of butter and cheese to the Korean market.
Marketing Strategies
Major foreign suppliers of dairy ingredients have their agents in Korea, as local food/dairy
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manufacturers generally depend on trading agents to source materials from abroad. Advantages in
having an agent include cost benefits, assistance in obtaining information on import requirements,
and established networks with food manufacturers.
The reference list of successful sales to buyers in Korea and abroad is an extremely useful
marketing tool. In the absence of a sales history to Korean buyers, a reference list of sales to
Japan or the USA would be helpful.
Distribution Channels
Local dairy product manufactures supply to customers and retailers through their own
distribution chain. Retail outlets and local manufacturers who sell or use imported products
usually purchase through exporters‘ local agents or representatives.
REGULATORY OVERVIEW
Duties/Taxes
A Minimum Market Access (MMA) system has been implemented for some dairy products to
protect the local industry. Please check with New Zealand Trade & Enterprise for the current duty
rates for individual products. Regulatory and Licensing Restrictions or Difficulties The National
Veterinary Research & Quarantine Service inspects dairy-based products. The products, if
applicable, should meet the standards and specification set out in the ―Manufacturing &
Processing Standards and Specification of Livestock Products.‖ Labelling standards and import
requirements can change frequently in Korea and are controlled by the National Veterinary
Research and Quarantine Service (NVRQS) and Korea Food & Drug Administration. Close
contact with Korean representatives and importers is essential for obtaining the latest information
on requirement.
RECOMMENDED STRATEGIES
Possible Points of Differentiation for NZ Companies New Zealand has a very positive country
image in Korea – clean and green. As food quality and safety issues are increasing in importance.
New Zealand‘s suppliers can take advantage of this favourable country image.
Tactical Recommendations on Market Entry
Exporters should consider a distributorship/agency to ensure effective distribution in the
market. A local presence would help exporters keep in touch with any changes in the regulatory
environment and market trends. Participation in a food exhibition could be a cost-effective way of
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initial market entrance. Also New Zealand Trade & Enterprise can provide customized market
research or assistance to exporters, including identifying interested Korean companies.
Recommendations on Long Term Strategic Issues for Exporters To Consider It is important to
continue to provide a stable supply and price for Korean importers. Otherwise it might be difficult
to maintain a long-term relationship and importers can easily turn to other sources. It is also
important to raise the profile of New Zealand dairy products among consumers, not only among
importers/distributors/wholesalers In 2011, retail sales of cheese reached a recorded to $333
million, which was a 15 percent increase from 2010. The United States was the largest dairy
exporting country with 43 percent market share, followed by New Zealand with 27 percent and
the , EU with 14 percent. FTAs are expected to expand market share for cheese and non-fat dry
milk for the United States and the EU at the expense of New Zealand and Australia. A wellbeing
trend is supporting a new and growing market segment of ‗super premium‘ milk including
organic milk, milk from grass fed cows, and milk with added nutritional supplements, and
commands prices 3 times higher than regular milk. Despite a shortage of fluid milk resulting a
FMD outbreak, Korea‘s per capita consumption of dairy products grew by 1.4 percent to 73.2 kg,
in 2011.
Dairy, Milk, Fluid
Production:
In 2011, Korean raw milk production was 1.89 million metric tons (MMT), decreased by 9
percent compared to a previous year. From November 2010, FMD among cows, pigs and ox was
prevalent in over 200 districts within South Korea. FMD forced the slaughter of 34,000 dairy
cows (8 % of 430,000 national herds) which resulted in a shortage of fluid milk. The Korean
government set a policy where when one animal was found to have FMD, destroyed. This led to
a shortage of raw milk which badly affected the production of drinking milk products. Drinking
milk use was 86 percent of total raw milk production while remaining 14 percent is marketed for
processing.
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Consumption:
In 2011, retail value sales of drinking milk are decreased by 1% to reach $3.4 billion which was
strongly affected by shortages of raw milk from foot-and-mouth disease. Flavored milk drinks
with fruit juice reached the highest retail value growth by 10% and unit prices rose in all types of
drinking milk products due to a higher raw milk prices.
Fresh/pasteurized milk decreased by 5% in 2011.Sales of drinking milk products are marginally
decreased due to incidents of FMD in cattle. This led to a shortage of raw milk which badly
affected the production of drinking milk products. On the other hand, many consumers and
restaurants replaced milk with soy milk, enabling soy milk with a healthy growth rate in 2011.
In May 2009, regulations regarding flavored milk drinks changed so that products including real
fruit juice could feature brand names such as real fruit juice included flavored milk drink. As
such, products without real fruit juice could be called ‗fruit name syrup milk drink‘ instead of
‗flavored‘. Manufacturers started to add real fruit juice to most fruit flavored milk drinks to
maintain the brand name as ‗fruit name flavored milk drink‘. Flavored milk drinks increased by
4% in 2011 due to changes in most dairy only flavored milk drinks to flavored milk drinks with
fruit juice. This is because ‗fruit name syrup milk drink‘ could convey a negative image of being
low quality among consumers. In 2011, only coffee flavored, grain and bean flavored milk
drinks remained under the dairy only flavored milk drinks, and all fruit flavored milk drinks
move under the flavored milk drinks with fruit juice category.
Seoul Dairy maintained the leading position with a 38% value share in 2010 followed by Maeil
Dairy at 15% market share with organic milk brand, Sangha Farm. Since the recent outbreaks of
FMD, consumers became concerned about drinking fresh milk. As a result, sales of soy milk
increased as opposed to fresh milk. Sangha Farm is now a leader in organic milk. Vegemil by Dr.
Chung‘s Food maintained the leading position to a 39% value share in soy milk.
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Korea raw milk supply & demand
Unit: 1000 METRIC TON
2006 2007 2008 2009 2010 2011
Supply Inventory from a year before 116 53 107 96 55 13
Production 2,176 2,188 2,139 2,110 2,073 1,888
Import 882 968 885 959 1,135 1,620
Total 3,174 3,209 3,131 3,166 3,263 3,521
Demand Consumption 3,121 3,101 3,035 3,111 3,249 3,485
Inventory 53 107 96 55 13 36
Total 3,175 3,209 3,131 3,166 3,263 3,521
Per Capita Consumption (Kilo Gram) 63.6 63.0 61.3 62.3 62.8 69.4
Source: ministry of food & agriculture fisher forestry (MIFAFF)/ 2012 agriculture outlook by
korea rural economy institute(KREI)
Domestic raw milk usage
Unit: 1000 MT
Milk 2006 2007 2008 2009 2010 2011
Drinking Use 1,555 1,582 1,583 1,569 1,541 736
Processed Use 621 606 556 540 532 206
Total 2,176 2,188 2,139 2,110 2,073 942
Source: ministry of food & agriculture fisher forestry (MIFAFF)/ 2012 agriculture outlook by
korea rural economy institute(KREI) The Korean consumers‘ priorities of milk selection are
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freshness (30%), brand name (20%), safety (19%), function (8%) and price (22%) by agriculture
outlook center survey during January 2012.
Korea‘s key dairy product imports Unit: MT
Products (HS
Code) 2008 2009 2010 2011
U.S. Total U.S. Total U.S. Total U.S. Total
Cheese (0406) 11,300 47,400 9,100 49,000 18,500 61,000 32,400 76,200
NFDM
(0402.10) 41 4,900 100 9,600 650 7,900 900 33,500
Whole Fat
DM (0402.21) 0 1,300 0 1,200 0 1,400 0 5,300
Mixed Milk
(0404.90 &
1901.90.2000)
1,468 25,900 910 26,000 440 31,600 1,300 36,000
Butter
(0405.10) 56 1,900 80 2,100 66 3,000 900 4,800
Whey Powder
(0404.10) 14,009 32,000 15,800 32,200 16,000 37,600 12,900 30,400
Ice Cream
(2105) 356 2,000 520 2,010 632 2,600 840 3,600
TOTAL 39,700
(24%) 165,000
36,300
(21%) 176,200
54,700
(26%) 207,000
72,800
(26%) 280,500
Source: 2012 Korea Customs Office
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Notes: In 2011, imports of dairy products increased, such as cheese imports increased by 25% up
to 76,200 MT, mixed milk decreased by 11% up to 28,000 MT, butter increased by 60% up to
4,800 MT but NFDM increased by 320% up to 33,500 MT compared to 2010.
Dairy product import by country
Unit: MT
U.S.
New
Zealand Netherlands Australia Germany Total
2007 42,100
(23%) 28,600 21,500 25,900 5,600 183,700
2008 39,700
(24%) 31,100 23,100 21,600 5,700 164,700
2009 36,300
(21%) 34,500 20,100 31,300 6,900 176,200
2010 54,700
(26%) 39,400 28,600 28,600 5,800 207,000
2011 72,800
(26%)
53,000
(19%)
32,400
(12%)
32,400
(12%)
20,500
(7%)
280,500
(100%)
In 2011, average unit price of imported dairy products was $4 per kilogram which was increased
by 21%. Jumping the international animal feed price and decreased raw milk production of
Australia and New Zealand made the price higher.
PRESENT POSITION AND TRENDOF DAIRY PRODUCT OF SOUTH KOREA
Population growth:
Population growth has a tremendous impact in the growth of demand for dairy products.
korean population is growing at a rate of 2.6%, which induces additional demand for the
dairy products. Based on the Census of 2007, korean Population is about 73.09 million,
increased by 20 million from what it has been thirteen years ago.
Economic growth:
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For the past five years ending 2007/08, korean economy registered an average real
GDP of 11.8%. The economic growth will contribute in increasing the leaving conditions
and purchasing capabilities of the people. Rapid growth of many cities contributes for
increasing the demand for dairy products (MoFED 2008). Mainly Because of the impact
of the Global economic slowdown IMF projected that 2009‘s korean Growth rate will
not exceed 7%.
Conducive Business Environment:
Many private investors are now engaged in dairy farm development and dairy product
processing. Currently there are about seven dairy processors and a number of dairy farms
in south korea. In the socialist regime, private Supermarkets were small in number and
little known had small significance. All public owned supermarkets are now privatized
except two merchandise store and duty free store. Currently there are about 70
Supermarkets in Maeil Dairy and Namyang Dairy , where few of them are with more
than two chains. Big towns other than Addis Ababa have similarly 3 to 6 super markets.
These supermarkets are among the main distribution channel of the products of the dairy
industry, both the local and the imported one. In addition to the supermarkets, with the
expansion of Maeil Dairy and Namyang Dairy, many village shops and kiosks are
opened and are among the primary active distributers of dairy products.
Increased foreign Community because of the increasing in the size and number of international
organization in south korea, foreign investments and continuing public investments. These
trigger more demands for dairy products.
Foreign Investment:
Investment policies and other supports attract foreign investors in the sector. Though few in
number, foreign investors are engaged in dairy farm and milk processing business.
Direct Actors
Majority of smallholder producers may be excluded from the emerging value chain due to
capacity limitations. Small producers lack the necessary technological, organizational and
institutional capacity for successful participation in the value chain. They are less organized and
distant from market, lack economies of scale, face higher transaction costs and lack institutions
for risk management (Tesfaye and et al).
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Urban and peri-urban smallholders are the main supplier of raw milk in the dairy industry. Most
of milk processors do not have their own dairy farms. Even those who have their own farms are
souring mainly from small holders. For example, Sebeta Agro industry, the first private dairy
processor, is collecting 99% of raw milk from outside source though it has its own farm.
Cooperatives
Politicization of cooperatives mainly in the socialist regime has created the bad impression
among many. Recently cooperatives are playing important roles in ensuring sustainable supply
of raw milk to the industry by coordinating the flow of the milk from their members and
assisting of members by supplying inputs to the dairy farms. Many cooperatives are established
since 1991 for marketing of raw milks of small holders in the urban and per-urban areas. The
most successful cooperatives are, Ada Dairy cooperative and some cooperatives in Selale area
(all in the radius of 100 km from Maeil Dairy and Namyang Dairy). Ada Dairy Cooperative has
its own processing plant. Another cooperative in Northern part of south korea, has recently
established a processing plant targeting the consumers at Mekele town. A project on
livestock/dairy had helped a dairy coop to be organized in Gondar.
Individual collectors
Individual collectors are competing with processors for the raw milk. Individual collectors
mainly supplying cafe‘s, institutions and restaurants. They are responsible for the highest portion
of the milk supply in the market. Cafe‘s and restaurants are opting for unpasteurised raw milk
mainly for bulk delivery and of the perception that they have better fat and nutrients content and
test than the pasteurised one. Individual collectors are using their own transportation system
indelivering the milk consistently. Some of the individual collectors in the Selale milk shed are
from Gurage tribes and there is a slight decline in milk purchase when they are leaving for
holiday vacation in the month of September. The price of the milk will slightly lower as
competition will be ease among the buyers of the union
Urban small holders
Urban smallholders are mainly supplying to households though house to house delivery. Most of
them are using plastic jerry can for handling the milk. The main end consumers of house delivery
are infants and children. The delivery is often on a monthly contractual basis with minimum
delivery size of half litre. Some urban smallholders are also supplying to cafe‘s and restaurants.
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Recently these urban smallholders are facing a pressure from the municipality to shut off their
small farms because of health and environment issues. Based on the discussion with the
chairman of KMPPA, it is estimated that 20% to 30% of these farms are closed in the year 2009.
Based on the information of Vet service provider of Akaki district of Addis Ababa, the numbers
of cows vaccinated in the year 2008/09 are about 600 as compared with that of the year 2007/08
which was about 1000 cows. The decline in the size of smallholding urban farmers is believed to
be one of the contributing factors.
Commercial processors
Commercial processors are those adopting modern technology with a majority of their output is
pasteurised packed milk with the size of 500ml. Currently there are about seven dairy processing
companies operating in Maeil Dairy and Namyang Dairy and nearby towns. One of the oldest
state owned dairy processing enterprise formerly called DDE or Shola is privatized in the year
2008 and named as Lame Dairy Plc (Table 2). Ada Dairy initially has attempted to produce
packed milk, but not continued with pack milk production and currently supplying its pasteurised
milk mainly to Lame and sometimes to Lema Dairy. Genesis Farm is producing cheese, butter
and yogurts. Raw milks are sold to other processors, including Lema.
There are other two dairy processors very far away from Addis. These are Dire Dawa Dairy
Enterprise (500 km away from Addis) and Cooperative based processor in Tigray region. A dairy
processing company established some years ago in the town of Dessie (400km north of Addis
Ababa) has been recently closed down because of managerial problems. The properties are sold
to a merchandise business. There is no indication that the acquiring company will consider entry
in the dairy business.
Dairy Potential For import/ export in India/ Gujarat Market
Dairy development in India has been acknowledged the world over as one of the highly
successful programmes. Dairy sector is the single largest contributor of agricultural sector to
India‘s gross domestic product, with its annual value exceeding Rs. 100,000 crores Having
attained self-sufficiency in food grain production, there is a need to plan for strategic
diversification of Indian agriculture to ensure sustainability and nutritional adequacy.
Diversification of Indian agriculture focused on dairying and export of dairy products represents
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excellent potential leading to prosperity of the farming community representing 65 per cent of
the population.
With 198 million cattle and 86 million buffaloes, India has the largest population of milch
animals in the world. These livestock constitute more than 50 per cent of the buffaloes and 20
per cent of the cattle in the world. Although number of livestock is large, average milk
production is far below their genetic potential. With a wellcrafted strategic approach, this huge
animal wealth could be utilised in right perspective for enhancement of milk production without
many incremental inputs. In contrast, a small rise in milk production requires intensive inputs
and crossing of genetic barriers in advanced countries of the world, where milch animals are
utilised to produce milk at their maximum potential.
India is the located amidst perennially milk deficit countries in Asia and other country Africa.
For the major importers of milk and other milk products are for the country Bangladesh, China,
Hong Kong, Singapore, Thailand, Malaysia, Philippines, Japan, UAE, Oman, and other Gulf
countries located in close proximity to India. China, India and Indonesia alone account for more
than 40 per cent of the world‘s six billion-plus population. Economic growth and changes in
dietary preferences in the Southeast Asian countries have stimulated consumption of dairy
products, even though it is not a part of their traditional diets. Growth of quick service
restaurants (QSRs), particularly pizza chains, and growing bakeries and other food processing
industries also increase the demand for cheese and other dairy products. India, thus, enjoys a
strategically advantageous geographical location in terms of international trade of dairy products.
CONCLUSION
South korea has large cattle population. Dairying is practices the majority of the rural
population.
There are both the ‗good and not good‘ experiences in the country with regard to dairy
business and Dairy industry. Any dairy investment can build on the existing experiences.
There is no need to reinvest the wheel.
Suitable ecological condition for dairying in south korea
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The major highland areas and districts are marked as milk shed areas for dairy
development. The Milk shed areas overlap with high population density, urban centre
concentration, good road and Communication network and access to electric power grids.
korean Country depends on agriculture or dairy only.
.
SUGGESTION
Improve packaging (e.g. out of home usage).
New product development to increase customer selection (lifestyle products, pro-biotic
yogurt, Cottage cheese).
Distribution into multiple market channels to reach more consumers.
Investment opportunity in south korea in dairy industry.
Amul position good in Indian market.
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Home Appliance Industry
The South Korean economy has been showing signs of rapid recovery since the second quarter
of 2011. Asset prices started to go back to normal levels and private consumption has been on
the rebound, boosted by economic stimulus packages. In addition, exports have bounced back
by volume since June of 2011. Real economic indicators have been improving and leading
economic indicators are pointing to a continuous economic recovery in the future.
The outlook on the production of the Home appliance industry
Type Year
2010
Year 2011 Year
2011
Year 2012 Year
2012 H1 H2 H1 H2
Home Appliance
(KRW 1 billion)
31,625
(0.8%)
14,720
(11.1%)
13,440
(10.8%)
28,160
(11.0%)
15,040
(2.2%)
13,700
(1.9%)
28,740
(2.1%)
The outlook on domestic demand for Home appliance goods
Type Year
2010
Year 2011 Year
2011
Year 2012 Year
2012 H1 H2 H1 H2
Home Appliance
(KRW 1billion)
22,862
(1.1%)
10,91
4
(9.8)
10,042
(6.7%)
20,95
6
(8.3)
11,322
(3.7%)
10,437
(3.9%)
21,759
(3.8%)
Exports go up 10.8 percent
Although a strong won can put downward pressure, exports are expected to jump 10.8 percent,
remaining similar to 2010 levels, as exports to emerging markets, led by China, continue to
grow. The IT industry - whose exports are expected to climb 15.2 percent thanks to such
improvements in export conditions as the World Cup 2010 in South Africa and the launch of
Windows 7 - is likely to lead export activities in manufacturing.
Exports of semiconductors, displays, information & communications equipment, and home
appliances are expected to advance 17.0 percent, 15.1 percent, 14.3 percent and 13.4
percent respectively. Of the total exports, the combined share of shipbuilding, information &
communications equipment, automobiles, and semiconductors is forecast to amount to 41
percent. Each of the four industries has an around 10 percent share of the total exports.
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Export outlook of Home appliance Indusrty :
Type Year
2010
Year 2011 Year
2011
Year 2012 Year
2012 H1 H2 H1 H2
Home
appliance
(US$ million)
12,896
(-4.0%)
4,650
(-34.6%)
4,810
(-16.8%)
9,460
(-26.6%)
5,480
(17.8%)
5,250
(9.1%)
10,730
(13.4%)
Imports go up 12.4 percent
In 2012, the revenues of the top 10 major industries are projected to gain 12.4 percent due to the
low base effect from 2011 when their revenues tumbled 24 percent, but still they are expected
to fall short of 2010 levels.
The IT industry's imports will rise 14.8 percent, boosted by increased demand for parts imports
for export goods, growing reimportation of products and parts produced overseas, and foreign
brands' inroads into the Korean market. The slump in exports and imports in 2009 was largely
due to a decrease in unit prices that came on the heels of global recession-triggered volume
reductions, a weak won and a drop in raw material prices. As for exports, by volume, they
reversed course and ticked up after June of 2011.
A strong won, the global economic recovery, and rising oil prices have started to push up the
unit prices of exports and imports. Exports of IT goods such as displays and semiconductors are
showing signs of rapid recovery.
The global economic recession has made a dent in S. Korea's exports, but in view of major
economies, S. Korea has fared well in relative terms. When post-financial crisis export growth
is compared, S. Korea's export loss is milder than other major economies. After the global credit
crunch struck, flagship export items have seen their market shares significantly increase in the
global market. Since these relative booms are believed to hinge on exchange rate effects, the
appreciation of the won is predicted to detract from the booms in the future.
However, in light of the long spell of a weak won and the fact that the won-dollar exchange
rate, unlike other major currencies, is still at high levels compared to during the pre-financial
crisis periods, the relative booms are estimated to continue for the time being if the won-dollar
exchange rate slowly goes downward.
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The real economy has been showing a faster-than expected recovery, propped up by the Korean
government's aggressive economic stimulus packages and recovering asset prices. One-off
factors, such as economic stimulus packages and a weak won, need to be taken into
consideration. Private consumption posted year-on-year growth of 0.6 percent in the last third
quarter due largely to the government's "tax deductions for clunkers" program. In the post-crisis
periods, S. Korea's export gains, relative to other rivaling economies, are estimated to have
rested largely on exchange rate effects and major economies' economy-boosting efforts.
When S. Korea is compared to Japan who has a similar trade structure, S. Korea's relative
export booms seem to be attributable to price falls and the effect of payability, brought on by
the weak won.
Exchange rate effects and decreased demand for high-end Japanese goods during the financial
crisis are responsible for 70 percent of S. Korea's relative export booms.
Import outlook :
Type Year
2010
Year 2011 Year
2011
Year 2012 Year 2012
H1 H2 H1 H2
Home appliance
(US$ million)
4,848
(6.6%)
1,833
(-29.7%)
1,990
(-11.2%)
3,82
(-21.1%)
2,190
(19.5%)
2,200
(10.6%)
4,390
(14.8%)
Exports of home appliance are expected to advance 13.4 percent
Amid improving consumer confidence, helped by wide-spreading optimism about the Korean
economy since the second half of 2009, domestic demand for home appliances is projected to
gain 3.8 percent in 2010, breaking the cycle of decline in 2009.
Exports of home appliances are likely to advance 13.4 percent in dollar terms in 2010, bolstered
by the World Cup 2010 in South Africa, enhanced branding power of S. Korean white goods
suppliers, reinforced competitiveness, expansion of overseas economic cooperation, and the
continuation of China's unrivalled economic growth.
In dollar terms, exports are expected to grow, but a strong won is likely to send the
won-converted value of exports growth into turning negative. In addition, expected sluggish
growth in domestic demand is likely to weigh down the production of home appliances that is
forecast to edge up a mere 2.1 percent in 2010. On the other hand, imports of home appliances
will surge 14.8 percent, dwarfing export gains, on the back of the low base effect from the
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previous year and the strong won- which have pushed down the prices of imports, fueling
demand for high-end and low-end imported goods, and parts needed to manufacture export
goods.
MAJOR PLAYERS IN HOME APPLIANCE INDUSTRY IN
SOUTH KOREA
Brand Company
Name Headquarters Market Share %
1 Haier Haier Group Qingdao, China 5.1 %
2 Whirlpool Whirlpool Corp. Michigan, USA 4.5 %
3 LG LG Group Seoul, South Korea 4.3 %
4 Panasonic Panasonic Corp. Osaka, Japan 3.1 %
5 G.E. General Electrics
Co. Fairfield, Connecticut, USA 3.0 %
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128
SOUTH KOREA‘S IMPORT OF HOME APPLIANCE
PRODUCTS FROM INDIA
South Korea recorded a trade surplus of 874 USD Million in January of 2013. Balance of Trade
in South Korea is reported by the Ministry of Knowledge Economy. Historically, from 1966 until
2013, South Korea Balance of Trade averaged 418.31 USD Million reaching an all time high of
6794.27 USD Million in June of 2010 and a record low of -4043.46 USD Million in January of
2008.
South Korea relies largely upon exports to fuel the growth of its economy. The most important
exports are finished products such electronics, semiconductors, LCD panel, mobile phone,
computers related, television, motor vehicle, steel, ships and petrochemicals. South Korea
imports machinery, oil, steel, transport equipment, organic chemicals and plastics. Its main
trading partners are: China, European Union, The United States and Japan. This page includes a
chart with historical data for South Korea Balance of Trade.
CONCLUSION
South Korea is the most popular country in the world. South Korea imports many
products from the India like machinery, electronics and electronic equipment, oil, steel,
transport equipment, organic chemicals and plastics. But this project involves import-
export of home appliances to South Korea.
Major contributors in the production of LG, The company operates its business through
129
five divisions: Mobile Communications, Home Entertainment, Home Appliances, Air
Conditioning, and Energy Solutions.
LG is market leader in India and it has full market share. So LG can use its present
strategy in in introduction of their product in south Korea. The market in south Korea is
less developed for Electronics' products industry so there is full scope for LG to start their
section there.
South Korea is actively searching for new paths to future prosperity, as it is increasingly
challenged by other Asian countries.
The availability and use of information and communication technologies are a pre-
requisite for economic and social development in our world.
The openness of the Korean economy makes it vulnerable to global economic
fluctuations.
SUGGESTIONS
India should reduce trade barriers like barriers related to registration, certification, testing
procedures, product standards etc so that trade with another country can easily take place.
Government of India should take more steps to promote export with other country and
carrying out any other duties which may be vested under rules made under the policy.
The Government of India should also take steps to increase production of Electronics'
products in country so that export opportunity can be increase.
South Korea should liberalize their trade policy because it is stated that the custom duty
should be paid in only Korean wan and they should think about the high taxes as taxes
are high as compared to India.
The franchising in south Korea is very costly but it is witnessing good expansion i.e.
800% in last 8 years so the companies should take advantage of these policies.
130
Mobile Industry
Structure of Mobile Industry in South Korea
The Mobile Communication Industry in South Korea
As of March 2009, the number of mobile subscribers in Korea nearing 46 million total mobile
subscribers and the nation‘s penetration rate almost 100%. Mobile telecommunications services
in South Korea are served by three operators: SKT (SKTelecom), KTF (Korea Telecom Freetel),
and LGT (LG Telecom). SKT represents 50.50% of the market share, KTF 31.54% and LGT
17.95% as of December 2007. The nation first launched its mobile telecommunication services
in 1960.
Changes in the number of mobile subscribers are indicated in the table below: unit: number of
subscribers
Dec. 2001 Dec. 2002 Dec. 2003 Dec. 2004 Dec. 2005 Dec. 2006 Dec. 2007
SKT 15,179,063[1] 17,219,562 18,313,135 18,783,338 19,530,117 20,271,133 21,968,169
KTF 9,590,698 10,332,770 10,441,766 11,728,932 12,302,357 12,913,699 13,720,734
LGT 4,275,835 4,790,161 4,814,046 6,073,782 6,509,849 7,012,283 7,808,638
Total 29,045,596 32,342,493 33,568,947 36,586,052 38,342,323 40,197,115 43,497,541
In March, 1984, the Korean government permitted the Korea Telecom to establish the Korea
Mobile Telecom as a subsidiary dealing with mobile services. The Korea Mobile Telecom was to
provide analogue cellular service employing the method of AMPS (Advanced Mobile Phone
Service) in Seoul metropolitan area including Seoul, An-Yang, Suwon, and Sung-nam. In May,
1988, the Korea Mobile Telecom launched a full swing mobile communication business,
expanding its scope into areas beyond Seoul and its vicinity, and at the end of 1991, the entire
nation came to enjoy mobile services.
131
In 1994, in an effort to restructure communications industry, the Korean government announced
its selection of a second mobile service provider, Shinsegi (which was later merged into SKT in
January, 2002), and privatized the Korea Mobile Communications. As a result, the era of
monopoly ended in the nation‘s mobile communications service, laying groundwork for duopoly.
The market became truly competitive in April, 1996, when Shinsegi started providing services
using the method of CDMA. In June, 1996, the Korean government selected PCS (Personal
Communication Services) providers, which would compete with the aforementioned companies,
the so-called ―second generation mobile services companies.‖ The goal of the government was to
secure competitive environment in the nation‘s communications market. The Korea Telecom
Freetel, LG Telecom, and Hansol PCS (merged into KTF in May, 2001) were the three selected
PCS carriers and began their PCS business in October, 1997. With Shinsegi and Hansol PCS out
of the picture, only SKT, KTF, and LGT are currently competing in Korea‘s mobile
communications market.
RESTRICTIONS
Mobile Communication: Service
―The Information and Communication Promotion Office‖ – which is under the branch of the
Ministry of Information and Communication – is responsible for the restrictions on mobile phone
industries. They oversee works relating to authorizing establishments, service charges, sharing
network lines, M&As and other legal authorizations until the suspension or liquidation of
businesses. However, due to the amendment of Electric Communication Business Act, the
Communication Committee now takes the responsibility of executing the final rulings such as
imposing penalties and determining business suspension.
Legal Basis
Electric Communication Business Act
Article 5: The mobile phone service is a business that must be admitted by the Minister of
Information and Communication Department and this business sector is not opened to foreign
corporations.
132
Electric Communication Business Entity Act
Article 6: There is a limitation for foreign governments and corporations‘ in ownership of
domestic mobile phone companies (about 49%). If it does exceed the limitation then they do not
have the voting rights for the excess portion of the equity limitation and will receive orders to
rectify and penalty will be imposed.
Enforcement of Electric Communication Business Act
If unfair actions are discovered on the contract regarding the rate and subscription, the
Communication Committee will impose penalies and temporarily suspend the business.
Mobile Communication: Mobile Phone/Equipments
In the case of the domestic market, business can be done without any restrictions if the business
satisfies the criteria and tests for compatibility with the national mobile communication
enterprises, basic A/S, and standards of quality. As for the export market, the test for
compatibility with other countries‘ mobile communication enterprises and basic A/S must be met
to do business in Korea.
Research and Markets: South Korea's Telecoms, Mobile, Broadband and Forecasts
Report
Research and Markets: South Korea's Telecoms, Mobile, Broadband and Forecasts Report 2012
South Korea is a country leading in technology use. The report covers trends and developments
in telecommunications, mobile, internet, broadband, digital TV and IPTV. Subjects include:
o Market and industry analyses, trends and developments;
o Facts, figures and statistics;
o Industry and regulatory issues;
o Infrastructure;
o Major players, revenues, subscribers, ARPU;
o Internet, VoIP, IPTV;
133
o Mobile voice and data markets;
o Broadband (FttH, DSL, cable TV, WiBro);
o Convergence and digital media;
o Smart Grids and Smart cities;
o Forecasts to 2016 in fixed-line, mobile, internet and broadband subscribers.
Market highlights:
o Into 2013, fibre technology accounted for over 60% of all broadband subscribers in South
Korea while ADSL subscriptions had declined to close to 10%, the balance being
accounted for by cable modem subscribers
o Mobile penetration increased to 110%; Strong LTE demand was enabled by the
introduction of more smartphones into the market and has seen an uptrend in ARPU
o LT data usage is reported at least 50% higher compared with 3G at 1.6GB and 1.2GB
respectively as reported by SK Telecom end June 2012. Samsung reports figures as high
as 2.9GB of data on average a month compared with 1.2GB for 3G users
o LTE-Advanced testing continued
o HD voice over LTE (VoLTE) was launched by SK Telecom
o Multi-carrier technology on 800MHz and 1.8GHz bands was launched in a world first
o The introduction of MVNO services saw subscriptions near one million entering 2013
o Spectrum auctions were held raising over US$1.5 billion for 10 year licence allocations
o Wi-Fi and femtocell investments increased to reduce pressure on the core mobile
networks
o A Smart Grid pilot is underway on Jeju Island with plans for a nationwide Smart Grid by
2030
o Green Economy initiatives are driving investments in Smart Cities.
South Korea – key telecom parameters – 2011 - 2013
134
Sector 2011 2012 (e) 2013 (e)
Internet users (million)
Internet users 37.2 37.4 37.5
Broadband subscribers (million)
Total broadband subscribers 17.8 18.5 19.3
Broadband penetration 36.5% 37.8% 39.3%
Subscribers to telecoms services
(million)
Fixed-line telephones 18.6 18.1 17.9
Mobile phones 52.5 53.6 54.6
Increased share of the ICT industry contribution to GDP as the government intervened on tariffs
in a bid to fight inflation.
For those needing High Level Strategic Analysis and Objective Analysis on Korea, this report is
essential reading and gives further information on:
o potential introduction of a fourth mobile licensee and the introduction of MVNOs in 2015
o The New Songdo City Development planned to be a future Korean ― Smart City‖.
o The Government‘s ―Smart Work‖ initiative that aims to have 30% of public employees
work from home or smart-work centres by 2015 with Smartphone, laptops and other
mobile devices.
o WiBro subscribers passing the 900,000 mark after investments of over KRW 2 trillion.
o the country‘s goal to capture 10% of the global cloud services market by 2014 and to
halve the cost of operating the public sector‘s ICT infrastructure
o the development of new technologies such as controlling a screen with one‘s gaze
o trials of 3D broadcasts in tandem with regular 2D broadcasts
o Direct deals by Samsung with companies including Skype and music streamer Spotify.
135
Supports
Information Promotion Act
The Ministry of Information and Communication provides financial support for the R&D and
infrastructure development on Information Communication and developing human resources
with the fund prepared by the government and related providers.
Article 33: The government enacts promotion fund to promote and support information society.
Article 34: The fund is composed of allotments from the government and contributions from the
communication companies. This fund will be used to develop high-speed information
communication infrastructure, R&D on information and communication, support education
programs to develop human resources for information and communication technologies.
Article 35: The Minister of Information and Communication carries out the use and management
of the fund and the minister may entrust related organizations and associations with the fund.
Research and Markets: South Korea's Telecoms, Mobile, Broadband and Forecasts
Report
Research and Markets: South Korea's Telecoms, Mobile, Broadband and Forecasts Report 2012
South Korea is a country leading in technology use. The report covers trends and developments
in telecommunications, mobile, internet, broadband, digital TV and IPTV. Subjects include:
o Market and industry analyses, trends and developments;
o Facts, figures and statistics;
o Industry and regulatory issues;
o Infrastructure;
o Major players, revenues, subscribers, ARPU;
o Internet, VoIP, IPTV;
o Mobile voice and data markets;
136
o Broadband (FttH, DSL, cable TV, WiBro);
o Convergence and digital media;
o Smart Grids and Smart cities;
o Forecasts to 2016 in fixed-line, mobile, internet and broadband subscribers.
Market highlights:
o Into 2013, fibre technology accounted for over 60% of all broadband subscribers in South
Korea while ADSL subscriptions had declined to close to 10%, the balance being
accounted for by cable modem subscribers
o Mobile penetration increased to 110%; Strong LTE demand was enabled by the
introduction of more smartphones into the market and has seen an uptrend in ARPU
o LT data usage is reported at least 50% higher compared with 3G at 1.6GB and 1.2GB
respectively as reported by SK Telecom end June 2012. Samsung reports figures as high
as 2.9GB of data on average a month compared with 1.2GB for 3G users
o LTE-Advanced testing continued
o HD voice over LTE (VoLTE) was launched by SK Telecom
o Multi-carrier technology on 800MHz and 1.8GHz bands was launched in a world first
o The introduction of MVNO services saw subscriptions near one million entering 2013
o Spectrum auctions were held raising over US$1.5 billion for 10 year licence allocations
o Wi-Fi and femtocell investments increased to reduce pressure on the core mobile
networks
o A Smart Grid pilot is underway on Jeju Island with plans for a nationwide Smart Grid by
2030
o Green Economy initiatives are driving investments in Smart Cities.
South Korea – key telecom parameters – 2011 - 2013
137
Sector 2011 2012 (e) 2013 (e)
Internet users (million)
Internet users 37.2 37.4 37.5
Broadband subscribers (million)
Total broadband subscribers 17.8 18.5 19.3
Broadband penetration 36.5% 37.8% 39.3%
Subscribers to telecoms services
(million)
Fixed-line telephones 18.6 18.1 17.9
Mobile phones 52.5 53.6 54.6
Increased share of the ICT industry contribution to GDP as the government intervened on tariffs
in a bid to fight inflation.
For those needing High Level Strategic Analysis and Objective Analysis on Korea, this report is
essential reading and gives further information on:
o potential introduction of a fourth mobile licensee and the introduction of MVNOs in 2015
o The New Songdo City Development planned to be a future Korean ― Smart City‖.
o The Government‘s ―Smart Work‖ initiative that aims to have 30% of public employees
work from home or smart-work centres by 2015 with Smartphone, laptops and other
mobile devices.
o WiBro subscribers passing the 900,000 mark after investments of over KRW 2 trillion.
o the country‘s goal to capture 10% of the global cloud services market by 2014 and to
halve the cost of operating the public sector‘s ICT infrastructure
o the development of new technologies such as controlling a screen with one‘s gaze
o trials of 3D broadcasts in tandem with regular 2D broadcasts
o Opportunities for investing in the South Korean Mobile Sector
138
1) Korea, world‘s second-most innovative country'
Korea is the second-most innovative country in the world according to Bloomberg Business
week. In its annual Global Innovative Index, a list of the 50 most innovative countries, Korea
gave away the top spot to the U.S.
The Innovative Index for each country is evaluated based on seven factors: R&D intensity,
productivity, high-tech density, researcher concentration, manufacturing capability, education
level, and patent activity.
Korea, which stood at third place last year, climbed one notch. Korea was ranked first in patent
activity and was in the top quarter in the categories of productivity, education level, and R&D
intensity. However, the country lagged behind in productivity, only taking 32nd place.
The U.S. jumped up to the first spot from seventh, possibly due to its outstanding results in high-
tech density. Japan and Singapore were the only other Asian countries in the top ten, taking sixth
and seventh place respectively.
2) Korean brands sought out for quality, style.
As the international reputation of Korean-made products from Korean companies like Samsung
and LG continues to advance, the question of what distinguishes Korean brands from their
competitors has emerged as a common topic of discussion among market watchers.
3) Mobile phones can be purchased in supermarkets
Mobile phones have become available at retail stores according to the revised regulations on
mobile phones by the Korea Communication Commission.
As Korea launches its mobile phone blacklist system, consumers no longer need to sign a
contract with a telecom company to buy a mobile phone. Under the new system, mobile phone
users have a wider selection of telecommunications companies, as they can purchase a mobile
phone from retail stores such as large discount stores, online shopping malls, and discount stores
and register it with any telecommunications company.
139
Mobile phones brought from other countries can also be used by simply inserting a USIM card.
Although users have to register their overseas mobile phone with the National Radio Research
Agency, it will be registration-free this coming July if it is for private use rather than commerce.
4) Korean brands benefit from worldwide cultural exposure
Along with the growing popularity of Korean culture overseas, Korean multinationals‘ products
and services are enjoying a better positioning in the global marketplace. The findings emerged
from a recently conducted survey by the Korea Trade-Investment Promotion Agency (KOTRA),
5) SMBA helps social enterprises
Social enterprises in Korea now can receive financial support from the Small and Medium
Business Administration (SMBA). The SMBA, along with the Credit Guarantee Foundation and
the Small and Medium Industry Bank, recently established a special guarantee for social
6) ‗Made in Korea‘ finding new markets
As K-pop and Korean culture continue to connect with audiences across the globe, Korean
products too are finding their place in the international market, the Korea Agro-Fisheries Trade
Corporation‘s monthly magazine Agra Food compiled a list of the world‘s series Trade
Corporation‘s monthly magazine Agra Food compiled a list of the world‘s.
CONCLUSION
Knowing just the framework of the Korean society is enough to make a difference in situations
such as negotiations. Major religions, important social values, the mighty presence of the
government are all things to consider when evaluating their moves and motives. Having an idea
of what to expect when meeting with Koreans will prevent some very embarrassing situations.
As the South Korean economy proceeds to grow in its rapid state, it is becoming increasingly
useful to know about the business etiquette and ethics. Business cards, bowing and being vague
when you really want to say ―No!‖ may seem like minute details. But you need to respect their
culture, as they should yours. The more effort you put into it getting to know their culture, the
more they will be impressed with you. Working with people who highly regard personal
140
relationships, small things like being humble will pay off. No matter what happens, keep your
emotions under control and be patient. As the wise professor said, leave the judging for later;
right now, just accept it and wait.
141
Ship Building Industry
South Korea‟ s advance in the international shipbuilding industry in the period
1970-90 was spectacular. The period was turbulent, as the crisis in the shipping sector led to a
dramatic decline in the demand for new tonnage from the middle of the 1970s
onwards, sparking a global shipbuilding slump. The response in Western European countries
was based on a number of ingredients; nationalization, rationalization, subsidization,
specialization and, ultimately, massive disinvestment and downscaling. By 1990 the Western
European merchant ship completions had been reduced by around 75 per cent relative to the
mid-1970s‟ peak – from more than twelve million gross register tons (grt) in 1975 to less
than three million grt in 1990. The South Korean completions on the other hand multiplied by
a factor of more than eight over the same period
The crisis of the 1970s and 1980s was a watershed in the postwar shipping market.
As a result of the OPEC oil price increases, the rapid growth of tanker demand was
replaced by stagnation and then absolute reduction. When the market collapsed, there
was a substantial overhang of ordered, non-delivered vessels, and the second half of the
1970s and first half of the
1980s were characterised by overcapacity, substantial lay-ups and a massive reduction
in the amount of new tonnage launched.
Problems in the shipping industry rapidly spill over to the shipbuilding sector. As a
result of the strong growth of the fleet before the freight market breakdown, from 1974
onwards new orders were virtually absent and large amounts of tonnage on order was
cancelled. Chart 1 shows the fluctuations in the tonnage completed in the period 1969-1990,
as well as South Korea‟ s increasing market share. The more than ten year glut and the
South Korean shipyards‟ massive expansion during this period are evident from the data.
Chart 1. Tonnage completed (million grt) and South Korea‟ s share (per cent),
1969-1989
142
South Korean m arket share
Tonnage com pleted (m ill.grt)
Polynom ial trends
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
40
35
30
25
20
15
10
5
0
The basis for South Korea‟ s growth in the international shipbuilding market should
be sought in a combination of international and domestic elements. Although these two
factors are closely intertwined, the rest of this paper is organised by looking at the two factors
separately. However, we initially indicate why we think it is necessary to take both aspects
into account, and why we have taken a ―two-stage‖ approach in our analysis, where
we look at international factors before we consider the domestic dimension.
By the mid 1980s, South Korea had become the most important competitor to the
Japanese in the high-volume shipbuilding market. Some European yards had chosen to
focus on more advanced purpose-built vessels, but in aggregate the European shipbuilding
capacity had been dramatically reduced. For the largest vessels, it was now more or less a two-
horse race between Japan and South Korea. In the mid 1980s the currency development
improved South Korea‟ s competitiveness even further. As a result of the appreciation of
the yen, the advantages related to higher productivity in Japanese yards were eroded; ―the
price differential with the [South] Koreans this time a year ago was between 5-10%. Now,
though, since the won is linked to the dollar, the gap is anything up to 50%‖18
In the last part of the 1980s, however, the South Korean expansion lost some steam.
Rising labour costs, labour conflicts and uncertainty in connection with the transition to
143
democracy all affected the country‟ s shipbuilding sector negatively.19 Nevertheless, there
is no doubt that South Korea by the beginning of the 1980s had come a long way from the
meagre starting point at the beginning of the 1970s. During that decade, South Korean
shipbuilding developed from a sheltered, domestically oriented industry to an important
challenger in the world market. Table shows the transition of the country‟ s shipbuilding
industry from 1971 to 1981.
Table Shipbuilding capacity, South Korea 1971 and 1981
1971 1981
Shipbuilding capacity (grt) 190,000 4,000,000
Domestic demand (grt) 43,000 193,000
Export demand (grt) - 880,000
Shipbuilding companies 131 153
Table indicates that by 1981 there was substantial surplus capacity in the South Korean
shipbuilding industry. During the 1980s, as a result of demand for new ships
recovering, the overcapacity was substantially reduced, even though production capacity
was further increased. This enabled South Korea to develop from an important
challenger to the world‟ s second largest shipbuilding nation. Table 5 shows that
Hyundai, the first company to properly enter the world market, had been followed by several
other yards, most of which had an impressive orderbook based primarily on foreign
demand.
Table Orderbook by shipyard, end of 199021
Domestic # Domestic grt Export # Export grt Export share Avg. Size
Hyundai 0 0 45 3003.5 100 66,744
Daewoo 2 72 21 2753.9 97.45 122,865
Hanjin 4 155 4 208.9 57.41 45,488
Samsung 0 0 14 802.6 100 57,329
Tacoma 1 0.4 1 0.1 20 250
Donghae 1 5.7 6 18.9 76.83 3,514
Dae Dong 2 2.5 3 7.5 75 2,000
144
Daesun 6 8.4 2 0.8 8.70 1,150
Shin-A 4 5.4 0 0 0 1,350
Halla 0 0 8 216 100 27,000
Others 0 0 20 3.6 100 180
Sum 20 249.4 124 7015.8 96.6 50,453
South Korea‟ s position at the end of the 1980s was vastly different from only ten
years earlier. The country‟ s international market share had increased further, but
the competitive position had been changed as well. In the late 1980s currency developments
worked against the South Korean yards, and labour costs increased in tandem with rising
living standards. Indeed, by 1989 the competitive position of the country‟ s shipbuilding
industry had changed: ―South Korea has now entered the ranks of the high quality-high
cost shipbuilding nations, competing on direct terms with Japan.‖
Indian ship building industry to reach Rs 9,200
crore by 2015
The Indian shipbuilding and ship repair industry is likely to reach Rs 9,200 crore from the
current level of just over Rs 7,310 crore, according to a study done by the industry body
ASSOCHAM.
The study 'Shipbuilding Industry in India: An overview', by The Associated Chambers of
Commerce and Industry of India (ASSOCHAM), said that India accounts for just about one per
cent of the global shipbuilding industry worth about Rs 7.3 lakh crore but is growing at a
compounded annual growth rate (CAGR) of about 8 per cent.
Globally, this industry is growing at a CAGR of about 24 per cent and is likely to reach Rs 14
lakh crore by 2015 owing to rising global sea borne trade, according to the study.
"Lower costs of labour, availability of skilled workforce together with robust demand in the
domestic market and a growing steel industry are certain factors that build up a strong case for
shipbuilding sector in India," said Mr D.S. Rawat, secretary general of ASSOCHAM.
145
"For a well balanced and comprehensively developed domestic shipbuilding and ship repair
industry, the government should provide fiscal incentives to develop strong research and
development facilities, designing capabilities and set up an auxiliary base to encourage the
growth of the sector," said Mr Rawat.
The overall cargo traffic at major ports in India is about 600 million tonnes and is likely to reach
1,230 million tonnes by 2015 and 3,000 million tones by 2020 growing at a compounded annual
growth rate (CAGR) of about 20 per cent, said ASSOCHAM study.
"For this India needs to furbish up its ports and the whole shipping infrastructure to enhance the
handling capacity and facilitate operation of larger shipments to increase its share in the global
maritime business," said Mr Rawat.
"The government should rope in maritime states to identify and make land available, thereby
seeking their contribution for setting up a new port or a shipyard in each of these states."
"This also denotes huge scope for private sector and foreign direct investment (FDI) in the
shipping industry and the maritime states can develop a composite project on the public-private
partnership model," he said.
China, South Korea and Japan are leading shipbuilding nations and cater to over 80 per cent of
the global shipbuilding industry. China alone accounts for over 35 per cent of this global
industry. India and Vietnam are upcoming centres for global shipbuilding.
High input costs and rising costs of raw material, freight together with miscellaneous duties and
taxes being imposed amounts to a huge price differential of about 50 per cent in building a ship
in India and other countries, said ASSOCHAM.
Besides, though the costs of labour in India is low compared to that in other nations but
shipbuilding being a labour-intensive industry, fulfilling the requirement of skilled workforce is
another significant problem being faced by the shipbuilding companies.
he government has a key role to improve the efficiency and productivity of domestic
shipbuilding companies to enable them compete with their overseas counterparts. ASSOCHAM
146
recommends revival of subsidy scheme, easing tax related regulations and declaring the
shipbuilding a status of strategic industry.
With about 8,000 kilometre long coastline there are about 27 shipyards, 12 major ports and 200
ports under states' jurisdiction in India, there is huge scope for development of shipping sector
considering that country's opportunities in the maritime business have not been utilized fully.
Current and future market situation
• The Indian shipbuilding industry has around 28 shipyards comprising of 8
public sector, 6 yards under central and 2 under state governments with
around 20 private shipyards.
• The Indian shipbuilding turnover for both the private and public
shipyard sector reached 1.6 billion dollars in 2010.
• Government owned Cochin Shipyard Limited and Hindustan Shipyard Limited
are the major shipyards in India.
• Private shipyards are more in numbers, but are severely limited by capacity
and size of ship they can build.
• The Indian ship building industry does not only produce Indian and
International cargos, but also provides facilities such as ship repairing.
• The Indian shipbuilding industry is estimated to double from its 2010 revenue
of $1.6 billion in the next five years.
Main segments in the Indian shipbuilding industry
• Shipbuilding industry is mainly divided into the following:
• New ship building yards
• New building ship yards are mainly active in building commercial and defense
147
vessels
• Commercial vessels are mainly built for European owners and Defence
vessels are for Indian Navy
• Ship yards mainly build vessels for European owners
• Major yards are ABG Shipyard, Bharti Shipyard, Modest, Pipavav Shipyard,
L&T Shipyard, Cochin Shipyard, etc
• Ship repairing
• Indian ship repairing industry consists of around 7 ship repair units (SRU‘s),
namely Alcock Ashdown & Co. Limited, Chennai Port Trust, Hindustan Shipyard
Limited, Mumbai port Trust, Cochin Shipyards, Garden Reach Shipbuilders and
Mazgaon Dock Limited who have been given the permanent approvals as SRU‘s.
SWOT Analysis of the Indian shipbuilding industry
Strengths
•Government allowing 30% cash subsidies to new building yards in India.
•Large coastline for ships
•Strong labour force
•Low cost labour
Weaknesses
•Lack in building high capacity ship yards
•Lack of trained engineers and skilled labours
•Government support and initiative for
shipbuilding is negligible.
•No financing support to shipbuilding companies from the government
Opportunities
•Requirements of equipments and ancillaries in Indian new building shipyards.
148
•Demand for offshore oil exploration and production in Indian shores and
abroad through collaborations.
Threats
•Order cancellation in new ship building due to untimely delivery by ship yards.
•Lack of government recognition
•Shipbuilding industry do not have
countrywide presence.
•Lack of professionals and R&D facilities.
149
Steel Industry
WORLD STEEL PRODUCTION IN 2012:
Rank Country Production (million tonne)
1
China 626.56
2 Japan 109.60
3 USA 80.59
4 Russia 67.00
5 India 66.80
6 South Korea 58.45
7 Germany 43.82
8 Ukraine 33.56
9 Brazil 32.82
Both countries some routes to trade in each other country:
An Indian company setting up its shop in South Korea will no more be a figment of imagination,
thanks to the Comprehensive Economic Partnership Agreement (CEPA) reaching its penultimate
point. With the signing of this treaty, India and South Korea‘s trade relations will apparently reach
new heights. The best things being both the government are eagerly waiting to make most of the new
partnership. South Korean companies, right from LG, Samsung to Hyundai have made their presence
felt in a big way in the Indian shores. But when we talk about Indian companies leaving footprints in
South Korea soil, there is hardly any, thanks to the unbalanced policy of non-tariff barriers.
But since both the governments will be signing the Comprehensive Economi Partnership Agreement
in the later part of the year, India Inc. can soon start thinking of starting operations in Korea.f this
happens, India-South Korea trade will reach a remarkable high of $15 billion from $10 billion mark
by 2012-13. The trade deficit that has been consistently growing between the two countries can also
be close in 11 .
The policy also intends to inspire Indian companies to make more investments across all segments in
South Korea.In this regard, the officials from Federation of Indian Chamber of Commerce and
Industry (FICCI) were in South Korea recently to hold discussions with their foreign counterpart
about the possibility of setting up of sectors like Information and Technology and service industry in
150
Korea and even opening Indian markets for Korean Engineering and Shipbuilding companies in the
Indian market.
The Indians especially will look forward to spread its service sector in the Korean markets, be it IT
services or other professional services.In any case, the Korean companies have already made over
$100 billion of FDI. And if POSCO‘s project gets a green signal, then India stands to gain immensely
from it.
Investment Opportunity Steel
Sector Overview
India was the world‘s fifth largest producer of crude steel in 2009 and is expected to become the
world‘s second largest producer by 2015–2016. These are the projections made by Ernst & Young in
a report on the outlook of Indian Steel industry.
The report also projects the total crude steel capacity in India to be around 112.5 million tonnes by
2015. It also notes that India is the world‘s fourth largest iron ore producer, with sufficient iron ore
reserves to meet expected steel demand.
According to the Ministry of Steel Annual Report 2010-11, India remains world's largest producer of
direct reduced iron (DRI) or sponge iron during January / December 2010, a rank it has held since
2002.
The annual report statistics estimate the Crude steel production to be 50.59 million tonne during
April - Dec 2010. Pig iron production for sale in April - December 2010 was 4.22 million tonne.
Domestic steel consumption was at 44.28 million tonne during the period.
The Indian steel sector enjoys advantages of domestic availability of raw materials and cheap labor.
Iron ore is also available in abundant quantities. This provides major cost advantage to the domestic
steel industry, with companies like Tata Steel being one of the lowest cost producers in the world
Being a core sector, steel industry reflects the overall economic growth of an economy in the long
term. Also, steel demand, being derived from other sectors like automobiles, consumer durables and
infrastructure, its fortune is dependent on the growth of these user industries.
While steel continues to have a stronghold in traditional sectors such as construction, housing and
ground transportation, special steels are increasingly used in engineering industries such as power
generation, petrochemicals and fertilisers. Indian steel industry is very modern with state-of-the-art
steel mills. It has always strived for continuous modernisation & up-gradation of older plants and
higher energy efficiency levels.
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According to the Ministry of Steel, Steel producers have signed 222 MOU‘s with various states for a
planned capacity of about 275.7 million tones in 2009-10.
Investment Policy
Indian investment policy stipulates 100 per cent foreign direct investment (FDI) through the
automatic route in the Indian steel sector.
Some of the initiatives taken by the government to promote the steel sector include National Steel
Policy 2005, which seeks to facilitate the removal of procedural and policy bottlenecks that affect the
availability of production inputs, increased investment in research and development, and the creation
of road, railway and port infrastructure.
Some initiatives undertaken by the Indian Government in the Eleventh Plan to promote the steel
sector include:
The Planning Commission has approved a total outlay of US$ 9.5 billion for the development and
promotion of the iron and steel sector.
The scheme for the promotion of research and development in the iron and steel sector has been
approved with a budgetary provision of US$ 24.6 million to initiate and implement the provisions of
the scheme.
The National Steel policy 2005 targets indigenous production of 110 million tones (mt) by 2019-20
against targeted consumption of 90mt by 2019-20. The Eleventh plan working group for steel
recommends the following for effective
Development of Indian steel industry:
Full utilization of the existing policy framework of Public-Private Partnerships (PPPs) in
development of infrastructure like Railways.
―Scheme for promotion of Research and Development in Iron & Steel sector" with a budgetary
provision of Rs.1,180 million for implementation. The objective of the scheme is to develop path-
breaking technologies in an environment friendly manner.
Spread awareness about hedging mechanisms available in exchanges like MCX and NCDX and
develop appropriate regulatory mechanism to avoid any manipulative practices. Develop an
appropriate Institutional Framework for collection of data and dissemination of Information.
Consider setting up of a multi-disciplinary organization along the lines of the International Iron &
Steel Institute (IISI).
A dedicated plan fund of Rs.250 million for the 11th Five Year Plan in the Ministry of Steel towards
grant for development of human resources for iron and steel and for ad campaigns for promotion of
steel usage.
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A Technology Up-gradation Fund Scheme (TUFS) for the Small and Medium Enterprises (SME)
sector.
Moreover, in order to encourage R&D activities in iron & steel sector, Ministry of Steel is providing
financial assistance from Steel Development Fund (SDF) and Plan Fund. Sixty four research projects
initiated by public and private undertakings, research laboratories, educational and other promotional
institutions have so far been approved at a cost of Rs. 4,420 million during 2010, of which the SDF
component is Rs. 2,780 million. So far 31 projects have been completed and 24 research projects are
underway.
The government introduced Special Economic Zones (SEZs) in June 2005, with the plan of creating
internationally competitive regions. Steel plants operating in SEZs receive some advantages like tax
holiday; they can freely source inputs domestically or externally without any specific approval or
duty payable.
Market Highlights
More than 3,500 different varieties of steel are available in the steel industry of India. These can
however be classified into two broad categories of flat products and long products. Flat products
include plates and hot rolled sheets such as coils and sheets.
Flat products are derived from slabs. One of the major uses of steel plates is in ship building. Long
products include bars, rods, wires, ropes and piers. These are called long products due to their shapes.
Long products are made from billets and blooms. Long products are mostly used in housing and
construction and also in rail tracks.
Iron ore and coal constitute the primary raw materials for steel production. One of the growth drivers
helping the sector to grow is abundant availability of iron ore in the country with States such as
Orissa, Jharkhand and Chhattisgarh which are rich in iron ore reserves. The National Minerals
Development Corporation (NMDC) plans to expand its iron ore production capacity from its existing
capacity of 30 million tons per annum (MTPA) to 50 MTPA by 2014–15 through the capacity
expansion of current mines as well as by setting up new mines. Further, India also has well
established facilities for the production of steel. India‘s steel sector also has a competitive advantage
vis-à-vis the availability of raw materials and workforce, both skilled and unskilled.
Major Players
Indian steel Industry can be divided into two main sectors Public sector and Private sector. Further on
the basis of routes of production, the Indian steel industry can be divided into two types of producers:
Integrated producers and Secondary producers.
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Integrated producers convert iron ore into steel. There are three major integrated steel players in
India, namely Steel Authority of India Limited (SAIL), Tata Iron and Steel Company Limited
(TISCO) and Rashtriya Ispat Nigam Limited (RINL).
Secondary producers are the mini steel plants (MSPs), which make steel by melting scrap or sponge
iron or a mixture of the two. Essar Steel, Ispat Industries and Lloyds steel are the largest producers of
steel through the secondary route.
The Indian steel industry also is receiving significant foreign investments such as POSCO, a South
Korean steel producer and Arcelor - Mittal Group, Europe based steel producer—announcing plans
for establishing about 12 million tonne production units each in India.
Other foreign players who have set foot in India are Japan's Nippon Steel in joint venture with Tata
Steel for making cold rolled sheets; Japan's JFE Holdings in talks with JSW for a stake buy; Japan's
Kobe Steel and SAIL in talks for a joint venture and Russia's Severstal and NMDC in joint venture to
a build steel plant.
Sector Prospects
According to the Indian Ministry of Steel, the present per capita consumption of steel in the country
is only around 49 kg against the world average of 182 kg. So there is immense potential for growth
of the sector. The ministry also predicts that India is expected to become the second largest producer
of steel in the world by 2015-16, provided all requirements for fresh capacity creation are met.
"Over the next couple of years, there could be mergers and acquisitions, particularly in the sponge
iron sector," predicts Kejriwal Research & Investment Services, referring to the hundreds of small
units, many of which are unviable. In 2010, JSW Steel bought a controlling stake in Ispat Industries.
Opportunities exist for future growth of the sector due to reasons that include potentially huge
domestic demand for steel-intensive social and economic infrastructure resulting from all round
economic development and particularly because of anticipated growth in urbanization; demographic
conditions that favour Increasing demand for consumer durables; untapped rural market and
increasing interest of domestic and overseas producers in capacity creation to serve the domestic and
overseas markets.
Korea's steel industry:
Korea's steel industry is one of the country's most successful industries and is a symbol of Korea's
industrial power. Pohang Iron and Steel Company (POSCO) was set up in 1968, with the strong
support of then-President of Korea, Park Chung Hee. POSCO is, today, the fourth largest steelmaker
in the world with about 2.8% of world market share. Indeed, the domestic steel industry is one of
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Korea's critical industries, having played an instrumental role in building up Korea's highly-
successful automobile and shipbuilding industries with its supply of low-cost steel.
This paper seeks to examine Korea's steel industry, through looking at the sources of competitive
advantages behind POSCO. The steel giant is practically synonymous with the Korean steel industry,
with the international profile of the industry rising on the back of POSCO's success At the sources of
competitive advantages, in a bid to predict the competitiveness of the Korean steel industry in 20
years' time.
Headquartered in South Korea, Posco is the world's fifth largest steel company. The company has
signed a MoU for setting up a steel plant at Paradip in Orissa with a total investment of $12 billion
(Rs 52,000 crore). The biggest foreign direct investment in India. However, the Left Parties and the
Orissa Gana Parishad are against POSCO coming into India as they argue that the government was
acting against the state's interest by permitting Posco to export iron ore.
A remarkable feature of South Korea is its transformation from a developing country in 1950s to a
high-income country of the world with a substantial per capita income. The economic reforms of
1990s in India have been influenced with East-Asian success and South Korea was among the chief
countries to have an impact on Indian policy makers' thinking process. Though Consular relations
between India and South Koreawere set up in 1962, it was in 1973 with the establishment of formal
diplomatic ties that a new chapter was opened in the history of Indo-Korean cooperation.
Both India and Korea contribute significantly in the world GDP. Korea is among the few Asian
countries that are counted among the developed countries of the world; India too has a growing
stature and increasing role in international affairs.
In a bid to boost bilateral ties, India and South Korea on Jun 1, 2005 decided to step up efforts to take
their economic partnership to higher levels by utilising synergies in trade, investment and hi-tech
areas. The two sides held ministerial discussions and hoped that negotiations for the $ 12 billion
integrated steel plant to be set up by Korean company Posco at Paradip in Orissa would be concluded
at an early date. Negotiations for the mega project are at an advanced stage and when completed it
would be the largest single foreign investment by any country in India. 25
Key areas of opportunities for Indian companies
The Republic of Korea is located between China and Japan. Its geopolitical positionhas enabled
Korea to act as a bridge for cultural exchanges and trade between itsneighbors. In this regard, Korea
is an optimal location for doing business with China(the largest market in the world), and Japan (the
155
world‘s 2nd biggest economy).North Asia is home to 25% of the world‘s population and generates
22% of its GDP(forecasted to increase to 30% by 2020).Korea has rapidly emerged as one of the
world‘s leading ICT (Information &Communication Technology) powerhouses. Korea‘s excellent
telecommunicationsinfrastructure makes Internet use and maintenance easily affordable. Its
outstandingedge and competitiveness enabled Seoul to rank top in the UN Global e-
GovernmentSurvey.
Korea‘s e-Government program was exported to Moscow, Russia in 2004, andHanoi, Vietnam in
2005.Korea is the world‘s 8th largest investor in research and development (IMD 2003).Annual
R&D investment has increased steadily since 1997, well above the rate of GDPgrowth. Although
R&D investment temporarily shrunk in 1999 because of the economicslowdown caused by the Asian
financial crisis, it has been on the rebound since 1999.
The R&D investment in 2005 stood at US$ 24.1 billion, or 2.99% of GDP, which isclose to the
highest level in the world. Korea‘s responsiveness to the latest productsand services make the
country an ideal test bend. In fact, a number of global
companies take advantage of this responsiveness to utilize Korea‘s leading
infrastructure and dynamic market.
156
Textile Industry
South Korea is the seventh-largest textile and apparel exporter, holding a 2-percent share of the
US$527 billion global market in 2009, the Korea Federation of Textile Industries (KOFOTI)
reports. The textile industry is a leading force in Korean economic development and a major
source of foreign exchange earnings.
In 2008, 6,035 textile and apparel companies operated in South Korea, accounting for 10.3
percent of the country's total manufacturing activity, KOFOTI reports. The textile and apparel
industry employed 174,000 people that year, representing approximately 7 percent of total
employees in the manufacturing sector; and produced goods worth US$35.2 million won,
accounting for 3.2 percent of the country's manufactured goods.
ROLE OF TEXTILE INDUSTRY IN SOUTH KOREA‘S ECONOMY:
According to KOFOTI, the country's textile and apparel exports in 2010 totaled US$13.9 billion
- representing 3 percent of South Korea's total exports and a 19.5-percent increase over the
previous year. In that year, textile material exports increased 39.7 percent to US$1.1 billion;
yarn, 34.5 percent to US$1.6 billion; fabric, 18.9 percent to US$8.5 billion; and textile products,
7.8 percent to US$2.7 billion. South Korea's main export market is China, which in 2010
accounted for 19.8 percent or US$2.8 billion of South Korea's total textile and apparel exports.
Other significant export markets include Vietnam, which accounted for 11.2 percent or US$1.6
billion of the country's total textile and apparel exports; the United States, 8 percent or US$1.2
billion; and Indonesia, 7.9 percent or US$1.1 billion. Specifically, the country ranks first in knit
man-made fiber exports, holding a 16.7-percent global market share; polyester filament fabric,
with 27.6 percent; and tire-cord textiles, with 38.2 percent.
South Korea's textile and apparel imports have increased significantly since 1990. In 2010,
imports of those items totaled US$9.9 billion - representing 2.3 percent of the country's total
imports and a 34-percent increase over the previous year. KOFOTI reports that in that year,
textile material imports increased 16.3 percent to US$245 million; yarn, 48.4 percent to US$2.2
billion; fabric, 30.4 percent to US$1.6 billion; and textile products, 30.9 percent to US$5.8
billion. South Korea imports most of its textiles and apparel from China, which in 2010
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accounted for 54.2 percent and US$5.4 billion of South Korea's total textile and apparel imports.
Other significant import markets include Vietnam, which accounted for 8.6 percent or US$849
million; Indonesia, 4.7 percent or US$471 million; and Japan, 4.1 percent or US$410 million.
Machinery Investments
South Korea has increased its machinery investments considerably in parallel with its increasing
textile and apparel production. The 2009 and 2010 International Textile Machinery Shipment
Statistics reports of the Switzerland-based International Textile Manufacturers Federation
indicate that the country's imports of short-staple spindles increased 650 percent in 2010 over
2009; false-twist spindles, 380 percent; shuttleless looms, 179 percent; and flat knitting
machinery, 101 percent. According to the Association of Italian Textile Machinery
Manufacturers, Italy's textile machinery exports to South Korea in 2010 were worth 13 million
euros. In the first half of 2011, exports were worth 10 million euros, representing a 90-percent
increase over first-half 2010 exports. Statistics from the Swiss Mechanical and Electrical
Engineering Industries' Textile Machinery Division show that Switzerland's textile machinery
exports to South Korea in 2010 were worth 28.4 million Swiss francs, and in the first half of
2011, exports were worth 13.3 million Swiss francs, representing a 25.6-percent increase over
first-half 2010 exports.
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The German Engineering Federation (VDMA) Textile Machinery Association reports that
Germany's textile machinery exports to the South Korean market are small in comparison to
other markets; however, in 2010, those exports increased substantially over 2009. Weaving
machinery exports were worth approximately 2.8 million euros in 2010, more than 14 times
greater than 2009 exports; knitting machinery exports were worth approximately 17.9 million
Euros, a 369-percent increase; spinning machinery, approximately 19.7 million euros, a 73-
percent increase; and finishing machinery, approximately 12.2 million euros, a 43-percent
increase.
FREE TRADE AGREEMENTS:
South Korea has been aggressively pursuing free trade agreements (FTAs) in efforts to
strengthen international cooperation and trade and to increase its exports. The country has
benefited from FTAs signed with the Association of Southeast Asian Nations (ASEAN),
European Free Trade Association (EFTA), Chile, Singapore and India. It also has signed FTAs
with Peru and the European Union; and is in negotiations to sign FTAs with countries including
158
Canada, Australia, New Zealand, Mexico, Colombia and Turkey. South Korea also is exploring
initiating FTA talks with China and re-initiating talks with Japan.
The pending Korea-United States FTA (KORUS) will undoubtedly affect South Korea's textile
and apparel industry. Both the U.S. and South Korean governments view the FTA as an
extension of an already important economic relationship that would provide a means by which
the two trading partners can address and resolve issues. KORUS is the United States' first FTA
with a major Asian economy and the first since the North America Free Trade Agreement with a
country that has a large developed textile sector that exports significant amounts of textile
products to the United States. South Korea is the fifth-largest exporter of textile products to the
United States, reports the United States-based National Council of Textile Organizations
(NCTO); and the 10th-largest market for U.S. textile and apparel exports, reports the U.S.
Department of Commerce's International Trade Administration.
The Industry's Future :
South Korea's textile industry has been facing increased competition in the global textile market,
resulting from factors including the end of the global textile quota system in 2005 and recent
changes in the global economic environment characterized by escalating raw material prices and
the appreciation of its currency, the won, as well as the global proliferation of FTAs. Also, textile
industries in developing countries with low labor and production costs are growing rapidly and
offering goods at more competitive prices.
KOFOTI Chairman Ro Hee Chan has implemented similar strategic projects for 2011, which
include employing new technologies to create value-added textiles for an expanded range of
markets; raising publicity of the textile industry domestically; and increasing exports by
strengthening international cooperation and trade. KOFOTI anticipates these projects will help
the textile industry achieve its 2011 goal of US$15.3 billion in textile exports. South Korea is
aiming to become the fourth-largest textile exporter and seventh-largest apparel exporter globally
by 2015. Korean textile market to grow by 4.2% in 2013.
COMPARATIVE POSITION OF TEXTILE INDUSTRY OF INDIA AND SOUTH KOREA:
159
Cost competitiveness: Yarn: US$ per kg of yarn and Fabric : US$ per yard of fabric.
I. OPEN ENDED YARN.
II. OPEN ENDED WOVEN FABRIC
OPEN ENDED KNITTED FABRIC
2.35
2.51
2.31
2.17
2 2.1 2.2 2.3 2.4 2.5 2.6
SOUTH KOREA
CHINA
BRAZIL
INDIA
0.7
0.65
0.6
0.61
0.54 0.56 0.58 0.6 0.62 0.64 0.66 0.68 0.7 0.72
SOUTH KOREA
CHINA
BRAZIL
INDIA
160
RING YARN
RING WOVEN FABRIC
0.06
0.04
0.07
0.06
0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08
SOUTH KOREA
CHINA
BRAZIL
INDIA
2.68
2.76
2.61
2.45
2.25 2.3 2.35 2.4 2.45 2.5 2.55 2.6 2.65 2.7 2.75 2.8
SOUTH KOREA
CHINA
BRAZIL
INDIA
161
RING KNITTED FABRIC
TAXTURED YARN
0.75
0.69
0.65
0.66
0.6 0.62 0.64 0.66 0.68 0.7 0.72 0.74 0.76
SOUTH KOREA
CHINA
BRAZIL
INDIA
1.22
1.21
1.21
1.12
1.06 1.08 1.1 1.12 1.14 1.16 1.18 1.2 1.22 1.24
SOUTH KOREA
CHINA
BRAZIL
INDIA
162
Favorable factor conditions provide India with a strong comparative advantage over south Korea
in the textile industry.
Abundant and low price supply of raw-materials: As can be seen from the cost competitiveness
chart, India is more cost-competitive than South Korea across a range of materials. India also has
a diverse supply of raw materials, 23 varieties of cotton and all four varieties of silk. This
inherent strength in availability of raw materials insulates the market from any supply-side
shocks.
1.68
1.4
1.9
2.06
0 0.5 1 1.5 2 2.5
SOUTH KOREA
CHINA
BRAZIL
INDIA
163
Labour Cost in textile industry:
Availability of low cost skilled labor: Labor costs in India continue to be significantly low as
compared to other countries. This factor provides a significant advantage to the textile industry
in India, in terms of increased productivity at lower costs. Here south Korea has also high labor
cost than India. So definitely India will get advantage of it and increase the productivity.
With China leading the global textile trade, India ranks second with 8 per cent of the total. India
contributes to nearly 4 per cent of total textile exports and 3 per cent of total apparel exports in
the world. India has the highest number of looms- 1.8 million shuttle looms (at 45 per cent of
global capacity) and 200,000 shuttle-less looms (at 3 per cent of global capacity) and 3.9 million
hand looms (at 85 per cent of global capacity).
India has the second highest number of spindles in the world with 40 million spindles (at 23 per
cent of global capacity). India ranks first in jute production (at 1,900 million kilograms), second
in silk production (at 15 million kilograms of raw silk), second in cotton exports (at 2,000
million kilograms), second in cotton production (at 2,700 million kilograms of cotton fibe), fith
in man-made fibes (at 2,000 million kilograms) and ranks eighth in the total production of wool
(at 51 million kilograms) in the world.
15.13
6.15 5.73
0.69 0.57 0.34
0
2
4
6
8
10
12
14
16
USA HONGKONG SOUTH KOREA
COASTAL CHINA
INDIA PAKISTAN
164
Opportunities for investing in the South Korean textile Sector:
1. Favorable factor conditions:
Favorable factor conditions provide South Korea with a strong comparative advantage over other
competing countries in the textile industry. India has also this strength even more favorable factor
conditions in india than south korea.
2. Abundant and low price supply of raw-materials:
As can be seen from the cost competitiveness chart, South Korea is cost-competitive than China
and Brazil across a range of materials. South Korea also has a diverse supply of raw materials, 23 varieties
of cotton and all four varieties of silk. This inherent strength in availability of raw materials insulates the
market from any supply-side shocks.
3. Availability of low cost skilled labor:
Labor costs in South Korea continue to be significantly low as compared to other
countries. This factor provides a significant advantage to the textile industry in South
Korea, in terms of increased productivity at lower costs. Remember india has low labor
cost than south korea.
4. Favorable domestic market:
With increase in disposable income levels, consumer awareness and propensity to
spend and the demographic trends in South Korea are changing significantly. According
to data, the consuming class, with an annual income of US$ 980 or above, is growing
continuously and is expected to constitute over 80 per cent of the population by 2009-10.
There is a significant change in the consumer mindset which has led to a growing trend
of increased consumption of personal care and lifestyle.
So, Due to the above factors there will be the best opportunities for doing textile
business in south korea.
The textile industry is usually more capital intensive than the clothing industry and it is highly
automated, particularly in developed countries. It consists of spinning, weaving and finishing,
and the three functions are often undertaken in integrated plants. Traditionally, and in many
markets, it is still the case that lead time in the textile sector is quite long and the capital intensity
of the industry results in relatively large minimum orders. The textile industry is therefore less
flexible in terms of adjusting to consumer tastes during a season than the clothing and retail
sectors. The textile sector is thus in many ways the bottleneck in the supply
165
Both India and south Korea is having good opportunities to do textile business. Of course India
is having greater opportunities than south Korea due to the various factors shown above. So
textile industry plays crucial role in economy and both india and south korea will be act that how
they can expand the textile business. So from the above data we can conclude that india is the
best place to do textile business.
166
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