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Korea Introduction
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In the area of trade, Korea has been an important customer for such Alaska natural resources as oil and gas, chemicals, timber, seafood, coal, and minerals. Korea remains Alaska's Number 2 trading partner. During 2000 Alaska exports to Korea totaled $448.6 million, close to the all-time high reached in 1999. Exports were primarily comprised of seafood, crude oil and natural gas, chemicals, wood products, coal and minerals. Dollar trade in 1999 was up dramatically due to Korea's recovering economy and the strengthening of the won, following the 1997-98 "IMF flu." Higher prices of crude oil and seafood also helped the export picture in 1999 and 2000. Korea is not only an important export market for Alaska - it is also an important investor. Korea's two international air carriers, Korean Air and Asiana Airlines, are longtime partners in Alaska, providing both passenger and cargo links to Korea and Asia. Educational and cultural links are stronger than ever. Our countries enjoy many ties -- from sister-city relations to the long established Alaska Korea Business Council, to Governor's missions and Presidential visits. Alaska has a considerable Korean population that is very active in both community life and trade. |
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The Korean Economy:
Background In 2001, Korea anticipates a two percent growth, according to the Korean Ministry of Finance and Economy. Consumer inflation, though rising during the first half, is expected to remain at the three percent level for the year as a whole due to the stabilization of oil prices. The current account will record a surplus of 5 to 7 billion dollars in 2001, as weak import demands offset sluggish export activities caused by the slowdown of global economy and the aggravation of terms of trade. Over the past four years, Korea has committed itself to recovering from the economic crisis and developing a market-driven economy through decisive restructuring. The Korean economy produced a major rebound in 1999 after a severe recession in 1998, returned to normal during the first half of 2000, then, beginning in the fourth quarter of 2000, slowed, mainly due to shrinking exports. However, according to LG Economic Research Institute, Seoul, the shock of the September 11 terrorist attacks on the U.S. will trouble the Korean economy at least until the first of 2002, due to the deceleration of the world economy and oil price increases. Many organizations are providing a revised GDP forecast for 2001 in light of the terrorist attacks and are revising their forecasts downward to 2.0 - 2.5 %. The Bank of Korea and private economic research institutes in Korea regularly release forecasts on the Korean economy. The Bank performs the typical functions of a central bank, issuing banknotes and coins, formulating and implementing monetary and credit policy, serving as the bankers' bank and the government's bank. In addition, the Bank of Korea undertakes the operation and management of payment/settlement systems, and manages the nation's foreign exchange reserves. It also exercises certain bank supervisory functions stipulated in the Bank of Korea Act. Economic Trend (Source: Bank of Korea)
Korea Economy Update, November 2002 Korea's Gross Domestic Product Growth
In addition to
the Bank of Korea, Gross Domestic Product (GDP) That forecast is
broadly in line with World Bank, which said in The International
Monetary Fund's more bullish prediction, released two The U.S. Commercial Service reports that in May 2001, the Korean won had weakened to 1280-1310 won/dollar from around 1100 won/dollar one year before. In late 1997 the won fell to nearly 1,900 won/dollar when Korea's nearly depleted foreign currency reserves helped spark a financial crisis that required IMF intervention. Foreign reserves had grown to $93.6 billion at the end of May 2001. Korea's trade surplus estimate for 2001 is $12 billion. U.S. Commercial Service, Country Commercial Guide (See http://www.usatrade.gov/Website/CCG.nsf/ ShowCCG?OpenForm&Country=KOREA) The U.S. Commercial Service's Country Commercial Guide (CCG) presents a comprehensive look at the Republic of Korea's commercial environment through economic, political and market analysis. The U.S. Commercial Service, Seoul, reports that in response to the Asian financial crisis of 1997-98, the Kim Dae Jung administration has been implementing structural reforms aimed at putting the Korean economy on a more open, market-oriented basis. Many of these reforms are paying off. The Bank of Korea (BOK) reports Korea's economy has been experiencing a downturn since the fourth quarter of 2000, with various sources predicting recovery later in 2001. In 1999, Korea's GDP grew 10.7 percent. Prior to the 1997-98 financial crisis, the Republic of Korea's economic growth over the past 30 years was spectacular. Despite the need to maintain a large military, South Korea, one of the world's poorest countries only a generation ago, is now the United States' sixth-largest trading partner and, until the economic crisis of late 1997, was ranked as the 11th-largest economy in the world. The US Commercial Service list of best prospects for Non-Agricultural Goods and Services
Best Prospects for Agricultural Products
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Alaska-Korea Trade Overview Alaska's exports to Korea hit an all-time high in 1999, reaching $487 million. In 2000, that number declined slightly, to $448.5 million. Korea is Alaska's long-time Number 2 export market, and the 54% improvement between 1998 and 1999 and into 2000 shows the rebound of the Korean economy, as well as the increase of commodity prices for the products Korea imports from Alaska. However, the economy of Korea has experienced a downturn beginning in the fourth quarter of 2000. In 2000, seafood accounted for 29% of Alaska's exports to Korea. Oil, gas and coal were second, accounting for 27% of the total. Fertilizer (21%), wood products (8%), machinery and minerals (7% each) rounded out the top export products in 2000.
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| Energy Exports
Alaska's Trade Representative in Korea produces a quarterly energy market report. Click here for the latest quarterly report. In 1999, the year of economic recovery for Korea, total energy demand grew by 9.1% from the crisis-stricken 1998 levels to completely recover to the 1997 levels. However, the trend of Korean total energy demand in 2000 revealed how serious the impacts of high oil price and sluggish economy are. The growth rate of energy consumption was 8.9% in the first half and then fell to 3.8% in the second half. In the first half of 2001 the growth rate of energy consumption fell further to 2.3%. Even though the Korean economy and energy demand are expected to recover to normal levels in the second half, the forecast by KEEI (Korea Energy Economics Institute) shows a moderate growth of 3.5% in energy demand for 2001 overall. LNG and electricity demand will still have substantial growth, while relatively weak demand is expected for oil. During the first half of 2001, Korea's energy import reached $ 18.4 billion, which is a 3.7% increase over the corresponding period of 2000:
Crude Oil: Korea has imported crude oil from Alaska's North Slope since the North Slope oil export ban was lifted in 1996. Crude oil was Alaska's number one export product to Korea in 1996 through 1999, and was the number two export in 2000. In 2000 Alaska exported $103 million of crude oil to Korea, a decrease of 55% from 1999. North Slope oil producers have announced they will not export crude oil overseas in 2001, but instead will ship all North Slope crude to U.S. West Coast refineries. While this policy will cause a statistical impact in Alaska's export picture, the economic impact will be negligible, as the change is merely in the destination of the crude, and the price at US refineries will be the same as in Korea and other Asian countries. Major customers for Alaska crude oil in Korea are LG Caltex and Hyundai. Coal: Alaska has been shipping its coal to Korea since 1984. Korea is the only export market for Alaska coal at this time. Coal from Usibelli Coal Mine in Healy is shipped via Alaska Railroad to Hyundai Seward Terminal, and sent to Korea Electric Power Corporation (KEPCO). Annual exports from Alaska average 600,000 - 700,000 tons. Alaska coal exports to Korea reached 650,000 tons worth $25.0 million in 1997, declined severely in 1998 during contract negotiations and the economic crisis, and rose to $15 million in 1999. In 2000, Alaska exported $16.3 million of coal to Korea, an increase of 8.4% from 1999. During the first quarter of 2001, the consumption of bituminous coal decreased by 2.5%. At the same time, Korea's import of bituminous coal reached $500 million in the first quarter of 2001, up 3% from the first quarter of 2000. There is a new
challenge for Alaska coal exporters. After the economic Fertilizer: Urea, a nitrogen fertilizer, is a biproduct of the processing of LNG. Fertilizer with a value of $95.5 million was exported from Alaska to Korea in 2000, an increase of 88% over 1999.
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| Seafood Exports
The value of Alaska's seafood exports to Korea increased dramatically in 1999 and 2000, following three years of decline in 1996-98. Seafood exports to Korea were $103.5 million in 1999, more than double the 1998 number, and increased another 30% in 2000 to $133 million. In recent years Korea has grown to be Alaska's second largest seafood market.
Species: The main species Alaska exported to Korea in 2000 were frozen fish including surimi, pollock, pollock roe, Atka mackerel, rockfish, cod. Beginning in 1999, Alaska has supplied salmon and other seafoods to the high-end market of deluxe hotels in Korea. Salmon roe, scallops, sole and halibut are popular among Korean consumers. The demand for seafood in Korea is especially strong and supplies are short. Korea's local catch is shrinking. Total imports of seafood increased to $1.23 billion in 2000 from $1.04 billion in 1999. Imports of seafood from the United States increased by about 13% to $136.3 million in 2000 from $120.2 million in 1999 (although the volume figures reflect a slight decrease). The U.S. market share is small but is expected to grow substantially in the future. Fish imports in Korea are expected to increase continuously in the coming years in order to meet supply shortages. Competition: China is competing with Alaska for cod, pollock roe and surimi. Russia is one of Alaska's main competitors for frozen seafood, including cod, pollock, pollock roe, atka mackerel, and rock fish. Japan, China, Norway, New Zealand and Canada are Alaska's major competitors for fresh fish with competitive prices. Alaska's Trade Representative in Korea reports that Alaska fresh fish is marketable in Korea if Alaska suppliers target niche markets in Korea for premium quality seafood. Wholesale market prices at the Noryangjin and Garak-dong markets for seafood species exported from Alaska are posted and updated weekly at http://www.dced.state.ak.us/trade/korea/korea.htm. |
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Wood Products Exports Alaska forest products exports to Korea have varied moderately over the past decade. From 1992 to 1997 Alaska's export of forest products to Korea fluctuated between $50 million and $75 million, decreased dramatically in 1998 to $24 million, and increased to $40 million in 1999 and $37 million in 2000.
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Tourism, Air Cargo Korean Air is a longtime business partner of the State of Alaska, contributing the largest single amount in landing and fuel fees of any air carrier operating at the state-owned Ted Stevens Anchorage International Airport. Korean Air provides scheduled nonstop passenger and cargo service between Alaska and Korea. These nonstop passenger and cargo flights are an important year-round transportation link between Alaska and Korea, and between Alaska and Asia. Asiana Airlines is also an important operator in Alaska, using Anchorage as a refueling stop for both its passenger and cargo flights between the Lower 48 and Korea.
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Technical Services Korea is a promising market for Alaska's expertise in environmental and other technical services. Environmental
Services The U.S. Commercial Service Korea estimates the size of the Korean environmental technology market (public and private sector inclusive) for 2000 at $8.14 billion. Given the country's continued economic growth as well as increased Korean and private sector expenditures in this sector, the market is expected to expand 18% to $9.6 billion in 2001. In accordance with this projection, Korea's 2001 budget for environmental projects has been increased 8.5% over its 2000 level to $1.2 billion. Oil spill remediation, a likely market niche for Alaskan firms, is beginning to emerge as a promising environmental subsector. Oil spills are a serious problem in Korea, which the country is poorly equipped to handle. For example, the total number of accidents in Korea increased from 299 in 1995 to 463 in 1999, in reflection of the increased maritime activity along the Korean coast. Given this situation, if an accident on the scope of the Exxon-Valdez accident in Alaska took place in Korea, the level of damage would be ten times that experienced in Alaska. Competition is fierce among competitors for Korea's environmental technology market. However, the Korean pollution control market continues to expand and there is good potential for sales of U.S. environmental goods, services and technologies. The current market share of U.S. environmental firms among foreign competitors in Korea is estimated to account for 20 percent of the total market, second only to Japanese firms with 40 percent. Sales of many types of equipment and technical expertise, as well as joint venture manufacturing and construction projects, offer the most promising avenues for Alaska participation. In 2000, Korea purchased pollution control equipment and services from foreign companies valued at $2.4 billion, 30 percent of the total environmental market ($8.4 billion). The Division of International Trade & Market Development, the U. S. Commercial Service Korea and the US-Asia Environmental Partnership (US-AEP) Korea have worked together closely for the past several years. In 1997, Governor Tony Knowles signed a memorandum of cooperation with US-AEP Korea, which recognized Alaska's environmental expertise and affirmed the US-AEP's desire to help Alaska companies to partner with Korean government and industry. Alaska looks forward to continuing to build on this memorandum of cooperation. Architectural
and Engineering Services In general, the Korean architectural/engineering services sector lags behind foreign competitors. Therefore, the domestic market demand for key architectural/engineering technologies has been met mostly by foreign suppliers. The key architectural/engineering technologies required by the domestic market, according to the U.S. Commercial Service, include the service fields of telecommunication, transportation, water supply, sewage and waste, and industrial processing plants. Even the leading domestic architectural/engineering firms prefer to partner with foreign competitors on the implementation of large public and private projects. Construction
Sector The housing construction industry will experience gradual growth as the Korean government finances the construction of 500,000 housing units in 2001. While these statistics may be somewhat skewed based on the declines resulting from the Korean fiscal crisis, it cannot be denied that the commercial and residential construction industry is beginning to heat up. Partnerships with major Korean companies include consulting services for advanced design and technology, and financing packages for construction projects, which are two promising business opportunities for U.S. companies in Korea, according to the USCS. Intelligent Building System (IBS) technology is another opportunity which has a short history in Korea but is increasing in significance. It is anticipated that this sector will generate business opportunities for U.S. companies in Korea specializing in system engineering, and the design of IBS building construction. The best prospects include: - Remodeling Industry - Intelligent Building System (IBS) - Cyber Apartment |
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For
more information on the Korea Market, email: Shelley James Korea Trade Specialist |