International Business : SPOTLIGHT ON SOUTH KOREA : THE South Korean ECONOMY

The Republic of Korea has shown impressive economic growth over the past 25 years, largely because of a sustained program of export-oriented policies. One of the world’s poorest countries only a generation ago, South Korea is now the United States’ seventh-largest trading partner and the world’s 12th-largest economy. Since his inauguration in 1993, President Kim Young Sam has undertaken major economic reforms aimed at eliminating corruption (the underground economy is estimated to equal 20% of gross national product) and restricting the scope of operations of large conglomerates.

Technology

Increased research and development and the import of technology through licensing and joint ventures have all played key roles in developing the country’s economy. South Korean electronics firms such as Samsung, Goldstar and Hyundai are now among the world’s top producers of memory chips: They supplied about 10% of the 1994 global demand for semiconductors.

Trade

The country’s chief trading partners are Japan and the United States. After several years of surpluses, South Korea’s global trade and bilateral surplus with the United States dropped dramatically in 1989 with the appreciation of the South Korean currency, the won as well as labor disputes, cumulative wage increases and strong domestic demand. But long-term growth prospects remain bright. With the restoration of diplomatic relations in 1992, North Korea has become a significant market.

Agriculture

About 22% of South Korea’s land is arable, and almost all of that is under cultivation. To maximize use, the country relies strongly on multiple cropping; in some areas, as many as four crops are grown during a single year. Rice is the principal crop, accounting for a third of planted acreage and 60% of all farm production. Other important crops are corn, barley, potatoes and fruit.

Minerals and Energy

The division of the Korean peninsula in 1945 left North Korea with most of the area’s mineral resources. Mining and quarrying make up South Korea’s smallest economic sector, contributing only 0.3% of gross domestic product and employing less than 1% of the work force in 1992. Petroleum must be imported. The country’s meager resources include coal, tungsten, limestone and iron ore. Offshore reserves of natural gas have been discovered.

Manufacturing

Manufacturing is concentrated in the Seoul area. Measured by value of output, the country’s most important manufactured products are electrical machinery and transport equipment, mainly motor vehicles and ships. Textiles, electronics and footwear are significant industries, but South Korea’s wage rates have risen in recent years, so jobs in these labor-intensive trades have been moving to Asian nations that have lower labor costs.

Labor

The most striking trend has been the decline in agriculture employment. In 1963, 63% of the work force worked in agriculture, compared to 14.8% in 1993. Further, since an overseas work program was established in 1963, the government has encouraged people to work abroad. Overseas construction work, particularly in the Middle East, has become an important source of foreign exchange.

SOUTH KOREAN ECONOMICS Population

In millions

1999 (projected): 46.6

GDP Growth

% figures

1999 (projected): 7.0

Inflation

% figures

1999 (projected): 5.0

Trade Balance

In billions of dollars

1999 (projected): 16.6

Foreign Debt

In billions of dollars

1999 (projected): 38.1

Figures for 1995 through 1999 are estimates.

Sources: Bank of America, World Information Services, Encyclopedia of the Third World, Countries of the World. Compiled by Laura B. Benko / Los Angeles Times

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Resources

Some useful addresses, phone numbers and publications for doing business in South Korea:

OFFICIAL FOREIGN OFFICES

The Korean Consulate can provide information on visa requirements and political affairs in South Korea. A customs officer based at the consulate can answer questions regarding import regulations and duties for people who want to export to Korea.

Korean Consulate

3243 Wilshire Blvd. Los Angeles, CA 90010 (213) 385-9300 Fax: (213) 385-1849 For general information about business opportunities in South Korea, contact the Korean Embassy in Washington or the U.S. Embassy in Korea.

Korean Embassy

2370 Massachusetts Ave. N.W. Washington, D.C. 20008 (202) 797-6343 Fax: (202) 387-0413

U.S. Embassy

82 Sejong-Ro , Chongro-Ku Seoul 110-030 (82-2) 397-4114 Fax: (82-2) 739-1628 The Korea Trade Center, the Southwestern U.S. branch office of the Korea Trade Promotion Corp., can provide lists of Korean manufacturers, exporters and importers. The center can also schedule meetings between Korean companies and visiting business people.

Korea Trade Center

4801 Wilshire Blvd., Suite 104 Los Angeles, CA 90010 (213) 954-9500 Fax: (213) 954-1707

Korea Trade Promotion Corp.

Korea World Trade Center 159 Samsong-dong Kangnam-gu, Seoul (82-2) 551-4181 Fax: (82-2) 551-4477

The following organization can assist people interested in investment opportunities in Korea, such as setting up an office or factory.

Consultation Office for Overseas Companies

Room 524, Building 3 Government Complex II Kwachon, Kyonggi-do Republic of Korea 427-760 (82-2) 500-2539 or (82-2) 507-2152 Fax: (82-2) 503-9655

TRADE CONTACTS

Businesses interested in exporting to Korea must become a “registered foreign trader” by joining the Korean Foreign Trade Assn. This designation is necessary in order to export under the Foreign Trade Law.

Korean Foreign Trade Assn.

Sung-Ki Manager America’s Division International Affairs Department Room 4720 KOEX Building, 159-1 Samsung-dong, Kangnam-ku, Seoul (82-2) 551-5301 Fax: (82-2) 551-5100

Korean Foreign Trade Assn.

460 Park Ave., Room 600 New York, N.Y. 10022 (212) 421-8804 Fax: (212) 223-3827 These agencies can provide information on tariffs and can counsel companies interested in doing business in Korea.

Asia Pacific Business Counseling Center

Room 2032 14th & Constitution Avenue N.W. Washington, D.C. 20230 (202) 482-2522, Ext. 4390 Fax: (202) 482-4453

Assn. of Foreign Trading Agents

AFTAK Building 218 Hangang-ro, 2ka Yongsan-ku, Seoul (82-2) 780-3377 Fax: (82-2) 785-4373

Korean Chamber of Commerce and Industry

Eyo-Dae Kim Executive Director International Affairs 45 Namdaemunro 4-ka Chung-ku, Seoul 100-743 (82-2) 316-3523 Fax: (82-2) 757-9475 For directories of Korean companies interested in partnering with businesses overseas to discuss trade, investment and technology, contact the following organization.

Korea Federation of Small Businesses

18-2 Yoido-dong Youngdeungpo-ku, Seoul 150-010 (82-2) 785-0892 Fax: (82-2) 782-0247 To receive country- and industry-specific research reports, foreign trade leads and descriptions of government programs, sign on to the Automated Trade Library Service database at the California Trade and Commerce Agency.

California Trade and Commerce Agency

Export Development Program Office of Export Development One World Trade Center, Suite 990 Long Beach, CA 90831-0990 (310) 590-5965 Fax: (310) 590-5958

Sources: United States Foreign Commercial Service, U.S. Embassy; Korea Trade Center; Korea Trade Promotion Corp. Researched by JENNIFER OLDHAM and DAVID NEIMAN / Los Angeles Times