Korea Eyeing Advanced
Trading Nation

Trade volume predicted to grow to $1 trillion within seven years

Korea's exports are projected to grow to $300 billion next year and $400 billion in 2008 with an annual growth rate of some 12 percent, Minister of Commerce, Industry and Energy Lee Hee-beom said.
MOCIE Minister Lee made the projection, based on a forecast that Korea would see its products'global competitive edge increased, coupled with a steady global economic growth, despite lingering uncertainties like jitters over foreign currencies and oil price hikes.
"There are such lingering external uncertainties as the jitters over foreign currency exchanges and oil price hikes. However, thanks to a strong global economic growth and strengthened competitiveness of our products, Korea is forecast to achieve a feat of posting $1 trillion in trade within seven years. Exports are projected to grow to $300 billion next year and $400 billion in 2008 with an annual growth rate of close to 12 percent,"Minister Lee said in a written interview with NewsWorld.
Citing Korea's feat of achieving $500 billion in trade volume this year, the minister noted that Korea has technological and competitive levels in the global markets enough to cope with market-opening and globalization measures like the signing of Free Trade Agreements (FTAs). He also took up other topics including cultivation of SMEs, FDIs and overseas resources exploration and new and renewable energy issues. The following are some excerpts of his interview.
Question: Would you say about the significance of Korea's achieving $500 billion in foreign trade during 2005 and the mid- and long-term export projection?
Answer: Korea has a potential to emerge as one of advanced trade countries with more than $20,000 in the per capita national income. In reality, all nations except China which have surpassed $500 billion in trade volume are in the more than $20,000 national income level. Seven advanced countries - the United States, Japan, UK, the Netherlands, Belgium, Germany and France - reach the more than $30,000 income level, while Canada, Hong Kong and Italy are in the more than $20,000 income level.
A constant rise in the nation's trade volume testifies that Korea has secured technological levels and competitiveness in the global markets enough to cope with market-opening and globalization measures like the signing of Free Trade Agreements (FTAs).
The portion of trade to Gross Domestic Product (GDP) is on a steady rise. In particular, exports have served as a driving force behind the growth of the economy. Exports'contribution rate to economic growth, or trade-related economic growth rate divided by GDP growth rate surged from 9 percent in the 60s to 76 percent in the 90s and 98 percent in the 2000s. GDP is the total value of final goods and services produced within a country's borders in a year.
There are such lingering external uncertainties as the jitters over foreign currency exchanges and oil price hikes. However, thanks to a strong global economic growth and strengthened competitiveness of our products, Korea is forecast to achieve a feat of posting $1 trillion in trade within seven years. Exports are projected to grow to $300 billion next year and $400 billion in 2008 with an annual growth rate of close to 12 percent.
Q: Will you introduce plans to build an infrastructure for establishing Korea as an advanced trading country in a bid to tide over such problems as multilateral economic cooperation, trade conflicts and the formation of regional economic blocs?
A: Competition is getting fierce among countries and products in the wake of the spread of globalization. The global economy is experiencing such a deepened "multipolar symptom"as the emerging of BRICs (Brazil, Russia, India and China) countries with a vast demand market and a big economic potential. Trade issues are getting more complicated as a more fierce competition causes a rise of trading conflicts and regional economic blocs have sprung up in the wake of the global spread of FTAs.
The government is seeking to continue to beef up multilateral trade and energy security cooperation by making the most use of international organizations like the World Trade Organization (WTO), the Organization for Economic Cooperation and Development (OECD) and the International Energy Agency (IEA) under the new trading circumstances. It plans to actively participate in WTO/DDA negotiations so as to reduce foreign countries'tariffs and non-tariffs. Korea has actively participated in OECD shipbuilding and steel negotiations, IEA's Standing Group on Oil Markets and talks on energy cooperation in Northeast Asia.
The Korean government is putting more energy into making domestic systems and practices conform to international standards in areas like labor, competition and financing. The financing sector will be overhauled to international levels through such measures as easing restrictions. In the competition sector, efforts will be made to establish effective systems for regulating cartels and ameliorating restrictions limiting competition. In order to raise flexibility in the labor market, a system for hiring foreign workers will be improved.
Korea is trying to strike FTAs simultaneously and in a multi-faceted manner to counter regionalism prevailing across the world. The tentatively named Trade Readjustment Support Act will be enacted as a means designed to safeguard the domestic industry from the effects of market-opening measures. The proposed law calls for promoting the smooth restructuring of companies and assisting workers transferring to other workplaces.
The government is streamlining a system for supporting Korean operations in foreign countries in a bid to build up an efficient production network and preempt possible trade conflicts. It is making efforts to create an environment conducive for attracting foreign direct investments and to improve foreigners'living conditions with a view to hosting foreign companies and expertise manpower.
Q: Will you tell our readers about plans to foster world-class SMEs or midsize corporations with a global operation network?
A: Since the inauguration of the participatory government, 18 government agencies and 146 support organizations have come up with 1,000 individual measures designed to support SMEs so as to establish a foundation for growth of the innovation-driven economy. Such global conglomerates as Samsung and LG have secured R&D and global marketing capabilities, and competitive edge on their own. Innovative SMEs and midsize corporations, on the other hand, are experiencing management difficulties in the face of borderless competition as they are not entitled to government support due to their graduation from the SME category.
A joint study by MOCIE and the Industrial Bank of Korea showed that midsize corporations with more than 300 employees and more than 40 billion won in sales could have a potential to compete globally, and there are merely some 800 companies belonging to the category. Midsize companies with a global competitive edge include ones which have built up technological division and collaboration networks between small and large firms in the wake of global outsourcing; have secured basic technologies on parts and materials and modules; and are capable of exploring new markets based on technological power and the economy of scale.
The MOCIE reported on November 1 to President Roh Moo-hyun policies designed to foster innovative SMEs and conventional midsize companies into world-class ones with a competitive edge.
For their part, SMEs and midsize companies are encouraged to undergo innovations while developing. A cooperative regime will be established to help large corporations change their attitude toward smaller companies and help organizations overhaul their collaboration systems.
As part of its efforts to promote global marketing, the ministry plans to establish global network and systems for supporting overseas Korean operations and to beef up a competitive edge in design, brand and after-sale services. It will strengthen R&D support systems designed to expand technological capabilities; build up a foundation for helping SMEs advance to promising business areas and secure core technologies through strategic alliances or M&As; and disseminate excellent management innovation practices with an en eye on raising their global competitive edge.
Q: Will you elaborate on policies designed to promote the parts and materials industry?
A: The objective is to provide parts and material companies with a wide range of support ranging from the cultivation of technology and innovation capabilities, improved competitiveness of developed items to commercialization and a boost in exports with the vision of developing Korea into a global parts and materials powerhouse.
Since 2000, the government and the private sector have set aside 630.9 billion won and 401.7 billion won in assisting in the development of 412 parts and materials technologies, respectively. During the period between 2000 and 2004, 104 projects turned out to be successful. As of January 2005, nine firms out of the total beneficiaries were listed on the Kosdaq.
Public organizations have dispatched their own research manpower, equipment and information to parts and materials companies to help them fix their technological hitches in the field. A combined 10,000 researchers have been sent to the field to fix a total of 962 technological problems since 2002, each costing 100 million won in government support.
The government has offered support for enhancing reliability of parts and material products in order to help SMEs enter the markets. It spent 83.8 billion won in assisting 18 reliability accreditation agencies in purchasing 1,327 pieces of equipment last April. Between 2003 and 2004, 19.7 billion won was earmarked for implementing 291 projects related to the dissemination of reliability infrastructure technologies, while 7.9 billion won was set aside for educating 10,000 graduate students and industrial manpower during the period between 2002 and 2004.
Q: Will you give figures on the foreign direct investments (FDIs) Korea has attracted so far this year and what steps are in place to facilitate FDIs?
A: This year is a stellar year for achieving quantitative and qualitative growth in attracting FDIs. The parts and materials sector induced $1,806 million worth of FDIs; the R&D field, $36 million and five mainstay industries, $2,388 million.
The year 2005 witnessed mega events like the APEC 2005 Korea contributing to a remarked growth in FDIs. Korea hosted the 8th World Chinese Entrepreneurs Convention, the first of its kind, in October, attracting $830 million worth of FDIs. The convention served as a potential opportunity for initiating an inflow of Chinese entrepreneurs'capital, estimated at $2 trillion around the world, into Korea in earnest. During the APEC conference, the nation also attracted $500 million worth of FDIs and hosted the Asia-Pacific headquarters of eBay, thus helping Korea raising its profile as a business hub of Northeast Asia.
During next year, the government plans to concentrate its efforts to attract FDIs on such priority areas as next-generation growth engine industries and parts & materials sector, considered essential to boost industrial competitiveness, as well as ones designed to spur balanced national development and job creation.
In particular, Korea is exerting itself to implement such quality-oriented policies of attracting FDIs as hosting R&D centers and regional headquarters of multinational corporations under a strategy of linking foreign and domestic companies in Korea and abroad.
Korea plans to establish mid- and long-term visions for attracting FDIs in connection with its industrial development visions and strategies, while seeking to invigorate Invest Korea, an agency specializing in inducing FDIs, and conduct client-tailored overseas road shows on attracting FDIs. The nation plans to advance the implementation of 151 selective tasks designed to improve an environment for inducing foreign investments and explore additional new tasks.
Q: Will you be more specific on the current status of Korea's overseas crude oil and gas field exploration projects and ways of promoting cooperation with foreign countries in the energy sector?
A: Thanks to the government's active support and increased investments from the private sector, overseas crude oil exploration projects have reverted to the levels recorded before the Asian financial crisis in 1997-98.
As of the end of November 2005, Korea has been undertaking 66 oil exploration projects in 26 countries, with the size of investments projected to grow a record high of $800 million, up from $670 million in 2004. Its own development rate of crude oil rose from 2.0 percent in 2001 to 3.8 percent in 2004 and an estimated 4.1 percent in 2005.
In particular, Korea has been awarded with the rights to explore a mining zone with estimated deposits of 3.7 billion barrels in Western Kamchatka, Russia and another one with estimated reserves of 1.6 billion barrels in Zhambyl, Kazakhstan following summit talks.
Korea acquired the right to explore a super-size mining zone in Nigeria on August 26, while the nation struck oil at the Vietnamese Mining Zone 15-1. the second discovery of oil in the Southeast Asian country, on September 1.
The Korean government will continue to step up diplomatic efforts through summit talks with resources-rich countries to secure a supply of resources, while expanding government-to-government dialogue channels on cooperation in the energy sector to pay the way for the private sector's participation.
Following his official trips to Kazakhstan and Russia in September 2004 and thereafter, President Roh Moo-hyun has held summit talks so far this year to strengthen cooperation with Uzbekistan, Mexico, the Middle East and Southeast Asian countries.
Korea plans to increase from the current 17 to 20 by 2007 the number of countries with which the nation has formed up a bilateral energy cooperation committee. Korea held bilateral energy cooperation committee meetings with Kazakhstan and Vietnam in April 2005,; with Brazil in May,; with Russia and Australia in July 7,; with Peru in November,; and Mongolia in December.
The government has actively been engaged in multilateral negotiations, as Korea hosted the 7th Energy Ministers'Meeting & 2nd Meeting of Ministers Responsible for Mining last October.
Question: Will you explain Korea's petroleum stockpile plan aimed at ensuring an efficient petroleum distribution in Northeast Asia?
A: Korea aims to raise the capacity of petroleum stockpiling facilities to 146 million barrels by 2007 and replenish 141 million barrels of petroleum reserves by 2008. The target petroleum reserves include the amounts being stored under the International Joint Stockpiling Project Korea and oil-producing countries are undertaking. If the joint projects are realized as planned, Korea is expected to gain momentum toward becoming a petroleum-stockpiling center in Northeast Asia.
Under the International Joint Stockpiling Project, Korea is inviting and storing crude oil of oil-exporting countries in Korea's storage facilities. Korea is not only better positioned to cope with an energy crisis by being given a preferential right to acquire a supply of crude oil, but also it can gain the proceeds from the lease of the storage facilities. The oil-producing countries have an advantage of securing a distribution base in the Southeast Asian market where petroleum demand is on a constant rise.
Currently, Korea is stockpiling 19.9 million barrels of crude oil from such countries as Norway, Algiers and China. The nation also plans to invite and store crude oil from oil-producing countries in the Middle East. The International Joint Stockpiling Project is part of a vision of developing Korea into a Northeast Asian oil hub. The government plans to expand the project under the so-called win-win strategy under which Korea is entitled to priority in purchasing crude oil in case of emergency and oil-producing countries, in return, have a distribution base in the Northeast Asia, including Korea, China and Japan.
Q: Will you give the details about the government's development and distribution projects of new and renewable energy and a plan to establish infrastructure for introducing the "hydrogen economy"?
A: New and renewable energy sources are futuristic and clean ones that are a driving force for sustainable development. Globally, the new and renewable energy industry is projected to grow at an annual average rate of 2.3 percent by 2020. Development of the industry is getting significant so as to minimize the economic effects, caused by oil price hikes and address issues related to international protocols on climate change.
The MOCIE strives for raising the portion of new and renewable energy sources to 5 percent of the total primary energy use by 2011, according to a master plan on the industry, established in December 2003. Under the plan, the ministry is aggressively building a policy infrastructure in such areas as budgets, organization and laws and regulations while actively pushing ahead with efforts to develop and distribute technologies. The government budget for the sector rose from 119.3 billion won in 2003 to 196.4 billion won in 2004 and to 324.2 billion won in 2005.
As far as specific strategies, the government will focus R&D activities on arenas with a high feasibility of commercialization and industrial development of new and renewable energy sources. It is attaching priority on the development of three core arenas, hydrogen/fuel cell, photovoltaic and tidal power that could have a wide range of spill-over effects while providing support for commercialization of such energy sources as solar thermal energy, bioenergy and geothermal power.
It plans to develop and support programs for distributing technologies in core arenas, includes one on supplying 100,000 solar roofs, in a bid to create markets.
The government plans to provide institutional support for the establishment of infrastructure for commercialization and cultivation of manpower, including the introduction of new and renewable energy companies, parts-sharing and standardization, certification and public organizations'mandatory use of new and renewable energy sources.
Last September, it established a master plan for fostering the industries of hydrogen energy and fuel cell emerging as alternative energy sources with the goal of raising the portion of the hydrogen energy to 15 percent of the total energy consumption and the sector's percentage of gross domestic product to 5 percent by 2040. To this end, the government is planning to build up infrastructure on the production, storage and distribution of hydrogen while making preparations for a shift into the hydrogen economy through such institutional reform measures as legislation of a law governing the facilitation of the hydrogen economy and standardization as well as continuous R&D support. nw

Minister of Commerce, Industry and Energy Lee Hee-beom