Korea Joins Ranks of Powerhouses
with $300 Bln in Exports

Likely to see exports surging 10 to 11 percent next year

Korea has achieved a feat of surpassing the $300 billion export mark this year, becoming the 11th trading powerhouse in the world.
However, the exporting outlook for next year will likely be dimmer than this year due to such unfavorable external factors as a slow-down of the global economy and the appreciation of Korean won, Minister of Commerce, Industry and Energy Chung Sye-kyun said in an interview. The following are excerpts of his interview in which he touched on such topics as industry development and energy policies.
Question: What does it mean for Korea to achieve a target of exporting $300 billion abroad?
Answer: Korea ranked 11th in the world following such advanced countries, including the United States, Germany and Japan, joining ranks of countries which have surpassed the $300 billion export mark, figures made available at WTO and World Bank in 2005 show. Out of the countries which have already shattered the $300 billion export barrier,
nine countries except China have witnessed their per capita income topping the $30,000 mark, indicating every probability that Korea could enter the $30,000 per capita income stage.
It is noteworthy that despite the triple unfavorable factors - the appreciation of the Korean currency, crude oil price hikes and raw material price surges - Korea has achieved a feat of posting $300 billion worth of exports in two years after surpassing the $200 billion export mark. Export amounts are projected to climb 14.6 percent from $284.4 billion in 2005 to an estimated $326 billion in 2006. The value of the Korean currency soared from 1,024 won against the dollar in December 2005 to 970 won in January 2006 and 923 won on Dec. 15, 2006. Dubai crude oil surged from $33.56 in January 2004 to $45.85 in March 2005 and $69.16 in July 2006 before dropping to $59.18 on Dec.15, 2006.
Korea has made a strong showing in such mainstay exporting industries as semiconductor, automobiles and shipbuilding, reconfirming their high standing in the global market. Semiconductor products became the first single item in history of export to top $30 billion worth of exports, while automobiles are almost certain to follow suit. The domestic shipbuilding industry has basked in an unprecedented boom with a record high of landing $40.5 billion worth of new orders in the first 11 months of this year, up 54.6 percent over the same period of last year.
The government and the private sector's concerted efforts to raise exports have paid off. They have come up with diverse steps, including the ones designed to foster the parts and materials industry, attract foreign direct investments, explore foreign markets and build up trade infrastructure like e-Trade.
Q: How do you forecast exports for next year?
A: The exporting outlook for next year is likely to be dimmer than this year due to a slow-down of the global economy and the appreciation of the Korean currency. Developing countries like China and India are predicted to continue a robust growth,
but the global economy is forecast to register a lower growth rate due to a slow-down of the American economy, influenced by the effects of the sluggish housing sector. The International Monetary Fund predicted that the global economy will see its growth rate declining from 5.1 percent in 2006 to 4.9 percent in 2007. The weak dollar is forecast to prevail during next year with the fluctuations getting bigger due to a mix of gain and lose momentums.
Despite the prospect of slowing the global economy, Korea is likely to see exports register a double-digit growth rate of 10 to 11 percent thanks to Korean products'entry to rapidly developing countries and an export boom in mainstay products like semiconductors, shipbuilding and automobiles. Semiconductor exports will likely continue a boom due to a rise in the demand for DRAMs following the next July 1 release of Windows Vista, Microsoft's next-generation PC with a memory capacity of 1 to 2 GB, higher than the existing XP with a capacity of 128MB, and wider use of next-generation memory devices as Nand Flash memories.
Shipbuilding and automobile industry will likely see a robust export for next year thanks to a bountiful export stockpile as well as improved quality and brand value.
The government is doing its utmost in adopting policies to maintain a double-digit export growth rate for next year.
Q; What steps does your ministry take to maintain marketing leadership and competitive edge on the global market?
A: Korea is striving to expand value-added export items by securing value-added basic technologies of mainstay industries and differentiating rival countries. The nation is pushing ahead with strategies to secure core technologies of futuristic cars like fuel cell cars and establish itself as the global No.1 player in such value-added strategic industries. Korea is making strenuous efforts to foster such promising next-generation industries as robots, bio-technology and nano-technology and develop knowledge-based industry. The government is also focusing on exploring and cultivating world-class products and providing a package of support ranging from technology and design development to overseas marketing as part of its efforts to make export items more sophisticated.
The government is striving to expand an export base by expediting the development of promising SMEs into exporting companies through stepped-up support for overseas marketing. It is strengthening its overseas marketing support for exporting beginners and innovative SMES while beefing up collaboration among relevant institutions to upgrade performances by overhauling a system for supporting overseas marketing. Besides, it is continuously providing support for building up trade infrastructure like e-Trade and exhibition industry, while helping SMEs saving costs by reforming distribution systems in Korea and abroad.
The ministry is seeking to upgrade design and brand value, non-price competitive factors of exporting items, in a bid to secure competitiveness of made-in-Korea products and capitalize on improved national image. It is pushing ahead with a "Korea Premium"strategy to capitalize on Hallyu or Korean Wave and improved national image to link the brand value of exporting goods and competitive edge. It is also providing support for the development of technology and marketing activities in a bid to help SMEs build up design and brand capabilities.
Q: What strategies does your ministry employ to enhance the competitive edge of the domestic parts and materials industry?
A: The government has concentrated its focus on cultivating the parts and materials industry for a long time as part of its efforts to tackle such problems as bi-polarization between major and smaller companies, industrial restructuring and trade imbalance in favor of Japan. While in office in the past one year, I have drawn up and implemented major policies designed to develop mid-size, core companies and cultivate the materials industry, but it will take time a lot to yield achievements.
Fortunately, companies'own innovative efforts and government's continued support are combined to stabilize a foundation for turning the parts and materials exporting industry into a surplus, and there are signs of improving Korea's dependence on Japan for importing parts and materials. Korea's parts and materials trade surplus jumped from $6.2 billion in 2003 to $22.7 billion in 2005 and an estimated $31.9 billion in 2006, whereas parts and materials trade deficit between Korean and Japan surged from $13.9 billion in 2003 to $15.9 billion in 2004 and $16.1 billion in 2005, but the trade imbalance is projected to drop to $15.2 billion in 2006. However, there is a wide technology gap between Korea and advanced countries, as Korean-made parts stood at 86 percent of the technology level of advanced countries and Korean-made materials remained 60 percent of advanced countries's indicating that core parts and materials of major finished goods are imported from foreign countries.
In this regard, the ministry is attaching priority on fostering mid-size, core companies specializing in a global supply of core parts and materials. It is shifting from a simple "Catch-up technology development approach?to a "Big-Jump technology development strategy'while trying to facilitating M&As to help small-size companies evolve into bigger parts and materials firms.
The ministry plans to secure basic materials technologies in the mid- and long-term strategies to address trade imbalance in favor of Japan. In 2007, it plans to begin to work out a program on the development of basic materials technologies in order to explore and provide support for the development of top 50 core material technologies that will have the effects of occupying future markets.
It is exerting its efforts to develop Korea into a global parts and materials outsourcing supplier through the implementation of diverse and across-the-board support policies.
Q: Would you explain your ministry's plan to develop mid-size mainstay companies?
A: The government has implemented five major policies, including the ones designed to facilitate M&As among smaller and mid-size mainstay companies and strengthen mid-size mainstay companies'global management and technology capabilities. Korea aims to raise the percentage of mid-size mainstay companies in Korea to the level of advanced countries, around 1 percent by 2015.
The government plans to rationalize the criteria for screening M&As among mid-size mainstay companies through consultations among relevant government agencies.
It plans to expand mid-size mainstay firms'participation in the next-next-generation 15 strategic technology areas whose development is to be launched in 2008 or after, while spending more budget on R&D activities. The plan calls for earmarking about 1 trillion won per annum for the development of the 15 strategic technology fields.
A consortium will be formed and operated to supply gifted manpower to mid-size mainstay companies. Mid-size mainstay companies found to have ensured transparent management and social responsibility will be granted a "clean mid-size mainstay company"certificate to upgrade their ethical management to global standards.
Q: Would you explain the government's strategies during Free Trade Agreement negotiations with the United States?
A: Korea's signing FTA with the United States will serve as a good opportunity to improve Korean manufacturers'advance to the United States, the world's largest market, through technology ties and equality alliance with American multinationals.
However, some smaller companies with weaker competitiveness, compared to American counterparts, are expected to face an uphill battle following an FTA deal with the United States.
MOCIE is seeking to hold strategic negations with the United States for the successful conclusion of an FTA deal, while at the same time striving to implement steps to prop up the weak sectors.
The ministry plans to readjust duty reduction plans according to each item's competitive edge on the American market - short- and long-term ones - in an effort to maximize the market-opening effects following an FTA deal, while seeking to request the United States side to lower duties of such industries with an competitive edge as textiles and automobiles at the earliest possible date.
In an effort to help Korea conclude an FTA with the United States, the government plans to introduce a trade adjustment assistance, designed to provide support to companies or industries which suffer from damages in the wake of the proposed FTA deal.
Q: Would you elaborate on strategies to secure natural resources in an age of crude oil price hikes and resources war?
A: As competition has heated up to secure natural resources amid crude oil price hikes, for Korea, which depends on imports for 97 percent of its energy consumption, a stable supply of resources is prerequisite for maintaining a sustainable growth and stabilizing public lives. Accordingly, the government is adopting energy conservation policies in the demand category, while striving to expand a supply of new and renewable energy sources and aggressively undertake resources exploration projects abroad.
Korea aims to raise its own crude oil and gas development to a range of 18 percent of the domestic consumption by 2013.
To this end, first, in the early next year, the government plans to draw up the third overseas resources development plan between 2007 and 2016, calling for the establishment of basic development strategies according to each region and energy source, while pursuing strategic resources development policies like summit diplomatic activities.
Second, the government is seeking to spread a Korean model of exploring resources abroad and undertaking industrial infrastructure projects simultaneously to overcome nationalism of resources-rich countries. A case in point is promoting resources collaboration between Korea and Nigeria.
Third, it plans to develop Korea National Oil Corp. (KNOC) into a regional major with production capacity of 300,000 barrels per day. It is striving to expand government budgetary support to encourage the private sector's investments into resources development projects.
Fourth, the government plans to overhaul infrastructure for supporting overseas resources development projects.
Q: Would you give the details of the "Energy Vision 2030"?
A: The vision is a mid- and long-term energy plan that contains three principal directions, five visions and nine action plans.
The Energy Vision 2030 will likely be materialized after sounding out public opinions in the course of establishing national energy maser plans in the future. The three principal directions - energy security, energy efficiency and environment-friendliness - will be considered in drawing up energy policies as recommended by the International Energy Agency.
The five visions include the ones on raising Korea's own oil development rate from 4.1 percent in 2005 to 35 percent by 2030 and new and renewable energy supply rate from 2.1 percent to 9 percent; and reducing oil dependence rate from 44.4 percent in 2005 to 35 percent. nw

Minister of Commerce, Industry and Energy Chung Sye-kyun

MOCIE Minister Chung Sye-kyun, KOTRA CEO Hong Ki-hwa, Samsung Electro-Mechanics Vice Chairman Lee Hyung-do, KEIC President Kim Song-woong, SeAH Holdings Corp. Lee Jong-young, Daewoo E&C Executive Director Yoon Kuk-jin and other award winners pose during a reception marking Korea's feat of surpassing the $300 billion export mark.

The winners of the 2006 Korea Ten Best New Technology Awards are lined up with MOCIE Minister Chung Sye-kyun, 7th L, and KATS Administrator Choi Kaphong, 1st R, after winning the awards.

An offshore oil plaform operated by Korea Gas Corp. off the coast of Ulsan, producing natural gas.