MOCIE Gears Up
for Export Boom

Provides tailor-made services for firms to explore overseas markets

FTAs have become essential to speeding up the globalization of the national economy by introducing advanced business standards and management know-how, said Hong Suk-woo, assistant minister of the Trade & Investment Policy Office at the Ministry of Commerce, Industry and Energy (MOCIE).
He said that the ministry has been mobilizing all possible means to induce more foreign direct investment in order to secure engines to raise the potential for economic growth. The following are excerpts of the interview.
Q: What is the current status of exports and what is your assessment for this year?
A: The nation's exports for the January-October period reached US$303.1 billion, an increase of 13.9 percent from a year earlier. Imports stood at $288.5 billion, up 13.1 percent year-on-year. With this, the nation registered a $14.6 billion trade surplus.
Exports have boomed, boosted by brisk sales of main items like general machines, vessels, automobiles, petrochemical products and liquefied devices. Imports also maintained a solid growth rate amid the steady rise in the prices of crude oil, resources and materials, looming recovery in facility investment and the fall in value of the U.S. dollar. The trade balance continued to record a surplus for the 55th consecutive month since April 2003, thanks to a steady rise in exports.
The nation registered an export growth rate higher than those in major competing nations like the United States and Japan, though still lower than China. Booming overseas sales have also made a great contribution to the recovering domestic economy. During the January-June period the United States recorded a 10.5 percent export growth rate while Japan and Taiwan marked 12.8 percent and 7.5 percent rates, respectively. China's exports rose by 27.6 percent.
By region, overseas sales in China and the European Union have continued to increase with growing market opportunities in newly emerging markets like Southeast Asia, the Middle East and member nations of the Association of Southeast Asian Nations (ASEAN). But exports to the United States and Japan have remained relatively sluggish due to prospects for a slowdown in the U.S. economy and the low value of the Japanese yen. Exports to China grew 16.2 percent, 15.0 percent to the EU, 36.3 percent to the Middle East, 19.3 percent to ASEAN nations, 22.3 percent to Latin America, 4.8 percent to the U.S. and a decline of 3.2 percent to Japan.
Despite unstable factors surrounding exports like skyrocketing crude oil prices, the lingering sub-prime mortgage crisis and a possible slowdown in the global economy, exports will likely continue to increase, boosted by the continued growth of developing nations like China. Against this backdrop, the nation is likely to realize the target exports volume of $367 billion with a $15 billion trade surplus.
However, the steady depreciation of the U.S. dollar coupled with the rising price of crude oil will likely become factors that will lead to decline in the trade surplus.
Q: Can you tell our readers about strategies to raise the global competitiveness of Korea's export commodities and promote overseas marketing?
A: Global trading is becoming more and more competitive with the spread of regionalism, the emergence of gigantic global enterprises and rapidly developing nations like China, in particular. We need to exert various efforts to cope with the harsh global competition and reach the $1 trillion trade era at as early a date as possible. Toward that end, we need to explore new markets and generate new export engines.
The ministry has come up with a package of measures to help companies do business in overseas markets. First, we set up a marketing strategy differentiated in accordance with items and markets. We have been providing companies with tailor-made marketing services.
The ministry has also been utilizing bilateral and multilateral cooperative channels to protect intellectual property rights in overseas markets and help companies tackle the problems in foreign markets.
With the goal of creating further export locomotives and laying the foundation, we have been helping companies develop world-class products and take part in exhibitions. We have also been helping small- and medium-sized companies in their bids to become export firms and set up branches in overseas markets.
Q; Please tell us about the situation on u-trading and its future plans.?
A: 1. Current situation We are now constructing the u-trade hub system where trading processes from marketing to payment settlement are dealt with through the Internet. Under the system, all trading companies, banks, certification organizations, shipping firms and customs offices are interconnected via the EDI (Electronics Data Interchange) device with an electronic documents intermediary service. The ministry set up a law for the promotion of u-trade in 1991 and founded KTNET. As of October 2007, some 47,000 companies are using the system.
The government pursuant to its motto of electronic administration has been developing relevant services for electronic trading and electronic documentation since 2004. The government has also been carrying out u-trade businesses for the period from December 2004 to February 2008 with money from the state coffer (18 billion won) and the Korea International Trade Association (KITA) (8 billion won).
U-trade service first business (December 2005- May 2006): Formation of the u-trade infrastructure through an electronic credit letter system and the setup of an electronic trading document conservatory.
U-trade service second business (December 2006- February 2007): Setup of an electronic trading system for trading companies coupled with the linkage of firms, banks, the Korea Chamber of Commerce and Industry and insurance companies.
U-trade service third business (July 2007-February 2008): Establishment of electronic trading for logistics companies for connection with shipping companies, air freight companies and customs offices.
2. Future plans
a. Development of next-generation electronic trading system
We have been taking steps to provide u-trade service from the year 2008 until 2012 for the next government. We have joined hands with the Ministry of Construction and Transportation and the Korea Customs Service to set up a global integrated electronics trading and logistics network.
There will be systematic cooperation between the systems of KOTRA and KTNET encompassing all processes of overseas public relations, negotiations and contract and post-contract signing. Through the linkage of KOTRA's Buy Korea and KTNET's uTradeHub, a single channel will be established that will deal with all trading processes from marketing to monetary settlement.
b. Promoting u-trade service
In order to promote the PR of commodities based online, an electronic management system will be setup by integrating electronics catalogues now scattered at individual e-market places. Under the new system, a commodity will be introduced on e-market places like BuyKorea, EC21, ECPlaza and goBizKorea.
With the view to completing the e-Nego system, the system will be connected to the intra-nets of banks, shipping companies and air freight companies. The ministry plans to offer some incentives like financial assistance to induce banks and shipping firms to join the envisioned system.
c. Pursuit of global electronics trading
Through the linkage of the system with major trading partner nations, the global electronic trading service (e-B/L and e-Nego) will become available. The ministry will first seek the global linkages with nations with large trading volume a and highly developed electronic trading system like China, Hong Kong and Singapore.
An international mutual recognition regime on electronic settlement and certification will be set up. The ministry will also take the leading role in creating a global standard for data and document formats for electronic trading.
d. Spreading of electronics trading users
The ministry will attempt to save possible auxiliary electronic-trading costs by implementing the system in accordance with target clients among large companies, mid-sized firms and small ones.
Q: What do you think are the prospects for the Korea-U.S. FTA's National Assembly ratification?
A: The governments of the Republic of Korea and the United States signed the Korea-U.S. Free Trade Agreement (KORUS FTA) and our government submitted the bill for ratification to the National Assembly on Sept. 7.
We judged it would be better to submit the FTA bill at as early a date as possible so that the National Assembly can embark on full-fledged deliberation on it. The industrial sector, which will be the primary beneficiary of the FTA, expects early ratification and the government has expressed its hope for the National Assembly to promptly deal with the matter to maximize the economic effect of the free trade accord.
As for the United States, the FTA bill is supposed to be ratified within 90 days after it was submitted to the Congress. So, we believe the U.S. administration has been deliberating on the proper time for its submission.
In the meantime, the Ministry of Commerce, Industry and Energy has been taking measures so that the KORUS FTA can be implemented without particular difficulties and the enterprises can effectively utilize it.
It has set up the `FTA Assistance Portal Site'on its Web site to enable companies to have easy access to relevant information and use it.
The ministry plans to set up a comprehensive FTA assistance center within the year to provide companies lacking information with tailor-made information and consulting. In addition, the ministry will help companies to advance into the U.S. market and expand its technological assistance to firms in competitive areas. It is also carrying out assistance steps to help firms to induce foreign investment and advance into other foreign markets.
Q: Would you discuss the envisioned signing of a free trade agreement between Korea and the European Union?
A: The FTA between Korea and the EU was chosen as a mid-to-long-term task under the FTA roadmap in August 2003. The two sides began negotiations in May this year. Compared with previous free trade accords, including the KORUS FTA, the Korea-EU FTA has progressed faster. Since it was chosen as the mid-to-long-term task in August 2003, officials from the two sides held meetings in July and September 2006. In September and December 2006, the Korean government
deliberated on the relevant processes. It held a public hearing on the FTA in November 2006 and a consultation meeting of private experts in December. On May 2, 2007, the Korean government decided to begin negotiations on the Korea-EU FTA.
We believe the Korea-EU FTA will have an economic effect that matches the one we expect from the KORUS FTA. The EU is the world's largest market with a gross domestic product (GDP) reaching $13.5 trillion compared to the $12.5 billion U.S. GDP. It is the world's second largest import market following the U.S.
The EU is the nation's second largest trading partner after China and the largest investment partner. The EU's 27 members include many developing nations and Korea is expected to see high economic benefits from the envisaged FTA as the EU has been applying high trade tariffs.
In particular, due to its geographical location near the newly emerging markets of Russia and the Middle East, the EU can be utilized as a stepping stone into those neighboring markets.
Officials from both sides have had close technical consultations in the area of commodity concessions and expect improved results in the fifth negotiations in November.
The government plans to push for the negotiations in a serious and premeditated manner to maximize the interests of domestic companies while focusing on the goal of signing an agreement at as early a date as possible.
The possible signing of the Korea-EU FTA will have a positive impact on the whole national economy in terms of national income, living and welfare standards, trading, production and employment.
We can secure the world's second largest market in a stable way and can avoid possible trade conflict. We can also introduce global standards and advance our economic system, creating an environment favorable to doing business. All these outcomes will help promote Korea's growth potential.
The signing of the Korea-EU FTA following the KORUS FTA will put the nation on the path to registering 7.6 percent growth in GDP and a $27.7 billion increase in welfare standards. It will also have the effect of generating 110,000 jobs in the short term and 550,000 jobs in the mid-to-long-term basis.
In the manufacturing sector, the Korea-EU FTA is likely to have a greater effect on increasing exports and imports than the KORUS FTA. Some products like automobiles will likely see booming exports as the EU has been applying higher tariffs so far.
Imports will also increase sharply as the EU has been enjoying a higher competitiveness in the manufacturing area. Exports of automobiles, textiles, electrical and electronics products will increase while the imports of machines, chemicals, plastics, medical and cosmetic goods will also surge.
Q: Let's turn to foreign direct investment. What is the current situation and future prospects?
A: The Korean government established a law for the promotion of foreign direct investment following the financial crisis in 1997. Because of brisk efforts to induce foreign investment, FDI reached $108.4 billion for the period from 1998 to September 2007. Foreign investment has been greatly contributing to the globalization of the national economy in respect to expanding the foreign reserves and the introduction of advanced managerial know-how.
As of the end of September, foreign investment stood at $6.31 billion, down 16 percent from a year earlier.
Investment was brisk in the areas of culture, leisure and real estate development, pushing the investment in the service sector to a record 7.2 percent growth.
Investment in the service sector reached $4.117 billion during the January-September period of 2006, while it stood at $4.412 billion during the first nine months of this year.
By type, the portion of greenfield investment, the investment in a manufacturing plant, office, or other physical company-related structure or group of structures in an area where no previous facilities exist, during the January-September period increased from 54.4 percent in 2005 and 61.7 percent in 2006 to 66.8 percent in the first nine months of this year. Fresh investment also rose from 32.5 percent in 2005 and 38.6 percent in 2006 to 41.5 percent in the first nine months of this year.
The foreign direct investment is expected to surpass $10 billion dollars this year, given the recovery after the third quarter.
Foreign investors have been feeling overburdened by the steady appreciation of the Korean won against the U.S. dollar but the envisioned signing of FTAs will likely promote investors'interests in the Korean market. nw

Hong Suk-woo, assistant minister of the Trade & Investment Policy Office at the Ministry of Commerce, Industry and Energy (MOCIE)

FTAs Korea has singed with foreign countries are expected to boost Korea abroad shipment of Korean-made exports.