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'Korea rebuilds: from crisis to opportunity'. Address at the launch of the East Asia Analytical Unit's report 'Korea rebuilds: from crisis to opportunity', Sydney, 3 May 1999



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'Korea Rebuilds: From Crisis To Opportunity'

Address by the Deputy Prime Minister Leader of the National Party Minister for Trade The Hon Tim Fischer MP at the Launch of the East Asia Analytical Unit's Report ' Korea Rebuilds: From Crisis To Opportunity'

Sydney, 3 May 1999

 

(Check Against Delivery)

 

Introduction

Mr Park Tae-young [Korean Minister for Commerce, Industry and Energy]; Ambassadors Shin and Hely; Paul Jeans [President, Australia-Korea Business Council]; Brian Scott [Chairman, Australia-Korea Foundation]; distinguished guests, ladies and gentlemen.

It gives me great pleasure to launch the report - Korea Rebuilds: From Crisis to Opportunity - the latest by the East Asia Analytical Unit of the Department of Foreign Affairs and Trade. This launch rounds out today's events highlighting This report, which is on the Korean economy, is the EAAthe significant trade and investment opportunities emerging between Australia and Korea.

I congratulate the Australia-Korea Business Council and Frances Perkins and her team in the East Asia Analytical Unit for bringing together this distinguished group of Koreans and Australians. I also want to thank BHP, National Mutual and Pacific Power for their corporate sponsorship of EAAU research and the Australia-Korea Foundation and Austrade for their substantial financial assistance for this report.

From Crisis to Opportunity

This report cannot be more timely. As this audience well knows, Asia's financial crisis sent major shock waves through the Korean economy, exposing some serious structural weaknesses. Korea's extraordinary growth and transformation over the past 35 years was severely disrupted. Korea's per capita income, which had reached over US$10 000 in 1997, slumped by a third with the depreciation of the won. Output contracted and unemployment rose to historically high levels.

But since early 1998 the new administration under President Kim Dae-jung has acted decisively, using the opportunity provided by the crisis to reform Korea's economic system. Korea is now setting the pace among crisis-hit Asian economies. This is the result of a determination to overhaul the financial and corporate sectors, liberalise foreign investment and open markets to international competition.

Many analysts are progressively revising Korea's economic growth forecasts upwards. Growth forecasts for 1999 range from 2 to 4 per cent and higher in following years. As this report highlights, it implies an earlier return to higher economic growth and quicker restoration of incomes than was predicted six months or even three months ago.

The Changing Business Environment

The EAAU report spotlights Korea's changing business environment. Foreign business people now see:

  • A greater willingness to challenge old practices;
  • Major changes in attitudes and management practices in Korean business and government; and
  • Significant reform in areas such as foreign investment, the financial sector, corporate governance, and international trade.

Foreign businesses are taking advantage of significant new investmen t opportunities in Korea. Last year, foreigners invested nearly US$9 billion in Korea, up nearly 30 per cent on 1997. More than half of this was invested through mergers and acquisitions that were illegal for foreigners before the crisis.

Korea is changing into a fairer and more rewarding market with the coupling of ongoing reform to increasing foreign investment in industry, banking and retailing.

Bilateral Trade Relations

Of course, the past demonstrates that Australia and Korea are natural trade partners and Korea's economic reforms and the resumption of growth will expand opportunities in the future.

Australia has a highly complementary trading relationship with Korea. Commodity exports account for more than three quarters of Australia's exports to Korea. Even with Korea's economic crisis, demand for raw materials and basic foodstuffs has been holding up well.

While Korea's ranking as a trading partner slipped during the economic crisis, the ROK is still Australia's third largest export market and fourth largest trading partner, with two way trade of over A$10 billion in 1998.

Significantly, Australia's share of the Korean market rose from 3.6 per cent in 1996 to 5 per cent in 1998, its highest level ever. We moved to become Korea's fourth largest trade partner behind the USA, Japan and China.

Nonetheless, a challenging conclusi on of the EAAU report is that, in the new competitive business environment, Australian companies need to be more proactive - in defending current market share, and in developing medium term expansion strategies.

Emerging New Opportunities

Following recovery, the Korean economy will remain strongly oriented towards industrial production and reliant on raw material and energy imports. Thus opportunities will continue to expand for commodity exporters. But as restructuring continues, longstanding supply arrangements will need to adjust to a more competitive, more decentralised industry environment.

As incomes recover and market barriers shrink, opportunities should expand for Australian exporters of services, processed food and complex manufactures.

As the EAAU 's report observes, almost any foreign company can achieve sales of US$5 million to US$10 million in Korea. But moving beyond small niches of this size invites strong local competition. As more multinational distributors (like Wal-Mart) open in Korea, distribution opportunities for Australian consumer good exporters are increasing.

New opportunities are also opening up in technology intensive sectors, particularly in finance and information technology. Australian firms are now supplying management consultancy services (including risk management, accounting and legal services) related to bank and corporate restructuring.

For example, the Australian office of Pricewaterhouse- Coopers is providing key personnel advising banks leading corporate workouts. And you heard earlier this afternoon about Macquarie Bank's joint venture with Korean bank Kookmin to develop derivative software products. Another Australian company, Sydney-based Bantec, is supplying an image-based processing system to Korea's central financial clearing house.

Notwithstanding these successes, Australian companies still have a relatively low market profile in many areas. We also know that traditionally Australia-Korea bilateral investment flows have not matched the level of trade. But the watershed changes in Korea's foreign investment regime should make Korea a more attractive investment destination.

Australian companies need to visit Korea to assess the trade and investment opportunities for themselves, and the EAAU's report will provide an excellent resource in this regard.

Closer Bilateral Relations

The Australian Government is strongly promoting closer links between Australia and Korea, while actively pursuing Australia's broader commercial interests.

That is why I am so pleased to welcome Minister Park Tae-young and his delegation to Australia. The Minister's visit is raising awareness of Korean business opportunities within the Australian business community, and lifting Australia's profile with potential Korean importers and joint venture partners.

Next week, my own visit to Korea will allow me to reinforce Australia's commitment to a comprehensive economic and political relationship with Korea. The key purpose of the visit is to co-chair the 23rd Ministerial Trade Talks with Mr Han Duck-soo, Korea's Minister of State for Trade, and to meet other senior leaders in the Government.

I hope to progress a very broad agenda:

  • Identifying common ground in the run-up to the Seattle Ministerial of the WTO
  • Building on the already close working relationsh ip between Australia and Korea in APEC; and
  • Progressing market access issues, including for Australian exporters of beef and citrus.

Conclusion

Finally, I want to say that Australia recognises that this period of rapid structural reform in Korea is also one of considerable economic and social stress. Australia is no fair-weather friend. We are a partner for the long-haul. Our contribution to the IMF support package for Korea and the Government's extension since January 1998 of export credit insurance to support bilateral trade reflect this commitment.

At the same time, we are confident that what is emerging is a much stronger and more competitive Korean economy. The challenge for government and business is to respond proactively and creatively to the changes taking place in Korea, and to seize the comme rcial opportunities emerging there.

I commend to you the EAAU's Korea report as an important contribution to a better understanding of the new Korean economy.

 

 

jy  1999-07-20  17:00