|Korea: A Strategic Approach' |
'Korea: A Strategic Approach'
Speech by FCO Minister for Trade and Investment, Baroness Symons, at a Conference on Korea, British Museum, London, Wednesday 10 October 2001. Source: FCO, London.
It is said that Korea is often regarded as a forgotten part of North East Asia, perhaps understandably as it is wedged between the world's second and third largest economies, Japan and China. Koreans, with a knack for self-deprecation, refer to themselves as a ‘shrimp between two whales’. Korea is one of those places which tends to produce certain preconceptions when it is mentioned. Most of these are outdated.
My task, and that of the other speakers this afternoon, is to divide the myths from the facts, and to show you that Korea is a modern, outgoing and substantive economy, with much going for it. It is also in the middle of the world's most dynamic and exciting region, which by some estimates now accounts for 20% of world GDP and could account for over 30% in the next decade. I hope you will go away from this event wanting to know more. My officials here, Charles Humfrey's team in Seoul, and Vice-Minister Lee's officials in London are ready and willing to help.
A Modern and Outgoing Economy
A few facts and figures to set the scene. How many people know that Korea is the world's 13th largest economy, bigger than the Netherlands or Thailand, Malaysia and Indonesia put together? And that is despite having had a per capita GDP equivalent to Sudan's or Haiti's in 1960. This is why Korea is a member of the OECD, the G20 and a key player in ASEM and the WTO.
Korea is the world's largest shipbuilder, largest producer of memory chips, 6th largest car producer and 3rd largest steel producer. In the global downturn, its diversified economy has been more resilient than many in Asia. Growth may have slowed but it has not stopped.
Korea has good long-term prospects. It has:
- A highly skilled workforce, the highest household expenditure on education in the world, and a culture of hard work and ambition.
- An entrepreneurial spirit: SMEs provide most of the value-added in Korea's economy (c. 85%), employ nine out of ten workers and account for 40% of Korea's exports. Korea has also seen a high number of new start-ups in recent years: more and more Korean companies are looking for alliances with foreign firms, which bring not only capital but particular skills and also generate jobs.
- Korea has more mobile 'phones than fixed lines, and one of the highest percentages of internet usage in the world, with ADSL readily available.
- There are good transport and telecoms infrastructures. Korea is also looking to develop further as a logistics hub in North East Asia.
- Korea has a high level of R&D spending in both public and private sectors. More and more young Koreans are keen to start their own businesses. Korea's leading internet portal, Daum (the fourth largest in world), started with $7,000 of family savings in 1996. Young entrepreneurs are also behind the digital animation company in Korea which produces the animation for ‘The Simpsons’.
- There is a growing affluence and signs of the economy adjusting to growth through domestic demand and consumption. Korea's population of 46m is still ‘young’ demographically. The younger generation is increasingly ‘globalised’ and sophisticated. Korea has long been noted for traditions of hard work. But leisure will increase, boosting the development of retail, creative and leisure industries. These are the sectors of the future, but the opportunities will arrive sooner than you think.
- Opening Markets and Investment Opportunities
Korea's strategic position in North East Asia offers investors big opportunities, especially now that China is about to join WTO. China is already Korea's third largest export market, second if exports to Hong Kong are included. Korea is already the 6th largest investor in China. Korea could therefore be an ideal high value-added platform to enter the Chinese market.
There is a Korean saying ‘A monk cannot shave his head alone’, akin to ‘no man is an island’. Many of you may still think that Korea is a closed economy. That may have been true in the past, but Korea has undergone a tremendous surge in liberalisation in the late 1990s. As a country whose exports account for over 40% of GDP, Korea knows that it benefits from globalisation.
Both our countries want a new WTO round, because we believe we benefit from trade and investment. That said, there is room to do more yet. I am sure Vice-Minister Lee would acknowledge that Korea is still in the process of restructuring its economy, particularly its corporate, financial and public sectors. This process poses major challenges, but offers opportunities for investors in financial services and public-private partnerships in infrastructure. I hope that the process of market opening will continue, offering UK firms with world class reputations in legal services, broadcasting, media and publishing, and news and business information services, opportunities to invest in markets which are currently closed or restricted or have regulation or other non-tariff issues which deter investment.
In this context, we value the leading role that Korea has been taking in Geneva and in the ASEM process as a strong advocate of a new Round of global trade talks. It is a shared belief that the agenda should be broad-based and should include, amongst other issues, core rules on investment. We firmly believe common investment principles could help not only countries which export FDI, but also countries trying to attract it. A multilateral agreement on investment would be of great value to Korea. It is encouraging to see that the US is also now ready to consider the benefits of including investment in a new trade Round.
The Importance of Inward Investment
I would like to say a few words about the importance of investment generally.
The UK is the biggest European investor in Korea and Korean companies are important investors here. There are over 120 Korean investments in the UK accounting for more than one third of total Korean investment in Europe. Korean companies in the UK cover many industry sectors, from the manufacture of flat panel displays to research and development of new car tyres, via semiconductor design and software engineering. And they make a valuable contribution to our economy.
The UK attracts more investment than any other country in Europe and globally our record is second only to the US. We have more than 40% of all Japanese and US investment in Europe. In the last financial year we recorded 869 new investment projects accounting for some 70,000 new jobs.
Why have so many companies made the UK their base in Europe?
Our national successes, past and present, have always been built on a foundation of resilience and innovation. We have responded to the challenges of new technologies and new markets to deliver high quality and high-value-added goods and services. International investors are committed to the UK because they recognise our workers' skills, our flexible and adaptable working practices and our good labour relations. They value our low tax base. Investors know that the Government is committed to a lasting economic stability.
Inward investment makes an enormous contribution to our country. Overseas owned companies make up less than 2% of all UK enterprises but contribute 19% of employment, 28% of net output and 40% of the Financial Times’ top 100 UK exporters. But the full story of the benefits of inward investment to the UK goes further than the facts and figures reveal. It’s not just the stable economy, skilled work force and scientific base that attracts companies to the UK, but also a combination of innovation, technology and creativity that makes the UK the number one investment location in Europe.
As I said earlier, the UK is the biggest European investor in Korea. Investing in Korea requires effort. There are challenges for all foreign businesses. But as our speakers will show, those with patience, determination and good preparation can succeed, as UK companies have already.
Many foreign firms are already riding the Korean tiger: by one account, half of all Fortune Global 500 firms have a presence there. There are notable success stories, some of whom are with us today. And there are Korean agencies, including KOTRA (the Korea Trade and Investment Promotion Agency) and KISC (the Korea Investment Service Centre) and the Office of the Investment Ombudsman who are also there to help, along with our own Embassy.
In particular, the fact that over $45 billion of FDI has flowed into Korea since the start of 1998 is the best testimony to the opportunities. And firms from the EU have invested the most since 1998. These are genuinely radical changes, benefiting Korea and its foreign partners. I very much hope that those of you who have considered the market so far may be encouraged to take a further look and ride the Korean tiger.