Office of Commercial Affairs,
Royal Thai Embassy in Korea
1. Subject: Korea maintains tough stance on beef imports - ‘Korea respects the views of farmers in dealing with [the rice market]’
Date: October 25, 2010
Source: JoongAng Daily
The Ministry for Food, Agriculture, Forestry and Fisheries will apply stricter standards on beef imports from Canada even if it lifts bans on Canadian beef, said Agriculture Minister Yoo Jeong-bok.
“We cannot overlook the fact that BSE [mad cow disease] occurred in that country and we are considering tougher rules on beef imports from Canada than from the United States.
We are discussing what kinds of actions should be taken when BSE occurs again.
We also are reviewing several options, including expanding the scope of banned beef parts.”Yoo said.
The fourth round of negotiations with Canada fell apart on Saturday over disagreements on how to deal with possible future outbreaks of mad cow disease and Canada’s ongoing case against Korea at the World Trade Organization.
Delegates from the Canadian Food Inspection Agency were in Seoul for three-day talks regarding lifting the ban on Canadian beef, which has been in place since May 21, 2003, after bovine spongiform encephalopathy, or mad cow disease, broke out in Canada.
Canada wanted to resume exports on the grounds that it was branded a “controlled risk” country in 2007 by the Paris-based Organization for Animal Health, meaning it is able to export beef. Canada brought the dispute to the WTO in September 2009.
Regarding demands by some U.S. lawmakers on fully opening the Korean market to U.S. beef, Yoo said there hasn’t been an official request to fully open the market.
“On the import conditions agreed upon with the United States, a full market opening can only be considered when American beef regains the trust of Korean consumers.” U.S. beef from cattle younger than 30 months is now allowed to be imported, but the U.S. wants the age limit to be eliminated. Korea claims that older cattle can be infected with BSE.
Yoo also said that his ministry is preparing to accelerate opening the rice market from 2012 to 2015. The 2015 deadline was established during the Uruguay Round of international trade negotiations under the WTO.
Yoo said he saw no need to wait until 2015. “We’ve maintained our position that we would respect the views of farmers in dealing with this issue,” Yoo said. “The price of international rice will rise when the market is completely open and the gap between domestic and international prices is narrowing.
Rice imports by the private sector are less likely since a high tariff will be imposed on rice imports. There are already discussions on opening the market earlier than scheduled.” The government agreed with the WTO to import rice and gradually increase imports by 20,000 tons a year in return for delaying opening the market fully by 2015.
Despite a huge surplus of domestic rice production, Korea still needs to import 368,006 tons of rice in 2012 before fully opening the market in 2015. Korea is allowed to impose a set of tariffs on rice under the WTO agreement.
Since the price for imported rice stands at 71,000 won ($63) per 80 kilograms (176 pounds) and the domestic price is 138,000 won for the same amount, the government believes that tariffs result in similar prices for domestic and imported rice.
As a result, it believes that rice farmers will not be hurt by imports if the local rice market is fully opened. Yoo also said the recent sharp rise in the price of Napa cabbage, the main ingredient in kimchi, has forced the Agriculture Ministry to re-examine how it assesses farm output to better deal with price volatility.
“So far, the ministry has studied the size of farmland to determine supply, but from now on we are going to focus on assessing market price,” Yoo said. “We will try to determine the price movements of certain agricultural produce by measuring supply and demand through statistical analysis. We will also create guidelines on how to respond to sudden changes in supply and demand.”
Yoo said the guidelines will include arranging the import of agricultural products from other countries when there is a price surge in local produce. In response to the skyrocketing price of cabbage last month, the ministry temporarily waived tariffs on Chinese cabbage imports.
However, wholesale cabbage prices plunged to 2,869 won ($2.55) as of last Friday from 12,079 won on Sept. 27, according to the ministry.
With the sudden drop in the price of locally grown cabbages, Chinese cabbage imports have become unpopular and are being sold to kimchi producers at a deep discount.
The ministry is reviewing whether it should restore tariffs on the imports.
The ministry has been heavily criticized by the media for its failure to foresee cabbage price movements, but the minister said it was because of the unusually heavy rainfall in late September as well as global warming.
“Unlike mass-produced goods, it is hard to accurately assess the supply and demand of farm goods,” Yoo said. “The situation is similar for other produce as well.
Apples used to be grown only in southern regions such as Daegu and Yeongju, but they are now being cultivated in the Chungcheong provinces and even in Pyeongchang in Gangwon.
“The walleye pollock is disappearing near our coasts and is getting imported from Russia, while the harvest of other seafood like mackerel and squid is increasing.
“As the agricultural environment changes rapidly, we are preparing for a set of coordinated policies together with other ministries.” Yoo also talked about reforming farm subsidies.
The government has offered subsidies to farmers to fill the gap between market and producer prices since 2005. Farm subsidies stand at 2.2 trillion won and rice subsidies make up 84 percent of the total. “If the amount of subsidies is reduced, the government has to come up with an alternative support system,” Yoo said.
“So, it is not a matter of whether we should increase or reduce it. We just need to find out what kind of policy is best to revive the farm economy.”
2. Subject: Local retailers look for life overseas
Date: October 26, 2010
Source: JoongAng Daily Newspaper
An excited crowd rushes through the entrance waving coupons and jostling for shopping baskets at the grand opening of a discount store in Indonesia.
Lotte Mart’s Gandaria City outlet opened its doors in Jakarta on Aug. 5, which marked the 20th outlet the discount store chain had opened in Indonesia and its 100th location abroad. That number has now increased to 102 foreign outlets, far surpassing Lotte Mart’s number of stores in Korea - 86.
Though the overseas expansion of domestic retail giants is only a recent phenomenon, the pace has accelerated drastically.
Their attempts to take root in foreign markets have been seen in multiple retail fields - from discount store chains and department stores to home shopping networks.
Driven by market saturation, slowing growth rates and a serendipitous emergence of active consumer markets in nearby countries, local retailers have evinced both the necessity and the will to continue expanding into overseas markets.
But the not-so-hidden secret of local retailers’ overseas ventures is that many are not turning a profit. Although its revenues are improving, E-Mart’s China unit has steadily recorded losses - beginning with a net loss of 7 billion won ($6.27 million) in 2005, which rose to a net loss of 60 billion won in 2009, according to the latest data from Hana Daetoo Securities.
Lotte Mart has expanded both its size and its revenues overseas - its Indonesian operations recorded a net profit of 10 billion won last year - but its overall foreign business still recorded losses of 21.2 billion won as of 2009.
One of the few reputed winners in the foreign market is CJ O Shopping, which reported a net profit of 17 billion won in 2009 from its overseas operations last year - more than double their profit in 2008. Foreign business as a percentage of CJ O Shopping’s overall reported revenue has also been growing steadily, from just 1.5 percent of overall revenue in 2004 to 24.3 percent in 2009.
2.1. A crowded domestic market Since Korea completed deregulating its retail industry in 1996, the sector has witnessed both rapid growth and transformation.
What was once a two-horse race between department stores selling high-end goods and traditional markets offering everything else, the retail scene in Korea transformed rapidly as large discount chains, convenience stores, home shopping networks and online malls rushed onto the scene.
In particular, discount store chains carved out their own sector and in less than a decade surpassed mainstays such as department stores and traditional markets to become the dominant shopping hot spots.
Discount stores boasted annual average revenue growth of 21 percent between 1999 and 2005, and became Korea’s largest retail sector in 2003.
Nonstore retailers, such as home shopping networks, cleared an annual average growth rate of a whopping 45 percent in revenue during the same period, overtaking department stores as the second-largest retail sector in 2005.
In a single decade, the landscape of Korea’s retail industry had completely changed. But 2006 was the turning point when the landscape changed for the worse.
The word “saturation” has often been evoked in the national media to describe the domestic retail industry, and there has been much evidence of it since 2006.
For the first time in over a decade, high-flying retailers saw growth rates slow, both by revenue and the number of outlets opened.
In the case of discount store chains, eye-popping revenue growth of 52 percent trickled down to just 8 percent in 2006.
It was in fact the first time the young industry had ever recorded single-digit growth. Since then, the sector has shown some signs of lasting congestion, with just a 5.7 percent growth rate in 2008 and 4 percent last year.
Korea’s retail companies are fast expanding overseas. Pictured is the thoroughfare outside Lotte Mart South Saigon, the discount store chain’s first outlet in Vietnam. [Provided by the company] Similarly, new store openings plummeted from 40.5 percent in 2000 to 6.7 percent in 2007, 8.5 percent in 2008 and 3 percent in 2009.
Beset by rapidly dwindling growth potential in the domestic retail market, local corporations turned their sights to nearby emerging markets.
With China opening its retail market to foreign competition in 2004 and Vietnam doing the same in 2009, the prospect of entering foreign markets became far more attractive to many local companies. “The fact is, the domestic market is small,” said Baek In-soo, chairman of Lotte Department Store’s Retail Industry Research Institute.
“It’s becoming increasingly difficult to hope for the double-digit growth rates of the past for the domestic consumer market, due to an aging society and low birthrates.
“The subsequent strategic choice lies between expanding geographical frontiers or developing a new form of retail that fits the changing needs of the customer,” he added.
So far, local retail companies have concentrated on consumer markets in China, India, Indonesia, Russia and Vietnam - all emerging nations with large potential for growth, a comparatively underdeveloped retail industry, and consumer markets where global retail behemoths from advanced nations have yet to seize dominance.
2.2. Reaching globally The initial foray into global markets by Korean retail giants took place with Shinsegae Group’s E-Mart, which established a Shanghai, China, outlet in February 1997.
However, the subsequent Asian financial crisis stalled retailers’ overseas ambitions. It was not until the mid-2000s that the retail industry re-established its international push.
Local discount chains have been the most voracious in expanding into overseas markets. E-Mart, Lotte Mart, and Nongshim Group’s MegaMart are all currently operating outlets on foreign soil.
In 2002, E-Mart began to refocus on the Chinese market, opening its second Shanghai outlet in 2004 and steadily increasing its locations on the mainland.
The company currently operates 27 stores in China. Unlike E-Mart, which tends to take its domestic store model and adapt it to local conditions, Lotte Mart - the discount store chain of Lotte Group - used a series of mergers and acquisitions to gain its foothold.
Lotte Mart was a full decade behind E-Mart in overseas expansion when it acquired eight stores in China from the Makro retail chain of the Netherlands in 2007.
But it has since then shown a much bigger appetite for foreign operations. In 2008, Lotte Mart became the first Korean retail company to enter Indonesia and Vietnam. It also acquired the Chinese retail chain Times in 2009.
Having first entered China in 2001, MegaMart currently operates three outlets in China and opened its first American outlet in Atlanta earlier this month. “Having determined that we need at least 10 outlets in terms of economies of scale, [we] plan to add outlets in stages in the southeastern United States such as Alabama and Tennessee,” said Kang Sung-kyun, CEO of MegaMart.
Among domestic department stores, Lotte Department Store is alone in operating overseas outlets, with two department stores in Beijing and Moscow.
In addition, plans to open two new Chinese outlets in Tianjin and Shenyang, plus one in Hanoi, Vietnam, by 2013 have also been announced.
Korean home shopping companies have demonstrated an appetite for growth in foreign markets. In 2004, CJ O Shopping created DongFang CJ as a joint venture with Shanghai Media Group, becoming the first in the home shopping industry to operate a unit overseas.
In addition, it established TianTian CJ in Tianjin, China, in 2008, and joined forces with Star India in 2009 to launch Star CJ.
The latter’s network, Star CJ Alive, began broadcasting on Aug. 1. In 2005, GS Home Shopping established Chungqing GS Shopping network in China, although the network stopped broadcasting in April of this year.
It also bought a stake in HomeShop18, a 24-hour shopping channel in India that is run by the Indian media group Network 18, as a strategic investment in 2009. Meanwhile, Lotte Home Shopping established MoMo Home Shopping with Taiwan’s Fubon Financial Holding Co. in 2005, and NS Home Shopping entered the American home shopping market in 2009 to broadcast in the Los Angeles area in partnership with MBC America. 2.3. Only the beginning Local experts say that Korean retailers’ overseas operations are still in their nascence.
“It’s just the beginning,” said Kim Sook-kyung, guest researcher specializing in retail at the Korea Institute for Industrial Economics and Trade. “Taking into account domestic market conditions as well as the ripple effect entering foreign markets can have, retail companies’ venture into foreign markets should be continued,” Kim suggested.
3. Subject: Korean economy hits the buffers on growth
Date: October 27, 2010
Source: Newsys
Korea’s economy slowed sharply in the third quarter, indicating a loss of momentum that is likely to extend into next year. The Bank of Korea reported that the gross domestic product grew 0.7 percent in the July-September period from the second quarter, when the economy achieved a quarter-on-quarter rate of 1.4 percent.
On an annual basis, the economy grew by 4.5 percent in the third quarter, according to the preliminary estimate. Even with the slowing pace of growth, the central bank said the economy will likely have a full-year growth rate of 6 percent because of a recovery in private consumption.
Exports, which account for about half of the GDP, gained 1.9 percent on-quarter in the third quarter after expanding 7 percent in the second quarter.
Private spending accelerated to a 1.3 percent on-quarter growth rate from 0.8 percent in the preceding quarter.
Facility investment expanded 6.3 percent after rising 9.1 percent in the second quarter, and construction investment went up 1.5 percent after contracting 3.6 percent in the second quarter.
Strong domestic demand is expected to increase inflationary pressure, with consumer inflation likely to surpass 3 percent in the fourth quarter, the central bank said. Hwang In-sung, a researcher at the Samsung Economic Research Institute, said that growth had been affected by sluggish exports in the auto and semiconductor sectors, which could continue until at least the first quarter of next year.
Most economists believe that the latest data shows that Korea is entering a period of slower growth, “Although the pick-up in private spending is encouraging, the effects of government stimulus spending that earlier boosted growth are fading away and the slowing global economy is expected to reduce exports,” said Yoo Byung-kyu, an analyst at Hyundai Research Institute. Nomura, the Japanese investment bank, estimates that Korea’s growth rate will contract by 0.1 percent in the fourth quarter, but will rebound to 1.3 percent growth in the first quarter of next year. “Weaker exports and a slump in housing activity, along with inventory adjustment, will likely result in a slight decline in the fourth quarter GDP,” said Kwon Young-sun, senior economist at Nomura International, yesterday.
4. Subject: Indonesia is newest base for Posco
Date: October 28, 2010
Source: Mail Business Newspaper
Posco is looking to make Indonesia its industrial base in Southeast Asia, breaking ground yesterday on a giant steel mill in this region of western Java.“The global economy is shifting from North America to Asia, and in the process Korea, China and Japan have been leading the steel industry in Asia,” said Chung Joon-yang, Posco’s chairman. “We have turned our sights to Indonesia where demand is still growing, unlike Korea, China and Japan where there is excess supply.
We believe that this is the appropriate time to secure the lead by entering Indonesia ahead of competitors like Japan.” Chung headed the groundbreaking ceremony of the joint-venture steel plant in Cilegon, a coastal industrial city in Banten Province.
Chung said Posco set its sights on Indonesia 15 years ago but delayed plans because of the Asian financial crisis in the late-1990s.
Posco and state-run Krakatau Steel agreed to the joint venture in August, with Posco holding a 70 percent stake. Although Krakatau Steel currently holds a 30 percent stake, it may eventually increase its share to 45 percent, according to Posco.
The plant will be the first blast-furnace integrated steel mill in Southeast Asia. Blast furnaces produce higher quality steel since they use iron ore rather than scrap metal used in electric furnaces.
Posco will be investing $2.7 billion in the first phase of construction, which will be completed by the end of 2013 and result in a production capacity of 3 million tons.
The second construction phase, details of which have not yet been finalized, will double its production capacity to 6 million tons. Nearly 80 percent of the steel produced at the plant will be sold in the Indonesian market, while the rest will be exported.
In recent years, Indonesia’s economy has enjoyed an average growth rate of around 6 percent. Before the global economic crisis, its GDP grew 6.3 percent in 2007 and 6.1 percent in 2008.
But it slowed to around 4 percent last year. The government in Jakarta this year estimates growth of 5 percent to 5.5 percent, while the World Bank predicts 5.6 percent growth.
Chung said Posco is not planning to limit its operations in Indonesia to steel production and wants to expand into other business sectors, including infrastructure construction, resource development and renewable energy development.
“There are 18,000 islands in Indonesia, but the resources on these islands aren’t properly developed,” Chung said. According to a Posco official, the company’s construction unit, Posco E&C, is hoping to participate in a project spearheaded by the Banten government to build a bridge connecting Sumatra and Java.
Chung said Posco has learned many lessons from the problems it is facing as it builds a steel plant in India. “In any country there is always opposition to any development project because of different interest groups,” Chung said. “It’s just a matter of whether the level of opposition is strong or weak.”The chairman said cooperation with the central government and local government is essential, as is building relations within the local community.
“We have gained much experience in India,” Chung said. “From now on, we will conduct a more mature corporate social responsibility policy.” Posco’s Indian steel plant, which is reported to be the largest investment in India, is currently on hold because of strong opposition from local residents and the country’s environment ministry.
5. Subject: Coffee outlets become marketing battlefield
Date: October 29, 2010
Source: Yonhap News
Park Ji-eun noticed something odd when she visited a coffee shop near the Galleria Department Store in Apgujeong-dong, southern Seoul. Coffee and other beverages were named after Kia Motors vehicles: “Forte Americano” and “Koup Blueberry Latte.” The coffee shop’s door and windows were also plastered with pictures of Fortes.
Searching for new sources of revenue, coffee chains have opened themselves up to in-store advertising. Competition is fierce among local and foreign coffee franchises. As many as 12 major franchises including Caffe Bene, Angel In Us, Hollys, Starbucks and The Coffee Bean and Tea Leaf operate over 1,000 outlets in Seoul.
Within some coffee shops, there are even rooms where customers can sample products that companies are promoting. Corporations are especially taking advantage of coffee shops’ young customer base and high foot traffic.
“Franchise coffee shops have high brand exposure effects since most are located in areas with large [foot traffic],” said an industry source.
According to Trend Monitor, a local survey research firm, the number of daily visitors to coffee shops in Seoul is estimated at 350,000.
Twenty-four percent of adults aged between 19 and 44 were found to be visiting coffee shops two to three times a week, while another 23 percent visit once a week.
Kia Motors has partnered with Caffe Bene to promote its newly released Forte GDI. The walls of Caffe Bene’s branches at Galleria, Sogong-dong and Nowon District are covered with large illustrations of the new models.
“[The marketing] is targeting females in their 20s and 30s,” said the Kia Motors official who came up with the marketing concept.
“We have decided to carry out such market activities taking into account that they [females in their 20s and 30s] tend to focus more on emotional experiences than complicated explanations on vehicles such as engine specifications or fuel efficiency.” KT has set up shop in De Chocolate’s branch in Apgujeong-dong, where customers can try out an iPhone 4 and Tablet PC.
Hyundai Motor has been displaying its vehicle, the i30, in The Coffee Bean and Tea Leaf’s Sinsa-dong branch. The Coffee Bean and Tea Leaf is also running advertisements in 170 branches nationwide on PDP televisions installed in its branches. They play a 15-second commercial up to 150 times a day.
Coffee shops are also being used as music distribution channels.
Three-man band House Rulez made an album called “Tom n Toms Coffee Break” for Tom N Toms coffee chain. All songs are titled in accordance with coffee types such as Espresso, Caramel Macchiato and Jasmine.
Mnet, a Korean cable music channel, is operating “Mnet Zone” in the Gangnam branch of A Twosome Place. After sampling music at the coffee franchise, customers can purchase CDs. Universal Music Korea also sells albums in 40 Starbucks branches.
Source : http://www.depthai.go.th