Office of Commercial Affairs,
Royal Thai Embassy in Korea
1. Subject: KERI says growth to slow next year
Date: November 1, 2010
Source: JoongAng Daily
The growth of Korea’s GDP will slow down to 4.1 percent next year from 6.1 percent this year, according to the Korea Economic Research Institute.
KERI said in a report yesterday that the expected slowdown in Asia’s fourth-largest economy was due to the fading effects of government stimulus measures, weaker demand in main export markets such as the U.S. and China and the unresolved sovereign debt crisis in Europe. “Considering that average GDP growth for the last ten years [2001-2010] was 4.2 percent, the 4.1 percent growth rate is still close to the level of potential growth,” said KERI.
KERI’s forecast is lower than the Korean government’s projection of 5 percent, the Bank of Korea’s 4.5 percent, and state-run Korea Development Institute’s 4.4 percent.
Private economic think tanks have lowered their forecasts taking into consideration external downside risks.
LG Economic Research Institute estimates a 4 percent growth rate for next year and Samsung Economic Research Institute estimates 3.8 percent.
Nonetheless, Finance Minister Yoon Jeung-hyun reaffirmed last week in a meeting with reporters that 5 percent growth should be attainable for the next year, as strong business investments and outbound shipments will support the economy.
According to KERI, private consumption, one of the main economic growth engines, will slow from 4.2 percent this year to 3.8 percent next year due to an expected rise in interest rates and a drop in asset prices.
Korea’s facility investment will slow dramatically from 23 percent this year to just 7 percent next year as businesses cut back investments amid uncertainties in the global economy.
2. Subject: Upgrading convenience store image
Date: November 1, 2010
Source: JoongAng Daily Newspaper
Walking into a FamilyMart located in Daebyeon Harbor in Gijang County, Busan, a customer will see something wholly unexpected in a convenience store: fishing lures.
Situated near a bus stop within the harbor area, the FamilyMart opened in April as a so-called “fishing-tackle convenience store,” specializing in fishing goods to attract the high number of fishermen who pass by.
The store sells 320 kinds of fishing goods and 15 varieties of bait, and the selection ranges from hooks costing 1,000 won ($0.89) to 50,000-won reels.
The convenience store also stocks a large collection of groceries, makgeolli and fresh bread to provide for every craving a fisherman may have while fishing. Local convenience store chains are increasingly breaking the mold of their cookie-cutter business model to diversify based on the location of the store.
Selling hot burgers in an amusement park and high-end goods in the headquarters of Samsung Electronics, fierce competition and threats of market saturation have caused convenience stores to adapt their offerings and even interior design to their surroundings.
For example, Bokwang FamilyMart - the No. 1 convenience store chain in Korea in terms of market share - is currently operating 1,100 of its roughly 5,200 stores nationwide as so-called “specialty” shops, with plans to expand this strategy to more locations.
Beside a convenience store specializing in fishing goods, there is also a “lottery FamilyMart” decked out with both scratch and online lottery tickets, a computer offering lottery information and a TV for sports games.
GS25, the No. 2 convenience store chain, is operating 500 cafe-type stores that brew fresh coffee within the store and some 300 bakery-type stores that bake 20 varieties of bread three times a day.
Partnering with BBQ, a chicken-delivery brand, some GS25 stores cook and sell chicken within the shop. Meanwhile, 7-Eleven and Buy the Way, both convenience store chains owned by Korea Seven, a Lotte Group subsidiary, are operating 40 bakery-type stores and 100 “hot food” locations selling burgers, pizzas and hot dogs.
The company plans to increase their number to 100 and 400, respectively by year’s end.
These specialized convenience stores are multiplying as each location attempts to set itself apart in a rapidly expanding industry where there is little room for growth.
While in 2000 there were 16,977 people per convenience store in Korea, the number has fallen to 3,523 people per convenience store in 2009 according to the Korea Chain Store Association.
“Specialized convenience stores account for about 25 percent more revenue than a regular convenience store, and are gaining popularity among store operators,” said Park Jae-gyu at Bokwang FamilyMart.
3. Subject: Produce, fish prices jumped 49% in October
Date: November 2, 2010
Source: Mail Economic Newspaper
The skyrocketing cost of cabbage, radishes, green onions, tomatoes and garlic led to the fastest year-on increase in Korea’s consumer price index in 20 months in October, raising concerns of inflationary pressure.
Overall prices of fresh produce and fish jumped 49.4 percent from a year before, the biggest rise since 1990 when the government started compiling the data, a government report said yesterday.
To deal with inflationary pressure, the government said yesterday that it intends to expand agricultural supplies by allowing a higher volume of imported goods, including garlic, chili peppers and radishes.
The price of gas for cooking and heating was lowered yesterday and liquefied petroleum gas prices will also be reduced.
According to Statistics Korea, the consumer price index shot up 4.1 percent last month from a year before. This is the fastest increase since February 2009 when the index rose by the same figure.
The index went up 0.2 percent from September. The rise was largely attributed to the soaring price of Napa cabbage, which leaped 261.5 percent in October from a year earlier.
Radish prices jumped even higher at 275.7 percent, followed by green onions (145.5 percent), tomatoes (115.4 percent) and garlic (102.5 percent).
The government said produce and fish prices were on the decline and overall inflation for the year would not exceed 3 percent.
The retail price of Napa cabbage, the main ingredient in kimchi, started climbing from 6,664 won ($6) on Sept. 15 to 7,184 won on Sept. 20, then to 10,425 won on Oct. 5 before falling to 3,770 won on Oct. 22.
“If the prices of vegetables continue to decline, consumer prices are going to fall this month,” Lee Eok-won, a director of the price policy team at the Ministry of Strategy and Finance, said in a statement.
“Fast economic recovery in the first half of the year led to increases in employment and household income, and this resulted in growing consumer demand,” Deputy Finance Minister Kang Ho-in said, explaining the price hikes.
“If inflation falls to around 3 percent in November and December, the overall rate of inflation for the year is likely to be about 3 percent, or even below.” However, the sharp gain in consumer prices last month is still expected to put pressure on the central bank to consider an interest rate increase when its policy makers meet on Nov. 16.
The Bank of Korea is aiming for a median inflation target of 3 percent with a margin of plus or minus 1 percentage point between 2010 and 2012. The central bank froze the interest rate at 2.25 percent for the third straight month in October because of the slowing global economic recovery and the local currency’s gain against the dollar.
Meanwhile, the government plans to raise imports of garlic, peppers, onions and radishes and cut tariffs on mackerel and walleye pollock to stabilize prices. The price of gas for heating and cooking was lowered 4.9 percent yesterday. The price of LPG will be cut by around 1 percent in November.
4. Subject: New record trade surplus - Export growth outpaces imports in October, setting trend
Date: November 3, 2010
Source: DongA Ilbo
Boosted by strong exports, Korea posted a record trade surplus of $6.91 billion in October, with the growth of exports outpacing imports, the Ministry of Knowledge Economy said yesterday.
Exports rose 29.9 percent to $44.12 billion from a year ago and imports jumped 22.4 percent to $37.21 billion. The previous record for the trade surplus was in June at $6.67 billion.
The trade surplus was up 38 percent from the previous month when it was $5.01 billion. Exports also hit a record high last month, breaking the previous record at $42.07 billion in June.
“Despite concerns of a possible slowdown in the country’s export growth, the increase was led by a rise in overseas orders for machinery, auto components, semiconductors, automobiles and ships,” said Kim Kyung-sik, deputy minister for trade and investment policy.
Exports for machinery rose 52.4 percent, automobile components 50.1 percent, semiconductors 33.1 percent, automobiles 32.8 percent, ships 22.6 percent and flat panel screens 8.8 percent.
Wireless telecommunications equipment reversed a decline in exports for the first time this year because of strong global demand for smartphones.
By region, exports to the United States rose by 71 percent for the first 20 days last month from a year earlier, while exports to the Middle East increased by 86.1 percent, Latin America by 64.3 percent and China by 33.8 percent.
The rise in Korea’s import demand was due to increased inflows of raw materials, including crude oil (10.9 percent), gas (22 percent) and coal (36.1 percent).
The ministry expects this year’s total trade surplus to reach an annual record high, exceeding last year’s figure of $40.4 billion.
The country’s trade surplus for the first 10 months was $35.97 billion, above the ministry’s full-year target of $32 billion. Meanwhile, the trade surplus increase comes amid lingering concerns that economic growth will soon face a slowdown due to global risks.
“In the case of October, there were more operating days - 2.5 days - which is partially the reason why exports increased,” Kim said, noting that nevertheless, Korea’s exports and imports will continue to grow by around 10 percent by the end of this year.
“The Korean won has appreciated relatively less than other neighboring countries, allowing Korean products to remain competitive in the global market.”
October marks the ninth month in a row the country’s trade balance has stayed in the black.
5. Subject: Retailers look forward to special Nov. events
Date: November 3, 2010
Source: Yonhap News
Cold weather has hit the nation this week, and on the streets of Seoul people can be seen bracing against the morning chill.
But as the temperature drops, local confectioners and retailers alike have a reason to celebrate. Two November events native to Korea - Pepero day and the CSATs - have the respective industries forecasting sales spikes and record revenues this year.
First, Pepero day on November 11 is expected to break all previous sales records this year. Lotte Confectionary, maker of the original slim chocolate-covered sticks called Pepero, is expecting their three-month revenue between September to November from this single snack to exceed 40 billion won ($36.4 million) for the first time.
This is partly attributed to Pepero day falling on a weekday. “The continued increases in Pepero day revenue is due to the fact that exchanging Pepero is an easy way to manage one’s popularity through comparatively low-cost gifts,” said an industry representative.
It is their explanation that since working professionals and students exchange Pepero gifts at offices or schools, the holiday’s sales tend to spike more on a weekday rather than over the weekend.
Meanwhile, for convenience stores Pepero day has overtaken Valentine’s day and White day (March 14) as the year’s single largest day for revenues since 2008, according to Korea Seven, which operates the convenience store chains 7-Eleven and Buy the Way.
Bokwang FamilyMart, the nation’s largest convenience store chain, is expecting their single-day revenue from selling Pepero day products alone to increase by 32 percent this year.
This follows a steady climb of Pepero day sales - the “holiday” posted a 28.8 percent on-year growth in 2009 and a whopping 72.2 percent growth in 2008 for the retail chain. Started in the mid-nineties amid a local fad of celebrating ersatz holidays, Pepero day reputedly falls on November 11 because the date, 11/11, looks like four sticks of Pepero standing up.
Wholesalers and retailers prepare for the unorthodox holiday by buying up Pepero three months before the day, according to Lotte Confectionary. November holds another rite-of-passage for Korean youth in the form of the College Scholastic Ability Test or CSAT.
Food companies are currently indulging in their annual marketing for the CSAT, which falls on November 18 this year. Taken by high school seniors as a key prerequisite in getting into a college of their choice, the highly competitive college application process in Korea has given rise to a culture of well-wishing gifts for CSAT takers.
6. Subject: Green industries are new target for SME growth - Kotra forecasts that opportunities exist in automotive components
Date: November 5, 2010
Source: Hankyung Economic
Cho Hwan-eik, the president of the Korea Trade-Investment Promotion Agency, stresses that this is an opportune moment for small and mid-size Korean companies to raise their competitiveness in green technologies.
Especially with Korea having to find new growth engines, the failure to miss out on collaboration with leading global green companies will hurt Korea’s economic legacy. The economy’s rapid rise after the Korean War was mainly based on manufacturing industries.
Although the manufacturing companies still dominate the nation’s economy, Korea has become a global powerhouse in the IT industry’s thanks to a boom in the sector in the late 1990s and early 2000. Cho says that Korea should repeat this strategy when it comes to green industries.
“Of course, there is still a lot more that we can do in the IT industry for another 20 to 30 years,” Cho said. “However if we concentrate too much on IT we could lose everything suddenly, and therefore we need to find new areas to sustain long-term growth.” In diversifying into the green industry, Cho notes that “Korea’s market share in the global green industry is only 1.4 percent.
Although in other areas we are surpassing Japan, when it comes to the green sector we are still behind. Additionally, competing with China in fields like solar energy is difficult because of their massive supply.” Cho, however, said Korea has a competitive edge against Japan and China in IT convergence.
“As the green industry is moving towards IT convergence, we could find a way where we could lead in areas like smart grids.” Kotra in the last two years has been holding various expos and events promoting small and mid-size Korean companies specializing in green industries.
It has also used the events to introduce these companies to global enterprises since the Lee Myung-bak administration has been promoting the green industry as a national priority since 2008.
“When Korea first entered the green business, it was focused on domestic-oriented policy,” Cho said. “But it was Kotra that first mentioned the importance in advancing the industry into the overseas market,” Cho said. “There is a strong potential for Korean parts companies to be suppliers to major green industry manufacturers.” Cho said that Kotra can play a key role because of its extensive international network. “We have a network whose history is nearly 50 years.
One of the first overseas businesses we opened, for example, was in Panama in 1969.” He said that Korean companies should also seize opportunities to tap the consumer market in China, where the focus by Korean manufacturers until now has been setting up production facilities rather than marketing.
“Many Korean companies that invested in China did so because of the cheap labor costs,” Cho said. “But for such companies to maintain competitiveness, they need to look inward to the market as well. Compared to Japan, Korea’s market share of consumer goods in China is low,” Cho said.
To improve support for Korean small and mid-sized companies, Kotra is planning to increase the number of business centers in China by setting up seven more next year.
Cho does not believe that monetary tightening by the Chinese central bank will reduce market demand in China and as a result reduce Korean exports there.
China accounts for 25 percent of Korea’s total exports. “It is certain that China in 2011 will continue to enjoy 8 to 9 percent GDP growth and even if the interest rate goes up and the Chinese currency appreciates, there is abundant liquidity,” Cho said. Thanks to Kotra, many Korean automotive part companies have become suppliers to global vehicle manufacturers.
In the last two years, orders have been secured with nine leading automakers, including General Motors and Volkswagen. “There are 10 major automobile companies and Honda is the only one that hasn’t given supply orders to Korean companies,” Cho said. “This is a significant step considering that just a couple of years ago the automotive parts they supplied were largely limited to tires.” He said the same could happen in other industries, adding that major global companies have strong faith in suppliers introduced by Kotra.
“We could expand Korean food industries by connecting with global retail companies and Kotra should be the driving force behind it,” Cho said. “When the competitiveness of small and medium companies is recognized by global companies, their position with Korean conglomerates will be improved as well,” Cho said. Besides promoting the small business sector, Kotra is encouraging the hiring of college graduates by foreign companies.
Kotra recently held a job fair at COEX where 95 foreign companies, including Google and DHL, participated. “We’re still at an early age,” Cho said. “It’s not easy but the point that we’re trying to open up opportunities for young people is meaningful.”
Source : http://www.depthai.go.th