Eight out of 10 South Korean companies reported an interest in continuing or expanding investments in Vietnam, which shows that Korean companies are still drawn to the Vietnamese market despite deteriorating conditions.
The Korea Chamber of Commerce & Industry (KCCI) conducted a survey on 154 Korean firms with branches in Vietnam and published the results on Tuesday. According to the survey, 66.9% of the respondents agreed that the business environment was going downhill while 9.1% said the conditions were severe, as the nation saw a steep fall in foreign currency reserves and faces a severe devaluation of its currency.
The biggest factor harming the business environment was rising costs due to inflation (50%), followed by weakening price competitiveness induced by falling exchange rates (14.9%), and withering consumption due to stagnant economy (14.3%).
Yet, Korean firms still found Vietnam to be an attractive destination for investments notwithstanding the obstacles. 71.4% of the surveyed companies replied that they were planning to maintain their current investment levels, while 15.6% were planning to expand investments, adding up to a total of 87% who were planning to stay in Vietnam.
If Vietnams business environment were to worsen even further, 15.6% of the surveyed said they would choose Myanmar as the destination for relocation, followed by Cambodia (10.4%), Laos (5.2%), and Bangladesh (1.3%).
POSCO, South Koreas largest steel maker, will be raising the price of primary steel products by 160,000 won ($146.5) per ton, starting this Friday. This hike is expected to add pressure to Koreas auto, shipbuilding, and construction sector, which have a high reliance on steel.
This upward climb is much steeper than previous estimates (130,000 won ~ 150,000 won), and increases the burden of production cost for shipbuilders, who require large amounts of steel.
POSCO announced on Tuesday that it will be raising the price of core steel products in the likes of hot rolled steel, cold rolled steel, and steel plates by up to 17.8%, and notified its clients. The new bill will apply for product orders received after this Friday.
The cost of hot rolled steel plates will rise from 900,000 won to 1.06 million won per ton (17.8%), while the prices climb from 950,000 won to 1.11 million won (16.8%) for shipbuilding steel plates, and from 1.02 million won to 1.18 million won (15.7%) for cold rolled plates.
"The nonstop rise in raw material prices is pressuring POSCO to jack up its own asking price from the second quarter (Q2)," said an industry official. "We expect similar courses for Hyundai Steel, Dongguk Steel, and other steel producers."
POSCO has been alarmed by soaring costs of raw materials such as iron ore and bituminous coal, which has heaved up production costs to take a 80% share of the final listing price.
POSCOs operating profit, which had once surpassed 20%, had made a sudden drop to 7.1% by Q4 of last year due to the companys price freeze policy and rising production costs. Industry experts say POSCOs decision to raise prices was driven by projections of an even lower operating profit in the singledigit range.
The three East Asian exporters - South Korea, China, and Japan - are facing cutthroat rivalry in India, the world's second most populous nation, as India starts to enlarge imports. Fittingly, critics are urging for better strategies for Korean firms to ensure that they come out top in this race.
The Institute for International Trade (IIT), a research division of the Korea International Trade Association (KITA), published a report in which it states that Korea's exports to India grew nine-folds in the past 10 years, while Korea's share in India's total imports grew from 1.8% to 3.0%.
During the same period, China saw a 20.5 fold growth in exports, to become the No. 1 exporter to India with a 10.7% share of India's aggregate imports.
Japan's exports grew 3.7 times, but its market share fell from 3.6% to 2.3%. This figure is not including imports from Japan-owned manufacturing bases in Southeast Asia, the IIT clarified. This rivalry is expected to intensify, as the three countries tend to have more similarities with each other than any other core exporters.
China is expected to pursue aggressive market expansion into electronics, parts, and mechanics. In the steel sector, Japan is seeking joint investments to extend its hold in the Indian market, while China is starting to consolidate large steel giants and focus on high value-added products.
For auto parts, which rank highest in both Korea and Japan's exports, there will be almost no direct competition thanks to vertical integration in the sector. However, the companies need to prepare against greater sourcing or diversification by global auto firms in the local market, advised the report.
In a report on global economy and Korean economy in 2011, the Samsung Economic Research Institute (SERI) corrected its forecast on South Koreas growth rate from 3.8% to 4.3%. Figures on consumer price inflation were adjusted at a steeper rate, from the lower 3% range to 4.1%.
SERIs numbers were lower for growth rate and higher for inflations when compared to forecasts published by the Bank of Korea (4.5% and 3.9%, respectively).
"Concerns on inflation and the Japanese quake will act as obstacles hindering growth. On the other hand, stimulus policies by the US are yielding better results than expected and our exports are still thriving, which means stable growth in the 4% range is still possible," said a senior researcher of SERI.
The institute predicted lower growth in the first half (3.7%) and higher growth in the second half (4.7%). In contrast, consumer inflation will hit higher in the first half (4.5%) and fall to 3.7% in the second half as price hikes in raw materials start to slow down, said SERI.
SERI also predicted the average won-to-dollar exchange rate to stay in the 1,060 won range, which hints at a strong won throughout the year. Weaker dollar will help raise trade surplus, while finance authorities will refrain from interfering in the foreign exchange market in order to calm prices, the institute explained.
- Some Republicans are pressuring Obama to submit the Korea FTA with other trade pacts
The Barack Obama administration said Tuesday the United States pending free trade deals with Korea and Panama are ready for congressional approval.
"In terms of packages that are now ready to move forward, where we have clearance on the implementing legislation and then the preconditions have been met, that is true of both Korea and Panama," Michael Froman, deputy national security adviser for international economics, said during a conference call.
Fromans remarks come as some congressional Republicans are pressuring Obama to submit the Korea free trade agreement (FTA) together with similar deals with Panama and Colombia, threatening to otherwise block Obamas nomination for Commerce Secretary Gary Lockes replacement. Locke has been appointed U.S. Ambassador to China.
An agreement with Panama took effect Monday, allowing exchanges of tax information to stave off tax evasion in the Latin American state often criticized for serving as a tax haven.
Washington also reached a new deal with Bogota early this month on labor rights, which have served as a stumbling block to the trade agreement with Colombias congressional approval since its signing in 2007.
Washington and Seoul produced a supplemental deal in December to address U.S. concerns over lopsided auto trade, the biggest hurdle to congressional approval. The deal calls for a delayed phaseout of auto tariffs in return for Washingtons concessions on pork and medicine.
Froman fell short of presenting a timeline for the submission of the Korea FTA to Congress for deliberation.
When asked about the administrations pledge to clear the Korea FTA through Congress by July 1, Froman said, "That will be part of the discussion we have between the administration and Congress on how to sequence, time and package the whole trade agenda."
U.S. Trade Representative Ron Kirk has urged Congress to approve the Korea deal "this spring" so as not to lag behind the European Union, which ratified a similar deal with Seoul set to take effect in July.
The top U.S. trade official last week repeated calls on Congress to move "now" to ratify the Korea deal, saying similar deals with Colombia and Panama will be ready "in a matter of weeks."
The strong South Korean won, rising international commodity prices and higher borrowing rates will pose a threat to Koreas thriving export market, according to a report.
Korea International Trade Association (KITA)s Institute of International Trade pointed to the currently rising commodity prices, the strong won and higher interest rates as factors that will have negative impacts on the countrys exports in a report that surveyed 325 domestic businesses, released on Sunday.
The Korean won to U.S. dollar exchange rates are hovering below 1,131.1 won, the appropriate exchange rate, and are even forecast to fall to 1,070.3 won, the breaking even point (BEP) exchange rate. In addition to the strong won, the soaring commodity prices are causing manufacturing costs to climb, posing adverse effects to exports of Korean businesses, the report analyzed.
About 33% of the surveyed businesses projected that exports will fall by one to five percent from their target exports, if the exchange rates remain below 1,100 won. 30% of the respondents said that they would have to give up exporting products, if oil prices reach $131~$140 per barrel.
The strong won will hurt the countrys key export sectors, the automobile, shipbuilding and home appliance industries, while soars in commodity prices will deal a blow to the petrochemical, nonmetal and steel industries that are highly sensitive to rising manufacturing costs.
Higher borrowing rates will cause investments and return on investment to decrease due to burden of repaying high interest rates, the report said.
"Impacts from the three highs are not visible yet, but if the trend continues, expansion of demand resulted from global recovery will be offset and export momentum may slow down. Korea needs to prepare measures against a possibility of falls in profitability and sluggish exports that could be triggered by pioneering new markets and free trade agreements (FTAs) with other countries," an official from the research center said.
South Koreas free trade agreements (FTAs) take only a 15% share of the nations overall trade, which amounts to less than a third of the global average.
FTA commerce took only 14.8% share of Koreas overall trade, which is 35% points short of the global average (49.2%), the Institute for International Trade (IIT) of the Korea International Trade Association (KITA) reported on Monday after it surveyed 2009 trade statistics by country.
In terms of FTA shares, Korea came in last among the worlds top 10 trading countries, which includes the US, China, Japan, and Germany.
EU countries in the likes of Germany, France, and Italy saw high levels of intra-trade among members, which boosted their FTA shares to more than 70%. Figures for the US were more than twice the figures for Korea (34.1%), while China and Japan also scored higher at 19.2% and 16.5% each.
However, Koreas number will spike to 35.1%, outpacing both China and Japan, once the FTAs with the EU, US, and Peru are successfully ratified by the National Assembly and put into effect.
Once Korea completes negotiations with the seven other pending FTA deals with 12 countries including Australia, Columbia, Turkey, New Zealand, Canada, Mexico, and the Gulf Cooperation Council (GCC) countries, the nations FTA-trade ratio will soar to near global average levels, the report forecast.
Office of Commercial Affairs, Royal Thai Embassy in Korea
Source : http://www.depthai.go.th