Industrial production grew for ten consecutive months but the index of leading macroeconomic indicators fell for four straight months. According to Statistics of Korea, production in mining/manufactur -ing/gas/electricity in April rose 19.9% from a year earlier, maintaining an upward trend since swinging back to the positive territory by rising 0.7% in July 2009. The main contributor was strong exports. Increased production was particularly noticeable in semiconductors/associated parts (36.7%), automobiles (39.0%) and machinery equipment (49.3%). Compared to a month ago, April's industrial production increased by 0.2%, a sixth monthly increase, but the growth was much smaller than in March (1.7%) and February (3.4%).
The capacity utilization rate index of the manufacturing sector rose 14.1% from a year ago but dropped 0.2% from the previous month. The manufacturing sector's average capacity utilization ratio remained at a high level of 82.2% in April. Yet, the ratio fell 0.2 percentage point from March, when it posted the highest figure in six years. Production in the service sector climbed 3.8% from a year ago, the sixth consecutive rise, thanks to strong performance in services related to leisure activities.
Retail sales, which represent consumption trends, grew 7.1% from April 2009 thanks to more sales of passenger cars, computers and clothing but dropped 1.7% from March 2010, the second monthly drop. The month-on-month decline was mainly due to sales of passenger cars, which was leading consumption increase in the second half of 2009 on the back of tax breaks but fell for the fourth straight month this year. Unusually low temperature also affected the decline.
Facilities investment rose 25.7% from a year ago, the sixth consecutive rise, on the back of greater investments in semiconductors and transportation equipment. But the investment fell 5.9% from the previous month. The government attributed the month-on-month drop to the base effect of the record high investment index for general machinery in March. Domestic machinery orders (excluding shipbuilding orders), a leading indicator for facilities investment, increased 25.6% from a year earlier, marking the second consecutive rise.
Indicators on construction were still sluggish. Completed construction dropped 5.4% from a year ago and 7.0% from a month ago in April. A stagnant real estate economy caused inactivity in construction projects and the private sector.
While production and consumption indicators, which represent current economic conditions, are indicating strong performance, the index of leading macroeconomic indicators (in terms of year-on-year change) dropped 1.2 percentage points from the previous month for four straight months, heightening the possibility of the index of coincident macroeconomic indicators turning south in the second half.
An official from the Ministry of Strategy and Finance said, "Industrial activities will continue to improve in May as, in warmer weather conditions, there are increasing consumption, agricultural production and exports of the manufacturing sector."
Consumer prices increased at a stable pace in May, remaining under 3% growth for the fourth consecutive month. According to Statistics Korea, the consumer price index grew 2.7% in May from a year ago, up 0.1 percentage point from April but still below 3%. From last month, the consumer price index increased 0.1%, the lowest growth in seven months.
The index excluding oil and agricultural products increased 1.6% from the previous year and 0.2% from April. The cost of living index including food ascended 3% from May 2009 but declined 0.2% from the previous month. The index for fresh food such as fish, vegetable and fruit jumped 9.9% from a year earlier but dropped 3.2% from the previous month. Notably, prices for fresh vegetables surged up 14.1% from last year as unusually cold weather damaged their production.
Broken by category, prices of agricultural/livestock/fishery products increased 4.4% from a year ago. The year-on-year increase was particularly high for homebred beef (16.4% ), green onions (78.2%), oriental melon (42.7%), white radish (55.1%), and tomato (29.2%). In contrast, rice (-11%), pork (-8.9%), mackerel (-13%) and potato (-11.9%) sharply dropped.
Prices of industrial product prices also rose by 3.8% year-on-year. Prices for LPG for cars (19.3%), gold rings (17.2%) and diesel (14.9%) went up but desktop computers (-23%) and TVs (-20.7%) tumbled. Service prices also went up 1.9% from a year ago. Compared to a year ago, prices for housing, public service and individual service rose 1.7%, 1.4% and 2.1%, respectively. In the public service sector, taxi fares and city gas prices jumped 7.8% and 5.4%, respectively, while mobile phone calling rates fell 1.5%. In the individual service sector, education costs maintained an upward trend, with kindergarten fees and private education costs for university rising 6% and 4.9%, respectively.
Compared to the previous month, prices of agricultural/livestock/fishery products dropped 1.8%, whereas prices of industrial products and services edged up 0.5% and 0.1%, respectively.
The recent consumer price stability is being led by stabilizing service prices which has the most impact on consumer prices. An official at Statistics Korea said, "While an 11% increase in agricultural/livestock/fishery products and 3% rise in industrial products pushes up consumer prices by 1%, an increase of 1.6% in service prices raises consumer prices by 1%." Under these circumstances, June prices will be affected by agricultural/livestock/fishery products, he said. Since consumer prices normally fall in June, June's inflation will likely stay below 3%." The Ministry of Strategy and Finance also projected that despite a possible volatility due to supply instability factors such as oil prices, consumer prices will stay at a stable 2-3% range in June.
The unflagging popularity of makgeolli traditional rice wine has led to fierce competition among breweries. One new tactic: appeal to patriotic drinkers by using domestically produced rice.
Their move comes along with a new government requirement that all alcoholic beverages include place-of-origin labels for their ingredients starting in August.
Seoul Takju, the nation’s largest makgeolli company, famous for its Jangsoo Makgeolli brand, is currently building a large new brewery in Jincheon, North Chungcheong, to expand the percentage of its makgeolli made with local rice. Until now, the company has used mainly imported rice as it is more cost-effective, costing around 680 won per kilogram ($0.28 per pound) while Korean rice is almost triple that price at around 1,650 won per kilogram.
With the new regulations looming, Seoul Takju has decided “to use Korean rice to inspire greater confidence in our consumers.”
Its largest competitor Kook Soon Dang is also focusing its marketing on drinks produced with Korean rice in order to increase its market share.
Recently, it introduced a makgeolli made with local rice and has been emphasizing its high-quality products made from rice harvested less than one year before it is processed into beverages.
Several regional rice wine makers including Baesangmyun Brewery are already using Korean rice to produce makgeolli, though their market shares aren’t nationally significant.
Rice wine produced with Korean rice accounted for just 13.6 percent of the total makgeolli market last year, while more than a majority - 58.4 percent - of makgeolli was produced using imported rice flour and 23.8 percent from imported rice.
“New competition is expected to arise among rice wine breweries. And this time, the competition isn’t over price, it’s over quality,” said an industry official.
Should makgeolli producers use Korean rice, the price of the drink is expected to increase by 200 to 300 won per bottle. That price difference is less severe than the gap between imported and domestic rice itself because not much rice is actually used to make modern makgeolli.
Even if the price jumps a few hundred won, breweries expect consumers will prefer to purchase drinks made from locally produced rice, as an increasing number of consumers are placing more importance on the product quality than on the price.
“Using Korean rice will also help regional farmers sell their stocks of rice,” the official said.
Local rice farmers have been concerned over leftover rice due to falling prices and consumption amid a bumper crop.
Their worries were exacerbated when the South Korean government stopped sending rice to North Korea, as the relationship between the two countries grows ever colder.
According to the Ministry for Food, Agriculture, Forestry, and Fisheries, 1.28 million tons of rice are currently in storage across Korea, while the price of rice has dropped up to 16.3 percent this year from 2009.
More than three trillion won (2.4 billion U.S. dollars) will be invested by 2013 to promote service industry exports such as those of medical services, cultural content and information technology. This is according to a plan “to promote the service industry’s penetration into foreign markets” agreed on Wednesday at a government meeting on emergency countermeasures. The Export-Import Bank of Korea will expand loans to companies in the service sector to 350 billion won (279 million dollars) by 2013. Insurance on cultural exports for such companies will also be raised to 120 billion won (95.8 million dollars) and the comprehensive insurance for the service sector to 2.5 trillion won (2 billion dollars).
Insurance on cultural exports will be expanded from covering movies, TV dramas and games to publishing and computer graphics.
Nam Jin-ung, policy coordination director at the Strategy and Finance Ministry, said, “Government assistance has focused on manufacturing but we’ve come up with a comprehensive support measure for the service industry,” adding, “The measure will help health care, medical services, IT, and content to actively enter foreign markets.”
Service exports last year reached 58.51 billion dollars, or 13.5 percent of the country’s export volume. The figure is far less than those of advanced economies and lowers than the world average of 15.1 percent for 2008. Separately, a government program will pursue getting global recognition of domestically issued technical certificates. The cross-certification program will come first for game graphic and program technicians, wireless installation engineers, and medical and electronics engineers who have huge potential to enter overseas markets.
Prospects increased yesterday that Korea could win its second big overseas nuclear plant contract after Seoul signed a memorandum of understanding with Turkey to cooperate on nuclear power projects.
Turkey is expected to award a $10 billion nuclear power contract later this year.
If Korea gets the Turkish contract, it would follow its success in winning a $20 billion contract last December to supply the United Arab Emirates with four nuclear power plants by a consortium led by Korea Electric Power Corporation.
The U.A.E. deal established Korea as an emerging player in the international nuclear industry sector as it competes against established companies from the United States, Japan and France.
Choi Kyung-hwan, Korea’s knowledge economy minister, and Turkey’s Energy Minister Taner Yildiz signed the MOU for the construction of a nuclear power plant in Sinop, Turkey, which is located on the Black Sea.
This follows an agreement signed in March between Kepco and Turkey’s state-owned Electricity Generation to conduct technical studies for the construction of the Sinop plant.
A contract for the Sinop project could be signed in November once a bilateral study of the project is completed in August.
“The Turkish government has confirmed through the MOU the high possibility of the deal being given to Korea,” said Kim Young-hak, vice knowledge economy minister. “The MOU calls for an agreement on the deal’s commercial aspects by this fall.”
Korea operates more than 20 nuclear plants and has achieved an unblemished safety record, but it used its ability to undercut the prices of its rivals in winning the U.A.E. contract, said analysts.
Korea is hoping to win future nuclear plant contracts in Poland, South Africa, Finland, Morocco, China and India, although it recently lost one in Jordan.
Officials from the Ministry of Knowledge Economy, however, cautioned that the Turkey deal was not in the bag. “The actual deal might not be concluded should there be disagreements with the Turkish government regarding specific conditions,” said a ministry official. “We’ll have to wait and see.”
The signing of the MOU came as Abdullah Gul, the Turkish president, is visiting Korea this week.
The nuclear deal with Turkey would open the way for other contracts with Korean companies.
“The nuclear energy cooperation with Turkey will allow cooperation in various other industries not only in the nuclear energy sector but also in developing green energy, developing renewable energy technology and searching for energy sources in other countries,” said Ryu Ji-chul, director at the Korea Energy Economics Institute.
“Should the [nuclear energy bid] become reality, Korea’s related industries will advance into Turkey and bilateral economic cooperation will enter a new era,” said Sohn Kyung-shik, chairman of the Korea Chamber of Commerce and Industry.
Office of Commercial Affairs, Royal Thai Embassy in Korea
Source : http://www.depthai.go.th