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Reforms transform South Korean trade

WHILE the minerals, energy and resource industries underpin Western Australia’s trade with South Korea, there are many opportunities in other sectors.

Australian Ambassador to the Republic of Korea, Colin Heseltine, told a breakfast gathering at Fraser’s this week – the sixth in WA Business News’ Meet the Ambassador series – that the 1997 Asian financial crisis led to the introduction of important economic and corporate reforms, which have transformed the South Korean economy and society.

These reforms have created an emerging economy and consumer-driven society with a demand for high-tech goods, luxury items and value-added products.

This is despite the problems associated with a subdued economy and labour relations.

“Korea is at a turning point,” Mr Heseltine said. “It is an emerging economy and a very sophisticated consumer economy.

“Young Koreans with newly discovered leisure time and the middle class are presenting many opportunities for value-added and service-based products.

“Massive investment in broadband infrastructure has placed Koreans as early adopters and at the forefront of Internet usage. Korea has the highest penetration of broadband usage in the world.”

This economic outlook has created many opportunities for WA companies in industries other than those involved in the traditional trade between the two countries of minerals, energy and commodities.

While LNG is showing huge growth potential and iron ore prospects for continuing growth remain strong, Mr Heseltine said Korean society offers many opportunities for value adding and services.

“Most opportunities are in value-added areas and they can be essentially linked to the major selling points that Australia has,” he said.

“These selling points have particular relevance here in WA.

“The first is that Australia presents itself as a clean, green and environmentally superior source of food and beverage. There are opportunities for other related products such as the export of live cattle, which was only resumed last year, beef from WA, and for seafood and forestry products.

“The second selling point for us is that Australia is a knowledge-based economy and it has significant capability and solutions using innovative technology.

“The third major selling point is the Australian lifestyle. It is epitomised in clothing, beauty and cosmetic products, leisure activities, sports, entertainment and tourism.

“As Korea moves towards a five-day working week there is going to be a lot more leisure time that Koreans have and they will need to fill the gap in their time.”

However, Mr Heseltine said the two biggest issues facing South Korea were the threat posed by North Korea and current labour relations woes.

“Labour strikes are certainly affecting business confidence and it seems one of the major challenges for the government,” he said.

“The militant trade union activity tends to be concentrated in some of the older industrial sectors, such as the transport services sector, where Korea is less competitive and where the contribution to Korean GDP is actually quite small.

“Major contributors to corporate earnings such as Samsung electronics and LG electronics have generally been immune to serious labour problems.”

Mr Heseltine said that a road to improve managing labour relations was released by the South Korean Government on September 4 this year and was generally viewed as positive.

However, he said the positive outlook for South Korea’s economy, coupled with the Government’s reform agenda, meant growth and trade potential.

“The Korean economy has the best reform record of any Asian economy since the 1997 Asian financial crisis,” Mr Heseltine said.

“With no major imbalances in the Korean economy, very large foreign reserves, modest inflation and positive budget outlook, economic growth is expected to rebound next year.

“Korea’s potential long-term growth rate remains at 5 per cent.”

p The Australian Ambassadors to Jordan, Egypt and Iraq will address a breakfast function at the Hyatt on Monday September 22.

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