Korea, Your avenue to opportunity

May 2015

Yongsoo Park

Head of Foreign Direct Investment Promotion Team

KOTRA Frankfurt

KOTRA

Profile of Korea

Economy & Industry

Korea-Germany Trade

Foreign Direct Investment in Korea

KOTRA

4

Status

Government agency for the trade and investment promotion of Korea

Vision

Global business platform for the future of Korea

Mission

Improve the customers’ competitiveness with global business activities

KOTRA

5

Supports for Exports

of Korean companies

• Identifying target

markets by region

• Supports for partnering

with global companies

• Guiding entry into

public procurement

market

• Supports for

participation in overseas

exhibitions

• Providing information

about Korean industries,

markets and business

sites

• Intermediary services

with governments

• Grievance resolutions

• Job fair for foreign

invested companies

• Providing market

information: global

markets and target

markets

• Supports for the

development of trade

policy of government

• Providing overseas

investment information

• Supports for the

employment of global

talents

Main Activities

Foreign Direction

Investment

Promotion

Supports for

Overseas Expansion

of Korean Companies

Trade & Investment

Information Services

6

CIS

(9)

North

America

(10) Middle

East

(15)

Europe

(21)

Africa

(10)

Southea

st Asia &

Oceania

(14)

Central &

South

America

(14)

China

(18) Japan

(4)

• 122 Overseas offices in 84 countries

Global Business Network

South

west

Asia

(7)

Profile of Korea

8

Korea ???

9

Korea ???

10

Korea ???

11

Statistics 2014

Population 51,378,174

Area 99,720 km2

GDP(Nominal) US$ 1.41 trillion

Real GDP Growth 3.3%

Per capita GNI(Nominal) US$ 28,180

Labor Force 26.5 million

Inflation rate 1.3%

Credit Rating, Outlook

• S&P: A+, Positive (‘14.9)

• Moody’s: Aa3, Stable (‘12.8)

• Fitch: AA-, Stable (‘12.9)

Export US$ 572.7 billion

Main Export Items Chemical products, Semiconductor,

Automotive, Machinery, Ship

Import US$ 525.5 billion

Main Import Items Crude Oil, Machinery, Chemical Products,

Electronic parts, Steel

Overview

12

Shanghai

Bejing

Ulaanbaatar

Sapporo

Tokyo

● Seoul

Taipei

Hong Kong

China Xian

2h 05m

3h 10m

3h 30m

1h 55m

2h 30m

2h 20m

2h 45m

(‘13) $9.47 trillion

(‘13) $4.89 trillion

(‘13) $1.30 trillion

(‘13) $11.5 billion

(‘13) $489.1 billion

Far East Russia (‘13) $117.4 billion

3h 45m

Gateway to the Northeast Asia • Population: >1.5b (22% of the world) • GDP: 16.3 trillion (22% of the world)

13

1st ASQ winner for 10

consecutive years

5th largest cargo handling world-wide in TEU

Busan Port

World’s 5th high-speed train

KTX

KTX

Gangwon-Do Gyeonggi-Do

Gyeongsangbuk-Do

Gyeongsang Nam-Do

Chungcheongbuk-Do

Jeollabuk-Do

Jeollanam-Do

Chungcheongnam-Do

Ground Transportation

Infrastructure

Incheon International Airport

Length of roads: 105,703km

(1.1km/km2)

* Germany: 1.8km/km2

2nd busiest international

cargo handler

2nd ICT Development Index

ICT

14

• A total of 22 chapters that would lift trade and investment barriers in various economic sectors ranging from goods and service, telecommunication, finance, investment, intellectual property, competition, transparency, environment, electronic commerce to economic cooperation

• To provide an occasion to drastically develop bilateral economic ties between Korea and China

Korea-China FTA

15

6,108

7,541

9,690

10,796 11,272

1,649

3,328

5,846

6,954 7,428

49.9

61.6

79.2

88.2

92.1

20.1

40.6

71.3

84.8 90.6

0

10

20

30

40

50

60

70

80

90

100

0

2,000

4,000

6,000

8,000

10,000

12,000

Instantly Over 5 years Over 10 years Over 15 years Over 20 years

Korea # of Items China # of Items Korea Percentage China Percentage

Tariff Concession Schedule of Korea-China FTA

• Korea to lift tariffs on 92.1% of traded goods over the next 20 years while China to lift tariffs on 90.6%

16

EU

EFTA

Turkey

GCC

Israel

Russia

China

Mongolia

Japan

SACU

India

Singapore Indonesia

ASEAN

Australia

New Zealand

Canada

USA

Mexico

MERCOSUR

Colombia

Peru

Chile

In effect

Concluded

Under negotiation

Under consideration

73%

FTA Network “Toray Advanced Materials is going to put carbon fiber from its Gumi plant on the markets of Europe and the United States, where aircraft are produced. Toray Advanced Materials has a 20-percent price competitiveness now with the U.S. and EU FTAs in effect” (Lee Young-kwan, President, Toray Advanced Materials Korea)

• FTAs with the world’s three biggest economic blocs, the US, EU and China

Vietnam

17

20 40 60 80

Singapore(1)

Korea(2)

Taiwan(3)

Japan(4)

Canada(5)

* Source: IMD World competitiveness year book(2013)

* Higher education achievement : Percentage of

population that has attained at lease tertiary education

for persons 25-34

Employment by Industry(2014. 12)

Human Resources

“Korean people are extremely curious but also they are technologically savvy people” (Xavier Veyry, President of AXA General Insurance in Korea)

(Unit: 1,000)

Industry # of

people %

Manufacturing 4,406 17.4%

Wholesale and retail 3,865 15.2%

Accommodation and food service 2,168 8.5%

Construction 1,838 7.2%

Education service 1,820 7.2%

Healthcare and welfare service 1,713 6.7%

Transportation 1,410 5.6%

Associations, repair and other personal services 1,260 5.0%

Facilities management and support services 1,200 4.7%

Agri., forestry & hunting 1,072 4.2%

Professional, scientific and technical activities 1,027 4.0%

Public administration and defence 869 3.4%

Financial institutions & insurance 807 3.2%

Others 1,927 7.6%

Total 25,384 100%

Higher Education Achievement

4.5 5.0 5.2 4.0 4.4

0.0

5.0

10.0

2010 2011 2012 2013 2014

Labor Turnover

18

• 1st most innovative country among 110 countries

• 2nd in Patent activity and Manufacturing capability

• 3rd in High-tech density and Tertiary efficiency

Innovation

“Korea is the first place where a lot of companies can test new technologies and new ways of doing business.” (Joseph Kern, CFO, IBM Korea)

1

51

101

R&D intensity

Productivity

High-tech

density

Researcher

concentration

Manufacturing

capability

Tertiary

efficiency

Patent activity

Korea

Japan

Bloomberg Global Innovation Index

• R&D intensity : Research and development as a percentage of gross domestic product

• Productivity : GDP per employed person, per hour worked

• High-tech density : High-tech public companies as a percentage of publicly listed companies

• Researcher concentration : R&D researchers per one million people

• Manufacturing capability : Manufacturing value-added as a percentage of GDP; products with high R&D intensity as a percentage of total manufactured exports

• Tertiary efficiency : Enrollment ratio in all subjects for post-secondary students; tertiary graduation ration of students who majored in science, engineering,

manufacturing and construction; annual new graduates and total tertiary-degree holders as percentages of labor force

• Patent activity : Resident patent filings per million population and per $1 million R&D spent

Rank Country Total score

1 South Korea 92.1

2 Sweden 90.8

3 United States 90.7

4 Japan 90.4

5 Germany 88.2

6 Denmark 87.0

7 Singapore 86.1

8 Switzerland 86.0

9 Finland 85.9

10 Taiwan 83.5

19

453,544

199,066

163,148

101,993

59,809 54,164 42,607

30,752 28,280 25,484 10,115

2.79

3.35

1.98

2.98

2.29

4.15

1.73 1.69

2.19

1.27

3.93

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Total R&D Expenditure % of GDP

* Source: OECD, Main Science and Technology Indicators 2014-1

R&D Expenditure “Korea’s emphasis on R&D is the main driver that has been bolstering its global competitiveness.” (Sharon Lam and Jason Liu, Morgan Stanley)

Economy & Industry

8

375

902

1,410

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

21

GDP

• One of the world’ fastest-growing developed countries

• GDP growth with CAGR = 12.5%

• 13th by nominal GDP and 13th by purchasing power parity (2014)

(unit: US$ billion)

Asian Financial Crisis

Global Financial Crisis

Government initiatives

Export-oriented strategy

22

Working Hours

(‘14, OECD)

• Korea 2,163hrs

• Japan 1,745hrs

• Germany 1,393hrs

• Netherlands 1,383hrs

• Moor’s Law: “The

computing chips

doubles every 18

months.”

• Hwang’s Law: “The

memory capacity of

chips could be

doubled every 12

months.”

• Frankfurt Declaration

1993 by Lee Kun-hee

“Change everything

but your wife and

children.”

• Chung Ju-yung,

the founder of

Hyundai Group,

“Even though I

suffer, I never fail.”

Growth Drivers

Hardworking Speed

Ever-changing Can-do Spirit

23

Smart Phone • Samsung 24.7%

• Apple 15.4%

• LG 4.6%

Large-size LCD • LG Display 21.1%

• Samsung Display 19.8%

Semiconductor • Intel 15.0%

• Samsung 10.4%

• SK Hynix 4.7%

DRAM • Samsung 41.4%

• SK Hynix 27.7%

Ship Building • 29.7% of world orders

IT Secondary Battery • Samsung SDI 20.5%

• LG Chem 15.9%

EV Secondary Battery • AESC 27.8%

• LG Chem 27.7%%

• Samsung SDI 17.9%

Automobile • Hyundai Motor Group 8.8%

Main Industries

“Korea is a very inviting environment for foreign direct investment. I see Korean companies in every corner of the world and they are competing globally. That is a big aspect when you invest here. You will get very good global reach at the same time” (Jeffrey Immelt, Chairman & CEO of GE, 25.10.2013)

24

2013 2014

Country Unit % Country Unit %

1 China 22,117 25 China 23,723 26.3

2 USA 11,066 12.5 USA 11,650 12.9

3 Japan 9,630 11 Japan 9,775 10.2

4 Germany 5,877 6.7 Germany 5,928 6.6

5 Korea 4,521 5.1 Korea 4,525 5.0

6 India 3,896 4.4 India 3,840 4.3

7 Brazil 3,740 4.2 Mexico 3,220 3.6

8 Mexico 3,052 3.5 Brasil 3,146 3.5

9 Thailand 2,457 2.8 Spain 2,403 2.7

10 Canada 2,380 2.7 Canada 2,394 2.7

World Total 88,311 100 90,105 100

Automotive Industry

(unit: 1,000) Automotive Production

25

Manufacturing Innovation 3.0

• Korean government and companies

plan to jointly invest US$ 1billion to

transform 10,000 companies into

smart factories by 2020

• Korean government and companies

plan to jointly invest US$ 1billion to

develop 8 key technologies for

smart manufacturing; Big Data,

Cloud Computing, Hologram, Cyber

Physical System, Energy Saving,

Smart Sensor, IoT, and 3D Printing

Korea-Germany Trade

27

7,571

21,299

0

5,000

10,000

15,000

20,000

25,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Export Import

Korea-Germany Trade

(unit: US$ million)

28,870

-13,728

-20,000

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Trade Balance

• Germany is the Korea’s largest trading partner in the EU

• Germany is the 19th country for export of Korea while the 6th country for import

28

Korea-Germany Trade by Product

• Korea surplus: Wireless communication apparatus, Vessel, ocean structure and parts, Battery

• Germany surplus: Automobile, Automobile parts, Mechanical elements, Fine chemical material,

Prime mover and pump, Meter, controller, analysis instrument

0 1,000 2,000 3,000 4,000 5,000 6,000

Automobile

Semiconductor

Wireless communication apparatus

Vessel, ocean structure and parts

Automobile parts

Synthetic resin

Dry battery and storage battery

Mechanical elements

Articles of plastic

Articles of rubber

Machine tools

Fine chemical material

Electron application apparatus

Prime mover and pump

Aircraft and parts

Tools

Other petrochemicals

Meter, controller, analysis instrument

Computer

Man-made staple fiber

Export

Import

(unit: US$ million)

29

Korea-Germany Automobile Trade

547

1,900

1,410 1,398

3,517

5,146

0

1,000

2,000

3,000

4,000

5,000

6,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Export Import (unit: US$ million)

• The Korea’s automobile import from Germany has increased to $5.1billion,

up 268.1% over the last 5 years while Korea’s export to Germany has

increased to $1.4billion, up 157.8%

Up 268.1%

Up 157.8%

30

Imported Cars in Korea by Brand

40,174 , 20%

35,213 , 18%

30,719 , 16%

27,647 , 14%

8,718 , 4%

6,840 , 3%

6,572 , 3%

6,464 , 3%

5,244 , 3%

4,675 , 2%

4,411 , 2%

3,601 , 2% 3,118 , 2%

2,976 , 2%

2,777 , 1%

2,568 , 1%

1,989 , 1%

1,163 , 1% 620 , 0% 503 , 0% 322 , 0%

45 , 0%

BMW

Mercedes-Benz

Volkswagen

Audi

Ford

Toyota

MINI

Lexus

Chrysler

Land Rover

Nissan

Honda

Peugeot

Volvo

Infiniti

Porsche

Jaguar

Fiat

Citroen

Cadillac

Bentley

Rolls-Royce

2014 (units, percentage)

68.1%

3.3%

71.4%

Foreign Direct Investment in Korea

32

• 5th easiest country for doing business among 189countries

Business Environment

“I believe there were no difficulties doing or expanding business in Korea. The business environment of Korea is good for foreign investors. I'm sure that speed is the key to gaining opportunities over your competitors, and Korea can be the best answer for speed.” (Frank Appel, CEO, Deutsche Post DHL)

0

50

100

150

Starting a business(17)

Dealing with

construction permits(12)

Getting electricity(1)

Registering property(79)

Getting credit(36)

Protecting minority

investors(21)

Paying taxes(25)

Trading across

borders(3)

Enforcing contracts(4)

Resolving insolvency(5)

* DTF: Distance to frontier

(Source: World Bank)

Rank Country DTF Score

1 Singapore 88.27

2 New Zealand 86.91

3 Hong Kong 84.97

4 Denmark 84.20

5 Korea 83.30

6 Norway 82.40

7 United States 81.98

8 United Kingdom 80.96

9 Finland 80.83

10 Australia 80.66

33

To finance the construction

of new plants or the purchase

of equipment related to the

investment

Reduction of rent

Support for infrastructure

Land Support Cash Grant

Corporate tax

Acquisition tax, Registration tax, Property tax

Custom duties

Tax Benefit

FDI Incentives

34

• Resolution of

investor grievances

• Improvement of

business & living

environment

Provide information

on the industries,

markets, legal &

taxation systems,

and infrastructure in

Korea

• Guidance on site

selection

• Support for seeking

business partners

• Coordinate FDI

incentive negotiations

Pre-Investment Consultation

Execution

Governments

After-care

One Stop Services for Foreign Investors

Local governments

42 KOTRA overseas offices

Ministry of Trade, Industry and Energy

Ministry of Strategy and Finance

Ministry of Land, Infrastructure and Transport

Ministry of Environment

Ministry of Employment and Labor

Ministry of Justice

Ministry of Government Legislation

National Tax Office

Korea Customs Office

35

2,167 2,681 3,749 4,410 4,552 5,017

3,704

6,898 4,398

8,848

5,008

6,788 5,364

3,290 5,393

2,957

4,884

6,690

11,483

13,071 13,673

16,286

14,548

19,003

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2009 2019 2011 2012 2013 2014

North America Asia Pacific Europe

Others Total AP Headquarter of Energy Solutions (‘13)

AP Electronics Materials R&D Center (‘14)

OLED Laboratory (‘14)

Production Facility for Gasoline Injector (‘13-’14)

FDI Trends • FDI to Korea hit record high in 2014 • Investment from China soared nearly 150% to 1.2 billion dollars and investment from the U.S.

also edged up while the amount from Japan shrunk due to the weakening Japanese yen • An easing of regulations, coupled with a boost in investment attractions from the FTAs of

Korea, encouraged foreign investors to increase investment in Korea

(unit: us$ million)

36

Foreign Invested Companies in Korea

> 14,000

37

歲寒圖 Wintry Days

“When winter comes, it will be noticed that the leaves of pine tree are not wilted”

38

Danke Schö n!

Yongsoo(Brian) Park Executive Director KOTRA Frankfurt

+49 69 242992 21 Brian@kotra.or.kr