LA LETTRE DE CORÉE Septembre 2003 Centre Coréen du Commerce Extérieur et des Investissements  http://www.kotraparis.com
MERCI DE PRENDRE NOTE DE NOS NOUVELLES COORDONNÉES
KOTRA PARIS - 19 avenue de l'Opéra - 75001 Paris
Téléphone :  +33 (0) 155 35 88 80 - Télécopie : +33 (0) 155 35 88 89 - email : fckotra@hotmail.com  
M. Dong Wong Lee - Directeur 
M. Frédéric Claveau -  Responsable Investissements
 
S O M M A I R E

 

¤ RELATIONS INTERNATIONALES

  • Corée du sud: le troisième grand d'Asie
  • South Korea, France to hold economic meeting next week
  • NK wants economic reform

¤ POLITIQUE ECONOMIQUE, MACRO-ECONOMIE ET RESTRUCTURATIONS

  • South Korea: hope in a brighter export outlook
  • Korea depends more on overseas markets
  • Korea is three times more dependent on imports than Japan
  • Korea's growth to slow to 2.5% this year: IMF
  • OECD team to visit Korea on economy

 

¤ INVESTISSEMENTS

  • Investors' dictionary
  • FDI and technology policies in Korea
  • Foreign investment on decline for 4 years
  • Foreign investment hailed as growth engine
  • S.Korea sees '04 foreign direct investment doubling
  • Foreign investment exceeds $280 billion
  • Can foreign-invested companies receive loans from overseas and how?
  • Tax breaks planned for foreign investment in SOC
  • Foreign investment in infrastructure to get tax breaks
  • Business body calls investment restriction 'unconstitutional'
  • Overseas investment unprofitable
  • Manufacturers still rolling out (of Korea)
  • Can Korea cut it as R&D hub?

¤ SECTEURS ECONOMIQUES

- Management

  • Labor issues concern foreign investors
  • South Korea talks tough on labor

- Finance et banques

  • 'Equity-investment limit should go'

- Nouvelles Technologies

  • South Korea to invest 188.5 bln won in IPv6 initiative

- Services, distribution

  • E-mart launches joint venture in China

- Agroalimentaire

  • Heineken launches Korean branch

- Transport automobile

  • Daimlerchrysler, Hyundai form venture
  • Bosch to invest over w100 bil. in Korea
  • LG CNS wins bid for Seoul's new transportation card system

- Défense et espace

  • South Korea proposes big increase in defense spending for 2004
  • Korea's first research satellite launched

¤ ENTREPRISES COREENNES

  • Who needs the chaebol anyway?
  • South Korean conglomerates rush to embrace holding companies
  • Chaebol exploit investment limit loophole
  • 13 Korean firms on fortune-500 list
  • LG chemical develops core organic material
  • Hyundai opens new Ulsan submarine plant
  • SK corp. union threatens to walk out
  • Samsung electronics on investment spree
  • New secret fund scandal rocks Hanwha, Daewoo
  • Small firms gloomy on production in Korea

¤ ENTREPRISES FRANÇAISES

  • SK telecom, Alcatel team up
  • Carrefour to invest w250 bill. in 2004
  • Carrefour to invest 1 trillion won in South Korea by 2007
  • Carrefour to invest w250 billion next year
     


- CORÉE DU SUD: LE TROISIÈME GRAND D'ASIE

Onzième économie mondiale, la Corée du Sud est aujourd'hui un pays qui compte dans le monde industriel développé. Apparue il y a une vingtaine d'année sur les marchés mondiaux avec des produits bon marché, la Corée vend aujourd'hui dans le monde entier ses téléviseurs, ses automobiles, ses navires et depuis peu, les produits d'une industrie électronique particulièrement innovante. Le poids de son économie peut être désormais comparé à celui de l'Inde ou du Mexique. Coincée entre les deux géants que sont la Chine et le Japon, la Corée du Sud s'est comportée pendant longtemps comme une forteresse imprenable. Son économie était traditionnellement dominée par les "chaebols", ces grands groupes industriels à la fois protectionnistes et relativement agressifs sur les marchés internationaux. Les implantations étrangères étaient fortement découragées et les importations limitées au strict minimum. La situation a brusquement évolué au milieu des années 1990 avec l'adhésion de la Corée du Sud à l'OCDE en 1996 et la crise financière de 1997. Deux événements qui ont entraîné une ouverture rapide du pays, à la grande surprise des observateurs qui ne pensaient pas que la Corée, fortement marquée par la tradition, serait capable d'autant de réactivité.

Pressée de rattraper son retard et de se faire une place sur la scène mondiale, la Corée affiche alors l'ambition de devenir le "hub" de l'Asie du Nord. Elle s'ouvre aux entreprises étrangères, notamment aux entreprises françaises, qui sont déjà nombreuses à avoir tenté l'aventure. La mise en œuvre d'un cadre législatif favorable à l'investissement étranger, la taille du marché intérieur coréen, le volume de ses importations (160 milliards de dollars en 2000, soit le douzième marché du monde) et sa situation centrale en Asie du Nord constituent autant d'incitations à s'y implanter.

Résultat: en l'espace de quelques années, la Corée du Sud est devenue le troisème partenaire de la France en Asie, après le Japon et la Chine, en termes à la fois d'échanges et d'investissements. Avec un montant de 2,8 milliards , les exportations françaises en direction de la Corée ne représentaient en 2002 qu'une part de marché de 1,4%, sensiblement inférieure à celle de ses voisins européens. En revanche, l'investissement direct dans le pays est largement privilégié par les entreprises françaises. Comptant au total 150 filiales dont les deux tiers sont industrielles, elles emploient plus de 26500 salariés, dont 400 expatriés français, et rélisent un chiffre d'affaire de 8 milliards , c'est à dire trois fois le montant de nos exportations. Ces chiffres placent la France au cinquième rang des pays investisseurs en Corée du Sud. À noter que le premier investisseur étranger en Corée est français: ils s'agit des hypermarchés (une trentaine) implantés par la société CARREFOUR. Autre projet d'envergure qui renforcera encore la présence française en Corée: la création d'une joint-venture entre Total-Fina-Elf et Samsung General Chemicals...

La Corée du Sud est également en passe de devenir un partenaire industriel important de la France grâce à une coopération particulièrement active depuis une dizaine d'années maintenant. Elle a débuté en 1993 avec la signature d'un grand contrat, celui du TGV (KTX coréen), qui impliquait de nombreuses entreprises françaises et qui a donné lieu a des transferts de technologies dans des domaines aussi variés, le ciment ou le verre.

Aujourd'hui cette coopération industrielle se pour suit et prend des formes originales. Ainsi du design, qui est devenu en l'espace de deux ou trois ans, un axe majeur des relations franco-coréennes. "À juste titre", affirme Étienne Coffin de la Digitip, "les industriels coréens considèrent que le design est un moyen de faire progresser leurs produits et développer le secteur du haut de gamme. Nous avons ainsi invité certains d'entre eux à découvrir en France, la manière dont nos industriels abordent cette discipline."

Cette année, c'est en Corée que la Dgitip, l'APCI (Association pour la Promotion de la Création Industrielle) et KIDP (Korean Institute of Design Promotion) ont organisé ensemble fin juin la "French Design week" qui a permis à de ,ombreuses entreprises coréennes d'établir des contacts avec des agences de design françaises. Pami elles, on peut citer LG Electronics et Samsung. Autre initiative, coréenne cette fois, l'organisation à Séoul du 1er au 10 décembre prochain des Oscars internationaux du design, qui seront précédés par une sélection des lauréats souhaitant concourir dans chacun des pays participants.

Coopération toujours: l'inauguation du TGV coréen (KTX) qui aura lieu en avril 2004 et qui devrait donner l'occasion aux entreprises françaises les plus dynamiques d'être présentes en Corée dans le cadre d'une grande opération "France Corée à Grande Vitesse". À ce titre, les Coréens envisagent de donner la priorité aux secteurs considérés comme des moteurs de croissance, c'est à dire ceux des technologies innovantes et de la recherche et développement.

Aujourd'hui plus que jamais, la Corée du Sud cherche donc à se moderniser en créant de la valeur ajoutée par le moyen de transferts importants de technologies. Partagée par la France, cette volonté a été largement réaffirmée par les deux pays lors du 7ème comité de coopération industrielle qui s'est déroulé le 26 juin dernier à Séoul.

Elle prend actuellement la forme d'opérations ponctuelles, tel le dossier mené avec le KETI (Institut Coréen de Technologie Électronique) sur les semi-conducteurs, et devrait, à plus long terme, porter sur des secteurs comme les biotechnologies -une étude sur le sujet est actuellement conduite par UbiFrance-, l'environnement, les technologies de l'information et de la communication, et plus spécialement de la dématérialisation des documents commerciaux. Sans aucun doute, des domaines d'avenir, à la condition toutefois d'observer une grande prudence dans le domaine délicat de la propriété intellectuelle. C'est à ce prix que les échanges de la France avec ce pays dont les atouts sont nombreux et l'ambition légitime resteront équilibrés.

Florence PIJAUDIER-CABOT. - Source : Revue INDUSTRIES août 2003

 

- SOUTH KOREA, FRANCE TO HOLD ECONOMIC MEETING NEXT WEEK

South Korea and France will hold their 16th annual joint economic committee meeting in Paris next Tuesday, according to officials here Thursday.

South Korean officials will discuss issues such as the European Union's decision to impose stiff tariffs on Hynix Semiconductor Inc. and simplifying procedures for issuing visas to businesspeople, according to the Ministry of Foreign Affairs and Trade.

Source : Yonhap - 18/09/03

 

- NK WANTS ECONOMIC REFORM

South Korean Unification Minister Jeong Se-hyun yesterday made a positive evaluation on the North Korean leadership's will to reform its moribund economy, while noting that unilateral efforts by the isolationist state will soon become unstuck without foreign investment.

"North Korea has recently provided a series of economic reform measures after reflecting that it has to overcome structural problems for its survival and development," Jeong said in an international seminar organised by the Korea Development Institute.

Jeong stressed, "North Korean leaders' reform will to resolve their country's economic hardship can be evaluated very positively."

Since July last year, the communist North has adopted elements of a market economy while maintaining the backbone of its planned economy. Pyongyang scrapped its decades-old food rationing system, raised wages and introduced a pilot "private farming" program.

The Korean Trade-Investment Promotion Agency revealed yesterday that North Korea has sent three batches of its economic survey team to Vietnam so far this year, which experts says are aimed at learning from the experience of the Southeast Asian country.

The minister stressed capital and goods from the international community will be a major factor in determining the success of the North Korean initiatives.

"North Korea's measures will have limited results without an injection of investment capital and supply of goods from foreign countries," Jeong said.

He said the direction of the North Korean economy will be decided within the framework of inter-Korean economic cooperation and international assistance.

Jeong said the Seoul government will seek a broad spectrum of measures to support North Korea's reformist ventures and openness.

By Seo Hyun-jin - The Korea Herald/ANN - Source : Sinchew-i 18/09/03

 

- SOUTH KOREA: HOPE IN A BRIGHTER EXPORT OUTLOOK

South Korea is emerging from its worst downturn since the Asian crisis in 1998, but a full recovery is still a way off.

Real gross domestic product fell 2.9% in the second quarter after a 1.6% drop in the first quarter. The government crushed consumer spending when it clamped down on consumer credit late last year. Plus, exports suffered from the war-related global slowdown and the SARS epidemic in Asia.

Now, economists agree that a recovery is starting to take hold, but that it faces stiff headwinds. Household balance sheets remain under pressure from last year's borrowing binge and job losses. Also, even though the stock market is up sharply, an increasing amount of Korean investment is going to China. "The Korean economy is now caught in a vicious circle of poor investment, lack of new employment, and poor domestic consumption," says Huh Chan Guk, chief economist at the Korea Economic Research Institute, a chaebol think tank.

Making matters worse, strikes by workers in the transportation, auto, shipbuilding, and chemical industries over the past two months have crippled industrial production. Then, as container loading for exports at the bustling Pusan port was finally getting back to normal, damage from Typhoon Maemi will further curtail port activity. The unusually long rainy season is also hampering farm output and construction. Economists generally expect growth of about 3% this year and 4% to 5% in 2004.

Exports, which account for some 40% of GDP, will lead the recovery, and the outlook there is improving. August export growth slowed to 11% from 16% in July, but that was a strong showing given the effects of the strikes. Business confidence in August rose to its highest level in almost a year. The healthier outlook for Korea's foreign markets, especially in Asia, should keep exports on the upswing. Gradually, that will boost profits, business investment, and hiring, which will help to get households spending again.

By James C. Cooper & Kathleen Madigan - With Moon Ihlwan in Seoul - Source : Business Week - 29/09/03

 

- KOREA DEPENDS MORE ON OVERSEAS MARKETS

Korea's dependence on foreign markets rose to 29.9 percent in 2000, largely due to the strong imports of core parts and materials, the Bank of Korea said yesterday.

According to the bank's latest "Industrial Report," published every five years, the country's dependence rate is three times that of Japan's. Accordingly, it is urgent that Korea develop its parts sectors to reduce its reliance on foreign partners, the BOK argued.

"The growing volume of imports in addition to challenges like rising import prices and unstable currency rates are eating into the profitability of exports," the central bank explained in a press release. "Steady investment in the information-technology and parts-and-material sectors should help reduce the dependence on imports by helping to create Korean products that can replace foreign ones."

Korea's dependency on foreign markets in 1990 had been 23.4 percent, before climbing to 24.9 percent in 1995. Rising exports, particularly of IT goods, too, contributed to the increase in the dependency rate.

Meanwhile, the report also noted that the nation's household economy has worsened, as spending in the private sector has outpaced wage increases. It also observed that Korea's industrial structure is fast shifting from manufacturing to IT and service.

According to the study, which is compiled every five years, Korea provided products and services worth 1,632 trillion won ($1.39 trillion) in 2000.

, which is 170 percent larger than the 1995 total of 969.26 trillion won.

The proportion of the service business in the total industrial activity grew to 39 percent in 2000 from 34.1 percent in 1995, while the share of IT escalated from 8.5 percent to 12.3 percent, proving that IT is indeed one of Korea's strongest industries.

During the five-year period, the private sector's spending on the telecommunication and information equipment sector ballooned by 260 percent and 250 percent, respectively.

Total expenditure by the private sector in 2000 added up to 352.37 trillion won, up 170 percent from 1995, while accumulated investment amount in 2000 came to 188.44 trillion won.

(mihui@heraldm.com) - Source : Korea Herald - 19/09/03

 

- KOREA IS THREE TIMES MORE DEPENDENT ON IMPORTS THAN JAPAN

Research found out that the Korean economy is becoming more dependent on imports due to its trade structure where increases in exports lead to increases in imports of raw materials and intermediate goods. It was also found that the share of the service industry in the economy is rapidly outpacing that of the manufacturing industry.

This is the founding of the Bank of Korea`s year 2000 statistics compiling the annual transactions of products and services. The extensive statistics, released Thursday, is compiled every 5 years.

? Dependency on imports three times higher than that of Japan

The Korean economy`s dependency on imports, which means the share of exports and imports in all the products and services provided to the domestic market, increased dramatically to 29.2% in 2000 from 23.4% in 1990 and 24.9% in 1995.

This means that 30% of components and parts required to produce a product should be bought from other nations. Japan recorded 10.8% in the dependency on imports, one third of the Korea`s figure.

Moreover, export`s effects of inducing imports increased from 0.30 in 1995 to 0.37 in 2000, meaning that 37% of production factors should be bought from overseas to produce one export item. Kim Jong-kui, the director of the division for statistics on input and output in the Bank of Korea, said that with more export items produced using imported intermediate goods, the added vale of the overall industry is decreasing. He stressed that more investments should be made on the domestic production of raw materials and components for a sustained growth.

Rapid increase in the share of the service industry

The share of the service sector in the overall industry increased to 39 % in 2000 from 30.3% in 1990, 34.1% in 1995 while the share of the manufacturing industry has been declining from 49.6% in 1990 to 47.6% in 1990 and 46.5% in 2000. Cho Seong-jong, the director of the division for statistics, said that rising share of the service sector in the economy inevitably occurs with the growth of the economy. But, the director said, that it is not desirable for the service sector to grow too rapidly without securing strong competitiveness.

The share of investment in the final demand plunged to 22.4% in 2000 from 28.9% in 1990 and 29.6% in 1995, which indicates sluggish investment.

Consumer spending in 2000 was worth 352,3710 trillion won, 1.7 times higher than 202,9713 trillion won in 1995. But over the same period, wages of employees increased by just 1.5 times, which indicates more lavish spending of Korean people.

by Joong-Hyun Park (sanjuck@donga.com) - Source : Dong A Ilbo _ 18/09/03

 

- KOREA'S GROWTH TO SLOW TO 2.5% THIS YEAR: IMF

The International Monetary Fund has lowered its economic growth forecast for South Korea in this year to 2.5 percent, less than half of what the international body predicted earlier, due to the spread of severe acute respiratory syndrome and depressed domestic consumption, the Ministry of Finance and Economy said yesterday.

According to the ministry, the 2003 World Economic Outlook report released yesterday by the IMF also predicted that the country should be able to achieve a 4.7 percent growth rate next year.

The IMF's 2003 estimate for Korean growth is far lower than the previous forecasts of 5.5 percent in March and 5 percent in April.

The fund attributed the expected modest growth in the local economy to the rise in global oil prices earlier this year, the SARS outbreak, and slumping consumer spending due to a sharp cut in household loans amid soaring a credit default rate, the ministry said.

The IMF also estimated that Korea's inflation rate would hover at 3.3 percent this year, with its unemployment rate standing at 3.4 percent, and the current account surplus reaching $8 billion.

The international organization forecast that the global economy would expand by 3.2 percent in 2003, slightly higher than 3 percent last year, before recovering to 4 percent in 2004.

It also predicted that the U.S. economy would grow 2.4 percent this year, compared with a 2 percent growth in Japan and a weak 0.5 percent expansion in the euro-zone economy.

By Kim Hyun-chul (simonkim@heraldm.com) - Source : Korea Herald - 19/09/03

 

- OECD TEAM TO VISIT KOREA ON ECONOMY

Officals from the Economic Review Committee of the Organization for Economic Cooperation and Development will visit Seoul to discuss a variety of pending economic issues Sept. 22.

During their four-day stay, the EDRC delegates will meet with officials of the government and private organizations to exchange information on a range of economic issues. High on the agenda are the current and future direction of the local economy, the restructuring efforts unfolding here and the macroeconomic policies of the government.

The discussions are also expected to touch on labor issues, including labor strikes and the five-day workweek.

The OECD team will pay much attention to the Korean goverment's antispeculation initiatives in the real-estate sector and its stance on the Doha Development Agenda trade talks and free-trade agreements, which will be critical for this nation's future trade relations.

The committee's visit to Korea is a part of its efforts to craft a comprehensive report on OECD member nations' economies, which will be published next year.

(kokobj74@heraldm.com) - Source : Korea Herald - 19/09/03

 

- INVESTORS' DICTIONARY

Question: What are the average administrative costs of setting up a corporation in Korea?

Answer: Several types of taxes and fees, as described below, must be paid in order to establish a corporation in Korea.

Thus, for establishing a foreign-invested corporation with the minimum capital requirement of 50 million won, the total expenses would amount to 935,000 won, excluding the fee for the notary public.

For further information please contact: Cho Eun-Hwa Tel: 02-3460-7563 E-mail: tou797@hotmail.com

Question: Can a foreign-invested company in Korea, with an environmental patent, receive government benefits or other grants?

Answer: The Ministry of Environment offers assistance in terms of long-term loans with low interest rates and other financial support with the objective of promoting the environmental industry. In order to receive the benefits, companies must be in possession of environment-related patents or certificates. There is no distinction made between domestic and foreign-invested companies.

The assistance consists of funding for the general improvement of the environmental industry, such as technology development and industrialization; or the recycling industry, including funding for recycling facilities, technology development and stabilization of management. The support is given after an evaluation of the company's qualifications.

For more details regarding the criteria for assistance please contact the Environmental Management Corporation for matters concerning funding to improve the environment at 02-5190-233. Matters concerning the promotion of recycling facilities are dealt with by the Korea Resources Recovery & Reutilization Corporation at 02-3773-9775.

For further information please contact: Park Byung-Ryul Tel: 02-3460-7567 E-mail: p456789@kotra.or.kr

Source : Korea Herald - 06/09/03

 

- FDI AND TECHNOLOGY POLICIES IN KOREA

For the Government of the Republic of Korea technology policy was very much a tool of broader industrial policy. It combined selective import-substitution with forceful export promotion, protecting and subsidizing targeted industries that were to form its future export advantage. In order to enter heavy industry, promote local R&D capabilities and establish an international image for its exports, the Government promoted the growth of giant local private firms, the chaebol, to spearhead industrialization. One of the pillars of the Republic of Korea's technological strategy, and one that marks it off from the other NIEs, was the deliberate creation of these large private conglomerates. The chaebol were handpicked from successful exporters and were given a range of subsidies and privileges, including the restriction of TNC entry, in return for furthering a strategy of setting up capital - and technology-intensive activities geared to export markets. The rationale for fostering size was obvious: in view of deficient markets for capital, skills, technology and even infrastructure, large and diversified firms could internalize many of their functions. They could undertake the cost and risk of absorbing very complex technologies (without a heavy reliance on FDI), further develop it by their own R&D, set up world-scale facilities and create their own brand names and distribution networks. Industry in the Republic of Korea built up an impressive R&D capability by drawing extensively on foreign technology in forms that promoted local control. Thus, it was one of the largest importers of capital goods in the developing world, and encouraged its firms to obtain the latest equipment (except when it was promoting particular domestic products) and technology. It encouraged the hiring of foreign experts, and the flow (often informal) of engineers from Japan to resolve technical problems.

FDI was allowed only where considered necessary, and the Government sought to keep control firmly in local hands. Foreign majority ownership was not permitted unless it was a condition of having access to closely held technologies, or to promote exports in internationally integrated activities. The Government intervened in major technology contracts to strengthen domestic buyers, and sought to maximize the participation of local consultants in engineering contracts to develop basic process capabilities. In 1973, it enacted the Engineering Service Promotion Law to protect and strengthen the domestic engineering services sector, and the Law for the Development of Specially Designated Research Institutes to provide legal, financial and tax incentives for private and public institutes in selected technological activities.

The Government supported technological effort in Republic of Korea in several ways. Private R&D was directly promoted by a number of incentives and other forms of assistance. Incentive schemes included tax-exempt TDR (Technology Development Reserve) funds, tax credits for R&D expenditures as well as for upgrading human capital related to research and setting up industry research institutes, accelerated depreciation for investments in R&D facilities and a tax exemption for 10 per cent of cost of relevant equipment, reduced import duties for imported research equipment, and a reduced excise tax for technology-intensive products. The KTAC (Korea Technology Advancement Corporation) helped firms to commercialize research results; a 6 per cent tax credit or special accelerated depreciation provided further incentives.

The import of technology was promoted by tax incentives: transfer costs of patent rights and technology import fees were tax-deductible; income from technology consulting was tax-exempt; and foreign engineers were exempt from income tax. In addition, the Government gave grants and long-term low-interest loans to participants in "National Projects", which gave tax privileges and official funds to private and government R&D institutes to carry out these projects. Technology finance was provided by the Republic of Korea Technology Development Corporation (see below).

However, the main stimulus to the tremendous growth of industrial R&D came less from the specific incentives to R&D than from the overall incentive regime that created large firms, gave them a protected market to master complex technologies, minimized reliance on FDI, and forced them into international markets where competition ensured that they would have to invest in their own research capabilities. This is why, for instance, the Republic of Korea has 35 times more R&D by industry as a proportion of GDP than Mexico (with roughly the same size of manufacturing value-added), an economy that has remained highly dependent on technology imports.

The Government of the Republic of Korea intervened often in arm's length technology imports to lower prices and strengthen the position of local buyers, but in a flexible way that did not constrain access to expensive know-how. The licensing policy was liberalized over the 1980s as the need for increasingly advanced technologies increased. The regime encouraged reverse engineering and R&D by technology-importing firms to develop indigenous technological capabilities; many of the larger firms were later able to enter into collaborative ventures with world technology leaders on a more equal basis. In the field of plant and process engineering, the Government stipulated that foreign contractors transfer their design knowledge to local firms, which quickly absorbed design technologies in some process industries. Even more so than Taiwan Province of China, the Republic of Korea was able to use imported technology to develop its domestic base of capabilities in advanced activities, rather than remaining passively dependent on inflows of foreign skills and innovations.

The chaebol soon developed sufficient international presence to manage their technology imports. However, SMEs had to be given continued assistance to search for and buy technologies overseas. Like Taiwan Province of China (and Japan), the Republic of Korea compiled a database on sources and prices of technology supply. This was linked to similar databases overseas and provided on-line in major industrial centres. There was also a programme to increase SMEs' technological linkages with large firms (see below), but unlike in the case of Taiwan Province of China, this was directed mainly at local large firms rather than at TNCs. As with the other export-oriented countries, foreign buyers were a valuable source of technology. The Government's export promotion efforts contributed greatly to this mode of technology acquisition. Several promotion measures were involved, including financial incentives, export targeting, other pressures to export (such as access to import licences) and information support.

The Korean Overseas Trade Agency (KOTRA) played a significant role in providing contacts and market intelligence, and bringing together foreign buyers and Republic of Korea suppliers. The chaebol themselves were instrumental in promoting exports by other firms via their trading arms, modelled on the Japanese sogo shosha. These had the financial and marketing strength to be able to substitute for foreign trading companies that small exporters in Taiwan Province of China had to rely on (above), and contributed to the superior ability of the Republic of Korea to establish its own brand names in international markets.

The Republic of Korea's policies to selectively encourage activities and firms via credit allocation and subsidization were inherent to its industrial policy from the start (Amsden, 1989; World Bank, 1993). As the industrial sector matured and entered more demanding areas of technology and the Government reduced the direct allocation of credit, its role in technology financing increased rather than decreased. This emphasis was also aided by the fact that the emerging "rules of the game" made other forms of subsidies and grants to industry unacceptable, while technology financing remained a permissible form of intervention.

The Government of the Republic of Korea provided technology financing in the form of both grants and loans (often directed and subsidized). A variety of institutions, such as venture capital companies, banks, credit guarantee companies and others, were used to channel funds to a variety of users in a variety of forms. These three forms of technology financing - subsidies, loans and institutional support - are described in turn.

Subsidies. There are three main forms of subsidies for technological effort: the Designated R&D Programme (launched in 1982), the Industrial Technology Development Programme (1987) and the Highly Advanced National Project (1992). Together these have contributed large sums of money for research approved or targeted by the Government, conducted by firms on their own, by research institutes on their own, and by firms in collaboration with research institutes (box 3).

Box 3. Republic of Korea government subsidies for technology development

The Designated R&D Programme has, since 1982, supported private firms undertaking research in core strategic technology development projects in the industrial area approved by the Ministry of Science and Technology. It funded up to 50 per cent of R&D costs of large firms and up to 80 per cent for SMEs. Between 1982 and 1993, this Programme funded 2,412 projects, which employed around 25,000 researchers at a total cost of around $2 billion, of which the Government contributed 58 per cent. It resulted in 1,384 patent applications, 675 commercialized products and $33 million of direct exports of know-how. Its indirect contribution in terms of training researchers and enhancing enterprise research capabilities was much larger. The value of grants under the Programme in 1994 was $186 million, 42 per cent of which was directed at high-technology products such as new speciality chemicals.

The Industrial Technology Development Programme, was started in 1987 to subsidize up to two thirds of the R&D costs of joint projects of national interest (National Research Projects) between private firms and research institutes. Between 1987 and 1993 this Programme sponsored 1,426 projects at a cost of $1.1 billion, of which the subsidy element from the Government was 41 per cent. In 1994, the Programme made grants of $180 million (with 31 per cent going to high-technology products), a significant increase from $69 million in 1990.

The Highly Advanced National Project (HAN) was launched in 1992 to support two activities: the development of specific high-technology products in which the Republic of Korea could become competitive with advanced industrial countries in a decade or two (Product Technology Development Project), and the development of "core" technologies considered essential for the economy in which the Republic of Korea wanted to achieve an independent innovative base (Fundamental Technology Development Project). So far 11 HAN projects have been selected, and during 1992-1994 the Government provided $350 million of subsidies for them. In this brief period, the programme resulted in 1,634 patent applications and 298 registrations.

Loans. The Government of the Republic of Korea set up three funds to provide loans, usually at subsidized rates, for technology development. The first was the Industrial Development Fund, providing low-interest loans for long-term productivity improvement and technology upgrading in high-technology industries. Several banks were used to channel the funds, which could total up to 70 per cent of the approved projects for large companies and up to 100 per cent for SMEs. The loans are given for five years, with a two-year grace period, and an interest rate of 6.5 per cent. The total funds disbursed during 1990-1994 came to around $618 million. The second fund was the Science and Technology Promotion Fund, started in 1993 to fund firms and research institutes undertaking HAN projects (noted above). Loans could total up to 80 per cent of the total value of the project, up to $1.3 million per project and $3.8 million per firm. They are for seven years, with a grace period of three years and an interest rate of 6 per cent. In its two years of operation the fund has offered $255 million. Third, an SME Foundation Formation Fund was set up as recently as 1994 to support technology development and environmental investment by smaller firms. The fund could finance 100 per cent of approved projects at an interest rate of 8.5 per cent over 10 years, with a grace period of three years. In 1994 this fund provides $400 million.

Financial institutions' technology financing. The Republic of Korea has the largest and most successful venture capital industry in the developing world. Starting with the launching of the Republic of Korea Technology Development Corporation (KTDC), a joint effort by the Government and the chaebol, in the early 1980s, several private venture capital funds were set up. There are 58 venture capital companies in the Republic of Korea today, which disbursed loans and investment funds amounting to $3.5 billion during 1990-1994 (85 per cent of this was in the form of loans).

A number of banks (Korea Development Bank, Industrial Bank of Korea, the Kookmin Bank, the Korea Long-Term Credit Bank and others) lend money to firms and research institutes for technology development. The State-owned KDB, for instance, offers three kinds of finance: Technology Development Loan, High-Technology Industry Promotion Loan and Production Technology Development Loan. These three instruments lent $ 3.4 billion during 1990-1994, with 40 per cent going into the High-Technology Industry Promotion programme. Both this programme and the Production Technology Development Loan are for firms approved by the Ministry of Trade, Industry and Energy; finance is provided for eight years with a three-year grace period and a subsidized interest rate of 8 per cent. The Industrial Development Bank of Korea offers Technology Development Loans for SMEs, which amounted to $560 million during 1990-1994. These loans are for developing new technologies or improving upon imported technologies, and IDB offers up to 100 per cent of the cost of the project at 8.5 per cent interest (over 10 years with a three-year grace). Other banks also offer similar loans to SMEs.

The Korea Technology Credit Guarantee Fund (KTCGF) offers credit guarantees for loans made to help firms develop or commercialize new technology. It concentrates on SMEs (firms with under 1,000 employees) in new technology industries, as well as research institutes that need funds for technology development. The total value of its guarantees between 1990 and 1994 was about $8 billion. The fee charged is 1 per cent of the value guaranteed for SMEs and 1.5 per cent for larger companies.

The scale of technology financing in the Republic of Korea is truly impressive, although the Government feels that it is still inadequate for its needs. This accounts for the constant setting up of new schemes, targeted at smaller firms and the fostering of collaboration with research institutes. The figures also indicate that there is tremendous technological dynamism in the SME sector, although the chaebol continue to account for the bulk of R&D expenditures. The extent of selectivity in technological activity remains very high, with no remission in the strategy of identifying and targeting specific areas for research activity.

The Asian crisis, however, has forced technologically sound but financially weak the Republic of Korea firms to invite FDI to cope with pressing cash flow problems (Kim, forthcoming). They put not only peripheral but also core businesses up for sale. Consequently, unlike China and South-East Asian economies that witnessed sharp falls in FDI (e.g. Singapore 24.8 per cent and Taiwan Province of China and Malaysia 19 per cent in 1998), the Republic of Korea had a sudden increase in FDI. Thus, FDI in manufacturing rose from $2.3 billion in 1997 to $8 billion in 1998 and to $15.5 billion in 1999. The lion's share of the new FDI took the form of mergers with and acquisitions of existing Republic of Korea firms. Hewlett-Packard purchased a 45 per cent stake in its Republic of Korea subsidiary from its joint venture partner, Samsung Electronics, for $36 million. Dow Chemical took over Ulsan Pacific Chemical by purchasing a 20 per cent stake. Philips purchased a 50 per cent stake in LG's highly profitable flat panel display business for $1.4 billion. Volvo purchased Samsung's construction machinery division for $730 million.

If assets sales are included, the Republic of Korea's top five chaebol raised over $7.4 billion in the year after the crisis. The Republic of Korea's economy will now be far more linked with foreign multinationals than before. But in most recent cases the FDI transfers neither new processes nor new product technologies. It does transfer managerial capabilities, which introduces transparent and accountable management systems, which Republic of Korea firms previously lacked.

Some TNCs have also started to conduct R&D locally. Thirty-nine TNCs, or 1.4 per cent of the total number of TNCs operating in Republic of Korea manufacturing, have set up R&D centres. Thirty-three of these were established in the 1990s, after the Republic of Korea had developed a significant R&D base. TNC R&D units, however, account for less than 1 per cent of the total number of corporate R&D centres. Most of TNC R&D involves adapting products to local markets, which suggests that local innovation by TNCs is fairly insignificant compared with that of domestic firms.

Patent registration in the United States is often used as a measure of international competitiveness. The cumulative number of patents granted to nationals of the Republic of Korea by the United States between 1969 and 1992 was 1,751 compared with 4,978 for Taiwan Province of China. However, the Republic of Korea jumped from 35th place in the number of patents in the United States (among 36 countries listed in an NTIS report) in 1969 to 11th place in 1992, giving an average annual growth rate of 43 per cent (NTIS, 1993). This growth rate was the highest of the countries in that report. A more recent report shows that the Republic of Korea jumped to sixth place in 1999, with 3,679 patents, after only Japan, Germany, Taiwan Province of China, France and the United Kingdom. Samsung Electronics, the most R&D - intensive firm in the Republic of Korea, ranked fourth with 1,545 US patents, coming only after IBM, NEC and Canon. These figures again indicate how rapidly the Republic of Korea has gained in technological competitiveness.

The Government of the Republic of Korea invested in a large array of technology infrastructure institutions. In 1966 it set up KIST (Korea Institute of Science and Technology) to conduct applied research of various kinds for industry. In its early years, KIST focused on solving simple problems of technology transfer and absorption. In the 1970s, the Government set up other specialized research institutes related to machinery, metals, electronics, nuclear energy, resources, chemicals, telecommunications, standards, shipbuilding, marine sciences, and so on. These were largely spun off from KIST, and by the end of the decade there were 16 public R&D institutions. In 1981 the Government decided to reduce their number and rationalize their operations. The existing institutes were merged into nine under the supervision of the Ministry of Science and Technology. KIST was merged with KAIS (Korea Advanced Institute of Science) to become KAIST, but was separated again - as KIST - in 1989.

The Government's strategic thrust in this sphere was mainly a series of National R&D Projects launched in 1982. These were large-scale projects which were regarded as too risky for industry to tackle alone but which were selected as being in the country's industrial interest. National Projects were conducted jointly by industry, public research institutes and the Government, and covered areas such as semiconductors, computers, fine chemicals, machinery, material science and plant system engineering. "Centres of Excellence" were formed in these fields to boost long-term competitiveness. National Projects were a continuation of the strategy of interventions to identify and develop the country's dynamic comparative advantage, orchestrating the different actors involved, underwriting a part of the risks, providing large financial grants and filling gaps that the market could not remedy (for data on the amounts involved see above on technology financing).

Other policy measures to stimulate technological effort in the Republic of Korea were more addressed to static market failures. These included the setting up of Science Research Centres and Engineering Research Centres at universities around the country to support R&D activities, the common utilization of advanced R&D facilities by smaller private firms, and the construction of science towns. Daeduk Science Town has been under construction since 1974, and a large number of research and educational institutions are already well established there. The construction of Kwangju Science Town has started; others such towns are planned. Technology diffusion was advanced by the Korea Institute for Economics and Technology, which collected, processed and disseminated scientific and technical information to industry.

Since the early 1980s a number of laws have been passed to promote SMEs, leading to a perceptible increase in their share of economic activity (over 1975-1986 the share of SMEs in employment, sales and value added rose by at least 25 per cent). This policy support was crucial to the reversal in their performance: it covered SME start-up, productivity improvement, technology development and export promotion. A host of tax incentives was provided to firms participating in these programmes, as well as finance at subsidized rates for using support services, credit guarantees, government procurement and the setting up of a specialized bank to finance SMEs. A number of other institutions were set up to help SMEs (such as the Small and Medium Industry Promotion Corporation to provide financial, technical and training assistance and the Industrial Development Bank to provide finance). The Government greatly increased its own budget contribution to the programme, although SMEs had to pay a part of the costs of most services provided to them.

To promote subcontracting to SMEs, the Government enacted a law designating parts and components that had to be procured through them and not made in-house by large firms. By 1987 about 1,200 items had been designated, involving 337 principal firms and some 2,200 subcontractors, mainly in the machinery, electrical, electronic and shipbuilding fields. By this time, subcontracting accounted for about 43 per cent of manufacturing output and 65-77 per cent of the output values of the electrical, transport equipment and other machinery industries. Generous financial and fiscal support was provided to subcontracting SMEs to support their operations and process and product development. In addition, subcontracting SMEs were exempted from stamp tax and were granted tax deductions for a certain percentage of their investments in laboratory and inspection equipment and for the whole of their expenses for technical consultancy. Subcontracting promotion councils were set up by the industrial subsector and within the Korea Federation of Small Business to help SMEs in contractual relationships, arbitrate disputes and monitor contract implementation.

Source : CNUCED - 2003 - document - "investment and policies for competitiveness : review of successful country experiences

 

- FOREIGN INVESTMENT ON DECLINE FOR 4 YEARS

Foreign direct investment in Korea has been declining for the past four years and the trend may not turn around this year without improvements in business conditions, which have been marred by labor disputes and hindered by state regulations, the Ministry of Commerce, Industry and Energy said yesterday.

In a report submitted to Rep. Eom Ho-sung of the opposition Grand National Party, the ministry said direct overseas investment in the nation dropped from $15.22 billion in 2000 to $11.29 billion in 2001, $9.1 billion in 2002 and $2.66 billion in the first half of this year.

The full 2003 figure could be less than the level of 1998, when the nation was hit by a major foreign-exchange crisis, the ministry forecast.

The FDI in 1998 sunk to $8.85 billion before rebounding to $15.54 billion the following year.

The reported cases of foreign investment also fell from 4,140 in 2000 to 3,340 in 2001, 2,402 in 2002 and 1,215 for the first six months of this year. The number of investments in 1998 and 1999 were 1,401 and 2,104, respectively.

"Worsening business conditions, most notably labor unrest, may inhibit foreign investment in the remainder of the year, sending the yearly total below the 1998 level," the report said.

The lawmaker attributed the downward trend to "the government's inconsistent policies on business and labor issues."

"The government urgently needs to ease state regulations on investment and stabilize labor-management relations," Eom said.

To lure more overseas investment, the Korean government plans to offer more tax benefits and simplify tax codes for foreign businesses operating here beginning next year.

It will lower the investment requirement for tax breaks to $30 million from $50 million for manufacturers. The amount for logistics businesses will be reduced to $10 million from $30 million, according to the government's draft tax plan for 2004.

(kalee@heraldm.com) By Lee Kyoung-ah - Source : Korea Herald - 02/09/03

 

- FOREIGN INVESTMENT HAILED AS GROWTH ENGINE

Finance minister forecasts economy will turn around on stimulus, global recovery

Minister of Finance and Economy Kim Jin-pyo said yesterday that the government would ease regulations and offer tax benefits to lure more foreign direct investment as part of its long-term strategy to strengthen the nation's growth potential.

In his opening speech at the Finance and Economy Committee held yesterday in the National Assembly, Kim reaffirmed his optimistic economic forecast, saying that the local economy would turn around on the back of government's economic stimulus efforts and the recovery of the global economy.

Last week, he suggested that the economy would begin perking up in the fourth quarter of this year to post annual growth in the mid-3 percent range, a more optimistic projection than the 3.1 percent estimated by the Bank of Korea.

Emphasizing the importance of investment for sustainable economic growth, the top economic policymaker noted that the government needs to boost investment to develop new industries that will be able to drive the national economy in the years ahead.

He added that the government plans to ease related regulations and expand tax benefits to attract more foreign direct investment, which has been decreasing since 2000.

To that end, the government will reduce income taxes for foreign CEOs working here and also streamline exit and entry processes, and simplify the foreign exchange systems in order to narrow the differences in business conditions for local and foreign companies, he explained.

He said that the government would hold a series of investor relations sessions for local logistics and IT industries both at home and abroad sometime this year. He added it would expand customs-free zones and increase the ratio of paper-free clearances at customs offices in order to improve the business environment for foreign companies.

In a bid to accelerate its efforts to nurture the recently chosen future growth engines, Kim said that the government plans to employ more science and engineering graduates in its ministries and offices while offering superb engineers incentives such as reductions in their military service terms.

He confessed that it was a "difficult option" to encourage consumer spending at a time when the nation was still faced with tricky problems such as lingering credit delinquencies and real-estate speculation.

Instead of choosing that risky strategy, he explained that the government decided to frontload its budget in the first half and provide a supplementary budget worth 4.5 trillion won ($3.8 billion), of which 70 percent is allocated for the third quarter.

By Koh Byung-joon (kokobj74@heraldm.com) - Source : Korea Herald - 09/09/03

 

- S.KOREA SEES '04 FOREIGN DIRECT INVESTMENT DOUBLING

(Updates with comments from investor, analysis, background) By Kim Myong-hwan

South Korea's commerce minister said on Wednesday foreign direct investment would nearly double next year, driven by an economic recovery and also government efforts to entice foreign investors.

The country has been losing its attractiveness as a venue for foreign investment in recent years mainly on concerns over its militant trade unions, the crisis over North Korea's nuclear ambitions and China's rise as a regional industrial powerhouse.

"We expect FDI will rise to about $10 billion in 2004, up from an estimated $5-$6 billion in 2003, as the economy is expected to recover from late this year and due to our efforts to create a better environment for foreign investment," Yoon Jin-sik told Reuters after making a speech to a group of foreign business leaders invited to check out investment opportunities.

With a sharp slide in foreign investment threatening to derail the country's ambitions of becoming a business hub for North Asia, South Korea said this month it would offer cash grants and other incentives to try to win back overseas money and support flagging growth in Asia's fourth-largest economy.

ENCOURAGING SIGNS

"Aside from arranging a seminar for foreign investors in the country, we also plan to send delegations to them in their countries to explain what we can offer," Yoon said.

He said he would lead a delegation to Japan in October to attract investors in the sectors of high-tech components and materials to South Korea.

Steve Rodgers, vice-president of Canadian automotive parts maker Magma International Inc, said South Korea's drive to offer more incentives was quite encouraging.

"South Korea has good quality infrastructure in the car industry, for example," Rodgers said. "Especially, what the government does now is quite positive to foreign investors."

Foreign direct investment (FDI) in the first half of 2003, measured by investment plans submitted to the government, fell 44 percent from a year earlier to $2.7 billion. FDI has been falling since it hit a peak of $15.5 billion in 1999, according to the ministry's data.

Reflecting gripes from expatriates living in South Korea, the ministry said this month investment in education, hospitals or other sites targeting foreigners living in the country would receive financial support from the government.

The finance ministry has previously said it would broaden the scope for tax incentives for foreign investors.

In addition, South Korea has sought to make its job market more flexible, giving employers more scope to lay off workers or employ temporary ones, since it accepted reform prescriptions from international lenders in late 1997 during the Asian crisis.

As part of an aim of doubling the country's per-capita gross domestic product (GDP) to $20,000 by 2012, the commerce ministry has picked 10 key high-tech sectors to focus on.

These include digital display devices, fourth-generation mobile phones, high-tech automobiles and next-generation semiconductors, the ministry said.

Source : Reuters - 23/09/03

 

- FOREIGN INVESTMENT EXCEEDS $280 BILLION

By Kim Jae-kyoung

Foreign investment in Korean markets reached $280.34 billion at the end of 2002, up $29.82 billion from the end of 2001, according to the Bank of Korea (BOK).

The foreign investment is composed of direct investment, portfolio investments (purchase of stocks and bonds), loans and credit.

The total breaks down into $62.66 billion in foreign direct investment, up $9.45 billion from 2001 and $116.73 billion in portfolio investment, up $10.72 billion from 2001. Loans and credits came to $100.96 billion in 2002, up from $91.30 billion in 2001 respectively.

The portfolio investment accounted for 41.6 percent of the total foreign investment, compared with 22.4 percent for direct investment.

Local shares held by foreigners totaled $76.64 billion at the end of 2002, up from $69.97 billion at the end of 2001, accounting for 35.1 percent of the total market capitalization, compared with the prior year¡¯s 35.9 percent.

``Although foreign investment increased last year, it was mainly due to external factors, such as the appreciation of the Korean won,¡¯¡¯ a BOK official said.

``Of the total increase of $29.82 billion, the $18.40 billion rise resulted from external factors,¡¯¡¯ he added. The won appreciated 9.7 percent against dollar in 2002.

The amount of foreign investment in Korea is well below those in advanced nations _ $9.07 trillion in the U.S., $5.23 trillion in Britain, $2.26 trillion in France, $1.58 trillion in Japan, $1.16 trillion in Italy, $689.66 billion in Hong Kong and $339.42 billion in Singapore.

Korean investments overseas reached $207.72 billion at the end of 2002, up $21.14 billion from the end of 2001.

The central bank said that foreign exposure to Korea has risen at a pace faster than local exposure to foreign markets last year, with the inbound investment surpassing outbound investment by $72.62 billion in 2002, up from $63.94 billion in 2001

The total outbound investment consists of $22.58 billion in direct investment, up $2.61 billion from 2001 and $12.41 billion in portfolio investment, up $4.18 billion from 2001.

The portion of the nation¡¯s outbound direct investment to gross domestic product stood at 4.7 percent, compared with the United States¡¯ 19.5 percent, Britain¡¯s 65.9 percent, France¡¯s 56 percent, Hong Kong¡¯s 186.9 percent and Japan¡¯s 7.2 percent.

Investment in foreign bonds jumped by $3.69 billion to $10.62 billion, while investment in overseas stocks increased by $490 million to $1.79 billion.

In the meantime, the central bank said Koreans made $530 million in profits out of investment abroad, which is equivalent of 0.25 percent to total overseas investment, while foreigners made $18.4 billion in profits from investment in local markets, 6.56 percent of the total.

This means that Koreans earned 2.5 won for every 1,000 won investment abroad compared with foreigners¡¯ 65 won gains here.

The central bank said that higher returns on foreign investment were thanks to rising evaluation profits from direct investment, coupled with won appreciation.

``Although Korean investment abroad has been increasing, the performance has stayed in the doldrums,¡¯¡¯ the official said. ``More efforts should be made to boost efficiency of investment abroad.¡¯¡¯

kjk@koreatimes.co.kr - Source : Korea Times - 25/09/03

 

- CAN FOREIGN-INVESTED COMPANIES RECEIVE LOANS FROM OVERSEAS AND HOW?

Answer: A foreign-invested company is a corporate entity legally established under domestic laws, and therefore it is possible to obtain loans from overseas just like Korean companies.

According to foreign exchange regulations, a Korean company that wishes to borrow short-term capital with a redemption period of less than 1 year has to get permission from the Ministry of Finance and Economy (MOFE). However, a foreign-invested company only needs to notify the designated foreign exchange bank if the loan does not exceed a certain amount. If the redemption period exceeds the 1-year period, then notification has to be given to the foreign exchange bank, but only if the individual loan amount exceeds $30 million does MOFE need to be notified.

A foreign-invested company that has received loans with a weighted average redemption period of more than 5 years from its overseas parent company or a company that has capital affiliation with the parent is categorized and treated as a foreign direct investment.

For further information please contact: Ju-Kyung Kim Tel: 02-3460-7575 E-mail: jkkimjk@hanmail.net

Source : Korea Herald - 14/09/03

- TAX BREAKS PLANNED FOR FOREIGN INVESTMENT IN SOC

The Korean government will offer tax breaks for foreign investment in social overhead capital worth $10 million beginning in 2004 in an effort to attract more overseas investment, Minister of Finance and Economy Kim Jin-pyo said Tuesday.

Foreign investors in 36 types of SOC projects, including construction of roads, ports and water resources, will be exempt from taxation for five years and get a 50 percent break on corporate taxes for two additional years.

Currently, such tax benefits are provided only for logistics and capital investment amounting to more than $30 million.

¡°Lack of SOC investment is leading to rising logistics costs, dragging down overall national competitiveness,¡± Kim said in a meaeting with reporters in Dubai. He is visiting the capital of the United Arab Emirates to attend the meeting of the International Monetary Fund and the World Bank.

The top economic leader confirmed that the government will sign an agreement with Gale for the U.S. real estate company¡¯s planned investment in development projects in the western port city of Incheon.

He said he will sign the deal, estimated to be worth $12.7 billion, on his return to Seoul.

The projects include construction of convention centers, trade centers, schools, hospitals and other facilities for the newly designated free economic zone within the city.

He also said the government will prepare a supplementary budget worth 5 trillion won to assist those who suffered losses from the recent Typhoon Maemi, as well as to stimulate the local economy.

Noting that every 1 trillion won of additional budget could result in economic growth of 0.6 percentage point, he said the extra budget will help the nation attain the 3 percent economic growth target.

By Koh Byung-joon Korea Herald correspondent (kokobj74@heraldm.com) - Source : Korea Herald - 24/09/03

- FOREIGN INVESTMENT IN INFRASTRUCTURE TO GET TAX BREAKS

By Lee Chi-dong-Korea Times Correspondent

DUBAI, United Arab Emirates _ Foreigners making investments of more than $10 million in Korea¡¯s logistics and transportation infrastructure will enjoy corporate tax cuts for seven years beginning next year.

Finance-Economy Minister Kim Jin-pyo yesterday unveiled the plan aimed at boosting investment in infrastructure and attracting foreign direct investment.

``It is one of the most urgent tasks to turn the country into a regional logistics hub,¡¯¡¯ said Kim, who is here attending the 58th annual meeting of the International Monetary Fund (IMF) and World Bank.

To that end, Korea will exempt foreign investments of more than $10 million in public infrastructure such as ports, roads, railways and other logistics-related facilities from corporate taxes for seven years, with taxes halved for the following three years, he added.

The government also plans to add two southern port cities _ Pusan and Kwangyang _ to the list of free economic zones this year.

It has already designated three areas in the western port city of Inchon as free economic zones where foreign investors are able to benefit from various tax incentives and good living conditions.

Meanwhile, Korea¡¯s top economic official has urged the IMF and its sister organization to increase its quota (capital investment ratio) in the international bodies.

``Korea¡¯s 0.77-percent quota is too small in consideration of its economic scope,¡¯¡¯ he said yesterday during his keynote speech at the two-day regular session of the gathering.

Kim also stressed that the IMF and World Bank should help North Korea open to the global economy.

``In line with gradual improvements with multilateral talks, North Korea will need to eventually become a partner in the global economy,¡¯¡¯ he said.

``Getting there will require help, both from the IMF and the World Bank,¡¯¡¯ he added. ``So they should extend technical assistance to the communist regime in preparation for its membership.¡¯¡¯

He reassured global financiers and investors that the Korean economy would achieve its potential growth rate of 5 percent next year, saying it will be spurred by two new engines.

``One engine will come from making Korea a main business hub in Asia,¡¯¡¯ he said. ``Another will come from the structural reforms that are making our economy more competitive and productive.¡¯¡¯

lcd@koreatimes.co.kr - Source : Korea Times - 23/09/03

- BUSINESS BODY CALLS INVESTMENT RESTRICTION 'UNCONSTITUTIONAL'

A leading local business organization has posed a constitutional challenge to the law that puts a limit on domestic companies' equity investment in other businesses.

The Korea Chamber of Commerce and Industry said in a report yesterday that the investment limit has many "unconstitutional elements" because it is against the constitutional principle of the "minimum restriction of people's basic rights" to their property, equality and economic freedom.

The country's fair-trade law prohibits a domestic conglomerate's equity investment into other companies from exceeding 25 percent of its assets. The law has been in effect since 1984, as the government tried to prevent local family-controlled corporations, or chaebol, from sprawling and overdiversifying their businesses by using one unit's money to set up or acquire another company.

As the law applies to affiliates of the nation's 30 largest conglomerates in terms of total assets, they have urged the government to ease the investment restraints, claiming that the regulation keeps them from making new investments at a time when the local economy is in a prolonged slump amid sluggish consumer spending and dwindling capital expenditures.

Citing the Korean constitution's ban on "excessive (governmental) restrictions" on basic rights, the commerce and industry chamber argued that the law, which was intended to prevent cross-shareholdings among chaebol affiliates, also restricts "productive equity investments" in general. "Therefore, it runs counter to the principle of no excessive bans," the business lobby stated.

The organization also claimed that the investment ceiling discriminates against local companies in favor of multinational corporations and weakens the competitiveness of domestic concerns.

In addition, it stated that the limit violates the principle of minimum restriction because there are other concrete laws that ban local companies from providing illegal financial support to affiliates and regulate antitrust activities by market-dominating businesses.

On the other hand, the state-funded Korea Development Institute today criticized past government actions to ease the chaebol investment limit.

In a report submitted to Chung Hyun-keun, an opposition Grand National Party lawmaker, during the National Assembly's audit of state affairs, the think tank said softening the investment limit in 2001 hindered governmental efforts to promote corporate restructuring.

It said the 2001 decision was designed to boost falling investment by conglomerates, but actually led to a compromise that was detrimental to overall corporate reform efforts.

The institute, in particular, criticized various exceptions and loopholes in the fair-trade law for hampering the effectiveness of the investment limit.

"At every economic downturn in the past, the business community asked the government to ease the investment regulations, and political compromises with politicians resulted in allowing new exceptions (to the law)," the research institute noted in the paper. "Ultimately, more exceptions have made the investment ceiling less effective and undermined the justification of the law."

However, it added that if all the exceptions were removed, the government could consider raising the investment limit from the current 25 percent of total assets to a higher rate.

The research body also urged the government to think twice about allowing chaebol financial units to exercise voting rights in other affiliates, in which they hold stakes.

"If they are permitted to exercise voting rights with shares that they bought with their customers' assets, they could make decisions that are against the customers' interests."

By Kim Hyun-chul (simonkim@heraldm.com) - Source : Korea Herald - 26/09/03

- OVERSEAS INVESTMENT UNPROFITABLE

Foreign investment in Korea exceeded its investments overseas by $72.62 billion at the end of last year.

According to "international investment position" figures released by the Bank of Korea yesterday, financial assets in Korea held by foreign investors, or the nation's external liabilities, totaled $280.34 billion as of the end of 2002, up 11.9 percent from a year earlier.

Conversely, Koreans' investment in foreign countries, or their external assets, stood at $207.72 billion, an 11.3 percent growth year-on-year.

The IIP is the balance sheet of the stock of external assets and liabilities encompassing equity capital, securities, loans, deposits and reserve holdings.

In 2002, Koreans posted a combined $60 million worth of appraised losses from their direct investment overseas, while foreigners racked up $7.48 billion worth of estimated profits from their direct investment here.

"Foreign businesses who invested in Korea basically benefited from the won's appreciation, which lifted their dollar-converted appraisal profit," explained Kim Ji-young of the BOK.

"But the biggest reason behind their increased profits is their good business performances, which came in contrast to Korean companies whose offshore business results stayed largely in red ink."

According to the central bank, the ratio of Korea's external assets plus liabilities against its gross domestic product stood at 102.4 percent, while the comparable rate reached 148.9 percent in the United States, 111.3 percent in Japan and 1,054.6 percent in Hong Kong.

"This figure represents a nation's financial openness, which indicates Korea remains less open compared to other major countries," Kim noted.

Among foreign investors' assets in Korea calculated late last year, 41.6 percent, or $116.73 billion worth, was either equity securities or debt securities, such as bonds and money market instruments.

Foreigners' direct investment here, including equity capital and reinvested earnings, accounted for 22.4 percent, or $62.66 billion worth, while other investment, such as trade credits, loans and deposits, made up 36 percent, or $100.96 billion worth.

Looking at Koreans' overseas assets, 58.4 percent of them, valued at $121.41 billion, was reserve assets, while 10.9 percent was direct investment abroad, 6 percent portfolio investment including equity and debt securities, and 24.7 percent in the form of other investments.

By Kim Ji-ho (jihoho@heraldm.com) - Source : Korea Herald - 26/09/03

- MANUFACTURERS STILL ROLLING OUT (OF KOREA)

The exodus of Korean firms going overseas continued to surge in the second half of this year: companies in the fields of light industries and electronics pressed ahead with measures for a relocation overseas, while big firms went as far as to move their core production plants abroad.

Hyosung, which occupies 60 percent of Korea's electrical machinery market, signed an agreement on Tuesday with a Chinese firm on build a transformer manufacturing plant in the province of Hubei, China. The total investment for the plant is set at US$10.34 million, of which Hyosung is to contribute 60 percent.

A Hyosung executive said that the firm decided to move to China because the demand for power equipment there has been rising for more than 10 percent a year. The company has also been expanding its production plants that are already in China.

Hanssem, a leading kitchenware manufacturer, started building a production plant at an industrial complex near Beijing. The firm plans to develop the plant into its production center for China, as well as for exports to Korea and Japan.

An official of the firm said it decided to relocate to China in order to save logistics and personnel expenses.

Tongkook Corp., a textile manufacturer that has been undergoing a debt-rescheduling program, is soon to start construction work on a production plant in Guangdong, China.

The exodus has been sweeping across Korea's electric goods firms and automakers.

Kia Motors, a sister carmaker of Hyundai Motor, plans to set up an assembly plant in Eastern Europe that will be capable of rolling out 300,000 cars a year. Kia also reported strong earnings in the first half of this year.

Korea's second-largest carmaker, Kia also plans to build another production plant in China with a yearly output of 200,000 units, to expand the firm's production capacity in China to 300,000 cars a year by 2006.

Following the dedication in July of a display-equipment manufacturing plant in Slovakia, Samsung Electronics plans to launch digital TV production lines in the country.

LG Electronics plans to reorganize its factory in Poland by September next year, focusing on digital televisions.

by Choi Hong-seop (hschoi@chosun.com) and by Kim Jong-ho (tellme@chosun.com) - Source : Chosun Ilbo - 23/09/03

- CAN KOREA CUT IT AS R&D HUB?

Faced with stagnant world investment flows, the competition around the globe to reel in foreign investments has become increasingly cutthroat in recent years.

In the Asian context, with the rapid emergence of the economies of China and other countries in the region, Korea's foreign investment attraction policy is gradually shifting from its traditional focus on luring manufacturing firms to fostering high technology industries with an emphasis on research and development.

With the clock ticking on Korea's need to adopt a new growth paradigm, it is encouraging to see many new government policy proposals for transforming the country into a regional R&D hub. According to the results of a survey of chief technology officers of foreign-invested firms in Korea conducted by Korea Investment Service Center, measures to promote easier recruitment of research personnel and active government support are needed in order for Korea to improve its R&D environment. In addition, survey respondents identified the following factors as setting Korea's R&D environment apart from its regional competitors.

Competitive IT-related manpower

The government's steadfast push to cultivate an educated workforce is demonstrated by the fact that the budget allocation as a percentage of GDP for higher education outpaces that of most OECD countries.

As a result, Korea is blessed with a wealth of highly educated and skilled workers - over 68 percent of the adult population has received higher education and 97 percent of the labor force has either vocational training or a university degree. In particular, Korea boasts the world's second-largest number of science and engineering graduates relative to its population.

And while Korean factory workers traditionally have been regarded as being very adroit with their hands, today's younger workforce is recognized as being thoroughly technology savvy and possessing creative ideas, characteristics that are indispensable in the high-tech and knowledge industries.

World-class manufacturing technology

As a production base for many prominent multinational firms, Korea is known for its mass-production capability and leading manufacturing technology. With such a strong manufacturing foundation in place, Korea's ability to commercialize original foreign technologies allows for maximization of synergy effects. For example, Liquidmetal's choice of Korea as its production base is a representative case of a core technology developed in a foreign country, in this case the United States, being commercialized using Korean manufacturing skills.

Differentiated industrial structure

Korea's unprecedented economic development has resulted in a dynamic industrial structure. From consumer goods to airplanes, ships, automobiles and semiconductors, world-class Korean firms are represented in nearly every industry imaginable. As such, in comparison to our Asian competitors, Korea is blessed with many related industries for firms to exploit and presents great opportunities for immediate field-testing of the results of R&D activities.

Furthermore, such a wide-ranging industrial structure has also resulted in a diverse consumer base including both high-end and low-end consumers. Characterized by quickly changing consumer attitudes, Korea is home to a plethora of early adapters, thus offering efficient information flows on the marketability of next generation products. Korea is now recognized as a leading test market for next generation cellular phone and home electronic goods, and is at the forefront of dictating or molding consumer needs through research and development rather than merely responding to existing consumer needs.

High-speed communication network

Korea's Internet usage rate is one of the highest in the world, with 28.61 million people, or 64.1 percent of the population, logging on to the web at least once a month. The country also boasts the world's highest broadband Internet penetration rate and is among the world leaders in mobile telecommunications, with the cellular phone penetration rate expected to reach the 80-percent mark by 2007. These factors make Korea's research and development climate highly desirable in the eyes of multinational corporations from advanced countries.

In fields such as IT application software, the ability to rapidly gather information gives firms a step up on the competition in terms of more effective and efficient results stemming from their R&D activities.

Compatibility of Hangeul with IT

Unlike Japanese and Chinese, which use Chinese written characters, Korea's Hangeul, much like English characters, can be written in a single-stroke, thus making conversion between the two languages in IT software applications much easier. In fact, studies show the strong economic value of Hangeul in that it is seven times faster than Chinese or Japanese in terms of computer processing. As such, Korea holds a competitive advantage in the region for English-based software development and application due to such simplicity and crossover compatibility.

As seen from the above, in comparison to our Asian neighbors, Korea presents several advantageous conditions for becoming the base for the regional R&D headquarters of multinational firms. The task at hand is to fully exploit these competitive factors while engaging in active overseas promotion of Korea's favorable R&D environment. As R&D centers and manufacturing facilities are complementary in nature, successfully attracting R&D facilities will naturally lead to an ancillary influx of green-field investments in the form of factories, thus helping to boost Korea's declining trend of inward foreign direct investment.

By Yoo Young-yeol - The writer is a home doctor at the Office of the Investment Ombudsman. He can be contacted at yyyoo@kotra.or.kr. - Ed. - Source : Korea Herald - 18/09/03

- LABOR ISSUES CONCERN FOREIGN INVESTORS

Labor issues are still the most critical concern for foreign investors who have strong interests in the local market.

This was the consensus among foreign investors participating in a seminar promoting the nation¡¯s vision of making Korea a business hub of Northeast Asia.

A group of investors at the seminar under the theme ``Hub Korea: A Forum on Korea as a Northeast Asian Business Hub¡¯¡¯ set off questions over the nation¡¯s labor issues from various aspects, such as the rising number of labor conflicts, costs and productivity.

Around 45 foreign executives from the global business community joined the three-day seminar, organized by Korea Trade-Investment Promotion Agency (KOTRA) and the Ministry of Commerce, Industry and Energy at COEX and Sheraton Grande Walkerhill in Seoul.

Confronted with the concerns, Commerce, Industry and Energy Minister Yoon Jin-sik pledged to deal strictly with the labor issues within the law, while adopting advanced labor practices that rely on dialogue and compromise in settling labor disputes.

``Illegal actions by labor unions will be dealt with severely in accordance with the law. Labor-related law will be revised according to international standards in the near future,¡¯¡¯ Yoon said.

Jung Tai-in, chief executive director of the Presidential Committee on Northeast Asian Business Hub also stressed that Korea¡¯s violent labor conflicts are limited to unions from conglomerates and the portion of all unionized workers lingers around only 12 percent.

Meanwhile, the participating investors showed their interest in industries with future growth potential like the car industry.

As the Korean car industry gets bigger, global car parts manufacturers are making a rush to Korea, positioning the nation as their strategic business hub in Northeast Asia.

``We have set up the first Asian research and development center in Korea and will start operating from next year,¡¯¡¯ Hubert Jacobs van Merlen, president of Luxembourg-based International Electronics & Engineering, told reporters in the opening of the seminar.

As for the reason behind the investment plan for Korea, the head of the European car sensor-electronics systems maker pointed out Korea¡¯s advantage by having biggest customers like Hyundai Motor and Kia Motors.

``Secondly, our investment decision was made based on the experienced and knowledgeable Korean engineers who are dedicated to their work.¡¯¡¯

Thomas Hedenborg, president of German-based car parts maker Hella-Behr Fahrzeugsysteme, also announced that his company will set up three new plants by the end of the year in Korea, citing the nation¡¯s growth potential for local car makers.

By Seo Jee-yeon jyseo@koreatimes.co.kr - Source : Korea Times - 24/09/03

- SOUTH KOREA TALKS TOUGH ON LABOR

The South Korean government said on Thursday that it would press to make the labor market more flexible and prevent illegal work stoppages.

Alarmed by warnings that militant labor unions would scare away foreign investment, authorities plan to unveil a five-year plan by the end of 2003 to improve labor-management ties.

However, analysts said the government's apparent tougher line on labor could be watered down for now by domestic political considerations ahead of parliamentary elections in April.

President Roh Moo Hyun, a former labor lawyer, came to power with strong backing from workers.

"The government will put every effort into eradicating illegal activities that disturb the basics of industrial relations," Labor Minister Kwon Ki Hong told foreign reporters.

The ministry unveiled this month a draft of the plan, aimed at clearing up doubts over labor practices and making it easier for employers to lay off workers and replace striking workers.

The government, business and labor representatives are supposed to discuss the plan with an aim of reaching an agreement by the end of this year. But labor, which fears the draft would undermine labor rights, has threatened to boycott the talks.

"Even without labor's participation, the government will go ahead with its legislation next year," Kwon said.

But analysts said the government's hand might be forced by political realities.

"It is little hard to believe Roh's government can remain tough with labor until the reform plan becomes a law without compromise," said Bae Kyu Shik, an analyst at the Korea Labor Research Institute.

South Korea's single-floor parliament is controlled by the majority opposition Grand National Party.

- HIGHER JOBLESS RATE SEEN

Sohn Nark Koo, a leader of the Korean Confederation of Trade Unions, said the government and business tended to exaggerate the impact of industrial unrest on the economy.

"Unionized workers represent only 11.7 percent of South Korea's entire workforce," said Sohn. "Also, violent labor action has been limited largely to a handful of large-scale manufacturers."

The minister said he expected South Korea's unemployment rate to come in at 3.4 percent in 2003, provided there were no big shocks to the economy, up from 3.1 percent last year.

"Youth unemployment is emerging as a serious social problem", Kwon said in the speech, where he also said the government would strengthen social protection for temporary and part-time workers.

The unemployment rate in August edged down to 3.5 percent, but stayed near a 22-month high of 3.6 percent set in July.

Labor unrest in South Korea has come under the spotlight this year after President Roh intervened in some disputes to ensure union demands were met, in the face of criticism from business leaders.

And despite the government's apparent tougher stance, it was able to persuade 30,000 truck drivers to end a two-week strike costing $600 million in delayed shipments, only after the state agreed in August to hold more talks on improving work conditions.

Hyundai Motor Co., also yielded to union demands for an 8.6 percent wage hike and other benefits to end a 47-day strike that cost the country's largest car maker $1.2 billion in lost output. The deal pushed Hyundai wage rates over $20 an hour, closer to U.S. rates.

Foreign direct investment (FDI) in first-half 2003, measured by investment plans submitted to the government, fell 44 percent from a year earlier to $2.7 billion. FDI has been falling since hitting a peak of $15.5 billion in 1999, government data show.

Source : Reuters - 25/09/03

- 'EQUITY-INVESTMENT LIMIT SHOULD GO'

The controversial equity-investment limit applied to companies with assets of 5 trillion won ($4.3 billion) or more should be changed to enhance its original objective of preventing controlling shareholders from wielding disproportionate power, according to a report by a private research center yesterday.

In a report commissioned by the Ministry of Finance and Economy, a corporate-competition research center at the Seoul National University said the current equity-investment limit system does not fulfill its intended goals, but rather prevents sound investment activities.

The report suggested that the equity-investment limit should be applied differentially according to what it called a decision-making index. The index is derived by dividing the controlling shareholders' decision-making power by their real ownership level, the report explained.

High index figures mean an owner of a company wields unwarranted and disproportionate power in the decision-making process through unorthodox equity investments.

While saying that the equity-investment limit should be kept at 25 percent of a company's assets for the time being, the report argued that the limit should be eased and differently applied on the basis of the index in the future, when market monitoring functions work properly.

If the index is less than 1.5, the limit should be raised to 100 percent; while if the figure is 1.25 or lower, it could be further eased to 150 percent, the report proposed.

In addition, the report suggested that companies be freed from the equity-investment limit if they meet the current debt-to-equity ratio requirement of 100 percent and have a low decision-making index.

The equity-investment limit was first introduced in 1986 through revisions to the fair-trade laws and has since then been a point of contention between business lobbies and the government.

By Koh Byung-joon (kokobj74@heraldm.com) - Source : Korea Herald - 19/09/03

- SOUTH KOREA TO INVEST 188.5 BLN WON IN IPV6 INITIATIVE

South Korea, one of the world's most highly wired countries, plans to invest a total of 188.5 billion won (US$160.9 million) by 2007 to back the development of a new Internet address system known as Internet protocol version 6 (IPv6), government officials said Thursday.

The plan is designed to put the nation in a leadership role in the worldwide Internet equipment market for the next-generation Web address system, the Ministry of Information and Communication said. - Source : Yonhap - 18/09/03

- E-MART LAUNCHES JOINT VENTURE IN CHINA

Korea's retail giant E-Mart has finalized a deal to form a joint venture with China's Taida Group, Tianjin's top real estate company, in a bid to expand its presence in the fast growing Chinese market, the company said yesterday.

The discount chain of Shinsegae Co. is planning to launch a namesake store by next year in the northern port city as a first step to establishing five large discount outlets in the region by 2006.

The Korean firm will own a 65 percent stake in the new entity with an initial capital of about $20 million, officials said.

The deal came six years after the leading discounter in Korea made its first foray into China's huge retail market. E-Mart established its first Chinese outlet in Shanghai in 1997 and more branches will open in the southern city this year.

Some 20 large discount stores run by local and multinational concerns, including Carrefour, are competing in Tianjin. With a population of about 10 million, Tianjin is among the four largest cities in China.

Source : Korea Herald - 19/09/03

- HEINEKEN LAUNCHES KOREAN BRANCH

Heineken, the maker of world's premium beer, will open its first office in Seoul to start full-scale business operations as part of its commitment to increased control and development of its brand here.

"This is a milestone for us and we are proud to say that Heineken is ready to expand its business in Korea,'' Heineken Korea president Jozef Hlavec said. "`With the launch of Heineken Korea, Koreans who enjoy the Heineken experience will fully benefit from our world-class services.''

Heineken beer has been available in South Korea for many years but with the newly formed company, local consumers will be able to enjoy a variety of new experiences.

"The launch of Heineken Korea clearly shows our long-term commitment to the Korean market. Our goal is to achieve increased growth compared with the last year based on Heineken's high quality products and services,'' Hlavec said.

Source : Korea Times - 25/09/03

- DAIMLERCHRYSLER, HYUNDAI FORM VENTURE

DaimlerChrysler AG will start a truck manufacturing joint venture with Hyundai Motor Co. as the German company expands its truck-making in Asia, Handelsblatt said.

The new company, to be named Daimler Hyundai Truck Corp., will be formed in October. DaimlerChrysler agreed to guarantee the jobs of South Korean employees, the newspaper said in a pre- release of an article to be published in tomorrow's edition.

Source : Korea Herald - 27/09/03

- BOSCH TO INVEST OVER W100 BIL. IN KOREA

Bosch Korea Ltd., an auto parts maker, plans to invest more than 100 billion won ($85.1 million) over the next few years to expand its local operations as part of its strategy to further localize its products.

"The investment is related to further localization of products and the expansion of our research and development facilities," Heinz Grewe, president and chief executive of Bosch Korea, said in a recent interview with The Korea Herald. "We will continue to invest in our Korean factories, localize parts and product, and we are going to enhance our capabilities in our Technical Center."

Established in 1989, Bosch Korea is the local subsidiary of Stuttgart, Germany-based Robert Bosch GmbH, one of the largest companies in the Western European country.

The planned investment is part of the German company's efforts to increase the local output of its injectors for the so-called "common-rail fuel-injection system" for diesel engines, as the Korean government will allow the sale of diesel-powered passenger vehicles from 2005.

The firm expects its sales revenue for this year to top 900 billion won, more than half of which will likely come from the sale of locally produced products, Grewe, 60, noted.

Bosch Korea said earlier this year that it aimed to increase its domestic sales volume of the common-rail diesel fuel injector to 2 million units by the end of next year from around 800,000 now. The company's plant in Daejeon has been rolling out the injectors since December 2002. Bosch Korea supplies the injectors to Hyundai Motor Co. and its affiliate Kia Motors Corp.

According to Bosch, the common-rail fuel-injection system uses a super-high-pressure pump to supply fuel to each injector fitted into a tubular accumulator, or rail. Under extremely high pressure, fuel burns more completely, resulting in higher fuel efficiency and less emission of unburned fuel, which causes pollution.

"Diesel engines have been evaluated as being noisy, dirty and malodorous. Because of this, many countries have set up strict regulations regarding diesel engines," Grewe explained. "However, most of these weak points have been addressed and improved through innovative technological advances since the mid-1990s."

He stressed that vehicles powered by common-rail diesel engines consume 30 percent less fuel than other types of engines. "Diesel engines are very efficient devices compared to their competitors like gasoline-powered cars and compared to future competitors like fuel-cell and hybrid engines."

Diesel-powered vehicles have become increasingly popular in Western Europe in recent years. According to Bosch, the diesel share of new passenger cars in Western Europe stood at more than 40 percent as of 2002, compared with 25 percent in 1998. The German company expects the figure to grow to about 50 percent in the next few years.

"About 25 percent of the traffic in Korea is concentrated in Seoul, and fuel consumption is Korea's problem, too," Grewe noted. "So I think the Korean government will promote diesel. It's a political responsibility (to protect the environment.)"

(simonkim@heraldm.com) - By Kim Hyun-chul - Source : Korea Herald - 04/09/03

- LG CNS WINS BID FOR SEOUL'S NEW TRANSPORTATION CARD SYSTEM

A consortium led by LG CNS, a system integration unit of LG Group, has been named as a preferred negotiator for Seoul's new transportation card system, beating its rival bidder, Samsung SDS.

The Seoul City Government said Thursday it would sign a final contract with the LG CNS-led consortium in mid-October after negotiating details about the new business.

Source : Yonhap - 18/09/03

- SOUTH KOREA PROPOSES BIG INCREASE IN DEFENSE SPENDING FOR 2004

SEOUL (AFP) Sep 23, 2003

The South Korean government on Tuesday proposed the biggest increase in defense spending in seven years to cope with mounting tension over the North Korean nuclear crisis.

The total budget for 2004 was set at 117.5 trillion won (102 billion dollars), up 2.1 percent from this year, according to the Ministry of Planning and Budget.

The government slashed capital spending to 17.1 trillion next year from 18.2 trillion won this year to inject more money into welfare and defense.

Next year's spending for defense will grow 8.1 percent to 18.9 trillion won, including 6.3 trillion won for new weapons such as missiles, surveillance planes and warships, the ministry said.

This marks the biggest increase in defense expenditure since South Korea was hit by the Asian financial crisis in 1997.

The increase is needed to build up the deterrence capability of South Korea's armed forces to effectively handle the changing security circumstances confronting the region, the ministry said.

The United States plans to realign 37,000 American troops in South Korea and to transfer certain missions to South Korean forces.

The goverment's proposal for next year's defense spending, however, fell short of the Defense Ministry's call for 22.3 trillion won.

Military officials have maintained that South Korea should boost its defense expenditure to 3.2 percent of gross domestic product.

Next year's spending for social welfare will grow 9.2 percent to 12.1 trillion won to help the elderly, subsidize medical care expenses and provide relief for low income earners.

The government set aside 539 billion won to address unemployment concerns among young people.

It also vowed to funnel more resources into farming communities to help them cope with the liberalization of South Korea's agricultural markets.

Budget Minister Park Bong-Heum said its proposal was based on its prediction that GDP would grow 5.5 percent next year. "The budget reflects government expectations that the economy will grow by 5.5 percent next year," he said.

Four consecutive years of fiscal surpluses have helped South Korea draw up a flexible policy to respond to an economic downturn. LG Investment Securities analyst Lee Tuck-Chung, however, projected next year's GDP growth at 4.5 percent. "Slower growth in China, deterioration in South Korean corporate earnings, and a further delay in recovery of consumption and investment will result in lower-than-expected growth," he said. Policymakers said the 2004 budget was focused on balancing revenues with spending. The country's budget was in the red from 1998 through 2002, forcing the government to issue bonds.

The government plans to collect 122.34 billion won in taxes next year, a rise of 6.4 percent or 7.39 billion won compared to this year.

The ministry said South Koreans should pay an average of 3.18 million won each in taxes in 2004, compared to three million won this year.

Source : AFP-Spacewar.com- 23/09/03

- KOREA'S FIRST RESEARCH SATELLITE LAUNCHED

ST Sat-1, the first Korean-made satellite dedicated to space and astronomy research, was launched Saturday on a Russian-made COSMOS-3M rocket.

However, space experts attempting to communicate with the satellite when it came over the Korean peninsula failed to do so due to technical problems, researchers at the satellite control center in Taejon said. The center didn¡¯t give details about the problems, saying only that they appear to be a communications malfunction between computers on the satellite and the space center.

An official from the center said researchers failed to detect a signal from the satellite, adding that orbital information received from Russia may be wrong.

The center announced Saturday that the satellite, weighing 106 kilograms, was launched at 3:46 p.m. on Saturday from a Russian base near the Arctic Ocean, and was successfully placed into orbit 690 kilometers above Earth.

The satellite was meant to be launched on Friday but the plan was delayed due to problems with the satellite¡¯s fuel rod.

Korea has launched several communications satellites in the past but this is the first designed for space research.

The main body of the satellite was designed and manufactured by the Korea Advanced Institute of Science and Technology (KAIST) with help from the Korea Aerospace Research Institute. KAIST said it worked with researchers from Seoul National University and the University of California, Berkeley to develop the satellite¡¯s components and core apparatus.

By Na Jeong-ju jj@koreatimes.co.kr - Source : Korea Times - 28/09/03

- WHO NEEDS THE CHAEBOL ANYWAY?

Korea's midsize companies are finally coming into their own

Just five years ago, Dongyang Mechatronics Corp. looked as though it might be headed for the scrap heap. The Asian economic crisis had already eaten into demand for Dongyang's auto parts and hydraulic gear when Daewoo Group -- which bought 70% of Dongyang's production -- collapsed. Despite efforts by the government and creditors to keep Daewoo units running until they found buyers, about a third of Dongyang's 900 employees lost their jobs, and sales tumbled 37%. "Everything had to change, from business strategy to factory operation," says Cho Byung Ho, Dongyang's founder and CEO.

So Cho rolled up his sleeves and started a difficult restructuring. He shut businesses that built incineration plants and greenhouses to focus on his core products. Then he ordered his sales staff to drum up new customers. Today, sales to former Daewoo companies represent just 12% of Dongyang's total. And roughly half of the company's estimated $189 million in sales this year will be to overseas clients such as General Motors (GM ), Volkswagen, and Hitachi, Cho says, up from just 3% in 1997. Indeed, GM, which buys some $3 million worth of windshield-wiper systems monthly from Dongyang, in April named the company its Supplier of the Year. The transition was painful, says Cho, "but as a result, the company has become healthier and more agile."

Dongyang is one of dozens of midsize companies helping to change the landscape of Korea Inc. For years, the country's economy was dominated by about 20 chaebol, or large industrial conglomerates. Midsize companies were far less dynamic and often saw their chief role as chaebol suppliers. But with a tidal wave of disgust at the financial shenanigans and shoddy corporate governance at the conglomerates, midsize companies may become drivers of the 21st century Korean economy. Execs have realized that simply supplying the chaebol and local consumers won't work for the long term, so they're cutting deals with multinationals and have started cultivating their own brands abroad. "These companies show the potential to emerge as another locomotive of growth for the Korean economy and fill the hole created by the failure of some of the chaebol," says Yang Ho Chull, managing director at Morgan Stanley (MWD ) in Seoul.

They're already doing so. While there are no precise statistics on the health of Korea's midsize companies, the top 20 chaebol accounted for just 38.6% of the total sales of the country's non-financial companies in 2002, down from 45.0% in 1998. "Industrial reshaping is taking place fairly quickly in Korea," says Rhee Namuh, chief executive of hedge-fund company Rhee Capital Advisors. Korea is likely to see double-digit export growth this year, he adds, "and smaller niche players are contributing to that."

Most of the midsize leaders had to learn some tough lessons before finding their way. Cosmetics maker AmorePacific Corp., for instance, tried to follow the footsteps of the chaebol, expanding into electronics, advertising, and financial services. But when Estée Lauder, L'Oréal, and Chanel began to unseat its brands at Korean department stores, AmorePacific managers refocused their business on health and beauty -- cutting the number of affiliates to 6 today from 23 in 1991, and slashing the workforce to 4,500 from 12,500. At the same time, AmorePacific brass knew they needed to expand overseas to grow. So in 1997, they started a push into France, and by last year, the company's Lolita Lempicka perfume commanded 2.6% of the tough French fragrance market -- making it the fourth-biggest seller in the country. Now, the company is launching a line of skin-care products in the U.S. and hopes to increase overseas sales to $150 million by 2005, from $60 million last year. "Global growth is the key to our future success," says Baek Jeong Gy, senior vice-president for corporate strategy at the company.

Other midsize companies have focused on improving the quality of their products. Hankook Tire Co. has set aside 5% of its annual sales to invest in technology and new production facilities in recent years. And it has opened research and development centers in the U.S., Germany, and China, plus six overseas sales offices, to increase quality and woo foreign buyers. Those initiatives have paid off as customers such as Ford (F ) Volkswagen, Mitsubishi Motors, and Volvo have all signed new contracts or increased their orders from Hankook, boosting exports by 20%, to $456 million, in the first half of this year. And the company's shipments of high-margin, high-performance tires leaped 44%, to 1 million units. That helped lift six-month net profit by 123%, to $54.2 million on sales of $722 million, up 14%.

Like businesses worldwide, Korea's midsize companies are also looking to China. Hankook has become the largest tire supplier for passenger cars there, with a 20% share of the market. This year, its tire production on the mainland is expected to grow by 11%, to $124 million. AmorePacific is marketing its Laneige brand cosmetics through 30 leading department stores in China this year and hopes to increase sales by 45%, to $16 million. Dongyang is running a hydraulic-cylinder plant at Shandong and plans to open an auto-parts plant elsewhere in China. Instant-noodle maker Nongshim Co., which has 74% of the Korean market, expects China sales to rise by at least 50% this year, to more than $30 million.

True, for every success story, there's another midsize company that continues to struggle. But President Roh Moo Hyun is trying to help by cracking down on chaebol that unfairly squeeze smaller suppliers. And Roh has earmarked $4.7 billion this year to finance technological innovation at small- and medium-size companies. "The government is trying to help midsize companies to keep innovating for growth and achieve a long-overdue balance with the chaebol," says Park Joon Kyeong, a senior economist at the Korea Development Institute, a state-funded think tank. The transformation is still a work in progress, but if these pioneers can show the way for their peers, Korea's midsize companies may soon rival the chaebol as the country's economic engine.

By Moon Ihlwan in Seoul - Source : Business Week - 08/09/03

- SOUTH KOREAN CONGLOMERATES RUSH TO EMBRACE HOLDING COMPANIES

By Yoo cheong-mo

"Holding company" is emerging as the new buzz phrase in South Korea's business community, with a number of local conglomerates gearing up for the transformation into the trail-blazing corporate governance structure.

The Hanwha and Kolon groups announced plans this week to shift into the holding company structure, following the lead of the LG and SK groups.

Source : Yonhap - 18/09/03

- CHAEBOL EXPLOIT INVESTMENT LIMIT LOOPHOLE

Korea's major large conglomerates, or chaebol, have focused their equity investments on companies doing similar or related businesses or on foreign-invested corporations in order to bypass a legal limit on investment, according to a report released yesterday by the Korea Fair Trade Commission.

Under the country's fair-trade law, a company with total assets of 5 trillion won ($4.3 billion) or more is prohibited from making equity investments into other businesses exceeding 25 percent of its assets.

But the law is not applied to chaebol's equity investment in state-run companies being privatized, in businesses operating infrastructure and in companies engaged in similar or closely related businesses.

Also exempt from the restriction are investments in corporate restructuring efforts, in foreign-invested companies, in venture start-ups and in new growth industries such as information technology and biotechnology.

According to the fair-trade watchdog's report, 1.82 trillion won, or 29 percent of Samsung Group's 6.27 trillion won of investment in other companies, was exempt from the restriction. The nation's top conglomerate put 70 percent of the 1.82 trillion won into similar or related companies or foreign-invested businesses.

LG Group, the No. 2 chaebol, made 4.34 trillion won of equity investment in other businesses. Of the amount, nearly 2.4 trillion won was not subject to the investment regulation, with 2.13 trillion won of the investment made in similar or related companies or foreign-invested businesses.

SK Group put almost 4.98 trillion won into equities of other companies, and investments worth a total of 2.12 trillion won were exempt from the restrictions. Of the exempted investments, SK put 1.28 trillion won into related businesses and 443.2 billion won in foreign-invested companies.

By Kim Hyun-chul (simonkim@heraldm.com) - Source : Korea Herald - 18/09/03

- 13 KOREAN FIRMS ON FORTUNE-500 LIST

Korea's share of the world's top-500 companies has not improved since 1997, showing the country's growth has been stagnant at least in this respect.

The Korea Chamber of Commerce and Industry noted yesterday that of this year's top-500 global companies compiled by the U.S.-based magazine Fortune, 13 were Korean. This is the same number as in 1997 and represents a share of 2.6 percent.

Considering the number of big businesses appears to influence a nation's competitiveness and wealth, Korea needs more Fortune-500 companies to help realize its goal of reaching per-capita national income of $20,000, the chamber argued.

In its analytical report on the latest Fortune list, KCCI noted that in the six-year period, the United States added 30 new firms to the list for a total of 192. The number of Chinese firm jumped from three to 11, and Canada and France's grew by eight and five firms, respectively.

The number of Japanese firms, on the other hand, dropped sharply from 126 in 1997 to 88 this year, the largest decline for a single country. The United Kingdom and Germany had eight and six fewer companies on the list, respectively, this year.

As for the contribution ratio of the Fortune-500 firms to the gross domestic product of their respective countries, Korean firms' was found to be 63.1 percent. France saw its Fortune-500 companies pitch in 77.4 percent of GDP, while Japan saw 62 percent, Germany 61.1 percent, United Kingdom 58.5 percent and the United States 51.9 percent.

"We can see from this that in the advanced nations, the Fortune-500 companies contribute more than 50 percent of their national GDP. Accordingly, the more firms on the list, the better the domestic economy," a KCCI official explained.

To support this point, the chamber found that the increase in the number of Fortune-500 businesses usually lead to a growth of GDP. In case of the United States and China, whose number of firms grew by 30 and eight, respectively, their GDP volume swelled by 25.6 percent and 37.7 percent.

In the case of Japan and Germany, who had declines of 38 and six firms, respectively, their GDP shrank by 7.6 percent and 5.8 percent. Korea, whose share did not change, has the same GDP of $476.6 billion from six years ago.

"The top-500 firms with their high market shares, great technology and human resources help the nation's competitiveness through employment and by helping smaller firms grow," the official pointed out.

By sector, there is one less Korean manufacturing firm on the Fortune-500 list now than six years ago due to the collapse of Daewoo Motors; while Kookmin Bank became the first Korean bank to make it on the chart, joining 62 lenders from around the world. Korea now has four trade firms on the list, an increase from three in 1997.

However, the 13 companies in high technology fields - like computers, office equipment and software - that made it on the list this year are all either American or Japanese. Nine of them are based in the United States while the other four are Japanese.

Korea is yet to debut in sectors like pharmaceuticals and food.

This proves that despite its high-technology reputation, Korea is significantly behind in up-and-coming sectors, which may determine its competitiveness in the future, according to the chamber.

The KCCI also learned that the asset sizes of Korean firms are much smaller than those of other global companies on average.

The combined assets of the 13 local firms on the list was $484.36 billion, which is only 3 percent of the total value of U.S. enterprises and only 6 percent of the value of Japanese ones.

The figure is also only about half as large as the combined assets of firms from China, Switzerland, the Netherlands and Italy, which all have fewer companies on the Fortune list than Korea.

(mihui@heraldm.com) By Kim Mi-hui - Source : Korea Herald - 08/09/03

- LG CHEMICAL DEVELOPS CORE ORGANIC MATERIAL

LG Chem has developed two core materials for organic EL (electro luminescence) for mass production from next year.

The organic EL materials that LG Chem has developed are HIL (hole injection layer) and ETL (electron transporting layer), both, essential materials for organic EL's self-emissivity.

LG Chem's development of the new organic EL material will improve the performance of organic EL devices, giving them an advantage over liquid crystal display (LCD) in small displays found on digital devices like mobile phones, personal digital assistants (PDAs) and digital cameras.

In particular, by using LG Chem's HIL, it is possible to use low-priced aluminum for the anode material where light is transmitted, contributing to simplifying production procedures and improving performance.

"Korea is already the global leader in LCDs and the second best global leader in organic EL for next generation displays, but still relies on such countries as the U.S. and Japan for materials and parts,'' said Yeo Jong-kee, chief technology officer (CTO) and president of LG Chem.

Yeo said that LG Chem plans to add HTL (hole transporting layer) and EML (emitting layer) materials for organic EL displays by 2004 and will seek to become the top player in the area by securing a market share of over 50 percent in the global organic EL market by 2005.

LG Chem projects the organic EL material market to grow at an annual rate of over 60 percent to 130 billion won in 2005 and to 310 billion won in 2008.

Organic EL display is a self light-emissive type display that uses organic materials formed into thin films that are driven by electric currents to generate light. The high picture quality of organic EL displays is considered as one of the leading next generation display technologies.

Source : Korea Times - 17/09/03

- HYUNDAI OPENS NEW ULSAN SUBMARINE PLANT

Hyundai Heavy Industries opened a high-tech submarine plant in the southern city of Ulsan yesterday.

The facility, which covers 14,850 square meters, will be used for design and assembly of state-of-the-art submarines ordered by the Ministry of Defense.

The world's largest shipbuilder said the plant would begin operation in the first quarter of next year.

The plant includes two roof cranes, a horizontal boring machine and other advanced assembly equipment for which Hyundai Heavy has invested about 10 billion won ($8.5 million).

The company has also invested 22 billion won to pay for additional construction costs while 40 billion won has been reserved for further expansion, which could include a transportation facility.

In contrast with the old factory, the new plant is marked by modern technology, such as a far greater level of durability and crane performance and fuel-cell power systems.

In addition, the plant is equipped with a channel to bring in seawater to test cooling and compression in real conditions.

"New technology has allowed us to replace a variety of machines and make the factory fully automated," said the company in a press release.

The government selected Hyundai Heavy as the first domestic manufacturer of battleships in 1975.

The company then diversified and eventually started production of torpedo ships and convoys. Hyundai Heavy started manufacturing submarines in 2000.

Source : Korea Herald - 18/09/03

- SK CORP. UNION THREATENS TO WALK OUT

Union members at SK Corp., the nation's largest oil refiner, said Friday they will go on strike if the company offers a debt-equity swap of 850 billion won (US$725.9 million) to SK Networks Co. (formerly SK Global), SK Group's trading arm, without the fulfillment of certain prerequisites.

"If SK Corp. converts its exposure to SK Networks into equity, it will obviously become insolvent along with the trading company. But the management is enforcing the debt-equity swap to allow the owners of the company to maintain their managerial rights," a union official explained.

Source : Yonhap - 19/09/03

- SAMSUNG ELECTRONICS ON INVESTMENT SPREE

Samsung Electronics Co. will build a research and development center at its Suwon plan by 2005, in the latest announcement by a company that is determined to outspend its rivals and solidify its position as the world's largest maker of memory chips and flat-panel displays.

Samsung officials said yesterday that the company would spend 200 billion won ($174 million) to construct the "Digital Media Research Center," at which the company will develop products related to computer systems, multimedia, digital images, and the display and printing fields.

Samsung plans to employ around 7,000 researchers at the complex, to be shaped like a tower.

"With the completion of the tower, our Suwon workplace will be the Mecca of cutting-edge research," said a company official.

Samsung's Suwon plant already is the site of an information and telecommunications research center.

Although Samsung reported a 41 percent on-year fall in net income to 1.13 trillion won in the second quarter of 2003, it has aggressively outspent its rivals in a bid to boost profits in the future.

In late August, Samsung said it would increase spending on flat-panel production facilities and equipment by 337 billion won this year and in early September it said it would increase its spending on chip facilities by 505.5 billion won, which would be spread over this year and next.

The announcement came on top of the 6.78 trillion won it had already earmarked for 2003, with the bulk of spending again going to the development and production of memory chips and flat panels.

In addition, it announced in June that it would spend up to 20 trillion won over the next seven years on new plants and equipment to make flat-panel screens for computers and televisions.

Samsung's aggressive spending - not to mention its optimistic forecast on sales of personal computers, chips and screens - has buoyed analysts' expectations for the company in the third quarter.

This week, Samsung announced it is in talks with rival Sony Corp. to work together on the display business.

However, there are considerable risks to Samsung's earnings prospects, including an appreciating won, which would make its products more expensive overseas, and the uncertainty in the chip and LCD sectors.

"We cannot ignore risk factors such as the potential burdens from group affiliates, unexpected price falls of core products such as DRAM, flash and TFT-LCD," said a report by Merrill Lynch on Monday.

The U.S. brokerage set a 12-month share-price target of 510,000 won and has issued a "buy" recommendation for Samsung Electronics, although it has rated the company's volatility risk as "high."

Samsung's share price declined 4,000 won to 401,000 won yesterday.

By Rafael Nam (rafaelnam@heraldm.com) - Source : Korea Herald - 26/09/03

- NEW SECRET FUND SCANDAL ROCKS HANWHA, DAEWOO

The prosecution said yesterday that it has opened an investigation into a fresh allegation that Hanwha and Daewoo, both contracted to build the Kangwon Land casino resort, amassed huge stores of secret funds through deals with local subcontractors.

Some of the money, which is estimated to total more than tens of billions of won, is suspected of having been filtered into political parties' coffers late last year to fund the presidential election, investigators said.

"While looking into the possibility of corruption in the casino project, we obtained convincing evidence that could show the two firms are responsible for certain irregularities in collecting secret funds," an investigator of the Supreme Seoul Public Prosecutor's Office said.

Hoping to illuminate how the revenue was pooled and consequently spent, investigators are now tracking the routes of financial deals conducted by key employees of the two major contractors.

In particular, prosecutors note that the allegation against Hanwha Engineering & Construction is gaining credibility, while the case involving Daewoo Engineering & Construction has yet to be substantiated.

If the case of the state-funded casino assumes political implications, it will be referred to the Seoul chapter from the local prosecution office based in the Gangwon Province town of Yeongwol.

Back in July, prosecutors in Yeongwol arrested nine present and former employees of the casino park, including its former president, Kim Kwang-shik, for accepting huge rebates from subcontractors.

At that time, Kim was charged with receiving 70 million won in return for currying favor for Daeduck Engineering, which was responsible for building roads around the leisure facility.

Opening its doors in late 2000 as the first casino that can be accessed by both foreigners and local patrons, Kangwon Land features two casino establishments and a deluxe hotel located in the rugged mountainous area in Jeongseon, next door to Yoeongwol.

By Choe Yong-shik (khjack@heraldm.com) - Source : Korea Herald - 19/09/03

- SMALL FIRMS GLOOMY ON PRODUCTION IN KOREA

Hyupdong Textile Co. of Iksan, North Jeolla province, moved some of its production to Qingdao, China, in February and is adding more facilities there. The clothing maker said it has been squeezed between its buyers¡¯ price demands and the cost of producing garments in Korea.

Lee Hwa-shik, the firm¡¯s president, said he was also going to move some of his lines to the Gaesong industrial park in North Korea when it opens.

More than a third of small and medium manufacturers here have shifted production facilities abroad or have plans to do so because of the high cost of making goods here and the difficulty in finding suitable workers, a recent survey by the Korea Federation of Small and Medium Business said yesterday. The figures suggest that cries of alarm about the ¡°deindustrialization¡± of Korea have at least some basis in fact, although some of the questions asked in the survey also suggest that the federation¡¯s intention could be to light a fire under the government to do something to help its members.

Thirty-one percent of the 375 firms surveyed said they are contemplating moving their factories overseas; most of the firms planning to move said they will do so within two years. Twenty-seven companies said they have already moved production abroad.

Others say they will not close factories here, but they will direct all new investment into foreign plants, and some smaller manufacturers are planning to get out of manufacturing entirely and move into service businesses.

Some firms told the association that they are also thinking about moving their research and development activities overseas.

But other questions in the survey suggest a political agenda. Half the companies surveyed said in response to a question about when deindustrialization will begin in Korea that it would start in four to five years. Those firms also predicted, the federation said, that deindustrialization would result in a long recession and high unemployment.

But half the firms complained about high costs and low efficiency in their plants here. Others cited labor strife and a disinclination by young Koreans to take jobs in manufacturing.

by Limb Jae-un <jbiz91@joongang.co.kr> - Source : JoongAng Daily - 19/09/03

- SK TELECOM, ALCATEL TEAM UP

SK Telecom, the country's largest mobile carrier, has signed a memorandum of understanding with French telecom equipment maker Alcatel to jointly develop third-generation mobile payment applications.

Under the deal, SK Telecom and Alcatel will identify, test and integrate the Korean wireless operator's m-commerce services with the French firm's wireless service and application platform, the two companies said in a joint press release.

SK Telecom Vice President Cha Jin-seok and his Alcatel counterpart Herve Derrey inked the deal in Shanghai, Alcatel's Asian headquarters.

The two sides will also develop and market a wide range of integrated mobile applications, such as location-based services, "infotainment" and gaming.

In the first stage of their partnership, SK Telecom and Alcatel have agreed to develop a joint m-commerce solution targeting the mobile commerce market, the statement said.

After three months of test-runs, the two companies will sign a contract to export the application to emerging pre-paid mobile phone markets such as China, Southeast Asia and Europe.

Source : Korea Herald - 18/09/03

- CARREFOUR TO INVEST W250 BILL. IN 2004

By Seo Jee-yeon

French discount chain Carrefour will invest 250 billion won in the local market next year and sustain its level of investment through 2007, Carrefour Korea representative director Philippe Broianigo said yesterday.

``We will continue to invest in Korea depending on the growth potential. The market competition is challenging, but opportunities in the market are growing as well,¡¯¡¯ Broianigo said in a media conference to commemorate the 40th anniversary of the group¡¯s foundation, held at the Seoul Plaza Hotel in downtown Seoul.

The planned investment next year would be used to open three to four new stores and remodel existing stores up to the level of department stores, Carrefour Korea said.

Contrary to the concerns over market saturation in the local discount chain industry, the newly-named Carrefour Korea head said there are still business opportunities here according to branches in and outside of Seoul.

Despite their strong investment plan, the expansion pace of Carrefour is still slower, as is global competitor Wal-Mart, than that of the market leader, local competitor E-Mart, which raised doubts about the viability of global discount chains in Korea.

Broianigo opposed the skepticism, saying, `` We don¡¯t agree we¡¯ve failed in the Korean market. We just need time to analyze the market and consumer behavior. We are moving toward another direction to what Korean customers want,¡¯¡¯ he said.

Carrefour Korea has continued to grow in sales, topping 1.8 trillion won in 2002 since it was established here in 1996 as the first foreign discount outlet, but its growth has slowed and has been overtaken by E-Mart.

In addition, labor conflicts have added difficulty in local operations this year. Broianigo implemented a lockout at the Joondong branch in Seoul to prevent damage from a strike.

``It was difficult to accept the situation that customers were disturbed by unionized workers,¡¯¡¯ he explained the reason for a hard-line measure against the current labor dispute.

``There was also misunderstanding between management and the labor union,¡¯¡¯ he said, advising the labor union has to be more constructive to build the future of Carrefour Korea.

To ease labor tensions, he promised to respect workers¡¯ needs and improve working conditions, particularly, of irregular workers.

Meanwhile, Carrefour Korea will launch a month-long marketing campaign from Oct. 2 at its 17 branches nationwide to commemorate the group¡¯s 40th anniversary, including a 40 percent discount sale on 1,000 products.

jyseo@koreatimes.co.kr - Source : Korea Times - 26/09/03

- CARREFOUR TO INVEST 1 TRILLION WON IN SOUTH KOREA BY 2007

Carrefour, the world's second-largest discounter, will invest an additional 1 trillion won (US$870 million) in South Korea by 2007, its top executive revealed Friday.

Philippe Broianigo, the representative director of Carrefour Korea Ltd., said that the French retailer would spend 250 billion won a year between 2004 and 2007 on massive facility expansion and store remodeling in South Korea.

Source : Yonhap - 26/09/03

- CARREFOUR TO INVEST W250 BILLION NEXT YEAR

Carrefour, the world's second-largest retail giant, will invest 250 billion won ($217 million) in Korea next year in four new stores and in improving store interiors, Philippe Broianigo, the head of Carrefour Korea, said yesterday.

"We are well aware of the huge potential in the Korean retail market. The current pace of investment will continue for the coming three or four years," he told reporters in a press conference held in downtown Seoul.

By 2004, Carrefour's cumulative investment in Korea is expected to hit 1.8 trillion won since it opened its first name-sake store in Seoul in 1996.

Carrefour, a France-based multinational corporation, operates 27 large-sized discount stores nationwide generating jobs for some 6,200 local workers.

"We will continue to change and develop to better respond to local consumer tastes. Our localization expertise is well evidenced in our operation of more than 9,600 stores in 30 countries worldwide," he said.

In a bid to serve local communities and their demands in a more sophisticated fashion, the company has offered a variety of community programs, such as free cooking classes and English lessons.

Gyesan Carrefour in Incheon opened a community center last year, the first such amenity offered in a store in the company's global business history.

In celebration of Carrefour's 40-year anniversary, Carrefour Korea is also planning massive sales events beginning next month, luring consumers with heavy discounts around 40 percent and fun lottery games.

"Expansion irrespective of profitability is not our goal in Korea," he said, brushing off concerns about Carrefour's competitiveness in the face of intensifying market struggle with local retailers, such as leading E-Mart stores.

"We are incessantly developing more profitable business models and we will maintain our selective investment," Broianigo added.

On the labor issues, which led the company to business shutdown in July, the top businessmen found the key to solving such labor unrest in mutual respect between labor and management. He also emphasized that transparent business practices are also essential to build up trust in the industrial partnership.

Source : Korea Herald - 27/09/03


 
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