South Korea Trade

Subchapters:

  • Business Relationships
  • Foreign direct investment
  • FTAs ​​and Treaties
  • Development Cooperation
  • Prospective fields of study (MOP)

Business relations

Trade relations with the EU

2017 2018 2019 2020 2021
Exports from the EU (million EUR) 43.5 43.7 43.4 45.3 51.9
Imports into the EU (million EUR) 44.0 46.0 47.4 44.1 55.4
Balance with the EU (million EUR) -0.5 -2.3 -4.1 1.2 -3.5

Source: European Commission, data in the table are rounded

From In 2011, when the EU-KR FTA entered into force, bilateral trade and investment expanded.

The total volume of trade in goods reached EUR 107.3 billion in 2021. The EU remains Korea’s third largest trading partner in goods, after the PRC and the US.

In 2021, Korea was the EU’s ninth largest import supplier (i.e. accounting for 2.6% of total imports) and also the ninth largest export market (2.4% of total exports). In the same year, the EU was Korea’s 3rd largest source of imports (10.7% of total imports) and 3rd largest export destination (9.9% of total exports). Bilateral trade between the EU and Korea is concentrated in industrial sectors, which accounted for 95.9% of total trade in 2021, including machinery and equipment (33.9%), transport equipment (18.9%) and chemicals (1%). Trade in agricultural products accounted for 3.9% in 2021. Of the total EU exports to Korea, the share of agricultural products increased from 5.3% in 2011 to 7.6% in 2021.

Trade relations with the Czech Republic

2017 2018 2019 2020 2021
Exports from the Czech Republic (billion CZK) 99 10.7 10.5 12.4 12.1
Imports to the Czech Republic (billion CZK) 11 93 87 91.1 96.6
Balance with the Czech Republic (billion CZK) -88 -82.3 -76.5 -78.8 -84.5

Source: businesscarriers.com

In recent years, Korea has become one of the most important non-European trade partners of the Czech Republic (the 3rd largest trade partner outside Europe after China and the USA).

Among our most important exports were apparatus and equipment for physical or chemical analysis, new rubber tires, synthetic rubber and its compounds, taps and valves for pipelines, boilers and baths, microscopes and diffractographs, pumps with liquid lift measuring equipment, parts, parts and accessories of motor vehicles, pipes, pipes and hoses made of plastic, tricycles, scooters, prams for dolls, also dolls, toys and puzzles. Beer continues to be a part of the food industry.

From the Republic of Korea, mainly means of transport and components for their production, parts, components and accessories of motor vehicles, devices for automatic data processing, electric lighting or signaling devices, electric accumulators including their separators, electronic integrated circuits, boards, panels and control tables for electrical control or distribution of electrical current, electrical motors and generators, electrical transformers and static converters. Likewise, animal antisera and vaccines.

Space for the development of mutual cooperation exists not only in the sphere of trade exchange and production cooperation, but also in the field of Science and Research (R&D).

Trade relations with countries outside the EU

Comment on the numbers in the table, the reasons for the positive or negative balance, comparison with the EU and what causes the differences.

2017 2018 2019 2020 2021
Exports from countries outside the EU (million EUR) 374.3 406.8 401.7 365.3 464.7
Imports to countries outside the EU (million EUR) 454 469.2 441.3 403.5 493
Balance with non-EU countries (million EUR) -79.7 -62.4 -39.6 -38.2 -28.3

Source: European Commission, data in the table are rounded

– Korea, as a member of the Regional Economic Partnership (RCEP), exported USD 25billion to RCEP countries last year, which represents approximately half of the country’s total foreign supplies, of which 25% goes to China and the remaining 25% to other countries. ASEAN (17%) and Japan (5%) account for the largest share of this share.

– The US is Korea’s second largest trading partner and Korea is the US’s seventh largest trading partner. Total bilateral trade in goods in 2021 reached USD 169.1 billion. Korea posted a trade surplus of $2 billion in 2021. In 2021, the US exported $billion worth of American-made cars and trucks to Korea. Exports of agricultural products from the US to Korea in 2021 reached 9.4 billion, making Korea the fifth largest export destination for American agriculture.

– China is not only the largest consumer market for Korean products, but also a key supplier of parts and materials. Korea’s dependence on parts and materials from China was 29.3% in 2021, higher than Japan’s 28.9% and 12.9% (US).

Korea is heavily dependent on the import of raw materials both for the electrical industry (batteries, chips), as well as for the energy industry (oil, natural gas and hydrogen) and food (wheat, corn – in these commodities, Korea is self-sufficient in only a little around 1%) .

Faced with skyrocketing raw material costs and strong competition, Korean battery makers are betting on materials through mining investments abroad (eg Australia, Canada) and long-term contracts and purchasing technology that can extract key elements from used batteries (US). Import of basic raw materials for the production of electric batteries to Korea, followed by PRC, Canada, Thailand, Chile, Russia, USA.

Korea imports liquefied natural gas (LNG) from terminals in Indonesia, Malaysia, Brunei, Oman, Qatar, Australia, USA and Russia (Sakhalin).

Less than 1% of H2 is produced in Korea. Korea is therefore trying to secure hydrogen from renewable energy sources or to import it (Australia).

In 2021, South Korea imported $4billion worth of oil, making it the fourth largest oil importer in the world. In the same year, crude oil was the 1st most imported product in South Korea. South Korea imports crude oil mainly from: Saudi Arabia, Russia, USA, Kuwait and UAE.

Foreign direct investment

In 2021, USD 29.51 billion in foreign investment was contracted. This was the seventh year in a row of investments above USD 20 billion.

The volume of investment that actually arrived in Korea last year was 18.03 billion USD. By country, investment from the EU nearly tripled to US$1billion last year, and the amount from Chinese-speaking countries increased by 38.1% to US$7.54 billion. Foreign direct investment pledges from the US fell 0.9% to $5.26 billion, while investment from Japan rose 52.8% to $1.21 billion last year.

Foreign direct investment has improved not only in quantity but also in quality, continuing to flow into advanced materials and components as well as emerging industries related to 4.0. Industrial revolution (high-tech materials, components, equipment, renewable energy and resource recycling, bio-health and ICT).

Korean investment abroad reached USD 75.87 billion in 2021 (a 32.8% increase from 2020). These were mainly investments in the financial and insurance sector (USD 29.32 billion), engineering (USD 18.17 billion), real estate (USD 7.01 billion), ICT (USD 6.67 billion) and large -retail trade ($3.59 billion). The main recipients of Korean investment are the US ($27.59 billion), the Cayman Islands ($10.63 billion), the PRC ($6.67 billion), Luxembourg ($4.37 billion), and Canada (2.70 billion USD).

Currently, there is no registered direct Czech investment in the Republic of Korea.

FTAs and treaties

Treaties with the EU

The beginning of the partnership between the Republic of Korea and the EU dates back to 1963. The Republic of Korea was the first Asian country to sign three key agreements with the EU (EU-ROK Framework Agreement “FA”; Framework Participation Agreement “FPA” and Free Trade Agreement “FTA” ). The EU is primarily an economic partner for the KR, which was confirmed at the EU-KR summit in Brussels on 07/01/2011, when the last mentioned agreement was signed – the Free Trade Agreement between the EU and the KR (FTA).

On the basis of the FTA between the EU and KR, trade liberalization enables companies from both sides to penetrate each other’s markets more easily, increases competition in domestic markets, expands the range of goods and services, and at the same time brings down prices for consumers. However, after ten years of existence, the ruleset needs to be updated to reflect the recent changes that have occurred in the entire global business environment.

Information on hygiene and phytosanitary issues (regionalization and export of beef from the EU) are hot topics, especially from the EU side.

Korea wants to upgrade two sectors, namely investment and digital trade. Due to the increasing bilateral investment after the FTA, Korea requested to discuss the investment chapter as there is no investment rule at the EU level. Currently, the FTA includes only minimal digital trade rules under the e-commerce section of the services chapter, with only two articles. Collaboration in digital technology and industry is not covered in any way. On the other hand, the EU would seek to conclude a digital partnership agreement with Korea as part of the EU’s Indo-Pacific strategy.

Other:
Korea is a member of the largest free trade zone, the so-called Regional Comprehensive Economic Partnership (RCEP)

Contracts with the Czech Republic

Treaty between the Czech Republic and the Republic of Korea on the avoidance of double taxation and the prevention of tax evasion in the field of income taxes, Seoul, 12 January 2018. Ratified by the KR on 21 January 2020.
Agreement between the Government of the Czechoslovak Republic and the Government of the Republic of Korea on air services, Seoul, 26 October 1990, No. 5/2004 Coll. ms
Agreement between the Government of the Czechoslovak Republic and the Government of the Republic of Korea on the support and mutual protection of investments, Seoul, 27 April 1992, No. 125/1995 Coll.
Agreement on cultural cooperation between the Government of the Czech Republic and the Government of the Republic of Korea, Seoul, 6 October 1994, No. 230/1994 Coll.
Agreement between the Government of the Czech Republic and the Government of the Republic of Korea on the abolition of the visa requirement, Seoul, 6 October 1994, No. 163/1995 Coll.
Agreement between the Government of the Czech Republic and the Government of the Republic of Korea on scientific and technical cooperation, Prague, 4 March 1995
Agreement between the Government of the Czech Republic and the Government of the Republic of Korea on cooperation in the peaceful use of nuclear energy, Seoul, 16 March 2001, No. 83/2001 Coll. ms

Developmental cooperation

At the beginning of 2011, the Republic of Korea became the 24th member of the OECD’s DAC (Development Assistance Committee). For the first time in the history of this organization, a former recipient of development aid became its member and donor at the same time. As a developed country and a member of the OECD, the Republic of Korea helps developing countries (Official Development Aid). This assistance takes place in both bilateral and multilateral form. Multilateral aid is realized by contributions to international organizations and funds, such as the ADB (Asian Development Bank), AFDB (African Development Bank), EBRD (European Bank for Reconstruction and Development) or the UN organization.

Bilateral aid is divided into:
· grants associated with the supply of equipment
· technological assistance, development studies, training and dispatch of Korean experts
· soft loans and EDCF (Economic Development Cooperation Fund) loans
The implementation of bilateral development programs (grants, technological assistance, training, etc.) is entrusted to the Korea International Cooperation Agency (KOICA), founded in 1991, which is subordinate to the Ministry of Foreign Affairs of the Republic of Korea . Bilateral credit assistance is provided by Exim Bank, which in this area is subordinate to the Ministry of Finance and Economy of the KR. The Korean government has set itself the goal of improving its “image” as a donor and reaching a level corresponding to the position of the Republic of Korea on an international scale.
Source: Ministry of Foreign Affairs of the Republic of Korea

Prospective fields of study (MOP)

Perspective fields for Czech exports to the Republic of Korea

ICT
Korea strives to become the most important global player of the “fourth industrial revolution” (Industry 4.0), which will connect ICT with Korean industry, secure economic cyberspace, develop financial technologies, blockchain and IoT. The Korean ICT sector is export-oriented, but Korean companies are also interested in imports. Czech companies could establish themselves, for example, in the field of cooperation in the development / export of security solutions, innovative computer programs, intelligent networks (Smart Grid), modern applications. On the innovation strategy “DNA” (Data, Network, AI) – in the Korean New Deal, CZK 66billion is expected to be spent until 2025, including the generation of more than 567,000 jobs.

Transport industry and infrastructure
The Korean government’s New Deal strategy highlights projects that should serve as the building blocks of upcoming changes. These changes and industrial procedures cannot do without advanced automation and digitization processes (Smart and Green Industrial Complexes with costs of CZK 27.5 billion by 2022; Smart Grid Smart – CZK 18.93 billion by 2022; Cities – CZK 27.5 billion until 2022, Digital Twin – CZK 8.6 billion until 2022, etc.). We offer cooperation with Czech companies in the implementation of applications for autonomous systems in all the above-mentioned areas. In the automotive industry, opportunities are opening up for Czech suppliers in the segment of components and solutions for electromobility.

Water management and waste industry
One of the cornerstones of the Korean New Deal strategy is green technology, which increases the demand for innovative solutions in environmental sustainability. Restrictions and restrictions accompanying the COVID-19 pandemic are causing an increase in the volume of waste related to “social distancing”. There are opportunities for Czech companies in the field of waste utilization (e.g. plastic partitions, face masks, packaging material for transporting food). In 2021, the Green New Deal accounted for CZK 13.39 billion in research and development investments. For the year 2022, expenditures of up to CZK 241.45 billion are set.

Energetics
Korea, where 40% of the state’s energy comes from coal-fired power plants, faces a major challenge in transitioning from fossil fuels to renewable energy sources. With its commitment to reduce CO2 to zero by 2050, Korea is starting to build H2 fuel cell power plants. The potential for cooperation with Czech companies is in H2 propulsion and energy storage. Furthermore, in the implementation of small modular reactors of the SMART type into energy networks and scientific research cooperation in the areas of “fundamental research, applied research relating to nuclear and new sources of energy”.

Entertainment and leisure
The digital, especially the gaming industry, is an economically and socially important sector in Korea. It is an industry combining technological innovations not only in AI, virtual and augmented reality, metaverse, machine learning (ML), 5G, streaming and data transmission, but also in industrial design, visualization and architecture. The boom is mainly in the field of mobile games (worldwide the fourth largest market in this subsector), where the Czech Republic has a very strong position and successful developers capable of penetrating the Korean market. For comparison, profits from the gaming industry in 2020/2021 in Korea reached approximately CZK 356 billion (USD 1billion), while in the Czech Republic, with a 5x smaller population, only CZK billion.

Healthcare and pharmaceutical industry
In Korea, more than 20% of the population is currently over 65 years of age, and the issue of medical care as well as appearance care is also rapidly gaining weight due to the COVID-19 pandemic. Medical diagnosis is experiencing rapid growth thanks to AI technologies, machine learning or the development of specialized diagnostic devices. Czech companies thus have an opportunity to import both medical devices and tools for rehabilitation and aesthetic medicine. Possible cooperation in the development and testing of vaccines and the use of nanomaterials in medicine.

Civil aviation industry
Aviation represents opportunities for Czech companies associated with drones and their various uses. The launch of Korea’s first launch vehicle is a milestone in Korea’s efforts to develop its own space technology. This offers interesting opportunities for Czech companies in the development of technological software applications, satellite data analysis or in the development of instruments and technologies for material research in microgravity and in space.

South Korea Trade