Koreans eye opportunities from free trade deal
New Zealand Herald, Auckland
Koreans eye opportunities from free trade deal
14 February 2009
By Fran O’Sullivan
Hee-Beom Lee is a fierce free trade advocate who believes there are plenty of opportunities for Korean business people to invest in New Zealand including in critical sectors like dairy.
Lee is chief executive of the Korean International Trade Association (Kita), Korea’s largest economic organisation representing more than 65,000 trading companies. He is a driving force in Korea’s international expansion sharing co-chairmanship of Korea’s FTA Alliance with the chairs of three other major industry lobbies.
Right now the FTA Alliance is supporting the Korean Government’s push to negotiate free trade deals with as many influential countries as possible - including New Zealand.
"Free trade should be made multi-laterally - not bilaterally," Lee emphasises at an interview at Seoul’s Trade Tower. "But as you know it is a long time since the WTO’s Doha Round was launched in 2001.
"Industry is pushing the Government to start negotiations (on the NZ FTA) as soon as possible."
In New Zealand’s case, Korea wants to rapidly expand total bilateral trade to more than double to US$5 billion ($9.55 billion) within a few years.
Lee accompanied former Korean President Roh Moo-hyun on his visit to New Zealand in late 2006. He saw first-hand the potential opportunities for Korean investment in business ranging from dairy to biotech.
"Operating dairy farms in New Zealand and investing in joint-venture agriculture companies would be attractive to Korea," he notes.
Although the Korean dairy industry is substantially comprised of small holdings, the amount of stock under the control of a single dairy farmer has expanded. In 1995, just 18 per cent of dairy farms had more than 50 cows - now nearly three-quarters of dairy farms have more than that number. But it is not on New Zealand’s industrial scale.
Korea is an important market for New Zealand’s service industry. It is the fifth largest source of short-term visitors to New Zealand and is the second largest source of students.
But Lee also believes the upcoming FTA will open the door to more Korean "experts" such as engineers, scientists and nurses filling labour gaps here.
To get an insight into the thinking that will affect Korean Government and business strategies, look no further than the influential Hyundai Research Institute. The institute has selected ten top world trends for 2009.
Heading the list is the move away from the United States dominating the world economy to a position where no single power has dominance.
It predicts "Obamanomics" will move from free trade to "fair trade" and Keynesian economics will predominate. China’s massive economic stimulus package of fast response, strong counter-measures for economic slowdown and domestic demand expansion strategy will overcome the economic crisis.
The Islamic economies will remain sluggish following the reduction in oil sales, minor markets will emerge and there will be a paradigm shift to green business.
Future food crises are "potentially expected" as a result of world population increases in developing countries, financial deleveraging will result in investment banks losing their pre-eminence and there will be the emergence of "multi-persona" bipolar consumers who are attracted by both high and low prices.
Among its recommendations, the institute suggests the Korean Government should make an effort to secure overseas food in preparation for future potential food crises.
This recommendation reinforces the underlying strategy behind Korea’s endeavour to forge closer economic links with New Zealand.
Korea imports 70 per cent of its needs and sees the prospective FTA with New Zealand as helping to secure reliable safe food supplies for Koreans - a challenge which eludes its own agricultural sector.
At Korea’s Rural Economic Institute, President Se-lk Oh points out successive governments have gradually weaned farmers off domestic supports.
"Korean farmers are ageing," said Oh. "The Government is trying to get them to be more competitive."
The institute’s analysis shows that the industrial and urbanisation wave which transformed Korea over the past three decades has left farmers behind.
There are 1.95 million Koreans engaged in farming in 2005 - about eight per cent of the whole economically active population.
While self-sufficiency in rice - Korea’s major staple grain - has reached almost 100 per cent due to government investment in production infrastructure as well as falling demand, total grain self-sufficiency is only 27 per cent.
The level of food self-sufficiency is low due to the lack of arable land. On a per capita basis there is only 0.04 hectares per person - much smaller that the 1.5ha in the US.
The average age of those that are employed in farming, forestry and fishing is changing. In 1970, just 6.3 per cent of the Korean agricultural labour workforce was over 60 - now 56 per cent are over that age threshold. Enticing young Koreans to continue in the farming business is a tough challenge.
Less than 4 per cent of farmers have a successor working alongside them. The institute predicts nearly one-third of Korean farmers will be over 70 by 2015.
Korea’s agriculture policy is also strongly directed towards consumers, with high quality safe agricultural products being the end goal.
Clauses in the Korea-United States FTA which open up Korea’s domestic beef trade to US competitors provoked opposition from Korean farmers. Koreans became suspicious over US beef after the 2004 bovine spongiform encephalopathy (BSE) outbreak.
But Oh does not expect the proposal to reduce tariffs on NZ-imported beef in the proposed Korea-NZ FTA to evoke as much heat.
There are no safety concerns in relation to NZ beef products. The tainted milk scandal at Fonterra’s China joint-venture (Sanlu) has not harmed the NZ dairy cooperative’s reputation in Korea.
But in October, the South Korean Food and Drug Administration found melamine traces in lactoferrin products imported from Tatua Cooperative Dairy Company and banned all further dairy imports from Tatua.The agency has now lifted the company-wide ban saying lactoferrins manufactured after December 16 can be imported into South Korea.
It will still conduct import examinations of the company’s products whenever they are imported.
* Fran O’Sullivan travelled to Seoul as a guest of the Korea Foundation.
