Korean Market

The economic development of South Korea is matched by few, if any, nations in the world. The Korean War left Korea devastated and divided. Nevertheless, South Korea has succeeded in building one of the most dynamic economies in the world. Confucian focus on education, discipline and hard work, and close relations between the public and business sector, has helped Korea develop from one of the poorest to one of the richest nations in the world in a matter of a few decades. South Korea has grown to become the 3rd largest economy in Asia, and the 15th largest economy in the world.

An export-driven economy

The Korean economy is highly export-driven and based on a great deal of coordination between the public and business sector. The South Korean economy features a number of industrial conglomerates, the so-called ‘chaebols’, which constitute the backbone of the export economy and includes global giants like Hyundai, Samsung, LG, Kia, Daewoo etc. that are global industry leaders in mobile phone technology, consumer electronics, as well as the shipyard and automotive industries to name a few.

Today, Korea is one of the OECD countries that invest most in research and development. Although the financial crisis in 2008 also hit South Korea, the economy was resilient and technically never went into an actual recession. Korea was the first country in the OECD to recover from the financial crisis and after a year of zero growth in 2009, the South Korean economy grew by 6.3% in 2010, 3.6% in 2011 and 2% in 2012.

Current trade relations between Korea and Denmark

Bilateral trade between Denmark and Korea has grown considerably since the early 1980’s. Export of goods from Denmark to Korea amounted to little more than 120 million DKK in 1980 but has taken off in the following decades growing ten-fold between 1980 and 1990 alone. Today, Korea is the third largest market in Asia for Danish exports following China (including Hong Kong) and Japan. And even if Danish exports to the Korean market suffered considerably from the financial crisis and the weaker Korean currency, the quick rebound of the Korean economy has seen Danish export of goods to Korea increasing well beyond the pre-crisis level and reaching approximately 4.4 billion DKK in 2012.

Danish exports of goods to Korea mainly consists of machineries, engines and similar industrial goods, which together constitutes more than 50% of the total Danish exports to Korea. Other main Danish exports include chemicals, pharmaceuticals, meat products and fur. Together these products account for approximately two thirds of Danish exports to Korea.

Denmark also exports a considerable amount of services to Korea due to Danish shipping companies playing an important role in the export-driven Korean economy.

Future opportunities – ‘Quality of Life’

A number of significant developments in Korea in these and coming years will impact trade patterns between Denmark and Korea and are paving the way for significant new commercial opportunities for the Danish business community in the years ahead. Economic progress for the Korean society as a whole - while extremely fast and impressive - has taken its toll on many individuals and aspects of society.

The EU-Korea FTA

The implementation of the EU-Korea Free Trade Agreement (FTA) starting July 2011, which is the most ambitious FTA negotiated by the EU with a third country, ensures an unprecedented level of access to the Korean market across the board for Danish exporters.

Increasing purchasing power

Rising Korean incomes will create a multitude of new commercial opportunities of particular Danish interest. According to IMF data, GDP per capita in Korea, measured in terms of actual purchasing power (PPP), reached 30.000 USD in 2010 and is expected to further increase to 39.000 USD by 2015 achieving a level comparable to Denmark, which is predicted by IMF to reach an average GDP per capita in PPP of slightly more than 43.000 USD the same year.

Lifestyle products

Koreans - already characterized by a sophisticated taste and a high propensity to consume - will reach income and expenditure levels creating a demand in particular for lifestyle products - broadly speaking - of high quality and design expressing high ‘quality of life’. This creates opportunities for Danish exports in a broad variety of areas spanning from healthy or specialized foodstuffs, clothing, accessories as well as furniture and interior decoration.

Children

The Korean birth rate is exceptionally low. This is in large part due to the lack of social infrastructure and the high cost of education, which makes it expensive to raise a child. Thus, raising a child or more - and the manner in which one does so - is an indication of wealth and success. Korean parents are keen to offer the best to their children and have thereby created a huge market for Danish products ranging from children’s wear and accessories to children’s furniture, children’s literature (Korean or English language) and other cultural or educational products. In line with the concept of ‘quality of life’, the Danish capability to develop or combine children’s products making them safe and sustainable (e.g. organic clothing, furniture) or entertaining and educational (television programmes, games, LEGO education) has the potential to provide Denmark a strong presence in the Korean market for children.

Sustainable energy, energy-efficiency and construction

Since President Lee initiated the green growth agenda, South Korea has been determined to achieve greater energy efficiency and decouple economic growth from expensive imported energy. To a large degree, the Korean green growth agenda will define the overall framework conditions of the Korean business sector and create new opportunities of particular interest to Danish exporters specialising in sustainable energy and energy efficiency. Sustainable construction, know-how and solutions may well go hand-in-hand with other commercial opportunities within architecture, city planning and urban development promising greater ‘quality of life’.Read more about the green growth alliance between Denmark and South Korea here.

Korean complementary sectors

Korea is also maintaining its competitive edge by ambitiously focusing on innovation within selected sectors that are complementary to areas of excellence within the Danish business community. These include electronics, biotechnology and new and renewable energy sectors, where opportunities for bilateral trade, investment and innovation cooperation are evident. Korea has been ranked the world’s second most innovative country by Boston Consulting Group, and can be expected to maintain its competitive advantage by having one of the highest levels of R&D expenditures in the OECD.

Demographics

Finally, with one of the lowest birth rates in the world, the Korean population is aging at a pace that will fundamentally transform Korea and turn of the youngest societies at present into one of the oldest within a short period of time. This will provide opportunities for Danish companies who have specialised and have a long tradition in providing welfare solutions and health care technology for the elderly. The Korean health consciousness is evident from the time and expenses Koreans use to maintain a healthy and active lifestyle. Increasing incomes will spur demand for more specialized and higher quality products in clothing and footwear, and especially sporting goods and accessories related to active or outdoor leisure activities. Promoting Danish ‘quality of life’ concepts and products in this area also has considerable export potential.

The Hangang River and the 63 Building in Seoul. Photo by Korea Tourism Organization.