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Zone

Ulsan Metropolitan City:The Link to Asia

FIW OverviewFOREIGNINVESTMENT WEEK2016 DRAWSRECORD-BREAKING CROWDIN SEOUL

Korea’s largest annual eventin investment promotion suc-cessfully wraps up afterthree-day run

Interview

Ombudsman’s OfficeFOREIGNINVESTMENTOMBUDSMANTAKES LEAD INIMPROVINGUNREASONABLECUSTOMSREGULATIONS

RegulatoryInformation UpdateNEW GRAFTLAW TO BEFDI-FRIENDLY

Introducing Korea's SMEs I 11pEconomic Indicators

IK WORLDWIDE I 12pKOTRA Locations Globally

IN BRIEF I 3pInvest Korea News, Foreign Company News...

INNOVATION AT ITS FINESTQuality and innovation lie at the heart of Brose Korea’s success

Express

INVESTKOREA

October 2016 www.investkorea.org

I 4p

I 6p

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Economic AnalysisARE KOREA’SEXPORTMARKETS REALLYRECOVERING? I 9p

In 1908, Max Brose, founder of the Germanautomobile supplier Brose Group, opened up atrading company for automobile accessories inBerlin. But dealing in vehicle parts was notenough—eleven years later he started develop-ing and producing his own automotive prod-ucts in the city of Coburg in Northern Bavaria.

Since then Brose has emerged as the world’sfifth-largest family-owned automotive suppli-er. Today, the company has 24,000 employeesworking in 60 locations in 23 countries,including Korea. The main goal of Brose is toguarantee quality and innovation to increasecomfort, safety and efficiency for drivers. It’sbecause of this vision that the company hasbecome so successful; its mechatronic systemsfor doors, seats or electric motors and drives

can be found in every second new vehiclearound the world today.

As the world’s fifth-largest automobile mar-ket in terms of vehicle production, Koreaproved to be an optimum market for the com-pany, which established Brose Korea in 2002.In a bid to further expand its internationalmotor business, Brose also set up a joint-ven-ture with Mando Corporation, one of Korea’sleading automotive suppliers, to form Mando-Brose in the Incheon Free Economic Zone.

To find out more about the company’s activ-ities in Korea, we talked to Stefan Halusa,President of Brose East Asia, on the occasionof Foreign Investment Week (FIW) 2016.

Stefan Halusa President of Brose East Asia

Greetings From Invest KOREA

It was a whirlwind week, but I’m happy to say that Foreign

Investment Week (FIW) 2016 has wrapped up successfully

thanks to your support! As Korea’s largest annual event for

international investment promotion, FIW 2016 provided the per-

fect opportunity for global CEOs, investors, policymakers and

the foreign press to come together and learn more about Korea’s

economic environment and where it’s headed.

This year’s event gathered the most participants in its 10 year history with over 1,300 people in attendance. The

number of requests for one-on-one business consultations between foreign investors and Korean companies also

jumped 50 percent compared to that of last year. Participants were able to get an in-depth look about Korea’s eco-

nomic and creative landscape, including its global FTA platform, emerging industries and promising startup scene.

There was also a separate program planned for members of the foreign press, including site visits and a forum on

the Korean government’s response to the recent changes in the world.

Aside from the official program, I had a chance to meet investors, dignitaries of various embassies and

Chambers of Commerce, as well as our distinguished Honorary Ambassadors. By getting to know them on a per-

sonal level, they provided me with suggestions on what Invest KOREA and the Korean government can do as a

whole to make Korea a better place for business. One thing that I know for sure is that FIW would not have been

possible without all of your help. Due to your overwhelming support, I’m confident that Korea’s economy is on

the right track.

FIW might have come to a close, but that doesn’t mean that our work is over yet. We at Invest KOREA will

continue to work right beside you to improve the investment environment here in all aspects.

Sincerely,

2 l October 2016

Dear Readers,

Yong Kook KimHead of Invest KOREA

October 2016 l 3

In Brief

Invest KOREA News

INVEST KOREA& KFEZATTENDS CITYSCAPEGLOBAL

On September 5-9, Invest KOREA(IK) and the Korean Free EconomicZones (KFEZs) jointly participated inCityscape Global held in Dubai.

At the event, representatives from IKand the KFEZs participated in a seminarto spread awareness on Korea's realestate and investment opportunities in thecountry.

Cityscape Global is the world’s largestreal estate fair, held annually around theworld in nine regions, including Dubai,Korea, Kuwait, Brazil and Egypt.Attended by about 150 companies, gov-ernment agencies and investors, it hasbecome one of the world’s most impor-tant real estate development projects andinvestment networking events.

IK PARTICIPATES INCHINAINTERNATIONALFAIR FOR INVESTMENTAND TRADE

On September 8, representatives fromIK, the Daegu-Gyeongbuk FEZ andregional governments participated in theChina International Fair for Investmentand Trade (CIFIT) held in Xiamen, Chinafor its 3-day run. The agency operated apromotional booth during the event topromote Korea’s investment environmentand identify potential Chinese investors.

About 1,400 organizations and compa-nies from 50 different countries as well astens of thousands of visitors from 100 dif-ferent countries participated in this year’sevent, which focused on attraction of for-eign capital and overseas expansion.

IK also attended the InternationalInvestment Forum, which was conducted

on the sidelines of the CIFIT to explainthe Chinese government’s two-wayinvestment policies and share investmentinformation.

Korea News

S. KOREAN HYBRID CARSOVERTAKE GERMANCOMPETITORS IN H1

South Korea's market for environmen-tally friendly cars expanded at a rapidpace in the first half of 2016, also over-taking that of Germany, the largest pro-ducer of green vehicles in Europe.

In the first six months of the year,South Korea-based manufacturers ofenvironmentally friendly vehicles sold acombined 26,161 cars, up 64 percentfrom the same period last year, accordingto data from the Korea AutomobileManufacturers Association (KAMA).

German producers, on the other hand,sold 25,031 green cars, up 21 percentover the cited period.

Such a large increase of South Koreancarmakers was partly attributed to newvehicle models recently launched by thecountry’s two leading automakers,Hyundai Motor Co. and Kia Motors Corp.

Foreign Company News

KEPCO DRAWSELECTRIC POWER IOTINVESTMENT FROM ALPSELECTRIC

State-run Korea Electric Power Corp.(KEPCO) drew the country’s first foreigndirect investment in Bitgaram EnergyValley, a state-sponsored energy cluster,from Japan’s Alps Electric Co.

In a ceremony held in Tokyo onSeptember 9, KEPCO and Alps Electricagreed to work on projects for the energycluster including those dealing with theInternet of Things (IoT). The Japanesefirm will also set up a research and devel-opment (R&D) center for IoT by the endof this year. From there, it plans to set upa production facility for new energyindustries in cooperation with KEPCO.

Founded in 1948, Alps Electric is aJapanese maker of home appliances,

office equipment and automotive elec-tronics equipment.

Government & Policy

S. KOREARELEASESCOMPREHENSIVE STRAT-EGY ON BIO INDUSTRY

On September 8, the Korean govern-ment rolled out a set of measures to fuelthe growth of the country's bio-healthindustry, aiming to become a global pow-erhouse in the sector and add nearly 1million new jobs.

The comprehensive plan for the nextfour years was finalized in a meetingpresided over by Prime Minister HwangKyo-ahn and announced by the Ministryof Health and Welfare.

Under the plan, the government willinvest more in R&D in the fields of medi-cine, medical devices and cosmetics. Italso forecasts that 940,000 new jobs willbe created by 2020 in the industry that iswidely viewed as the nation's next growthengine.

Most notably, Korea aims to more thandouble the number of foreigners visitingSouth Korea for medical purposes from300,000 in 2015 to 750,000 in 2020.

GOV'T TO CREATE FUNDSFOR VR, AR INDUSTRIES

South Korea will create KRW 40 bil-lion (USD 34.5 million) in special fundsto foster the virtual reality (VR) and aug-mented reality (AR) industries.

On September 7, the Ministry ofScience, ICT, and Future Planning saidfunds are aimed at bringing more invest-ment in the fields and to catch up withother global powerhouses.

The ministry said it will invest KRW12 billion (USD 10.8 million) annuallyinto the fund for the next two years andthe rest of the KRW 20 billion (USD 17.9million) will be supplemented from pri-vate funds.

The fund will be established in the formof the Korea Venture Fund, officials said,noting that the ministry will soon select acompany to operate the funds.

“The Korean miracle isn’t somethingthat happened from the end of the KoreanWar until today; it’s an ongoing processthat is only just beginning,” says JamieMetzl at the opening ceremony of ForeignInvestment Week (FIW) 2016. Metzl, apartner for the global investment compa-ny Cranemere LLC, is one of theHonorary Ambassadors of ForeignInvestment for Korea representing theUnited States. During his speech, Metzlactively engages a crowd of 1,300 people,pointing out what makes Korea a greatplace for investment—its workforce, itsgovernment and its strategic location.

The UK’s Honorary Ambassador andChairman of New Nuclear Watch Europe,Tim Yeo also echoes these same senti-ments in his speech: “Korea’s tremendouseconomic progress over the last 60 yearsto its current position as the 11th largesteconomy in the world is one of the great,remarkable success stories of the late 20thand early 21st century.”

FIW 2016, which took place in Seoulon September 27-29, is hosted annually

by the Ministry of Trade, Industry &Energy (MOTIE) and organized by theKorea Trade Investment PromotionAgency (KOTRA) and Invest KOREA,the foreign investment promotion arm ofKOTRA. It stands as the nation’s largestinternational investment attraction event.

This year’s FIW saw a 30 percent risein the number of attendees with a total of1,323 participants taking part in the event.Under the theme, ‘Strengthening globalpartnership in emerging industries of thefuture’, the event invited foreign investorsin the newly emerging industries andservice industries, namely those from thenew energy, ICT convergence, biohealth,advanced new material and high-end con-sumer goods sectors.

At the opening ceremony, Yong KookKim, Head of Invest KOREA, introducedKorea’s investment environment and howthe country could be the link to globalsuccess. Kim highlighted its stable creditrating, extensive FTA network and inno-vative technology as some of the reasonsto invest in Korea. He emphasized that

Invest KOREA and KOTRA are commit-ted to working together with current andprospective investors so they can trans-form their business opportunities into suc-cess stories.

ProgramsFIW 2016 was comprised of forums

covering various topics, including promis-ing areas of investment cooperation withKorean companies, success stories ofexisting foreign-invested companies andexpert strategies to succeed in the Koreanmarket. As such, the programs weredesigned to provide tangible support toforeign investors and provided opportuni-ties for Korean companies to networkwith foreign companies.

Unlike other investment conferences,FIW also provided a more intimate, multi-faceted approach to investor relations byholding business round-tables, one-on-oneconsultations and site tours to Korea’sburgeoning regions. Namely, 670 one-on-one consultations took place throughoutthe three-day event. Thanks to this

4 l October 2016

FIW Overview

Foreign Investment Week 2016Draws Record-Breaking Crowd in Seoul

Korea’s largest annual event in investment promotion successfully wraps up after three-day run

1,300 participants attended this year's FIW, making it the most successful FIW yet

October 2016 l 5

approach, participants had direct access tohigh-level officials from the Korean gov-ernment, academia and private sectors.

Strengthening Korea-Chinainvestment cooperationDespite concerns over China’s declin-

ing investment towards Korea after itsdecision to deploy THAAD (TerminalHigh Altitude Area Defense), a number ofChinese investors have shown great inter-est in investing in Korea. 82 Chineseinvestors from 73 companies, more thandouble the number from last year, partici-pated in the event.

CIPA (China Investment PromotionAgency), an investment promotion arm ofthe Ministry of Finance of the People’sRepublic of China, also suggested estab-lishing a body focusing on joint investmentcooperation in a bid to strengthen bilateralties.

On this note, this year’s FIW featuredan IR event that introduced promisinginvestment areas of the SaemangeumKorea-China Economic Cooperation Zoneand the government’s support measures topromote more investment in this region,as agreed by the Korea-China FTA andstate-level meetings.

Working together for CSRCompanies did more than just talk

about investment and finances at FIW;corporate social responsibility (CSR) wasalso a key word at this year’s FIW. TheCSR Forum, held on Sept. 28, increasedawareness about social responsibilities offoreign-invested companies and foreigninvestors visiting Korea.

Foreign Investment OmbudsmanJeffrey Kim, who resolves grievances fac-ing foreign-invested companies in Korea,started off the forum with an openingspeech. The session continued with theimportance of corporate social responsi-bility and current trends in Korea.

Most notably, Solvay Asia Pacific, IntelKorea and GM presented their activitiesand plans in Korea, and held fruitful dis-cussion on ways to strengthen CSR imple-mentation in the future.

Foreign Press ForumOn September 27, Invest KOREA host-

ed a familiarization (FAM) tour for mem-bers of the foreign press in conjunctionFIW. 19 foreign journalists from 11 coun-tries attended the FAM tour, which pro-moted Korea’s next-generation ICTdevelopment policies.

This year’s tour took placed at theGyeonggi Center for Creative Economy& Innovation (GCCEI) and the SamsungInnovation Museum (SIM). Journalistswere able to talk to representatives ofleading startups of Korea’s future indus-tries and learn about the Korea’s ICTindustry and convergence technologies atthe GCCEI.

Established in September 2014, theGCCEI currently operates 18 innovationcenters in 17 regions throughout the coun-try, which are designed according to theindustrial characteristics of each regionand specialized businesses. The managerof the public relations team, Baek SaeHyun, introduced Korea’s startup and for-eign investment environment while jour-nalists were able to intensively interviewthe CEO of ulalaLAB (IoT), an IoT tech-nology startup which provides variousplatforms using a smart sensor calledWicon, a convergence technology thatanalyzes the pattern of people, objects andanimals. They were also able to meet withthe head of Voler Creative, a startup spe-cializing in artificial intelligence (AI) andvirtual reality (VR) development, andMadorca, a mobile game developmentstartup.

The Foreign Press Forum explored thelong-term challenges facing the Koreaneconomy, while also looking at the coun-try’s policy direction for the future.Presenters from the public sector talkedabout a number of key issues, includingKorea’s reform regulations on the Internetof Things (IoT), as well as the ways thethe Korean government is responding tochanges in the global trade and commerceenvironment.

Perhaps the most highly anticipated ses-sion, was the session on Korea’s reunifi-cation plan and South Korea’s policiestowards North Korea. This particular sec-tion covered the government’s vision forgradual reunification and its trust buildingprocess while continuing to emphasize itszero tolerance policy to North Korea’s

nuclear weapons. This session was of par-ticular interest to foreign journalists, as itprovided a rare opportunity for partici-pants to directly ask questions to an offi-cial from the Ministry of Unification.

The press event wrapped up with moresite visits to Korea’s promising regions,including Ulsan, Energy Valley in Najuand Eco Delta City in Busan.

By Esther OhExecutive Consultant/Invest Korea

estheroh@kotra.or.kr

Kim Jae Hong, President of KOTRA, kicks offFIW with an opening speech

Kim Yong Kook, Head of Invest KOREA,welcomes visitors to the event

Participants listen closely to learn more aboutKorea's startup scene

Jamie Metzl,Honorary Ambassador of ForeignInvestment Promotion for Korea, talks about what

makes Korea a great place for investment

On May 18, 2016, the 5thMeeting on Deregulationand Private-Public JointMeeting in Charge of

Regulatory Reform was held in the BlueHouse and the event was attended by thepublic, and representatives from the gov-ernment and the private sector.

During the meeting, corporate repre-sentatives talked about unreasonable reg-ulatory challenges they faced while oper-ating business in Korea, and related min-isters (government regulators) spoke inresponse about how they will reform suchregulations.

In order to quickly respond to the gov-ernment’s deregulatory drive, the Officeof the Foreign Investment Ombudsmanwithin the Korea Trade-InvestmentPromotion Agency (KOTRA) workedtirelessly to address unreasonable regula-tory issues raised by foreign-investedcompanies in a bid to improve the coun-try’s business environment. In this regard,we offer one such example of grievanceresolution that has led to the improve-ment of unjustifiable customs regulations.

The Korea Customs Service (KCS)tightened up regulations on domestictransportation of express deliveries andthe Customs Act Newly inserted para-graph (6), Article 254-2 (Special CustomsClearance for Consignments) on July 1,2013. The newly inserted paragraph (6)stipulates that the head of a customsoffice shall clear a consignment throughcustoms at a designated storage place thatis separately determined in accordancewith the procedure prescribed by theCommissioner of the KCS. Effective asof July 1, 2013, the newly inserted provi-sions prohibit the express delivery ofsuch goods into any bonded warehouse.

Such tightened regulations the KCS seton the domestic transportation of express

delivery can be viewed as the preventivemeasures against the domestic inflow of‘goods threatening public security’ viaother means of transportation such asgeneral goods or mailing goods. Therelated logistics industry points out suchrestrictions on bonded transportation ofexpress delivery would have limitationsin preventing the inflow of ‘hazardoussubstances’ into the country.

So far the KCS has designated theentirety of express deliveries as itemssubject to customs control, requiring allof them to be subject to X-ray screening.This customs control of express deliverieshas been conducted more thoroughly thangeneral deliveries.

Domestic logistics companies usingexpress delivery are operating across allindustries in Korea, and are providinggoods and services produced by business-es all over the world through the globalnetworks. This restriction on bondedtransportation would lead to the compli-cated process of logistics companies andincreased inefficiency as it is much moretime- consuming and costly.

Domestic businesses’ logistics needscan be boiled down to just five things:speed, simplicity, cost, global distributionand compliance.

This means that businesses want theirgoods and services to be provided in aspeedy, simple and price-competitivemanner in the global market while com-plying with customs regulations of eachcountry.

Transportation services of expressdeliveries that satisfy the needs of suchbusinesses can play a key role in boostingcompetitiveness of logistics.

Multinational express carriers in Koreasuch as DHL, UPS, Fedex, and TNTraised some issues of such customs regu-lations for transportation of express deliv-

eries and requested that ForeignInvestment Ombudsman provide assis-tance in regulatory improvement.

The Ombudsman visited theCommissioner of the KCS on July 27,2015 to resolve such issues filed by theforeign-invested companies, and request-ed that relevant customs authoritiesreview and reconsider measures to allowfor bonded transportation of expressdeliveries. The Ombudsman also suggest-ed that the KCS and the foreign-investedcompanies involved attend the Meetingfor Foreign-invested Companies hostedby KOTRA.

As a result, both sides attended themeeting organized by the Ombudsman onAug. 19, 2015. During the event, the headof KCS listened attentively to the issuesrelated to prohibition on transportation ofsuch goods. On April 6, 2016, theOmbudsman attended the Private-PublicJoint Committee Meeting for RegulatoryReform hosted by the KCS where herepeatedly explained problems of the cur-rent system and strongly requested thatthe system be improved quickly.

On Aug. 7, 2016, the KCS accepted therequests by the foreign-invested compa-nies for regulatory improvement andamended the ‘Notice of disposal: ImportClearance of Express Deliveries' stipulat-ing that “bonded transportation such asbonded warehouse for private use shall beapproved for domestic businesses usingexpress services provided by express car-riers’.

With this amendment, domestic logis-tics companies using express deliveryservices are expected to boost their globalcompetitiveness through improved logis-tics.

By Dr. Jeffrey I. KimForeign Investment Ombudsman

jeffikim@kotra.or.kr

6 l October 2016

Ombudsman’s Office

Foreign Investment OmbudsmanTakes Lead in Improving

Unreasonable Customs Regulations

*Bonded transportation means transporting cargos imported form a foreign country into another bonded area in the original formof foreign goods after filing a declaration with or obtaining approval from the head of the relevant customs office without clearingthem through customs in the port of entry.

October 2016 l 7

Korea’s new anti-bribery law,the Improper Solicitation andGraft Act, will take effectSeptember 28. The purpose of

this act is to secure public confidence inpublic institutions by forbidding thebribery of government officials and otherrelevant people including journalists andteachers.

The most controversial part of the newact, first proposed in August 2012 by for-mer chief of the Anti-Corruption andCivil Rights Commission Kim Young-ran, was to limit the value of meals, giftsand congratulatory or condolence money.Under this act, if people in power or ofsocial influence receive meals pricedhigher than KRW 30,000 (USD 27), giftsvalued above KRW 50,000 (USD 45) ormarriage or funeral money beyond KRW100,000 (USD 90), they will be indictedfor bribery even though there was no quidpro quo. There has been hot debate on thislaw. Some say it is too harsh and otherssay it is still not enough to stop bribery.

Amid the voices of pros and cons, thenew anti-bribery law has been throughvarious stages. First, the Kim Young-ranbill was approved in the NationalAssembly on March 3, 2015. PresidentPark promulgated the new law on March26, 2015, and Korea’s ConstitutionalCourt ruled on July 28 this year that thenew law was constitutional, allowing thecontroversial law to take effect as sched-uled. On August 29, the ordinances of theanti-bribery law, including the limits ofKRW 30,000, KRW 50,000 and KRW100,000, were critically reviewed at avice ministerial meeting. It was finalizedat the Cabinet meeting.

The Kim Young-ran Act will apply todomestic citizens as well as foreignnationals by the principle of nationaltreatment. Foreign businesspeople haveshown much interest in Korea’s new anti-

graft law. Foreign investors may fear thatthe Kim Young-ran Act would impedetheir business significantly.

Bribery has been a part of human socie-ty since the oldest of times. A bribe ismoney or a favor given in order to influ-ence the decision of someone who is in aposition of political power or social influ-ence. The U.S. and other Western coun-tries had been lenient toward the offer ofbribes to foreign officials by their busi-nessmen until the late 1990s. When oper-ating a business in less developed coun-tries, they often see bribes as greasing thewheels. But this practice had to bestopped after the occurrences of hugebribery scandals committed by multina-tional companies including LockheedMartin. In November 1997, the U.S.Congress enacted the FCPA (ForeignCorrupt Practices Act) to stop the givingof bribes to foreign officials and to restorepublic confidence in the integrity of theAmerican business system. After theU.S., other advanced countries in Europefollowed suit and enacted strict anti-cor-ruption laws one after another.

Under these circumstances, Korea’snew anti-bribery law will help foreign-invested companies to become morecompetitive in the domestic as well asglobal markets. Now, the set of threenumbers, 3-5-10 which symbolizes thebudget limit for meal cost, gift price andcongratulatory or condolence money, isthe target for criticism. But these numberswill certainly change as inflation increasesand the living standard advances. In anyevent, the Kim Young-ran Act is very like-ly to work in favor of foreign investors.

By Dr. Jeffrey I.KimForeign Investment Ombudsman

jeffikim@kotra.or.kr

Regulatory Information Update

New graft law to be FDI-friendlyThe country’s new anti-bribery law will help foreign-invested companies

to become more competitive both in Korea and overseas

Outline of anti-courruption legislation ("Kim Young-ran" law)

8 l October 2016

Please tell us about Brose and itsbusiness activities in Korea.

We specialize in mechatronics systemsfor vehicle doors and seats as well aselectric motors and drives. Most of ourproducts may not be visible to the driverbecause they’re located somewhere underthe hood or in the door, but our solutionsenhance safety, comfort and efficiency.Our customers include around 80 carbrands and over 40 suppliers. More than24,000 employees generate ¤6.1 billion(USD 6.85 billion) in turnover.

On that note, Korea is home to thefifth-largest global car manufacturer,Hyundai Motor Group. That was morethan a good reason to expand our busi-ness to Korea. We set up a local teamclose to the customer in order to reactquickly and provide the best service,whether that is during the developmentphase of our products or during serialproduction.

We want to localize as many of ourcomponents in Korea as possible andthat’s why we set up a joint venture andestablished Mando-Brose Corporation,which develops and produces steeringmotors. As you know, Mando Corporationis one of the leading suppliers for steeringsystems, brake systems and suspensionsystems in the automotive industry. Theseproducts require electric motors, so in2011 we teamed up to supply motors toMando.

Were there any challenges thatBrose faced while trying to expandits business in Korea?

In our case, the biggest challenge wasthat Korea has a very well-establishedand cost competitive supply base. Thebusiness structure is different in Koreathan it is in Europe because its economyis largely influenced by big conglomer-ates and they’re very well-integrated inthe complete supply and value chain.Since strong customer-supplier relation-ships have been developed, it can be dif-

ficult for newcomers to be a part of thecountry’s supplier pool and penetrate thelocal market.

How can Korea become a moreideal investment destination forforeign companies?

When it comes to doing business inKorea, an important factor for multi-national and foreign companies is open-ness. They want an open, non-discrimina-tory regulatory environment so that theycan get the chance to develop sustainablebusinesses. Unrestricted capital inflowand outflows are important to us as well.

Aside from these aspects, it’s essentialfor us to be able to bring in the right peo-ple to support and develop our business inKorea. We need flexibility on workingpermits so that we can bring in overseastechnical experts; by doing so, we’ll beable to also bring in their knowledge andtechnical expertise to Korea. At our head-quarters in Germany, we focus onadvanced development and technology sothat is why it’s even more important tohave overseas talent come to Korea.

What are some of the goals orvision that Brose has in Korea andAsia?

Last year, we decided to change ourorganizational setup and made Korea ourheadquarters for our Asian business out-side of China. This is because Korea is byfar the second biggest market for us afterChina. So it’s likely that there will beadditional investment flowing into Koreato increase our business with car manu-facturers in the region.

But we’re not just working on projectswith Korean car manufacturers. We’resupporting our teams in Japan andASEAN countries by further developingengineering resources and infrastructurein Asia.

You’re participating in this year’sForeign Investment Week 2016

(Sep 27-29). What are some of thethings you’re looking forward to atthe event and what does such anevent mean for foreign compa-nies?

Korea has reached a very importantphase in its economic development. Thetremendous growth in the past decadeshas been achieved by a rapid expansionof a very cost-competitive industrial sec-tor. Today, Korea is one of the leadingeconomies in the world and is even amember of the G20. But economic con-cepts and strategies of the past will nolonger work in the future, and the countryhas to redefine itself to a certain extent inorder to ensure further economic growth.I’m very interested to hear about the gov-ernment’s plan to shape that future, espe-cially in regards to the so-called “creativeeconomy”. As such, FIW is the premierevent that provides foreign investors first-hand information from the governmentabout future investment policies. Andbased on such information, investors canmake efficient plans for future invest-ments.

Do you have any last words forforeign companies interested inextending their reach to Korea?

Foreign companies should definitelylook into Korea as a location for invest-ment, especially because of its FTA net-work. These FTAs make it very easy forcompanies here to export their productsto other countries. In our case, we’re ableto easily export our products from Koreato Europe, India and North America. Ihope Korea will continue to improve theirbusiness environment by establishingnew FTAs with more countries.

By Esther OhExecutive Consultant/Invest Korea

estheroh@kotra.or.kr

Interview

Innovation at its Finest(cont.)

October 2016 l 9

Economic Analysis

Are Korea’s Export Markets Really Recovering?

At last, Korea’s monthly exportsshowed a positive growth rate(vis-a-vis last year) of 2.6 per-cent last August. Export

growth rates have been in the negative ter-ritory for 25 consecutive months sinceJuly 2014. Never before has it shown sucha prolonged decline. The previous recordof consecutive negative growth rates were13 months from March 2001 to March2002 and 12 months from November2008 through October 2009. This 2.6 per-cent growth in August 2016 has put anend to the longest streak of negativegrowth in the export market, and there arehigh expectations that Korea’s exports arefinally back on the right track. But are wesure Korea's exports have regained theirmomentum?

Before answering that question, onepoint should be made clear to avoid possi-ble confusion and misjudgment. Usually,monthly statistics are too erratic to baselong term forecasts upon. For example,monthly export statistics could easily bedistorted by the number of working daysor holidays, which could differ by two orthree days, and sometimes up to four orfive days for months with longer holidays.One way to correct this deficiency may beto convert the monthly export data to dailyequivalent statistics by adjusting theamount of non-working days. To calculatedaily export statistics, Sundays and holi-days are usually excluded and Saturdaysare noted as half days. When applying thismethod, August 2016 had 22 workingdays and four Saturdays, while there were20 working days and four Saturdays inAugust 2015. Because there were twomore working days in August 2016 thanin the same month the previous year, thedaily equivalent of exports in August2016 is actually USD 1.67 billion, while

that of August 2015 was USD 1.78 bil-lion. With this modification, exports inAugust 2016 did not see an increase of 2.6percent, but rather a decrease of 6.2 per-cent. Another way to overcome this pitfallof month-to-month irregularity is to usequarterly statistics. The diagram belowshows the recent trends of quarterly exportgrowth rates, which has been in the nega-tives for eight consecutive quarters (fromthe third quarter of 2014 until the secondquarter of 2016). The surprising fact aboutthe diagram is that quarterly exportsshowed double-digit negative growth ratesfor six consecutive quarters (from the firstquarter of 2015 until the second quarter of2016). With this prolonged decline inexports and the daily equivalent exportgrowth statistics still in the negatives, itmight take some time before Korea'sexports markets see more positive growth.

Export Growth Rate of Koreaby Quarter

A number of incidents in Korea,including the recent Hanjin Shipping cri-sis and the massive recall orders of theSamsung Galaxy Note 7 have becomestumbling blocks for the Korean econo-my. Knowing that export is a critical ele-ment of Korea’s economic growth, whatshould then be done?

First, Korea has to rebuild its competi-tiveness. Domestic firms have to try hardto successfully outperform their maincompetitors like Apple, Toyota or Merck.They need to be constantly looking out forwhat their competitors are researching onand find out how they are marketing theirproducts, instead of meddling withdomestic issues. When the cost of laborwas the main source of competitiveness,Korea was at an advantage because of itslow wages. But it’s a different story now.In an era of highly advanced technologies,corporate executives, employees, govern-ments and bureaucrats all have to cometogether to make the economy competi-tive and creative. This is exactly whyGermany and China have been so deeplyconcerned with the fourth industrial revo-lution, and Korea is no exception. Ibelieve Korean firms and entrepreneursare wholeheartedly dedicated and commit-ted to doing so. The real challenge, how-ever, is how seriously and actively publicentities would take part in this endeavor.

Secondly, the country’s business regula-tory environment should be renovatedentirely. Fierce competitiveness in theglobal markets, along with unreasonableand unfair domestic regulations can serveas obstacles for companies. Withoutderegulation, domestic companies couldlose their competitive edge in the long runand eventually move their plants overseas.Whether you want to call this overhaul‘restructuring’ or a ‘reformation’, no onecan dispute their importance.

By Professor Se Don ShinDean, Sookmyung Women’s University

Former Senior Economist, Bank ofKorea

seshin@sm.ac.kr

According to Professor Shin Se Don, Korea's public and private marketmust work together to put the country's export market back on the right track

Source:Ministry of Trade, Industry & Energy

10 l October 2016

Ulsan Metropolitan CityLocated in the southeastern coast of

South Korea, Ulsan Metropolitan City isthe seventh largest metropolis with a pop-ulation of over 1.1 million and grossregional domestic product of USD 56,000per capita. It is also one of Korea’sbiggest industrial cities, accounting for15.2 percent of the country’s industrialoutput and a product export equivalent toUSD 97.3 billion. In addition, Ulsan isthe largest shipbuilding city in the world,accounting for 16 percent of the world’sshipbuilding output. The city is also hometo major Korean companies like Hyundai,Daewoo and SK, along with big names inthe automotive, shipbuilding and petro-chemical industries.

Ulsan Port Hinterland& New Ulsan PortAs the largest industrial logistics port,

Ulsan Port treats the highest amount ofliquid cargo in Korea, processing 190million tons of cargo a year with aberthing capacity of 110 berths. UlsanNew Port, to be completed in 2020, willhave a capacity of 89 million tons of car-go per year and an annual port handlingcapacity of 253 million tons. The city cur-rently accounts for 34.9 percent of petro-

chemical production in Korea, and theport is expected to handle 19.2 percent ofthe world’s petroleum consumption.

Its strategic seaside location, as well asthe city’s accessibility to the KTX (SouthKorea’s high-speed railroad), the GyeongbuHighway and the Gimhae InternationalAirport, also provide an extensive trans-portation network.

Ulsan Free Trade ZoneA free trade zone (FTZ) is a specific

class of economic zone designated by thenational government to promote foreigninvestment, trade and regional develop-ment through deregulation of foreigntrade laws, along with customs laws.

The Ulsan Free Trade Zone AdministrationAgency (UFTZAA), which covers 837,000square meters of the city, has beendesigned especially for foreign-investedand export-oriented companies. Locatedclose to existing large-scale industrial com-plexes, it aims to become a hub for newindustries and act as an outpost of the East-Sea Rim Economic Zone.

The UFTZAA provides a number ofincentives for investors, including lowrent, tax reductions and special regula-tions. For foreign invested manufacturingor export-oriented manufacturing compa-

nies, UFTZAA offers a competitivelypriced monthly rent at KRW 930-1,030(USD 0.83-0.92) per m2 for standard fac-tories and KRW 134 (USD 0.12) per m2

for private factories. Companies inadvanced technology industries andindustry-support services with newinvestments of more than USD 1 millionget a 100 percent waiver on rent, whilenew investment of more than USD 5 mil-lion can receive a 75 percent exemption.

Foreign-invested companies investingmore than USD 10 million are also eligi-ble for 100 percent corporate, income andlocal tax exemption for three years and 50percent for an additional two years.Companies can also receive tariff breakson capital goods, raw materials and con-struction materials imported for businesspurposes, and zero percent VAT rate onforeign goods or services exchangedamong tenants and domestic goods car-ried into a free trade zone.

For more information, visit the UlsanMetropolitan City website:

http://www.ulsan.go.kr/english/index

Zone

Ulsan Metropolitan City: The Link to AsiaAs Korea’s largest industrial city,

Ulsan provides an optimum place for foreign companies to call home

October 2016 l 11

October 20161,102

20101,156.3

20111,108.1

20121,126.9

20131,095.0

20141,053.2

KRW-USDForeign Exchange Rate

GDPNominal (USD million)

PPP (USD million)GDP Growth Rate

(Y-o-Y) (%)

2015105,870.7

Jan.-Aug. 201664,055.5

201118,655.8

201250,835.0

201381,148.2

201484,373.0

Balance of Current Account

(Unit: USD million)

(Unit: USD)

Source: The Bank of Korea, October 2016

(Unit: USD million)

(Unit: KRW)

Foreign TradeExportsImports

Trade Balance

201427,97035,379

201527,195 36,511

201625,989.9 37,699

201325,998 33,829

GDP Per CapitaNominal

PPP

2015526,757 436,49990,258

Jan.-Aug. 2016322,305261,15261,053

2011555,214524,41330,801

2012547,870519,58428,285

2013559,632515,58644,047

2014572,665525,51547,150

20141,410,0001,685,033

3.3

20151,377,5001,748,777

2.6

20111,202,7001,559,447

3.7

20121,222,4001,611,273

2.3

20131,305,4001,640,377

2.9

Economic Indicators

Source: The Bank of Korea, October 2016

Source: The Bank of Korea, October 2016

Source: International Monetary Fund, April 2016

Source: Korea International Trade Association, October 2016

Recently, the challenge of renewable energy development has become a global issuein the midst global warming. In 2015, total investments in the clean energy sectorreached a recordbreaking USD 329 billion, up 4 percent from 2014. Among the differ-ent types of renewable energy, wind power in particular has drawn attention as themost efficient, cost-effective and eco-friendly energy source, and ODIN Energy hasbeen a key player in this field.

Patented in 47 countries, ODIN Energy system’s innovative hybrid technology com-bines wind, solar and ESS power to generate four times more power than traditionalmethods. Its multi-floor tower structure also takes up 1/80 of the area required for stan-dard wind power systems. Moreover, it is a noise-free alternative to high voltage powerlines of traditional transmission towers, which are detrimental to people’s health andthe landscape.

As of May 2016, ODIN has already established 12 MOUs in the United States,Kenya, England, Egypt, Nigeria, Indonesia and Jordan. It has also participated as aneconomic mission delegate to the Korea-Africa Presidential Summit.

Introducing Korea’s SMEs

Address: 3F, 109, Gwanak-ro,Gwanak-gu, Seoul, South Korea

Tel : +82-70-7209-5340Fax : +82-2-884-8852

E-mail : info@odinenergy.co.kr

ODIN Energy

Contact Info:

Each month, Invest Korea Express introduces one Korean SME thatseeks to expand its network with foreign investors looking to do busi-ness in the country. In the October issue, we take a look at one ofKorea’s most promising renewable energy companies.

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