Business Opportunities and the Korea-Australia Free Trade Agreement. Australia Unlimited

Transcription

1 Business Opportunities and the Korea-Australia Free Trade Agreement

2 CONTENTS 1. Overview 2. Benefits from KAFTA 3. Challenges 4. Next Steps

3 Republic of Korea Economic snapshot Population: 50.2 million (2013) GDP: US$1.22 trillion (2013) GDP per capita: US$24,329 (2013) Unemployment: Inflation: Key industries: Import partners: 3.2% (2013 est.) 1.1% (2013 est.) Electronics, telecommunications, automobile production, chemicals, shipbuilding, steel China 15.5%, Japan 12.4%, United States 8.3%, Australia 4.4% (2012) Export partners: China 24.5%, United States 10.7%, Japan 7.1%, Australia 1.7% (2012) [Source: South Korea Fact Sheet 2013, DFAT/ The World Factbook-CIA 2013] 3

4 ($A million) Korea is Australia s third largest export market.. Australia s top ten export markets 94,708 47,541 19,598 9,581 9,508 7,395 7,355 5, ,858 China Japan Korea United States India New Zealand Taiwan Singapore Malaysia U.K. Total exports: A$261,993 billion [Source: DFAT Composition of Trade 2013] 4

5 ($A million). and our fourth largest trading partner overall Australia s top ten trading partners 150,919 70,753 54,714 32,087 27,087 21,554 19,885 19,546 17,889 16,122 China Japan United States Korea Singapore New Zealand UK Thailand Malaysia Germany [Source: DFAT Composition of Trade 2013] 5

6 Australia s trade with Korea is dominated by commodities and manufactured goods Australia s top goods exports to Korea Iron Ores & Concentrates Coal Beef Medicaments Sugars, molasses and honey Wheat Gold A$5.4 Bil A$5.0 Bil A$787 Mil A$508 Mil A$402 Mil A$316 Mil A$204 Mil Korea s top goods exports to Australia Refined Petroleum Passenger motor vehicles Heating and cooling equipment Monitors, projectors, TV Telecom equipment Electrical machinery A$3.4 Bil A$2.0 Bil A$683 Mil A$196 Mil A$160 Mil A$155 Mil [Source: DFAT Country Profile Republic of Korea, DFAT Composition of Trade 2013]

7 Korea is reliant on food imports, including from Australia Korea imports more than 70% of its food and agriculture products Korea Agriculture, 2.6% of GDP (as of 2010) Grain self-sufficiency 23.6% in 2012 Australia is the fourth biggest supplier to Korea in terms of its agriculture and food related imports USA (20.2%), China (14.6%), Brazil (9.1%), Australia (8.1%) Korea agricultural imports in 2013 : U$ 25.8 billion Agri/food imports from Australia to Korea in 2013 : U$ 2.1 billion

8 ($A million) Australian services exports to Korea Australia s top ten services markets 6,881 5,951 3,982 3,626 3,549 1,991 1,921 1,822 1,675 1,664 China United States U.K. New Zealand Singapore Japan India Hong Kong Korea Malaysia World total: A$55,070 million [Source: DFAT Composition of Trade 2013] 8

9 Our services exports are dominated by travel and education 100% = $1,675 million [Source: ABS, A$ million in 2013]

10 Korean investment in Australia Top 10 investors in Australia: (A$ Billion) [Source: ABS, International Investment Position, 2013 based on foreign investment in Australia]

11 Korean investment in Australia is concentrated in resources Korean investment into Australia: A$15 billion (2013, up 25.3% YoY) Significant Korean investment into Australia: o o o POSCO: 15% equity stake in Hancock Prospecting s Roy Hill Iron Ore Project in Western Australia (2012) Mirae Asset: 100% equity stake in Four Seasons Hotel in Sydney (2013) CJ Nutracon: Beef powder processing facilities in Toowoomba, QLD Australian investment in Korea: A$12.4 Billion (2013, up 19.8% YoY) [Source: DFAT & Austrade] 11

12 Korean investment into Australia is growing rapidly [Source: Reflects direct and portfolio equity and debt investment, ABS]

13 Australian exports to Korea by State State exports to Korea ($Am) WA QLD NSW VIC SA NT TAS [Source: DFAT, Australia s Trade by State and Territory ]

14 CONTENTS 1. Overview 2. Benefits from KAFTA 3. Challenges 4. Next Steps

15 KAFTA is a game changer The Korea-Australia Free Trade Agreement (KAFTA) reduces trade and investment barriers, making it easier for Australians to do business with Korea our 4th largest trading partner. KAFTA is a world-class, comprehensive agreement that substantially liberalises Australia s trade with Korea The Agreement helps level the playing field for Australian exporters competing with those from the US, the EU, Chile and the Association of South East Asian Nations (ASEAN), who benefit from existing trade deals with Korea. The Korea-Australia Free Trade Agreement is unambiguously good news for the Australian economy Jennifer Westacott - Chief Executive, Business Council of Australia

16 KAFTA benefits by product (1/4) Meat Beef (40%): Elimination over 15 years Pork (22.5%-25%): Elimination over 5-15 years Grains Wheat (1.8%): Elimination on entry into force Wheat gluten (8%): Elimination on entry into force Malt (269%): Elimination over 15 years Malting barley (513%): Elimination over 15 years Sugar Raw sugar (3%): Elimination on entry into force Refined sugar (35%): Elimination over 18 years Image: MLA Korea

17 KAFTA benefits by product (2/4) Cheese Cheddar cheese (36%) : Elimination over 13 years Cream cheese (36%) : Elimination over 18 years Other cheese(36%) : Elimination over 20 years Also an immediate duty-free quota of 4,630 tonnes, growing at three per cent per annum (compound) until the tariff is eliminated Butter Butter (up to 89%) : Elimination over 15 years Diary Spreads (8%) : Elimination over 3 years Preparations comprising more than 70 per cent butter (8%) : Elimination over 10 years Also an immediate duty-free quota of 113 tonnes for butter, growing at two per cent per annum, until the tariff is eliminated. Infant formula Infant formula (36-40%) : Elimination over years Also an immediate duty-free quota of 470 tonnes, growing at three per cent per annum (compound) until the tariff is eliminated. Other dairy products A range of other dairy products, such as milk, cream, ice-cream, yoghurt and whey: Elimination over 3-20 years

18 KAFTA benefits by product (3/4) Wine Sparkling wine, red wine, white wine (15%): Elimination on entry into force Fruits, nuts, vegetables Cherries (24%): Elimination on entry into force Dried grapes(21%): Elimination on entry into force Almonds (8%): Elimination on entry into force Macadamia nuts (30%): Elimination over 5 years Seafood Fresh or chilled Southern Bluefin Tuna (20%): Elimination on entry into force Australian wine sold in premium supermarket, Korea Australian almonds sold in hypermarkets Seasonal tariff elimination Potatoes for chipping (up to 304%): from December to April every year elimination on entry into force; for other months, elimination over 15 yrs Table grapes (45%): Down to 24% on entry into force. Elimination over 5 years between December and April each year First launch of Australian table grapes in Korea, May 2014

19 KAFTA benefits by product (4/4) Crude petroleum 3% tariff eliminated over five years Natural gas 3% tariff eliminated immediately on entry into force Titanium dioxide 6.5% tariff eliminated immediately on entry into force Unwrought aluminium 1-3% tariffs eliminated immediately on entry into force Pharmaceutical products Tariffs of up to 8% eliminated over three years, 90% will be eliminated immediately on entry into force Automotive parts 8% tariff eliminated immediately on entry into force

20 Our services sector will also benefit from KAFTA (1/2) KAFTA will provide the best treatment Korea has agreed with any trading partner Legal Services: Access for the first time to Korea s legal consulting services market Financial Services: Australian financial services providers will be able to supply on a cross-border basis Accountancy Services: Australian accountants can provide accounting consultancy services through offices in Korea

21 Our services sector will also benefit from KAFTA (2/2) Telecommunications Services: Australian telecommunications providers may be licensed to provide public telecommunications services Education Services: Guaranteed market access for Australian education providers in Korea s growing adult education sector Film and Television Services: New commercial opportunities for the Australian film and television industry Engineering Services: Australian engineers will benefit from a mutual recognition arrangement Other Professional Services: On-going work towards mutual recognition of qualifications and liberalised visa access arrangements

22 Other sectors of opportunity for Australian firms in Korea ICT digital content and services High level of broadband and mobile penetration Opportunities children s animation, mobile content, embedded software Health, aged care and biotech Health and aged care products and services, pharmaceuticals and medical equipment Education All sectors, transnational, non-award adult education Energy and Resources Strong ongoing demand for Australian commodities (including clean energy solutions) Korea the world s 10 th largest consumer of energy Infrastructure Increasing regional development in Korea; emerging demand in designing urban infrastructure, cultural and sports precincts and management skills after construction

23 CONTENTS 1. Overview 2. Benefits from KAFTA 3. Challenges 4. Next Steps

24 Some examples of issues with importing products into Korea (1/2) Inadequate research and preparation prior to commencement of export Non-compliance with Korean Government requirements We see cases where consignments don t present in Korea with the required quarantine certification - it is often the case that it is too late at that stage to remedy the situation. Korea takes food safety very seriously - It has strict testing requirements for prohibited substances and tolerances for other substances. (1) problems exist such as violations of maximum residue limits for pesticides and veterinary drugs; (2) detection of prohibited food additives; labelling non-compliances (3) shelf-life and expiry date issues. Australia Australia means Unlimited opportunities

25 Some examples of issues with importing products into Korea (2/2) Using multiple agents giving confusion to end users losing some credibility Packaging problems Trademarks and Patents Registration of Trademarks : The Korea Industrial Property Office (KIPO): First file, first registration principle Visit the Korea Industrial Property Rights Information Service ( for more information Australia Australia means Unlimited opportunities

26 Friction between exporters and importers can be caused by: Different expectations for time scales Long lead time from order to shipment Frequent staff changes Change of company ownership due to frequent M&As Small room for negotiation Frequent documentation mistakes Less attractive product packaging There is too much time between order and shipment Korean importer

27 Some tactical suggestions that assist you when exporting to Korea Prepare correct export documents Check import regulations and inspection requirements with Korean customs and importers in advance. Make agreement on payment methods and how to solve commercial disputes with Korean partners Support your local partner and evaluate periodically Work with an import agent to focus on your product Understand that quick responses and minimal shipping time are crucial Be patient regarding business development relationships are key!

28 Market Entry strategies things you need to know Preliminary market research Market visit Demonstrations, seminars, exhibitions Establishing Korean partners Meeting preparation, be ready to negotiate Follow up to show commitment Meeting local taste and packaging requirements Regular communication Long-term commitment to the market

29 CONTENTS 1. Overview 2. Benefits from KAFTA 3. Challenges 4. Next Steps

30 Upcoming events in Korea (1/2) Date Event 24 November 2014 Discover New Australian Wines Australian Wine Showcase for new to market wines 17 January 2015 Match Australia (2015 AFC Asian Cup, Australia) 29 January 2015 Showcase premium food and consumer products at Australia Day event February 2015 (tbc) Australian Publishing Mission to Korea March 2015 (tbc) March 2015 (tbc) March 2015 (tbc) Australia Business Showcase in Korea Retail & Online Promotion for Australian Food & Consumer products - part of the Australia Business Showcase in Korea Agrifood Investment Promotion Seminar

31 Upcoming events in Korea (2/2) Date March March 2015 (tbc) Event Korean financial delegation to the Conference of Major Super Funds (CMSF) Australian Grain Mission 8-10 April 2015 Australian Mission to Bio Korea 2015 April 2015 (tbc) Australian Korean School Partnership Project April 2015 (tbc) Career Fair in Australia May 2015 Seoul Food & Hotel Korea May 2015 (tbc) June 2015 (tbc) June 2015 (tbc) Commercial Exhibitions for Australian Aboriginal Arts Australian corporate training seminar/workshop Korea Railways & Logistics Fair and Seminar about Australian Railway Capability October 2015 (tbc) Australia Future Unlimited Education Exhibition 2015

32 How Austrade can help you Export Market Development Grants scheme TradeStart program General and tailored services: Identify actionable opportunities in market Interpret the business climate and local commercial practice, and provide language support Supply you with in-depth info on the market and the companies involved Refer you to potential customers in market Develop a visit/contact program for you Provide ongoing in-market assistance to help you establish your business presence.

33 Start the conversation My Contact Details Brett Cooper, Senior Trade Commissioner, Austrade Korea Tel: