Asia Pacific Trade Council Asia Pacific Trade Council 730 - 999 Canada Place, Vancouver, B.C. V6C 3E1, Canada 730 - 999 Canada Place, Vancouver, B.C. V6C 3E1, Canada Telephone: (604) 775-2100 Fax: (604) 775-2070 Telephone: (604) 775-2100 Fax: (604) 775-2070 www.asiapacifictradecouncil.com www.asiapacifictradecouncil.com Message from the Asia Pacific Trade Council
In November 2007, the Asia Pacific Trade Council established the South Korea Market Advisory Group (KMAG) to evaluate British Columbia’s relations with South Korea and provide recommendations on how the Province can grow its trade and investment relations with this important Asia Pacific partner.
South Korea is British Columbia’s fourth largest export market and just slightly behind third- place China. On the strength of rising commodity prices, and increased demand for natural resources, total exports to Korea from BC surpassed the CDN $1 billion mark in 2005. British Columbia and South Korea have an opportunity to build on this foundation and develop a more sophisticated and diverse trade relationship which capitalizes on gateway synergies – BC as a hub for engagement with North America and South Korea as a hub for engagement with Asia. The importance and potential of South Korea must not be lost. The British Columbia / South Korea relationship must be afforded attention, investment and cultivation.
The KMAG recommendations focus on the following five strategic areas: building high level bilateral relationships; building the BC Government’s capacity to engage with South Korea; building British Columbia’s profile as a sophisticated research, technology and investment partner; identifying new areas of opportunities in the BC / South Korea economic relationship; and advocating the conclusion of bilateral agreements (such as an Open Skies Agreement and Free Trade Agreement) that will remove barriers to greater trade with South Korea.
The Asia Pacific Trade Council fully supports this report and the recommendations brought forth by the KMAG. We ask that the Government of British Columbia give full consideration to the recommendations outlined in this report, and are confident that they will help to revitalize and strengthen the BC / South Korea trade and investment relationship.
Yours truly,
Arthur Hara Carol Lee Arvinder Bubber Chair Vice-Chair Vice-Chair
Foreword
On behalf of the South Korea Market Advisory Group (KMAG), I am delighted to present the Report on South Korea to the Asia Pacific Trade Council.
Despite the growing importance of the Asia Pacific region in the global economy over the last two decades, Canadians, and British Columbians, have not paid sufficient attention to developments across the Pacific Ocean. Indeed, within BC itself, the continued growth of ethnic Asian communities, including permanent and temporary residents, provides tangible evidence that the Asia Pacific region matters to BC. It is critically important that the Government of British Columbia allocate adequate resources towards ensuring that the important relationships with the Asia Pacific, including South Korea, are established and strengthened.
This Report, the fourth in a series of market reports prepared for the Asia Pacific Trade Council outlines the foundations of the BC-South Korea economic relationship, the strengths and complementarities between the two economies, and areas of potential mutual interest and cooperation. Although BC’s history of trade and commercial relations with South Korea has been relatively short, South Korea is becoming an increasingly important economic partner for BC, and as such, deserves greater attention from both the private sector and from government.
It may surprise some that South Korea is in fact a significant player in the Asia Pacific. South Korea has a strong presence in China’s manufacturing industries, and is increasing its presence in Southeast Asia. South Korean consumer goods are common in many markets around the world. South Korea has also been positioning itself as Asia’s premier transportation and logistical hub, especially for the Northeast Asian region. The growing complexities of the movement of goods, capital, and people around the world require a more flexible, multi-dimensional approach when looking at Asia. BC must adjust is mental lens to the emerging role of South Korea as a gateway to Northeast Asia.
The recommendations presented in this Report are intended to provide ideas and stimulation for discussion and to direct government on how and where to look in developing a stronger economic relationship with South Korea. The KMAG believes that the Government of British Columbia can and should take a proactive leadership role in building stronger linkages to South Korea. The recommendations and background material contained herein are the result of discussions in KMAG meetings, and consultations with British Columbia businesses, academic institutions and other experts and organizations familiar with or interested in South Korea. I am extremely appreciative of their participation, input and insight, and I present our recommendations on their behalf.
Tae-hoon Oum, Chair South Korea Market Advisory Group June 18th, 2007
Table of Contents
Executive Summary...... 1
Summary of Recommendations ...... 3
Section 1 - Introduction & Terms of Reference ...... 5 Section 2 - South Korea in Context and its Importance to British Columbia...... 6 Section 3 - British Columbia’s Economic Relationship With South Korea ...... 9 Section 4 - Recommendations And Discussions...... 19 Section 5 - Summary Of Kmag Activities ...... 30 Section 6 - Conclusion ...... 32
Appendix 1 - BC’s Education Sector ...... 35 Appendix 2 - BC’s Tourism Sector ...... 39 Appendix 3 - BC And High Technology ...... 42 Appendix 4 - BC’s Forestry Industry...... 46 Appendix 5 - Status Of Canada-South Korea Air Services And Open Skies...... 48 Appendix 6 - South Korea – Region Profiles And Transport Hubs ...... 52 Appendix 7 - Asia Pacific Trade Council – Members And Advisory Group...... 56 Appendix 8 - List of Individuals Consulted...... 59 Appendix 9 - BC - Korea Statistics ...... 61
Executive Summary
South Korea is the world’s 11th largest economy with GDP of almost C$1 trillion and a population of 48 million. It is also the world’s 10th largest trading nation with US$325 billion in exports and US$310 billion in imports in 2006. Over the last two decades, South Korea has transformed itself into a dynamic, knowledge-based economy with strong scientific research capability and high technology industries. All of this in a country that is only three times the size of Vancouver Island.
South Korea is important to British Columbia in several respects. BC’s merchandise exports to South Korea, C$1.37 billion in 2006, are only C$120 million less than BC’s exports to China (C$1.49 billion), and approximately four times BC’s exports to India (C$346 million).
South Korean firms are establishing plants and factories in China and other Asian countries in record numbers (11,061 plants and factories in China alone as of 2004) and are buying raw materials and parts not just for the domestic market but also to supply their facilities in other Asian countries. Therefore, an understanding of economic ties with South Korea does not mean simply looking at BC-South Korea trade links. South Korea has been very successful in developing as a Northeast Asian business/transport/logistics hub and BC’s gateway initiative can learn from South Korea’s effort and success in this area. Additionally, if Pyeongchang in South Korea is selected as the site for the 2014 Winter Olympic Games, BC’s Olympic experience will present many opportunities to BC firms looking to provide Olympic-related services.
South Korea has not been afforded a level of attention that is commensurate with the country’s impressive rise or with the rapidly growing Korean-Canadian community in BC. The following recommendations, generated by the South Korea Market Advisory Group (KMAG) under the auspices of the Asia Pacific Trade Council, are designed to provide the BC Government with a short list of concrete actions that will improve BC’s commercial relationship with South Korea. The recommendations were developed in the belief that BC’s ties with South Korea can also be leveraged to improve BC’s connections to other parts of Asia and South Korea’s ties with other parts of Canada. KMAG urges the BC Government to take a proactive leadership role in relations with South Korea, and to work closely with the federal government on key issues such as an Open Skies air services agreement and a bilateral free trade agreement with South Korea.
This report is intended to be used in conjunction with the work done by other Market Advisory Groups. It is the sincere hope of KMAG that the Government of British Columbia will give full consideration to the recommendations and discussions contained in this report as BC embarks on the Asia Pacific Initiative.
1 SOUTH KOREA MARKET ADVISORY GROUP REPORT EXECUTIVE SUMMARY
2
Summary of Recommendations
The South Korea Market Advisory Group offers eleven recommendations to the Government of British Columbia to enhance the British Columbia-South Korea relationship.
Take action to increase the level of direct commercial engagement with South Korea:
1. Increase the number of visits to South Korea by senior British Columbian Government officials, with an official visit by Premier Gordon Campbell to South Korea in 2008. 2. Establish a South Korea desk within the Ministry of Economic Development to promote and coordinate economic relations between British Columbia and South Korea. 3. Establish a British Columbia Trade and Investment Representative in Seoul, South Korea, similar to the trade and investment representative operations being established in Shanghai and Tokyo. Also, consider appointing honorary BC Trade Commissioners in key South Korean cities. 4. Expand and strengthen the Economic Cooperation Memorandum of Understanding with Gyeonggi Province to a full sister-province relationship, similar to the BC - Guangdong (China) sister province relationship, and encourage the development of a strategic twinning network in South Korea with BC municipalities and transportation/gateway stakeholders. 5. Build on the significant work already being done to expand the Korean market in the tourism, education, forest products and advanced technology sectors. Specifically, the Government of British Columbia should give careful consideration to the sector- specific recommendations outlined in the appendices to this report (see appendices 1 - 4).
Enhance British Columbia’s brand as an investment, advanced technology and research and development destination by undertaking the following actions:
6. Proactively market British Columbia as a favourable business and investment destination, including providing information on corporate taxation and the province’s improved labour relations environment. This effort should include a focus on developing the “Invest BC” Korean language website, and targeted outreach programs. 7. Make a concerted effort to sell British Columbia’s strength in research and development and selected advanced technology industries including alternative energy, biotechnology, information and communications technology, and digital arts and media.
3 SOUTH KOREA MARKET ADVISORY GROUP REPORT SUMMARY OF RECOMMENDATIONS
Work closely with the federal government to ensure that Canada’s policy and regulatory framework is conducive to maximizing investment, trade and people flows between Canada and South Korea:
8. Encourage the federal Government to conclude a Canada-South Korea Open Skies air services agreement, which would result in significant economic gains to British Columbia. 9. Press for Canada to conclude a Canada-South Korea Free Trade Agreement to prevent competitive disadvantage for Canadian goods and services in the South Korean market. 10. Work with the federal government to remove various impediments to immigration and the work permit process for skilled immigrant workers. 11. Improve federal and provincial coordination in addressing regulatory and other issues faced by potential investors looking to establish and conduct business in British Columbia.
4 INTRODUCTION AND TERMS OF REFERENCE SOUTH KOREA MARKET ADVISORY GROUP REPORT
SECTION 1 - INTRODUCTION & TERMS OF REFERENCE
The Asia Pacific Trade Council In the Speech from the Throne on February 8th, 2005, the Government of British Columbia announced the formation of “a new Asia Pacific Trade Council that will help advise [the] Government on where and how to best target available resources” to help British Columbia industry compete in international markets and integrate further with the fast-growing Asia Pacific region.
The mission of the Asia Pacific Trade Council (APTC) is to make recommendations to the Government of British Columbia on opportunities to leverage the province’s unique strengths – its gateway location, ports and transportation infrastructure, multicultural society, and historical links with the Asia Pacific – to maximize commerce for the benefit of all British Columbians and Canadians. The Council delivered its first report on the China/Hong Kong markets on July 10th, 2006, its second report on the India market on January 29th, 2007, and its third report on the Japan market on May 22nd, 2007.
The Council consists of a Chair, two Vice-Chairs and eight members all appointed by the Premier (a list of members is provided in Appendix 7). These distinguished British Columbians – leaders in business, government, and academia – have come together to provide the Government with expert insight and advice. The Council is supported in its work by a series of market advisory groups (MAGs) formed to conduct in-depth explorations of opportunities and issues for BC in specific regional markets and to make recommendations on how best to enhance the Province’s commercial engagement with these markets. The Council and its advisory groups are assisted by a Secretariat, which is staffed by the Ministry of Economic Development. Support for the Secretariat is provided by the Asia Pacific Foundation of Canada under grants from the Province of British Columbia.
The South Korea Market Advisory Group (KMAG) In the last 20 years, South Korea has rapidly developed into a dynamic advanced technology and knowledge-based economy. South Korea’s favourable geographical location has allowed it to position itself as a business and logistics hub for Northeast Asian markets. In recent years, British Columbia has enjoyed a strong influx of business and professional immigrants from South Korea, which has brought valuable business entrepreneurship, skills and linkages.
Work on the KMAG report officially commenced on November 29th, 2006. Given time restraints, the KMAG focused its attention on overarching strategic issues, with some time spent giving consideration to issues and opportunities in specific sectors. Therefore, KMAG’s recommendation on sectoral issues include a list of further studies in order to explore and seize the promising opportunities for the benefit of several key sectors of British Columbia’s economy.
5 SOUTH KOREA MARKET ADVISORY GROUP REPORT SOUTH KOREA AND ITS IMPORTANCE TO BRITISH COLUMBIA
SECTION 2 - SOUTH KOREA IN CONTEXT AND ITS IMPORTANCE TO BRITISH COLUMBIA
South Korea has developed into one of the most dynamic high technology and knowledge- based economies of the world. A member of the Organization for Economic Co-operation and Development (OECD) since 1996, the 11th largest economy and 10th leading trading nation in the world, South Korea is positioning itself as a business and logistics hub within Northeast Asia. Indeed, the South Korean Government has declared strong policy support for national development with the goal of becoming a global leader in several strategic industries. In particular, a high level of central government commitment to investing in science and technology through funding, promotion of education and human resource development, and facilitating increased research and development (R&D) activities in both the public and the private sector are all part of South Korea’s push to create a niche for itself in the global economy. Despite being a relatively small country, South Korea sends the largest absolute number of students to Canada and the United States, and has the highest number of PhDs graduated from US universities per capita.
South Korean firms continue to improve their global reputation for quality in semi- conductors, information and communication technology (ICT) products, automobiles, machinery, shipbuilding, computers, robotics, home appliances and electronics. In particular the large conglomerates, or chaebol, such as Samsung, Hyundai, LG, SK and Hanjin, have established themselves as global leaders in their respective fields as a result of heavy and consistent investment in R&D activities, from which they are now reaping the rewards in the form of new, innovative technologies. Furthermore, South Korean firms are increasingly active in investment abroad; recent regulatory relaxation of South Korean investment facilitates even greater levels of overseas investment. In particular, South Korean firms have been expanding production facilities vigorously in China and other Asian countries. As of 2004, South Korean firms had established 11,061 plants and factories in China alone. Therefore, South Korean firms purchase raw materials, parts and components not only for their domestic production but also to ship directly to their plants in China and other countries. Consequently, in dealing with South Korean firms, there is potential to export to third-country destinations in addition to South Korea directly.
Since the late 1990s, the South Korean Government has invested strategically to develop South Korea as a transport and logistics “super hub” for the Northeast Asian region – examples include investment in the Seoul-Incheon capital region as an air transport logistics hub and the Busan-Gwangyang region as the maritime transport logistics hub. As a result, direct airline routes now link South Korea with 48 Chinese cities and 35 Japanese cities, nearly all of which have populations greater than 1 million people. Seoul-Incheon has become a true super gateway for the Northeast Asian region. Busan is the 5th largest container port in the world, handling over 12 million TEUs1 in 2006. As British Columbia
1 TEU refers to a twenty-foot equivalent unit, a standard measurement used in marine and ground shipping. Total capacity is approximately 1,350 cubic feet, or 38.5 cubic metres.
6 SOUTH KOREA AND ITS IMPORTANCE TO BRITISH COLUMBIA SOUTH KOREA MARKET ADVISORY GROUP REPORT
develops the Greater Vancouver region as a major gateway linking Asia and North America, South Korea offers valuable lessons and insights on gateway planning and building.
Incheon links to most cities over 1 million in China and Japan
Harbin ASAHIKAWA SAPPORO Changchun Yanji HAKODATE AOMORI AKITA SENDAI Shenyang NIIGATA
Beijing FUKUSHIMA Dalian Seoul TOYAMA
Tianjing Weihai KOMATSU NARITA Jinan Yantai OKAYAMA Taegu NAGOYA Qingdao HIROSHIMA YONAGO Pusan OSAKA Xian TAKAMATSU FUKUOKA MATSUYAMA NAGASAKI OITA KUMAMOTO Cheju KAGOSHIMA MIYAZAKI Nanjing Shanghai Chengdu Wuhan Hangzhou Chongqing OKINAWA Changsha
Kunming Xiamen
Guilin Shenzhen Guangzhou Hong Kong Macau
Sanya
In 2006, British Columbia’s merchandise exports to South Korea was nearly C$1.37 billion, which is only about C$120 million less than BC’s C$1.49 billion exports to China and approximately four times BC’s exports to India (C$346 million). Since Canada’s surplus in services trade is significantly higher with South Korea (C$345 million in 2005) than with China (C$177 million in 2005), at the moment BC’s benefit from trade with South Korea is roughly on par with that of China. The natural question to ask British Columbia’s policy makers and trade officials is: “Given the importance of South Korea as a trade partner and consumer of BC education and tourism services, is sufficient attention and consideration being paid to South Korea, compared to other Asian countries?”
Because South Korea already has an Open Skies Agreement (OSA) and has successfully negotiated a free trade agreement (FTA) with the US, South Korea is most likely to be the first country in Asia ready to conclude an Open Skies and FTA with Canada. Given the geographic location of BC and the complementary industry structure between BC and South Korea (discussed in the following section), British Columbia stands to reap a lion’s share of benefits from both an Open Skies and FTA between Canada and South Korea.
7 SOUTH KOREA MARKET ADVISORY GROUP REPORT SOUTH KOREA AND ITS IMPORTANCE TO BRITISH COLUMBIA
BC Merchandise Export Trends: South Korea, China and India 1,600
1,400
1,200
1,000
800 China South Korea
C$ millionsC$ 600 India
400
200
0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: BC Stats
Trend of Canada’s trade in Services with South Korea
800
700
600
500 Exports 400 Imports Balance 300 C$ millions C$
200
100
0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: BC Stats
8 BC’S ECONOMIC RELATIONSHIP WITH SOUTH KOREA SOUTH KOREA MARKET ADVISORY GROUP REPORT
SECTION 3 - BRITISH COLUMBIA’S ECONOMIC RELATIONSHIP WITH SOUTH KOREA
South Korea has great potential not just as a market for British Columbia goods and services, but also as a source of investment in BC’s economy, as a partner in scientific research and development collaborations and as a partner for cultural exchange. However, it is fair to describe the BC-South Korea relationship at present as underdeveloped on various levels, but particularly in the economic dimension. Given the international reach of South Korean companies and their push to move up the global value chain, South Korea is a market that should not be underestimated nor overlooked by BC. Moreover, there are largely unexplored and untapped resources within BC that could be leveraged in expanding linkages between British Columbia and South Korea, such as the large number of South Korean students and tourists visiting BC every year, and the increasing Korean-Canadian population in the Lower Mainland.
South Korea’s Economic Structure As a natural resource-poor nation, South Korea relies heavily on imports of raw materials, energy, and other commodities. South Korea’s success depends on its 48 million people to build, develop, and service its economic growth. South Koreans place heavy emphasis on all levels of education, resulting in a well-educated population that is the engine of an economy with an estimated GDP of US$900 billion.2 This also means that South Korea presents a significant market of knowledgeable consumers with significant and increasing disposable income. In particular, the promotion within South Korea of English language learning in recent years has prompted many South Korean students to study in English-speaking countries, including the US, Australia, the UK, and Canada; additionally, specialized curricula, schools and campuses dedicated to developing a predominantly English-language environment within South Korea have proliferated. South Korea’s increasing global prominence has largely been the result of proactive efforts to improve the nation’s position in essential areas such as R&D investment, promotion of technology usage, and connectivity to the outside world. In short, South Korea is aiming to develop areas of national competitive advantage as a leader in technology and culture as it navigates among the increasing number of global competitors.
South Korea’s economy is made up of 3.3% agriculture, 40.7% industry, and 56.0% services. The country is still driven by the manufacturing and related sectors, and this is apparent when compared to other OECD member nations. The statistics also indicate that South Korea’s services sector is relatively underdeveloped, which suggests there may be opportunities for foreign firms, including BC-based companies, to provide the missing services and help as South Korea develops this sector.
2 EIU Country Report, November 2006.
9 SOUTH KOREA MARKET ADVISORY GROUP REPORT BC’S ECONOMIC RELATIONSHIP WITH SOUTH KOREA
Comparison of economic structure: S. Korea and selected OECD members (%) South Korea Australia Canada Japan USA Agriculture 3.3 3.8 2.3 1.6 0.9 Industry 40.7 26.2 29.2 25.3 20.4 Services 56.0 70.0 68.5 73.1 78.6
Statistics from CIA World Factbook, 2006 estimates
South Korea’s economy is dominated by large conglomerates, or chaebol. The chaebol are similar to Japanese conglomerates, known as keiretsu, and extend their presence and influence in many areas of the South Korean economy as the keiretsu do in Japan.3 However, the chaebol are typically more dominant in South Korea than the keiretsu are in Japan. One important feature of chaebol is that there is heavy involvement of the founding family in each respective chaebol grouping. Further, because of the corporate linkages between companies within a chaebol, foreign firms must be aware of the complexities that may exist when attempting to establish relationships within the South Korean market. It is important to thoroughly understand the local market conditions and networks that may affect how well a foreign firm and its products will fare in South Korea. Conversely, a thorough understanding of the chaebol and their business objectives is necessary in order to effectively align chaebol and BC interests and successfully attract large-scale investment from chaebol to British Columbia.
The effects of globalization on South Korea’s economy, and in particular on manufacturers, are important to note. In the 1990s, small and medium sized enterprises (SMEs) began to feel the squeeze from increasing global competition. As a way to reduce costs and improve competitiveness, many South Korean SMEs began to establish manufacturing capabilities abroad. China, with its abundant pool of low-cost labour and geographic proximity to South Korea, was the destination of choice for investments by SMEs. Over time, the chaebol also began to enter the overseas foreign direct investment (FDI) game, investing in China, but also in Southeast Asia and North America. There is no evidence of direct competition between South Korean SMEs and the chaebol with respect to overseas direct investment, because the nature and scale of overseas investment projects are different between the two types of firms.4 With recent policy changes by the South Korean Government, chaebol and SMEs alike now have even more freedom to invest abroad. Therefore, there may be additional opportunities for BC to attract South Korean investment, from both chaebol and SMEs, but BC must consistently and effectively demonstrate the advantages of British Columbia as the investment destination of choice.
An additional consideration is the increasing degree of integration and interdependence between South Korea and the rest of the world: with the increasing globalization of supply chains, outsourcing, and logistical networks, British Columbia should not view economic
3 In fact, South Korean “chaebol” exhibit a much greater level of integration among a group of companies which include those in different and sometimes unrelated industries. The majority or even 100% of ownership of a member firm may be held by other member firms in the chaebol. 4 For a more detailed discussion on this topic, please refer to Eun Mee Kim and Jai S. Mah, “Patterns of South Korea’s Foreign Direct Investment Flows into China.” Asian Survey, Vol. 46, Issue 6, pp. 881-897. See also Xiaohong Zhan, “Analysis of South Korea’s Direct Investment in China.”
10 BC’S ECONOMIC RELATIONSHIP WITH SOUTH KOREA SOUTH KOREA MARKET ADVISORY GROUP REPORT
relations with South Korea through a narrow, traditional lens. Instead, BC investors and companies should keep in mind that trade and investment flows between British Columbia and South Korea can be more complex, and may involve more than two countries. Within this new complexity, there may be new opportunities for indirect trade and investment, in the sense that these flows are no longer restricted to a direct, bilateral path. For example, South Korean companies may buy BC products for export to subsidiaries in China for processing, which in turn re-export intermediate goods to South Korea for finishing. These finished goods may ultimately end up in BC as imports from South Korea. Alternatively, if British Columbia is to attract South Korean investment, BC must consider the needs of the investor, the role that BC can play in that investor’s supply chain, and to aggressively market British Columbia as an investment destination that can offer a platform for accessing the North American market.
British Columbia and South Korea: Merchandise Trade BC’s economic relationship with South Korea has increased in importance since the 1980s. Throughout the 1990s, BC accounted for over 30% of Canada’s merchandise exports to South Korea, eventually reaching 42.3% in 2006 for a total of $1.37 billion.5 Overall, Canada accounted for 1% of total exports to South Korea in 2005,6 down from 2% in 1994.7 International comparison shows that Japan is still South Korea’s top import source, with an 18.5% market share, with China rising to second spot at roughly 15%, followed by the US at just under 12%. Australia has seen its market share grow to 3.8%. While it is perhaps natural that China has been gaining in increasing importance as an import source for South Korea’s economy, given the geographic proximity and production chain integration between South Korean firms and Chinese assemblers, Australia’s success in increasing its South Korean market share suggests that Canada, and British Columbia, have underperformed.
The top exports from British Columbia to South Korea remained largely the same from 2005 to 2006 in terms of categories, but there was a significant change in composition. Mineral fuels, oil and waxes as a category made up 35% of BC exports to South Korea, which, although substantially higher than the other four main categories, is less than it was in 2005 (44%). Ores, slag and ash occupied the number two spot, at 18%. The remaining categories actually increased their shares within the export composition, which may be an indication of South Korea’s increasing demand for these raw materials.
5 Statistics Canada.
11 SOUTH KOREA MARKET ADVISORY GROUP REPORT BC’S ECONOMIC RELATIONSHIP WITH SOUTH KOREA
BC’s Merchandise Trade with South Korea (2006)
Exports Imports
Rank Merchandise Classification ($m) % Rank Merchandise Classification ($m) % Mineral Fuels, Oils and 1 477.4 35 1 Motor vehicles, cycles, etc. 721.3 44 Waxes 2 Ores, Slag and Ash 247.6 18 2 Boilers, Machinery, etc. 221.7 13 Aluminium and related 3 191.1 14 3 Iron and Steel 219.7 13 articles Electrical or Electronic 4 Wood pulp and other pulp 173.6 13 4 201.8 12 Machinery 5 Wood and wood articles 90.7 7 5 Articles of Iron and Steel 79.8 5
Total BC exports to Total BC imports from 1,364.5 1,657.8 South Korea South Korea S. Korean exports as % of Imports from S. Korea as 4.1 4.3 BC’s total exports % of BC’s total imports
Note: Canadian import statistics are collected in terms of the province of clearance, not province of final destination. Source: Trade Data Online, Industry Canada,
British Columbia saw a decrease in the value of imports from South Korea, to a total of $1.7 billion in goods in 2006, compared to $2.6 billion in 2005. Consequently, imports from South Korea accounted for 4.3% of all BC imports in 2006, as compared to 6.5% in 2005. The leading import categories remained the same, with a slight variation in percentages. The decrease in the value of imports from South Korea measured in Canadian currency may be partially explained by the continued strength of the Canadian dollar. BC experienced a trade deficit of $293 million with South Korea in 2006, which is far smaller than the 2005 trade deficit of $1.1 billion.
British Columbia and South Korea: Trade in Services The services trade between British Columbia and South Korea includes many sectors, but the dominant areas are education and tourism. Indeed, the numbers of students and visitors from South Korea to BC have been consistently growing in recent years, providing BC with an enormous amount of economic benefit and positive exposure.
Education
The Korean student presence in British Columbia is under-reported due to changes in the Canadian visa policy that permits South Koreans to come to Canada to study without official study permits for courses up to six months. This change resulted in an explosion of South Koreans studying in BC, a large number of whom register with BC English as a Second Language colleges (ESL) for short-term courses.
12 BC’S ECONOMIC RELATIONSHIP WITH SOUTH KOREA SOUTH KOREA MARKET ADVISORY GROUP REPORT
Stock of South Korean students in Canada on Student Visas 1994 1996 1998 2000 2002 2004 2005 Total Students 2,389 9,111 8,309 14,283 21,977 24,627 25,457 % in BC 30.3% 46.4% 42.7% 46.0% 47.9% 48.2% 48.8% Source: Citizenship and Immigration Canada
Whilst the above statistics put the number of South Korean students on student visas in British Columbia at about 12,700, it is widely estimated that a similar number of students undertake short term study in British Columbia (for less than 6 months) without a student visa. Official statistics on service trade do not reflect the substantial amount of spending by the large number of South Korean students who are in BC schools, universities, and private academies without student visas.
Already, British Columbia is one of the most desired destinations for South Korean students and many South Korean educational institutions have been successfully operating branch schools in BC. Korean schools are hiring BC teachers not only for the branch schools in BC, but also to work in the parent schools in South Korea. British Columbia has the opportunity to capture ever increasing interest in education among South Koreans seeking ESL and other fields of study.
However, this education market will face a major challenge once the US waives current strict entry visa requirements for South Koreans. Recent South Korean statistics show that South Korea sends about 120,000 students to the US annually. As South Koreans typically prefer the US as a study destination, there will likely be a huge diversion of South Korean students away from BC once the waiver program is in place. In order to keep British Columbia competitive as an education destination for South Korean students, the public and private school systems at all levels must continue to provide high-quality, safe, and affordable programs that appeal to South Koreans.
Tourism
Tourism is a sector in which Asia’s influence on British Columbia is large, and South Korea has become a major purchaser of British Columbia’s tourism exports. The number of tourists entering Canada through BC has grown since the sharp fall-off after the Asian financial crisis, and indeed, the level of South Korean tourists exceeded even pre-crisis numbers by 2001. By 2005, the number exceeded 120,000 and in 2006 reached approximately 126,000. There is a linkage between tourism, education and immigration: many South Koreans visit BC to travel and study, or choose to study in a BC school after having visited BC. Moreover, because of the growing number of students and immigrants residing in BC, South Koreans are increasingly visiting BC to see relatives and friends.
Other possibilities for the tourism sector include the development of theme-based tourism, such as business, research and “experience” tours. Business tourism would provide a way for businesspeople to enjoy British Columbia as they explore investment opportunities or consider emigration to BC. Research visits could target those in the R&D area to visit BC and view particular research companies or facilities, such as university laboratories, to learn
13 SOUTH KOREA MARKET ADVISORY GROUP REPORT BC’S ECONOMIC RELATIONSHIP WITH SOUTH KOREA more about BC research and innovation capacity. Experience tours could offer South Koreans the opportunity to undertake farm-stays or to go on nature/adventure tours so that they can experience BC living and the outdoors.
South Korean Tourists to British Columbia
s 140.0 120.0 100.0 80.0 60.0 40.0 20.0
Thousands of person Thousands 0.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Year
Note: these figures do not account for visitors coming to BC via other Canadian provinces. Source: adapted from Statistics Canada, CANSIM Database, Table 427-0003. 6 December 2006. 2006 figure from Tourism BC Quarterly Backgrounder February 2007. 13 March 2007.
While this growth in South Korean tourism has been a benefit to BC, it has potential to grow even further. Currently, airfares for direct Canada-South Korea flights are expensive and the flights too infrequent, to the extent that typically flights are fully booked two or three months in advance. As a result, South Korean travel and tourism agencies do not promote Canada as a tourist destination. Compared to destinations such as the US and Australia, Canada is overly restrictive. An Open Skies Agreement between Canada and South Korea would expand tourist travel to Canada, and a large number of these tourists would come to British Columbia.
Other Services
As mentioned above, the South Korean economy is becoming more open to foreign firms in many services areas. Should Canada-South Korea FTA negotiations be successfully concluded, Canadian (and therefore British Columbian) companies would have greater access to South Korea. British Columbia is home to a variety of companies that can deliver services in a wide range of areas -- environmental engineering, real estate and property development, financial services, and software development. South Korea’s continued development will require the expertise of these types of companies, and BC companies need to stay abreast of the opportunities that may open in the South Korean market.
14 BC’S ECONOMIC RELATIONSHIP WITH SOUTH KOREA SOUTH KOREA MARKET ADVISORY GROUP REPORT
Investment While there are no figures readily available on a provincial basis, it is clear that in aggregate, direct investment in BC from South Korea has been minimal when considering the total magnitude of investments that are made and received by both countries. According to Korean Export-Import Bank statistics, Canada has not been a major destination for South Korean outward FDI. Other than an Alberta oil sands investment made by Korea National Oil Corporation (KNOC) in 2006, valued at almost $300 million, Canada has not seen large- scale investment from South Korea. In recent years, the investment flows to Canada have fluctuated between 0.5% and 0.8% of total South Koran outward investment; in 2006 the level hit 3.6% (due mostly to the KNOC oil sands investment). This was the first time Canada received more than 1.0% of South Korea’s total outward FDI since 1998, the year after the Asian financial crisis.
Foreign Direct Investment Stock
1600
1400
1200
1000 Canada to S. Korea 800 S. Korea to 600 C$ millions C$ Canada 400
200
0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
For Canada, South Korea is not a priority for direct investment, as the share of Canadian outward FDI to South Korea has in recent years consistently been 0.2%-0.3% of Canada’s total outward FDI. Conversely, investment from South Korea consistently comprises only 0.1% of Canada’s total inward FDI. In reviewing the statistics on the following page, it is clear that the bilateral investment relationship is underwhelming, at best. South Korea’s investment relationships are largely focused on Asia. Investment from BC-based companies to South Korea is minimal, and there have not been any recent significant South Korean investments in BC.8
8 For a broad overview of BC-South Korea investments, please see the South Korea Market Overview prepared by the Asia Pacific Foundation of Canada.
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Canada’s investment position with South Korea, year-end stock ($m) 1996 2000 2003 2004 2005
Canadian direct investment in S. Korea 172 760 698 1,364 779
Share of total Canadian outward FDI (%) 0.1 0.2 0.2 0.3 0.2
S. Korean direct investment in Canada 132 232 336 360 364
Share of total inward FDI (%) 0.1 0.1 0.1 0.1 0.1
Source: Adapted from Statistics Canada, Canada’s International Investment Position, Year-end Stocks. CANSIM Table 376-0051.
However, recent changes to South Korea’s economic policy now encourage the movement of South Korean capital into the global economy. 9 If British Columbia’s strengths are marketed properly and the needs of South Korean investor are met, BC may become a more attractive direct investment destination. BC has been assisting South Korean companies to establish subsidiaries or branch offices in BC to support investments in education, tourism, construction, ICT, and other industry sectors. In particular, it has been acknowledged that South Korean conglomerates and SMEs are keen on getting involved in British Columbia’s construction and real estate development projects which are booming due to the 2010 Olympic Games preparation and BC’s growing economy. Another sector that South Korean companies are interested in is bio-fuels. LGI and KEPCO have initiated contact with British Columbia through the Canadian Embassy in Seoul and requested BC’s assistance in establishing bio-fuel plants in BC utilizing pine beetle infested woods and other waste woods. Since it is the one of the best ways to deal with BC’s urgent problem with pine beetle infested forests, British Columbia should proactively engage in further discussions in this regard.
To boost investment linkages with South Korea, British Columbia must present a coherent and consistent message that highlights BC opportunities, while tailoring the message as necessary to account for the differences between types of South Korean investors. A short category list of investors is provided below:
• Chaebol: the large conglomerates are major players in the global marketplace, and often have multiple interests across a variety of sectors. A chaebol has the resources to make a significant investment based on its global strategy. An obvious target for such large-scale investment would be in the resources sector, which for BC means forestry, mining and energy. Other areas of interest to chaebol may also include real estate development (residential, commercial and resort/hospitality), information technology, alternative energy systems, and infrastructure.
9 At the beginning of 2007, South Korea’s government announced changes to its investment policy that include measures to give a three-year exemption to South Korean domestic investors on capital gains taxes on earnings from overseas equity investments. With respect to direct investment overseas, the changes include easing regulatory/administrative requirements for overseas investing, relaxing restrictions on real estate investment, and providing expanded risk-sharing tools (see Financial Times, South Korea Encourages Investment Abroad. 15 January, 2007; Measures to Boost Corporate Expansion Overseas and Encourage Overseas Direct Investment in Korea Policy Review, February 2007 Vol. 3, No.2.)
16 BC’S ECONOMIC RELATIONSHIP WITH SOUTH KOREA SOUTH KOREA MARKET ADVISORY GROUP REPORT
• Small and medium-sized enterprises (SMEs) may have resources to invest abroad, but on much smaller scale than the chaebol. SMEs are often part of a larger supply chain, and therefore investment motivations for SMEs typically reflect a need to improve efficiency and cut costs immediately for existing customers or markets. However, one advantage for SMEs is that they are more adaptable, as evidenced by the many South Korean SMEs that established production capacity in north-eastern China. BC has a solid base of research and technology development that may be of interest to South Korean SMEs. Potential areas of interest may be software development (e.g. for manufacturing or information management), pharmaceuticals and health, eco-friendly energy, and platforms for wireless communication.
• Individual investors are typically high-net worth business people with significant funds to invest. Such investors are often interested in emigrating to BC along with their families. Convenient access to Korean-language information on issues such as immigration, housing, the education system, social services and healthcare are essential.
British Columbia-Alberta Trade, Investment and Labour Mobility Agreement A new development in BC that can be marketed to South Korea is the British Columbia- Alberta Trade, Investment and Labour Mobility Agreement (TILMA). Introduced on a gradual basis from April 1, 2007, with full implementation set for 2009, TILMA aims to improve the business environment in BC and Alberta. TILMA will facilitate the establishment and operation of businesses by addressing issues that are considered impediments or barriers within the BC-Alberta region, which are otherwise not covered by federal trade agreements between Canada and other countries. The main principles of transparency and consistency are the key features in TILMA, as British Columbia and Alberta seek to create a level playing field for all businesses and investors in the provinces. Priorities include the consistent application of non-discrimination, clear and effective dispute resolution process, elimination of duplicate administrative procedures, cross-province recognition of designated occupations, and reduced administrative burden on transportation services. These changes introduced by TILMA are applicable to both domestic and foreign investors, businesses, and labour. Therefore, BC can include TILMA as part of the larger BC marketing / branding campaign to attract the attention and the investment of South Korean businesses, investors and potential immigrants.
Prospects for a Canada-South Korea Free Trade Agreement At the beginning of April 2007, the US and South Korea announced completion of negotiations on a Free Trade Agreement after months of bargaining sessions. Despite the conclusion of negotiations, approval from legislative bodies on both sides is required before the deal can enter into force.
These negotiations and outcomes affect current negotiations between Canada and South Korea for a bilateral FTA. As the natural conduit for much of the trade between Canada and Asia, BC stands to benefit from increases in trade between Canada and South Korea.
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Therefore, British Columbia has a significant stake in a Canada-South Korea FTA, and should be proactive in supporting federal negotiation efforts.
Outlook for the British Columbia-South Korea Economic Relationship The British Columbia-South Korea economic relationship is weighted toward a few key sectors, namely resources, education and tourism. These have been areas of competitive advantage for BC, and they can act as the foundation from which to further develop the economic relationship. However, BC cannot be complacent in even these sectors, as increasing global competition will impact BC’s attractiveness for South Korean students, tourists and businesses. Therefore, efforts should be made to maintain and strengthen these sectors. Other areas hold potential, but have not received the required attention, due largely to the traditional focus of Canadian businesses on the US and the impact of the North American Free Trade Agreement (NAFTA), but also partially due to lack of awareness of the South Korean market. With South Korea gaining prominence in the global economy, BC companies stand to benefit from the expansion of trade and investment relationships with South Korea. Aggressive awareness-building and promotion of British Columbia in South Korea, and of South Korea in BC, would be a step in the right direction in providing a platform from which BC companies can launch into South Korea.
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SECTION 4 - RECOMMENDATIONS AND DISCUSSIONS
Take action to increase the level of direct commercial engagement with South Korea:
1. Increase the number of visits to South Korea by senior British Columbia Government officials, with an official visit by Premier Gordon Campbell to South Korea in 2008.
Canada’s last high-level visit to South Korea was the 1997 Team Canada Mission led by Prime Minister Jean Chrétien, which included a British Columbia delegation led by the Premier. This Canadian Mission was reciprocated through a visit by South Korea’s then- President Kim Dae Jung in 1999. There has been no head-of-government visit since then. British Columbia’s Minister for Economic Development visited South Korea in 2003, however, this was the only provincial Ministerial visit in the past decade. The absence of regular high-level exchanges has contributed to weak, underdeveloped political and economic ties between the two countries, with a negative impact on multiple fronts: (1) Canadian businesses operating in South Korea feel that they receive insufficient attention and support from their government; (2) BC entrepreneurs looking to enter the South Korean market receive little direct encouragement or support from the BC Government; and (3) BC’s Korean-Canadian community interprets the lack of direct and personalized political ties with South Korea as disinterest and indifference.
Direct contact and personal relations are highly valued in Korea, and improved personal interactions and exchanges at the political level have the potential to strengthen economic relations. It is also important to note that hospitality is a very important element of Korean society. Any delegation of Canadian political, business and academic leaders to South Korea are received with extensive hospitality and ceremony. The BC Government should reciprocate such hospitality with equal enthusiasm.
2. Establish a South Korea desk within the Ministry of Economic Development to promote and coordinate economic relations between British Columbia and South Korea.
In order to enhance economic linkages between British Columbia and South Korea and to show BC’s continuous commitment to strengthening bilateral cooperation, the BC Government should establish a South Korea desk to manage the day to day trade and investment relationship.
The Ministry desk officer should supervise, support and coordinate all provincial economic initiatives with Korea, while working closely with key government, non-governmental and private sector stakeholders.
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3. Establish a British Columbia Trade and Investment Representative based in Seoul, South Korea, similar to the trade and investment representative operations being established in Shanghai and Tokyo. Also, consider appointing honorary BC trade commissioners in key South Korean cities.
The Trade Commissioner Service with the Canadian Embassy in Seoul provides trade and investment support for Canadian companies and South Korean clients. However, such broad national representation is not always able to dedicate resources to deal with province- specific trade and investment issues. British Columbia would benefit greatly from establishing a BC provincial trade and investment office in Seoul. Alberta has maintained its own trade office co-located in the Canadian Embassy in Seoul since 1989. Although Tourism BC maintains agency representation and BC Forestry Innovation Investment contributes to a Canada Wood office in South Korea, BC does not have an overall trade and investment presence in the country.
Having a physical representation in South Korea would facilitate British Columbia’s branding efforts as well as ensuring focused administration of the BC Government’s trade promotion and investment attraction activities in the country. The proposed office could also serve as a centre for gathering and distributing accurate and up-to-date information about the South Korean market to the BC Government and business community and for disseminating information on business and investment opportunities in BC to South Koreans. Another potential function is to assist BC universities and colleges in maintaining active links to the various Korean alumni who know BC and can facilitate business, political and cultural relationships.
KMAG also recommends that the British Columbia Government consider appointing honorary trade commissioners in South Korea’s major cities. Potential candidates are individuals living in South Korea who are fluent in both Korean and English with a BC education and/or business background. Appointed BC trade commissioners would be willing to work on a voluntary basis. This could be a highly cost-effective adjunct to a BC trade and investment office in Seoul.
4. Expand and strengthen the Economic Cooperation Memorandum of Understanding with Gyeonggi Province to a full sister-province relationship, similar to the British Columbia-Guangdong (China) sister province relationship, and encourage the development of a strategic twinning network in South Korea with BC municipalities and transportation/gateway stakeholders.
Formal relationship umbrellas such as Memorandums of Understanding (MOUs) and twinning relationships take on an added importance in Asia where the role of government is more central to the functioning of the economy. As outlined in the Asia Pacific Trade Council’s earlier China Market Advisory Report, city or regional twinning are special relationships that can enhance economic, academic, cultural and political linkages making them valuable tools for increasing goodwill and enhancing business, educational and cultural ties. British Columbia’s most successful and well-managed twinning relationships have helped the Province to build its reputation and expand its influence in international markets.
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They have helped reduce barriers to trade and investment, developed new business leads and relationships and opened markets for BC products, technologies and services.
British Columbia and Gyeonggi Province of South Korea concluded an MOU on economic cooperative exchange in 1997 during a visit to BC by a Gyeonggi provincial vice-minister. However, this agreement has been dormant. Gyeonggi Province is South Korea’s largest local administrative entity with 31 city and county level local autonomous administrative units. Gyeonggi’s geographical and economic importance is reflected by the fact that two of the country’s three Metropolitan Cities – Seoul and Incheon – are surrounded by Gyeonggi Province, and that over one quarter of all South Korea’s small and medium sized companies, including manufacturing facilities, are located in Gyeonggi. As many of these businesses have their head offices in Seoul, a close economic relationship with Gyeonggi automatically encompasses a close relationship with Seoul. Further information on Gyeonggi Province is provided at Appendix 6.
In order to take full advantage of the existing MOU with Gyeonggi Province and to derive further economic benefits from the relationship, the British Columbia Government should follow Singapore’s example and designate an officer to manage relationships under each bilateral agreement concluded by the government. Under this approach, a coordinating officer designated by the BC Government would have the overall responsibility to oversee the BC-Gyeonggi relationship, including coordination of political, economic and cultural exchanges between the two provinces. The long-dormant relationship with Gyeonggi Province should be revitalized and elevated to a full sister province relationship as soon as possible.
The BC Government should also encourage the City of Vancouver to explore opportunities to link with Incheon Metropolitan City, and encourage Whistler to link with Pyeongchang County. Incheon Metropolitan City is home to the Incheon International Airport, South Korea’s first Free Economic Zone, and Incheon Port, placing the city at the centre of South Korea’s bid to become the economic and logistics hub of Northeast Asia. Given Incheon’s geographic and economic advantages and advanced transportation infrastructure, the BC Government should encourage twinning between Vancouver and Incheon. Further information on Incheon Metropolitan City is provided in Appendix 6.
South Korea’s Pyeongchang County, a famous ski resort, is located approximately 180 km east of Seoul. Pyeongchang is one of the three final candidates to host the 2014 Winter Olympics and is eager to learn about Whistler’s experience through the Vancouver 2010 Olympic organizing committee. Of particular interest are the promotional and technology systems that will be showcased at the 2010 Winter Olympics, as well as the building and infrastructure projects that are being undertaken in preparation for the Winter Games. Other British Columbia ski resort communities, such as Kamloops and Kelowna, might also be candidates for a relationship with Pyeongchang, which is undertaking major construction and development activities. Further information on Pyeongchang is provided in Appendix 6. Gangwon Province, where Pyeongchang is located, holds great potential for BC construction and development industries as 90% of the land area is undeveloped. There are currently no sister city agreements between communities in BC and South Korea.
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South Korea has successfully developed into a northeast Asian business/transport/logistics hub, and British Columbia can learn from South Korea’s experiences as it implements its own initiatives to position BC as North America’s premier gateway to the Asia Pacific. Twinning arrangements between major British Columbia and South Korean transportation facilities provide an additional avenue for cooperation and collaboration between gateways.
The Port of Vancouver has a sister port arrangement with the Port of Incheon. This relationship could be strengthened to create a platform that will further enhance both ports’ competitiveness. This can be achieved by undertaking mutual assistance and joint cooperation programs for promotion of services between the two ports, exchange of information and trade contacts, training and apprenticeship programs, and other technical assistance. Extending twinning initiatives to other South Korean ports that are significant to British Columbia’s trade with the Asia-Pacific region, such as Busan Port and Gwangyang Port, is an important trade promotion strategy BC should consider.
Twinning arrangements between Vancouver International Airport and Incheon International Airport would complement relationships between ports. A sister airport agreement between Vancouver and Incheon could strengthen both airports through sharing information on management and operational expertise including route development strategies, technical expertise, training and exchanges of staff, and development of strong social and cultural ties.
Further information on Incheon International Airport and South Korea’s major seaports is provided in Appendix 6.
5. Build on the significant work already being done to expand the Korean market in the tourism, education, forest products and advanced technology sectors. Specifically, the Government of British Columbia should give careful consideration to the sector-specific recommendations outlined in the appendices to this report (see appendices 1-4).
The sectoral findings and recommendations outlined in appendices 1-4 are based on sectoral consultations conducted by the KMAG. The KMAG has identified four sectors where BC has either significant current interest, or where substantial potential for growth exist. These discussion papers are not intended to be comprehensive examinations of all aspects of the particular industry sector. Rather the discussion papers have been prepared as sectoral snapshots highlighting potential areas of opportunity. The papers are intended to stimulate discussion, and provide direction to Government on strategic sectoral engagement with South Korea.
Enhance British Columbia’s brand as an investment, advanced technology and research and development destination by undertaking the following actions:
6. Proactively market British Columbia as a favourable business and investment destination, including providing information on corporate taxation and the province’s improved labour relations environment. This effort should include a focus on developing the “Invest BC” Korean language website, and targeted outreach programs.
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Canada is generally not recognized in South Korea as a dynamic economy distinct from that of the United States, and among South Korean investors there is a widespread perception that Canada has high tax rates and very strict labour laws and regulations. However, perceptions based on limited understanding of the business climate in BC/Canada and misinformed assumptions could be dispelled by a clear, sustained, fact-based message that British Columbia offers a competitive business environment. In addition, individual investors may also be attracted by the absence of an inheritance tax in Canada.
The most efficient and effective way to get the message across to South Koreans would be through the use of the Internet. South Korea is one of the world’s leading countries for Internet usage, with more than 70% of the country’s population aged six and above accessing the Internet. The existing Invest BC website, with enhancements, could fulfill the role in disseminating accurate information in South Korea about British Columbia’s business climate. Enhancements could include providing a free monthly “What’s New” e-newsletter to subscribers which would keep readers updated on investment opportunities in British Columbia, and promote BC as a thriving market with strong R&D and product development capability for advanced technology industries, including alternative energy, information and communications technology, bio-medical sciences, and digital arts.
The 2010 Commerce Centre and its websites could connect British Columbian companies with South Korean companies in different Olympics-related projects and supply opportunities. BC companies’ expertise could provide a foundation for joint venture relationships with South Korean companies who want to get involved in the 2008 Beijing Games, 2010 Winter Olympic Games as well as 2014 Winter Olympics.
British Columbia companies could find business opportunities in South Korea as a result of the 2010 Olympic Games. Recently, BC developers and architects were asked to develop resorts and malls in Pyeongchang and Daegu. South Korean construction companies are known for their large-scale infrastructure construction projects such as highways, airports, dams and ports. However, South Koreans are familiar with North American construction styles and this familiarity and associated demand could provide business opportunities for BC developers in malls, golf courses, ski resorts and other kinds of resort developments. Furthermore, South Koreans are increasingly concerned about health and well-being and the environment, giving rise to opportunities for BC companies in the construction field, such as log-home builders or environmental engineering firms.
It is critical that British Columbia conveys a clear and consistent message tailored to the South Korean market:
• BC must increase awareness of investment opportunities, and such efforts in South Korea could ideally be coordinated by a South Korea-based trade and investment representative charged with building the “BC brand image” in South Korea. Korean- language materials should be readily available to explain BC’s advantages and opportunities.
• Basic information covering BC’s general business environment, jurisdictional differences on issues such as taxation (municipal, provincial, federal) and
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immigration (visa application process, residency requirements), and how South Korean investment regulations potentially impact decisions to invest in BC should also be available, with references to those who have expertise on such issues.
• At the same time, BC can facilitate private sector activity by providing information and channels for BC-based companies to learn about potential investors and partners from South Korea. All available resources and avenues for promoting BC, such as Olympic Games tie-ins, should be leveraged as much as possible. BC can also consult industry associations, Korean business associations, and individuals with South Korea market expertise for assistance in executing an effective awareness- building campaign.
In thinking about South Korea’s presence in British Columbia, it may be worthwhile to explore the issue of why Asian multinational firms withdrew their offices from BC. Until the late-1990s, there were 16 branch offices of South Korea’s multinational firms in Vancouver. Only six South Korean multinational firm branch offices remain in BC as of 2007. A similar phenomenon occurred with Japanese multinational presence in Vancouver during the same period. A larger Asian multinational presence would facilitate greater trade and attract greater Asian investment to BC. Therefore, KMAG recommends that the BC Government undertake a study to understand why Asian firms withdrew from BC and to consider possible measures that can motivate their return to the Province.
7. Make a concerted effort to sell British Columbia’s strength in research and development and selected advanced technology industries including alternative energy, biotechnology, information and communications technology, and digital arts and media.
British Columbia ranks as one of the leading centres for clean energy research and development. BC is the third-largest clean energy cluster worldwide, with over 3,700 people employed in this area. BC companies in the energy technology sector are already selling products, such as fuel cells, throughout the world, and many of these companies are recognized as leaders in their field. The energy technology sector enjoys an annual average growth rate of 12-15%. BC’s technology industry as a whole accounts for more than 5% of BC’s GDP, representing $14 billion revenue, over 70,000 workers and 8,700 companies.
Many of these technology companies in British Columbia are small and have little or no business experience in Asia. They also face challenges to compete with low cost manufacturing elsewhere in the world, such as China. One effective way to help overcome these challenges and to encourage BC’s technology sector to expand its brand presence in the Asian market is through R&D collaboration with South Korea.
South Korea is a world leader in the use of ICT in its economy, education and everyday life, and the contribution of the ICT sector to productivity growth in South Korea is the highest among the OECD countries. South Korea also has a highly competitive digital media technology sector. By establishing R&D collaborations with South Korea, British Columbia’s technology sector can benefit from (i) cost-sharing opportunities, (ii) access to South Korean research and technology, (iii) commercialization of BC’s technology in South Korean and
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Asian markets, and (iv) opportunities to build the Province’s reputation for high-technology capabilities in Asia. The BC Government can assist BC companies and research institutes to form partnerships with South Korean counterparts by providing information about opportunities for collaboration.
Work closely with the federal government to ensure that Canada’s policy and regulatory framework is conducive to maximizing investment, trade and people flows between Canada and South Korea:
8. Encourage the federal Government to conclude a Canada-South Korea Open Skies air services agreement, which would result in significant economic gains to British Columbia.
In recent years, flights between Canada and South Korea are almost always at full capacity except during a few months in the winter off-peak season. Even at very expensive airfares as compared to other overseas routes, it is not easy to buy tickets unless one books a seat several months in advance. Korean Air’s current twice-weekly B-747 all-cargo flight between Vancouver and Incheon has reached maximum capacity, and Korean Air has since been forced to transport surplus cargo by truck to the Seattle Airport to be serviced. It is clear that Vancouver is losing both passenger and cargo traffic to Seattle and other west coast US airports because of Canada’s restrictive bilateral air services agreement with South Korea.
Canada should take advantage of the global trend toward open aviation markets and air transport liberalization in order to more efficiently serve consumers as well as the tourism and related industries. In the long run, such a policy will also help make the Canadian airline industry more competitive and efficient. A major shift in Canada’s approach to bilateral air services agreements is imperative for the benefit of Canada’s economy and to capture the full benefit of non-US international travel by Canadians, which is increasingly taking place through US airports. Also, the Canadian Tourism Commission reports that currently one- third of non-US international travelers to Canada enter Canada via the United States. This happens because international travelers find better air fares and more frequent and convenient flight schedules by traveling via US hub airports due to the fact that the US has open skies air services agreement with 73 countries in six continents (as of January 2007).
Experience within the European Union and the United States has shown that an open skies policy promotes economic growth, allows for the development of new air services and greater competition in the air industry. The 1995 Canada-US Air Transport Agreement, which is Canada’s only Open Skies Agreement (OSA), has been successful in bringing about significant positive economic impacts for Canada.
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Case Study: Canada-US Air Transport Agreement
Canada signed a bilateral air services agreement with the United States in 1995. This agreement resulted in significant positive economic impacts for Canada, as demonstrated below:
• The capacity of scheduled airline services between the two countries increased by 25% in the first year alone. • The number of air trips taken by Canadian and US residents between the two countries increased by 41% in the first five years. • Air merchandise trade between the two countries nearly doubled during the second half of the 1990s. • Canadian air carriers’ transborder market share rose from 43.3 % in 1994 to over 50% in 1999. • From 1995 to 2000, the increased transborder air traffic generated about 4,500 additional person years of Canadian employment per annum, $160 million in wages and nearly $300 million in GDP.
An OSA with South Korea would help serve the growing demand for passage between Canada and South Korea. British Columbia would be in a good position to reap a lion’s share of benefits from an OSA as Vancouver would be the natural conduit for South Korea- Canada travel. More flights will bring additional visitors – tourists, international students and potential investors – to BC, leading to economic benefit in tourism and hospitality, education, real estate and other business sectors.
By signing an OSA with South Korea, the seat capacity and/or flight frequencies between Canada and South Korea are likely to triple within a few years, average airfares are likely to be reduced by up to 55% from the current level, and passenger volumes on Seoul-Canada routes are also likely to triple. An analysis of benefits that would accrue to Canada and BC from an OSA with South Korea is provided at Appendix 5.
The BC Government should urge the federal government to work vigorously towards pursuing an Open Skies Agreement with South Korea.
There are also OSA opportunities to be progressed at the provincial level. An OSA between South Korea and Shandong Province10 in China came into effect in September, 2006. Before the OSA, there were four flights a week operating between Incheon and Qingdao, the major port city in Shandong province. As a result of the OSA, flight frequencies between Incheon and Shandong increased to 260 flights per week (134 flights on the Incheon-Qingdao route, 60 flights on the Incheon-Yantai route, 56 flights on the Incheon-Weihai route, and 10 flights on the Incheon-Jinan route). The average round trip air airfares came down from US$420-530 to US$210, and as of April 2007, to around US$100.
10 Shandong province is located in the mid-east coastal region of China, north of Shanghai.
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9. Press for Canada to conclude a Canada-South Korea Free Trade Agreement to prevent competitive disadvantage for Canadian goods and services in the South Korean market.
Negotiations between trade officials from Ottawa and Seoul for an FTA continued in parallel with the negotiations between Washington and Seoul. The most significant issues in the Canada-South Korea negotiations are tariff rates, the automotive sector, and agriculture. The negotiations also cover non-tariff barriers, such as investment rules and market access regulations. Progress and success in these areas will result in increased transparency, greater future access to the South Korean market and creation of substantial new opportunities for British Columbia products, such as wood and related products and fish/seafood.
The conclusion of a Canada-South Korea FTA has increased in priority for Canada because of the recent conclusion of South Korea-US FTA negotiations, and opening of talks between South Korea and the European Union. If ratified, the South Korea-US FTA would put Canadian exports to South Korea at a competitive disadvantage relative to US exports.
British Columbia will benefit from additional port traffic generated by increased merchandise trade as a result of an FTA. However, these benefits may be constrained by insufficient port and logistical network infrastructure and unproductive terminal labour. For example, Hyundai container vessels are waiting up to three days to unload in Vancouver, incurring costs of C$150,000 per day as a result. Some South Korean importers are now bringing their products into Vancouver via the Port of Seattle. In order to fully realize the potential that is contained within both the Canada-South Korea FTA and in the Pacific Gateway Initiative, BC must act to ensure that ports, infrastructure and associated services are ready to handle the increased traffic more efficiently.
10. Work with the federal government to remove various impediments to immigration and the work permit process for skilled immigrant workers.
South Korea continues to be a large source of immigrants to British Columbia, and in particular the largest source of entrepreneur category immigrants. Many of these immigrants come to BC to establish small businesses, often utilizing their own capital and resources, or as skilled workers. As BC faces a shortage of skilled labour, particularly in recent years with the booming economy, the Province should regard South Korea as a potential source of highly skilled workers.
Number of South Korean Immigrants to BC Year 1994 1996 1998 2000 2002 2004 2005 Number 915 1,089 1,815 2,167 2,345 2,272 2,517
There is a global competition among developed countries for highly skilled immigrant workers. However, British Columbia faces some obstacles in attracting South Korean workers. South Koreans applying for a Canadian work permit are required by the federal government to obtain medical clearance whereas applicants from some other Asian countries are not. The BC Government should work with the federal government to remove impediments to the movement of skilled workers from South Korea to Canada.
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There is a strong relationship between immigration to British Columbia under the BC Provincial Nominee Program (BCPNP) and investment from South Korea. South Korea has been among the top four source countries for business immigrants to BC since 1997. In 2005, South Korea was No. 1 in the entrepreneur category with 241 landings out of the total 871 landings for this category. South Korea has been the third-largest source country since the launch of the BCPNP-Regional Business (BCPNP-RB) in September 2003. The majority of South Korean immigrants under BCPNP have invested in tourism businesses in the regions. This has been an important contribution to regional development.
Staff from British Columbia’s Ministry of Economic Development have been visiting South Korea twice a year to participate in emigration fairs and to promote investment in BC. Through BC’s regular visits to South Korea, the Province has established good working relationships with Citizenship and Immigration Canada (CIC), the Canadian Trade Commissioner Service, Human Resources Development Korea (HRD Korea) and Seoul Business Agency. HRD Korea, along with the province of Alberta, began promoting Canada to South Korean skilled workers this year.
Due to the continuing skill shortages in British Columbia, the Government should consider increasing its recruitment activities for skilled labour and immigrants in South Korea. South Korea has a highly skilled and well-educated workforce, and the quality of life that BC can offer is likely to be a strong attraction to many South Koreans considering emigration and working abroad.
Highlights of South Korea’s Human Resources
Under conditions of land and natural resources scarcity, South Korea has been able to achieve major economic development by relying on its diligent, high-quality workforce.
High level of education • According to the 2004 World Competitiveness Yearbook, published by the International Institute for Management Development (IMD) in Switzerland, South Korea ranked 5th globally in its educational level. Its higher education achievement level (for colleges and junior colleges) of 40% surpasses the average score of other OECD members. • 97% of Korean adult members of the labour force have received at least high school education. With a steady increase in college enrolment rates, South Korea has surpassed Japan and the United States, which are well-known for their high-quality educational environments. • The results of the 2003 Program for International Student Assessment (PISA), conducted once every three years on 15-year-old children's scholastic performance by the OECD in 30 member and 11 non-member countries, show that South Korean students came in first in problem-solving, second in literacy, third in mathematics and fourth in science. South Korea's overall rating was second only to Finland. • South Korea has the third highest number of teachers per 10,000 students in the world, following Canada and the US.
28 RECOMMENDATIONS AND DISCUSSIONS SOUTH KOREA MARKET ADVISORY GROUP REPORT
HRD Korea’s employment results by occupational category (31/7/06) Total IT Health Machinery & Electricity & Const. Office & Other care Metal electronics Service Total 2,972 751 364 332 7 51 1,292 175 2004 571 68 102 104 1 14 270 12 2005 1,621 345 221 165 2 26 700 162 2006 780 338 41 63 4 11 322 1
If British Columbia can provide a robust, sustainable new-immigrant orientation system that includes assistance in areas such as English language training and BC business/industry regulations and standards guidance, BC’s attractiveness to potential South Korean immigrants would be greatly enhanced. This would also reduce the incidence of South Korean investment immigrants returning to South Korea after unsuccessful attempts to establish themselves in British Columbia. An effective support system would improve South Korean perceptions about BC as a place to do business. A comprehensive orientation program would greatly reduce the confusion and frustrations of all new entrepreneurs and immigrants. Therefore, KMAG recommends that the British Columbia Government conduct a study to investigate this issue further, with the goal of creating a cost-effective orientation program for entrepreneurs and immigrants.
11. Improve federal and provincial coordination in addressing regulatory and other issues faced by potential investors looking to establish and conduct business in British Columbia.
South Korean and other foreign investors interested in setting up business operations in British Columbia are often confused or discouraged by inconsistent messages with regards to regulatory and taxation requirements imposed by federal and provincial jurisdictions. In addition, there can be additional licensing or regulatory constraints at the municipal or district level. Improving coordination among the three levels of government is necessary to attract new and expanded investment capital to BC.
One option is for British Columbia to assign staff from the Ministry of Economic Development to key corporate clients, especially major potential incoming investors, to assist the clients in identifying, understanding and resolving regulatory issues and processes. The BC officials assigned could be an investment and trade team that partners not only with federal agencies, but also with other provincial ministries and agencies, as well as with municipal and regional district authorities. Corporate clients could be selected based on size and strategic importance.
29 SOUTH KOREA MARKET ADVISORY GROUP REPORT SECTORAL CONSULATATIONS
SECTION 5 - OVERVIEW OF SOUTH KOREA MAG SECTORAL CONSULTATIONS
KMAG’s primary mandate was to conceptualize the commercial relationship between British Columbia and South Korea and provide a strategic framework that could be used by the BC Government to enhance BC-South Korea relations. This framework, which was drawn up by the KMAG through consultations with provincial and federal government officials and outside industry and corporate experts, is intended to identify the issues at the core of BC’s economic relations with South Korea.
The fundamental conclusion of the KMAG is that South Korea as a market has not received the attention commensurate to its global standing or its position as one of British Columbia’s most important economic partners. South Korea’s economic importance to BC has largely been the result of independent market forces, but BC can do far more to increase the level of economic exchange with South Korea.
During KMAG discussions and consultations, certain sectors were identified as key drivers behind the British Columbia-South Korea economic relationship. These sectors have potential for significant growth and represent an intersection between competitive strengths in BC and long term need in South Korea.
KMAG has highlighted key issues, challenges and ideas in each of these sectors in appendices 1 to 4 to this report. The sectoral appendices are intended to provide additional background information, to stimulate discussion, and to provide guidance to the British Columbia Government on how to address issues that are affecting trade and investment relations with South Korea in those sectors. Each appendix also offers suggestions on ideas or areas for future study.
EDUCATION
Education should be a central focus of British Columbia’s social, political and economic relations with South Korea. There is potential to expand BC’s education and training relationship with South Korea, which includes expanded opportunities for South Korean students in BC, who currently spend significant amounts on tuition and living costs in the Province. BC must also have a strategy to maintain its attractiveness to South Korean students in the wake of an anticipated US visa waiver program for temporary South Korean visitors, which is likely to increase the attractiveness of short term study in the US to South Korean students.
TOURISM
Tourism in British Columbia continues to be one of the most valuable sectors of the economy and is the third-largest earner of foreign income. South Korea is a market with huge potential for BC. Three issues have been identified as key barriers to increased growth in the South Korean travel market, namely: 1) lack of air capacity and inexpensive flights; 2)
30 SECTORAL CONSULATATIONS SOUTH KOREA MARKET ADVISORY GROUP REPORT
lack of knowledge about Canada generally and BC specifically; and 3) lack of packages tailored to South Korean interests.
FORESTRY
Forest products represent an established and growing opportunity for British Columbia exports to South Korea, given BC advantages such as market proximity, competitive shipping and acceptance of Canadian species and products by South Korean importers and customers. There are significant opportunities for increased wood usage, notably wood frame construction. Key challenges include 1) achieving widespread adoption and use of wood construction technologies by South Korea’s largest building companies, which control most new, large-scale construction projects, and 2) ensuring proper quality construction practices, supported by the refinement of established wood building codes and construction standards.
ADVANCED TECHNOLNOGY
There is huge potential for British Columbia’s growing cluster of advanced technology companies to engage South Korea. South Korea continues to heavily promote advanced technology, with billions of dollars of public and private sector spending each year on research and development. As a result there are many potential niche markets for BC companies to explore, such as biotechnology and pharmaceuticals, alternative energy, and information and communications technology. As South Korean companies look for new sources of ideas and technologies to bring to market, they also present a potential source of research partnerships and commercialization investment, for both BC companies and academic institutions and scientific research facilities. The key is to help BC technology industry stakeholders identify areas that match the interests of both British Columbia and South Korean technology industries.
AIR SERVICES
Studies have shown that air service liberalization between Canada and South Korea would result in positive economic impacts, including improved flows of trade merchandise, increased frequency of travel between the two countries, and positive sectoral impacts in tourism and education. British Columbia would be the primary destination for flights from South Korea to Canada, including those continuing to other parts of Canada and the US, and would accordingly stand to reap a large proportion of the benefits of an OSA. Therefore, the BC Government should continue to press the federal government on concluding a Canada-South Korea OSA.
31 SOUTH KOREA MARKET ADVISORY GROUP REPORT CONCLUSION
SECTION 6 - CONCLUSION
South Korea has emerged as a significant economic player on the world stage: its companies extend across the globe, it has become a leader in many areas of science and technology, and its people enjoy prosperity. Although at times overshadowed by the larger economic powers in East Asia, there is much to be gained from stronger commercial linkages with South Korea.
British Columbia’s push to become North America’s Gateway to Asia should naturally lead to South Korea in many respects, not least of which is the fact that South Korea is building itself as East Asia’s premier gateway to the Pacific. This means that there is vast potential for complementary investment and trade linkages, not only between South Korea and BC, but also between BC and other parts of Asia through South Korea. In exploring the commercial, educational and scientific developments between BC and South Korea, there are obvious areas of mutual interest and opportunities for expanding existing linkages. In both traditional areas, such as forestry, and emerging areas, such as high technology, there are many ways to explore BC-South Korea cooperation and collaboration.
This report presents a strong case for British Columbia to engage South Korea and build significant commercial linkages that will ultimately benefit all British Columbians. Through the recommendations outlined on page 3 & 4 of this report, the KMAG has identified key areas where the BC Government can apply its resources to build stronger trade and investment ties to South Korea. KMAG has also presented data and discussion on the importance of South Korea to BC and how best to think about South Korea. These recommendations and ideas, together with those presented in other Market Advisory Group reports, are intended to provide the Asia Pacific Trade Council with an integrated, concrete approach to solidifying British Columbia’s position in the Asia Pacific. It is the sincere hope of KMAG that the provincial government will give this report its full consideration.
32
Sectoral Appendices
SOUTH KOREA MARKET ADVISORY GROUP REPORT BC’s EDUCATION SECTOR
APPENDIX 1 - BC’S EDUCATION SECTOR
According to Citizenship and Immigration Canada statistics, in 2005 there were 12,694 South Koreans studying on student visas in British Columbia, just under half the total number of South Koreans studying on student visas in Canada (25,247). Of these South Korean students in BC, nearly 50% were studying in kindergarten to grade 12 (K-12 category), about 30% were in vocational training (or trades) programs, and 20% were in post-secondary educational institutions.
Korean students with official student entry visa
30000
25000
20000
Canada 15000 BC Numbers 10000
5000
0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Year
English as a Second Language (ESL) A provincial quality assurance system in the ESL sector is critical to ensure that BC delivers the highest standard of English language training to international students and that the reputation of our system is not tarnished by the practices of a few unscrupulous providers. The creation of a formal accreditation program with support from the provincial government is essential.
Offshore delivery of ESL programs is an area with potential for growth-the largest ESL teacher population in South Korea is from Canada, the majority of them from British Columbia.
35 SOUTH KOREA MARKET ADVISORY GROUP REPORT BC’s EDUCATION SECTOR
There are also opportunities to promote English language training to South Koreans in conjunction with social, cultural, and historical experiences in Canada. An example is provided below.
Specialty ESL school in Manitoba
The Continental Education Group of Vancouver will operate an English as an Additional Language school, called Continental College, in Roblin, Manitoba (population 3,610). Housed in a former Catholic seminary, St. Vladimir’s College, Continental College will target students from South Korea and is scheduled to open in autumn 2007 with 10 teachers and additional administrative and kitchen staff. The initial cohort will be 100 students, with anticipated growth to 500 students in five years. The primary attraction of Continental College will be its unique location and curriculum, allowing students to experience Canadian seasons and activities. Unlike ESL schools in major cities, where there are often other Koreans and Korean language media available, Continental College will provide students with a truly English-only environment. Students will also be housed in billets within the local community.
Source: Winnipeg Free Press “Western Manitoba seminary to be converted into English school for Koreans” February 21, 2007.
Kindergarten-Grade 12 Education Market British Columbia must continue to focus on quality assurance in the K-12 system to attract South Korean students. The K-12 system would benefit from the development of a BC international education brand, beyond the Dogwood Certificate, that promotes the excellence of our integrated education system and its pathways. The British Columbia Government should consider ways to promote tourism and business opportunities to the parents of South Korean students studying in the K-12 system. These South Koreans have a close sense of connection to BC by virtue of their children’s’ study, and this connection should be nurtured.
Many South Korean students in the K-12 system are eager to continue their studies in British Columbia at the post-secondary level. To improve the transition of students from K- 12 to the post-secondary system, BC should consider the development of academic and social support programs for South Korean students to assist in the adjustment to the post- secondary learning environment.
Post-Secondary Education Market A relatively small proportion of South Korean students seek post-secondary education in Canada and in British Columbia. Only about 19% of the total number of South Korean students in Canada are in post secondary education programs. This is largely a result of the weak reputation of Canadian higher education among South Korean students, despite the world class status of Canada’s university system and its institutions.
As South Korean university graduates from British Columbia’s institutions progress through their careers in government and the private sector, they become powerful advocates for BC and conduits for improved business and political relations. BC should continue to enhance the reputation of its higher educational institutions in South Korea while providing expanded
36 BC’s EDUCATION SECTOR SOUTH KOREA MARKET ADVISORY GROUP REPORT
opportunities for talented students to receive improved scholarship funds. Scholarship programs should be structured to promote the study of strategically selected academic areas in order to maximize the long-term benefits from such programs. In addition, the BC Government should encourage Ottawa to explore the establishment of high profile, prestigious scholarship programs to attract South Korean and other foreign students, perhaps by emulating such programs as the Fulbright scholarships in the US.
A complementary strategy would be to invite South Korean institutions to establish branch campuses in British Columbia.
US Visa Policy The capacity of British Columbia to attract South Koreans to its education system faces a major challenge with the anticipated removal of visa restrictions for South Koreans temporarily entering the US. The US is already a destination of choice for many thousands of South Korean ESL students and the visa waiver will make the US even more attractive to the market. Changes to US temporary visa policy in relation to South Korea has the potential to affect the BC ESL sector in the short term, and the post-secondary sector in the long term as many international students undertake study in other sectors (vocational and university) upon completion of their ESL studies.
KMAG recommends that the British Columbian Government conduct an assessment of the potential impact of the change in US visa policy on the South Korean international education market, its economic effects on BC, and the strategic options available to position BC in the wake of the visa change.
Research & Development and Exchange of Researchers Quality is a key factor to South Koreans when deciding on studies at a foreign institution, and an institution’s research capabilities and reputation are often a central part of this assessment. British Columbian institutions must aggressively build their research capabilities and market these capabilities in South Korea.
On a GDP basis, South Korea today spends twice as much on research and development (4%) as Canada (barely 2%). South Korea offers valuable lessons on the way a small country can build up R&D capabilities with consistent and heavy investment. Connecting British Columbia (and more broadly Canadian) research capabilities with South Korea for "next generation" partnerships would yield short and long term benefits, including the generation of knowledge to underpin innovation and industry competitiveness.
The initial areas of focus for British Columbia should be science and technology and information technology. The BC Government can assist the BC education sector in identifying fields of common interest between BC and South Korea. Some possible suggestions would be to develop a strategic plan to encourage BC-South Korea academic and research collaboration, and to study the possibility of establishing grant programs, perhaps with organizations such as the Korea Foundation, to support the exchange of researchers and faculty members. The BC Government could also undertake a study to examine opportunities, impediments and best practices in the area of research exchange.
37 SOUTH KOREA MARKET ADVISORY GROUP REPORT BC’s EDUCATION SECTOR
Tapping into the South Korean R&D sector
A workshop or roundtable with the leaders of academic institutions, local/provincial/federal representatives, and other relevant South Korea experts could be arranged by an organization such as the Asia Pacific Foundation to discuss ways to strengthen linkages in the research and development sectors of BC and South Korea, with the aim of finding ways to encourage interaction and cooperation through common interests. Topics could include issues such as identifying and overcoming challenges to BC-South Korean R&D cooperation, identifying the fields in which there are strong common strengths, increasing joint research activities at the institutional level, establishing test markets for new technologies, resolving challenges of intellectual property protection, and financing research and commercialization.
Summary of education sector recommendations
KMAG recommends that the Government of British Columbia undertake the following actions to support BC’s international education engagement with South Korea:
• Establish a Government-backed quality assurance and program accreditation system for the BC ESL sector • Explore ways to promote tourism experiences and business opportunities to the parents of South Korean students studying in BC • Develop an international education brand to promote BC’s integrated education system and the pathways available from K-12 to other sectors of the education system. • Work with institutions to develop academic and social support programs which assist South Korean students to make a successful transition from K-12 to post-secondary study in BC • Establish a scholarship fund for South Korean students to undertake study at BC’s higher education institutions • In relation to proposed changes to US visa requirements for temporary visitors from South Korea, conduct an assessment of the potential impact of the changes on the South Korean international education market, its economic effects on BC, and the strategic options available to position BC in the wake of the visa change. • Continue to promote the excellence of BC’s research and development and science and technology capabilities in South Korea. • Assist the BC education sector to identify areas of strategic complementarities with South Korea in science and technology, and undertake a study to examine international best practices in research exchange and collaboration.
38 SOUTH KOREA MARKET ADVISORY GROUP REPORT BC’s TOURISM SECTOR
APPENDIX 2 - BRITISH COLUMBIA’S TOURISM SECTOR
The South Korean travel market has rebounded solidly from the sharp drop that was caused by the 1997-98 financial crisis. In 2005, the outbound travel market was estimated at 10.1 million people, up from 5.5 million in 2000. This represents 82% growth from 2000 to 2005, or an average growth rate of 12.7% per year. More than 20% of all South Koreans traveled outside their own country in 2005 which is significantly higher than the 14% rate in Japan, despite Japan’s greater wealth.
Until 1989, South Koreans were not allowed to travel outside the country except on business trips which created a considerable amount of unsatisfied demand for overseas travel. Asia is the main destination for South Korean travelers, but the long-haul market is also growing. As travelers continue to gain confidence and grow more adventurous, they will increasingly travel outside the region.
South Korean Travel Market Estimated outbound (2005) 10.1 million Customs entries to Canada (2006) 193,000 Customs entries to BC (2006) 126,063 BC’s share of visitors to Canada 65.1% South Korean share of Asia Pacific visitors to 14.7% BC Source: Tourism BC
South Korea is a market with huge potential for British Columbia, with only about 1.2% of South Korean international travelers heading to the Province. The number of South Korean visitors to Canada is forecast to grow from 193,000 in 2006 to 233,000 in 2008. The large numbers of South Korean immigrants and students who come to BC inevitably draw friends and relatives for visits, and BC is the natural gateway for travel by South Koreans to the rest of Canada. A study commissioned by Tourism BC shows that there is considerable interest among South Koreans in traveling to Canada, with four million people estimated to be very interested in visiting Canada in the next two years.11
Top 10 Visitor Sources for BC (2006)
1. USA (overnight) 3,368,517 6. China 93,624 2. UK 231,864 7. Taiwan 82,011 3. Japan 215,562 8. Germany 80,568 4. Australia 128,068 9. Hong Kong 71,215 5. South Korea 126,063 10. Mexico 64,733 Source: Tourism BC
11 “South Korea Consumer & Travel Trade Research, Key Findings and Marketing Considerations”, Insignia Marketing Research, February 2007. Commissioned by the Canadian Tourism Commission & Tourism British Columbia,
39 SOUTH KOREA MARKET ADVISORY GROUP REPORT BC’s TOURISM SECTOR
This same study on the South Korean market found that there were three main barriers to rapidly expanding travel to British Columbia.
1. Lack of inexpensive and convenient flights By far the most important barrier to further developing the South Korean market is a lack of air capacity. Air Canada provides high yield daily service from Vancouver to Seoul. Unfortunately, restrictions governing this route have barred additional flights or the entry of other airlines from providing service. As outlined in Appendix 5, studies show that the flight load factor would be near or at capacity even if there were daily flights from Seoul to Vancouver and Toronto. The lack of air capacity has severely restricted the growth of the South Korean tourism market for British Columbia and has caused the Province to lose market share to other destinations. The lack of low-cost airfare options for the growing number of South Korea travelers stands in contrast to the US market, which offers many more routes and lower-fare options than Canada. As South Koreans and other Asians increase their travel abroad, the availability of inexpensive air fares becomes paramount as customers book their own travel and seek out the best value for money. It is anticipated that an Open Skies Air Services Agreement between Canada and South Korea would expand air travel and tourism markets.
2. Lack of knowledge about British Columbia Although South Korean perceptions of Canada tend to be positive, there is a lack of knowledge about specifics. Those considering Canada as a destination tend to associate Canada with outdoor experiences in beautiful, wide-open surroundings. Fortunately, the kind of outdoor activity experiences available in British Columbia (hiking, mountain biking, skiing/snowboarding, dog-sledding, whale watching) are generally of strong interest to South Koreans. However, BC’s attractions need to be more strongly marketed, especially to South Korean travel agents, who are a key link to the South Korean traveler. Building knowledge with these key intermediaries will be important for future success in the market. Developing and providing online content for consumers and the travel trade would be another method of increasing knowledge of BC among South Korea’s travel industry and consumer markets.
3. Lack of convenient and interesting tour packages According to travel agents, there are few product choices available beyond the most common Canadian package - a one week trip across the country covering the scenic highlights in British Columbia, Alberta and Ontario. Research shows that South Koreans are not aware of the full range of activities available in Canada and especially products that are not nature-based. Consequently, Canada ranks much lower on the future destination priority list (11th) than our two closest competitors, Australia (1st) and the United States (2nd). Developing the tourism market will require the creation of new and interesting packages to offer prospective tourism consumers. South Korea is a price-conscious market, and affordability must also inform the development of packages.
40 BC’s TOURISM SECTOR SOUTH KOREA MARKET ADVISORY GROUP REPORT
Summary of tourism sector recommendations
KMAG recommends that the Government of British Columbia undertake the following actions to support the BC tourism sector’s engagement with South Korea:
• Encourage the federal government to conclude an Open Skies Agreement between Canada and South Korea. • Undertake promotional activities, including on-line activities, to build knowledge amongst South Korean consumers and particularly travel agents of the full range of attractions in BC. • Work with the tourism industry to investigate the development of new, interesting and creative tour packages that meet South Korean consumer needs.
41 BC AND HIGH TECHNOLOGY SOUTH KOREA MARKET ADVISORY GROUP REPORT
APPENDIX 3 - BRITISH COLUMBIA AND ADVANCED TECHNOLOGY
BC is home to a wide range of companies and research centres in technology-related fields.12 An overview of South Korea’s technology industry is presented in order to provide a context from which to consider research and market opportunities. The importance of South Korea is not only based on its own market, but also on its position as a gateway to markets and partners in China, Japan, and other parts of Asia.
Canada-South Korea Arrangement on Science and Technology Cooperation In 2002, Canada and South Korea signed an Arrangement on Science and Technology Cooperation (S&T Arrangement), which outlines the goals and actions to be taken by both sides in expanding collaboration between the Canadian and South Korean S&T industries.13 Priority sectors were identified by both sides, and specific areas of common interest include: • Advanced communications technology • Bio-medical technology • Agri-foods and related bio-products • Sustainable energy systems
There is also an emphasis within the S&T Arrangement agenda on small and medium-sized enterprise involvement, as smaller firms are less able to undertake sizable research and development projects on their own and may therefore benefit from such collaboration initiatives.
Overview of South Korea’s Technology Industry South Korea’s national government has placed a high priority on promoting sciences and technological innovation, with the aim of being the R&D hub of the Asia Pacific by 2015, and holding the 7th overall position in global S&T rankings by 2025. The Ministry of Science and Technology (MOST) oversees these promotion efforts.14 Current policy objectives include reaching certain target levels in R&D spending, number of researchers with advanced degrees, patent registrations, and publications in recognized journals. The national budget allocates considerable resources toward research, reaching a record 4.8% of the total 2004 budget (equivalent to almost US$5 billion), with the goal of spending 7.0% of the budget on R&D in 2007. Priority areas by spending include information and communications technology, bio-technology, environment-related technology, space sciences and nanotechnology. The Government is also encouraging more students to pursue advanced studies in the basic and applied sciences, so that there will be a stronger pool of researchers for South Korean S&T sectors. South Korea also aims to expand international
12 For a starting overview of BC’s technology industry, see company listings BC Technology Industry Association at
42 BC AND HIGH TECHNOLOGY SOUTH KOREA MARKET ADVISORY GROUP REPORT
joint research and is encouraging increased overseas R&D investment. Both of these initiatives could be ways through which British Columbia companies and universities can engage and develop stronger ties to South Korea. R&D spending is largely driven by the private sector, accounting for 76.1% of the approximately US$16 billion overall R&D expenditure in 2003. Of interest to BC technology exporters is that in 2003, South Korea imported more than four times the value of technology than it exported, suggesting that the South Korean market still requires many types of foreign-sourced technologies.
One criticism of South Korea’s technology industry as a whole is that the “research culture” is rigid and hinders innovation, particularly in software development.15 Moreover, despite the increasing globalization of the South Korean R&D environment, foreign direct investment continues to be minimal, suggesting perceptions of a systemic problem (barriers to entry, intellectual property issues) or simple lack of interest in South Korea. British Columbia companies could be encouraged to exploit their own comparative advantage in research, products and services and target those areas that are underdeveloped in the South Korean market. This in turn could provide a competitive advantage in developing niche markets vis- à-vis Asia in general, through South Korea, in the face of growing global competition.
Going forward, existing resources and networks should be leveraged to help British Columbia companies and research institutions to identify, approach, and attract appropriate South Korean partners for joint research and commercialization opportunities. Resources include the Canada-South Korea S&T Arrangement, Canada’s Trade Commissioner Service, South Korean agencies such as the Korean Trade-Investment Promotion Agency (KOTRA), and academic linkages between BC and South Korean universities. Also, South Korean high technology firms could be encouraged to use BC as the test market for their S&T products before entering the larger Canada and U.S. markets. Similarly, BC S&T firms may be encouraged to work with South Korean counterparts to develop a beachhead to the larger Asian markets.
Selected Sectoral Overviews16
Biotechnology and Pharmaceuticals Biotechnology is a core sector in the South Korean plan to become a global technology power, and estimated government spending on this sector for 2006 was US$1.2 billion, or 10% of the national R&D budget. Pharmaceuticals, foods, chemicals and environment are the four largest fields in the South Korean biotechnology sector. One initiative coordinated by the South Korean Government is the clustering of bio-research centres placed among four regions (the Capital area, Daejeon/Chungcheong, Jeolla/Jeju, and Gangwon/Gyeongsang). Each cluster will be dedicated to a certain field within biotechnology, such as fishery, healthcare, oriental medicine or food. Pharmaceutical and healthcare related products are increasingly important as South Korea’s demography becomes weighted toward older age groups, which in turn increases demand for medicines
15 See Molly Webb, South Korea: Mass Innovation Comes of Age, Demos, 2007. Although this report is written from a British perspective, many of the issues and questions concerning R&D in South Korea and the potential for UK-South Korea collaboration also apply to Canadian/BC collaboration with South Korea. 16 These overviews are based on materials available at MOST and Korea Trade-Investment Agency
43 SOUTH KOREA MARKET ADVISORY GROUP REPORT BC AND HIGH TECHNOLOGY
and other health and lifestyle products. Consequently, the healthcare field is seeing continuous growth in expenditures, offering more commercial opportunities. Also, South Korea still lags other industrialized countries in areas such as biotechnology manufacturing and new materials technologies. This suggests that there are research and commercial opportunities for British Columbia companies to explore.
Eco-friendly and Sustainable Energy Among the South Korean Government’s policies is the 2nd Ten-Year Basic Plan for New and Renewable Energy (NRE), which aims to support the development of an infrastructure capable of generating 5% of domestic energy needs by 2011. High priority areas identified include hydrogen-fuel cells, photovoltaics (solar power), and wind generated power technologies, all intended for residential and commercial uses. Other areas of NRE interest include biomass and waste treatment technologies and hydro-electric projects. The South Korean NRE program includes tax and other incentives to spur and support investment in R&D as well as commercialization initiatives. The national budget is to allocate US$700 million to R&D, subsidies and loans in 2007, and this allocation is expected to grow to US$2.4 billion by 2011. Given this growing emphasis in South Korea in renewable and clean energy technologies, there is good potential for British Columbia companies with strengths in these areas to gain a foothold in South Korea.
Information and Communications Technology South Koreans are among the world’s biggest users of the internet and mobile technologies. As of June 2006, South Korea boasted a mobile phone subscription base of 41 million (or more than 80% of the total population) and had over 33 million internet users, with 14 million households with access to broadband internet connections. There is clearly a high demand for products and services with the ICT sector, as consumers and businesses look to increase their connectivity, increase the connection speed, engage and expand e-commerce, and look toward expanding applications of various technologies for other usages, such as ubiquitous computing and cashless purchases through mobile phones. This also has implications for other areas, such as education (“e-learning” options), government (internet- based information and service provision), and new media. As ICT diffuses into South Korean society, there will be an ever-increasing demand for software, hardware and related services (such as security).
Nanotechnology Nanotechnology is another key sector identified by the South Korean Government as crucial to the national S&T agenda. Successful development of products utilizing components such as carbon nanotubes, nanopolymers, and nanometals are essential to South Korean competitiveness in the global economy. An obvious area where nanomaterials are applied – and where South Korea has strength – is computing and electronics: South Korea is already a world-class semiconductor developer and manufacturer, with notable companies such as Samsung and Hynix among the global industry leaders. These types of products are used in many different applications, from computing to flat panel displays to home appliances to machinery to automobiles. Nanomaterials also have applications in fields such as construction and engineering, textiles and plastics, among others, but South Korea’s
44 BC AND HIGH TECHNOLOGY SOUTH KOREA MARKET ADVISORY GROUP REPORT
strengths in these areas are not as prominent. Interestingly, in terms of nanotechnology patent applications, South Korea is seventh, holding 1.0% of the world’s total, while Canada ranks fifth, holding 1.6%. The US is first, at 69.0% of the total.
Summary of advanced technology sector recommendations
KMAG recommends that the Government of British Columbia undertake the following actions to support the BC high technology sector’s engagement with South Korea:
• Work with BC companies and universities to position British Columbia to capitalize on opportunities for joint research and R&D activities with South Korea, in areas of BC’s competitive strengths. • Encourage South Korean technology firms to use BC as a test market for science and technology products before entry to the wider North American market.
45 BC’s FORESTRY INDUSTRY SOUTH KOREA MARKET ADVISORY GROUP REPORT
APPENDIX 4 - BC’S FORESTRY INDUSTRY
Forest products represent the largest export from British Columbia at $14.1 billion (2004).17 Despite the softwood lumber dispute with the United States and ongoing provincial and national market development in various emerging countries, the US is expected to remain the primary export market for BC forest products followed by Japan, China, Taiwan, and South Korea.18
South Korea is heavily reliant (over 90%) on imported wood. Canada is the number one exporter of softwood lumber to South Korea, with 2006 volumes up significantly from 2005. British Columbia provides over 95% of Canadian exports of softwood lumber. The key forestry products exported to South Korea include spruce-pine-fir (SPF) used primarily in wood-frame construction, and hemlock (preservative-treated) typically destined for landscaping and other outdoor applications. Pre-fabricated housing and other specialty products are also in demand. Wood housing starts have grown 280% since 2003, and are estimated to have more than doubled in 2006 to over 5,600 units. Some industry observers believe that wood-frame housing has the potential to double again to 10,000 units by 2012. Further increases would be possible when larger South Korean builders notice the benefits of wood-frame housing, potentially achieving over 25% of the residential single family market by 2020. There is also potential in the non-residential market for wood-frame construction.
As part of the Canadian industry, the British Columbia forest industry has developed a strong working relationship with the South Korean Government, industry and research officers involved in wood-frame construction. Considerable collaboration has occurred in relation to codes, education and training (resulting in newly revised regulations which allow for more wood-frame single-family and multi-family housing), construction of wood-frame demonstration buildings, completion of a construction guidebook, and delivery of South
17 2006 British Columbia Financial and Economic Review, 66th Edition (July 2006), table 1.7 page 17. 18 Ibid
46 BC’s FORESTRY INDUSTRY SOUTH KOREA MARKET ADVISORY GROUP REPORT
Korean builder training sessions at BC Institute of Technology (BCIT) in Vancouver. Both the newly opened Canada Wood office in Seoul and the BCIT program for South Korean builders are expected to help lay the groundwork for further export shipments from Canada.
South Korea’s massive 4th national territorial plan calls for the creation of new cities and towns on a massive scale in the next 20 years. This will change the housing mix and housing density in rural regions, and will use more wood-frame housing than in the past. In terms of this coming construction boom, the Canada Wood Group is heavily involved in South Korea.
As the South Korean economy expands, per capita wealth increases, and South Korean consumers focus increasingly on quality of life and lifestyle choices, there is a strong interest in improving the “liveability” of South Korean housing. Use of niche value-added products and development of outdoor spaces using treated wood and landscaping products are showing positive growth signs. Developing a strong recognition of the quality of BC wood products, and their proper use and application will be important – particularly in positioning them against low cost (and often low quality) Asian competing products. British Columbia has a logistical and service advantage over other competitors, including competitively priced weekly container service. The growing opportunities for BC forestry products include:
• Softwood lumber in wood-frame housing. • Landscaping applications. • Niche value-added product opportunities in the housing market (e.g. doors, windows and mouldings), do-it-yourself market (e.g. treated wood) and specialty markets (e.g. shakes and shingles).
Summary of forest sector recommendations
KMAG recommends that the Government of British Columbia undertake the following actions to support the BC forest sector’s engagement with South Korea.
• Support the refinement of South Korean wood building codes to address any outstanding issues that may hinder expansion of wood-frame construction. • Encourage larger development companies to consider and champion wood-frame technology (large companies will be the primary volume demand drivers). • Consider expanding and highlighting programs to improve and leverage builder training and homeowner perception on the benefits of wood construction, such as the BCIT course for professional wood-builders from South Korea. An area of emphasis can be “green buildings” and related technology/techniques. • Consider programs to successfully position BC products as high quality, reliable performance products – differentiated from low cost, low quality Asian competitors.
47 OPEN SKIES SOUTH KOREA MARKET ADVISORY GROUP REPORT
APPENDIX 5 - STATUS OF CANADA-SOUTH KOREA AIR SERVICES AND OPEN SKIES
Recommendation 8 of this report strongly urges the British Columbian Government to advocate for an Open Skies Agreement (OSA) between Canada and South Korea. The benefits that would accrue to Canada and BC through an OSA with South Korea are discussed in greater detail below.
Background - Air Service between Canada and South Korea The current bilateral air services agreement (ASA) between Canada and South Korea limits the number of seats available between the two countries (via Air Canada, which codeshares flights with Asiana Airlines), which results in insufficient capacity to meet growing demand. Singapore Airlines is permitted to serve the South Korea-Canada route three times a week as a grandfathered right from a prior agreement when Air Canada was serving Singapore from London.
This is clear evidence that the current market sharing conditions by Air Canada and Korean Air is akin to a bilateral monopoly, resulting in higher prices for South Korea-Canada flights than most other markets between Canada and Asian or European countries.
Current ASA between Canada and South Korea
Airlines Routes Aircraft Type Weekly Frequency Boeing 767 Air Canada Vancouver – Seoul 7 Airbus 340 Seoul – Vancouver Boeing 747 or Boeing 3 Korean Airlines Seoul – Toronto 777 3 (Singapore)-Seoul- Singapore Air (SIA) Boeing 777 3 Vancouver Total 16 flights/week
South Korean tourist volume to British Columbia has increased over time, however, a higher level of growth has occurred in the tourist segments which travel to Canada via US airports. Because South Korea has had an OSA with the US since 1998, South Koreans have easier and cheaper access to North America if they fly to or through the US. Air travel between South Korea and Canada has been constrained by the high airfares and limited number of airline seats available, especially during peak tourist seasons. An OSA between Canada and South Korea would expand the frequency of service and number of seats. In addition, new airlines, such as Asiana and West Jet, may enter the market in competition with existing carriers.
Anticipated Effects of Canada-South Korea Open Skies Agreement Total air traffic on the Vancouver-Seoul route increased from about 100,000 passengers in 1990 to over 300,000 in 2005. The International Civil Aviation Organisation Digest of Statistics shows that the annual average passenger load factors of Air Canada, Korean Air
48 OPEN SKIES SOUTH KOREA MARKET ADVISORY GROUP REPORT
and Singapore Airlines for the Vancouver-Seoul route in 2005 were 87%, 88% and 87%, respectively. This indicates near-full capacity for this route throughout the year, not only in the peak seasons but also shoulder and off-peak seasons. It also suggests that a high volume of potential passengers were blocked from the direct Seoul-Vancouver route, and had to opt for connecting routes via the US, Japan, Hong Kong or China, or not visit Canada at all. The restrictive ASA between South Korea and Canada has been the primary constraint on the growth of passenger volume between South Korea and Canada.
Trends of Passenger Volume between Vancouver and Seoul by Carriers 350
300 Thousands 250
200
Volume 150
100
50
0 1992 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Air Canada Korean Air Singapore Airlines Grand Total
Source: ICAO Digest of Statistics Series (1993 data not available)
Below, we estimate the effects of a Canada-Korea open skies agreement on airfares, passengers volumes, flight frequency and the impact on tourism in British Columbia using Wei Song’s study (forthcoming June, 2007) on “The Effects of Open Skies Air Services Agreement between Canada and South Korea,” to be submitted to the BC Ministry of Economic Development.
The idea of the model is to specify the demand and supply functions, and define the market clearing conditions so that the equilibrium prices and quantities can be measured with and without an OSA. The results reflect simultaneous changes in price, flight frequency and passenger volumes at the equilibrium under the Cournot quantity competition game between the current situation and the case of an OSA (The details and technical discussions on the Cournot competition model used here will be available in Wei Song’s report).
Assumptions used in this model for quantifying effects of the OSA: • Each airline’s cost on the Vancouver-Seoul route are assumed to be the same as their respective system average costs per revenue-passenger-kilometres (RPK). • Based on the results of a prior airline cost study,19 Air Canada’s average cost per RPK is assumed to be 31.4% higher than Korean Air’s cost per RPK.
19 Oum and Yu, 1998
49 SOUTH KOREA MARKET ADVISORY GROUP REPORT OPEN SKIES
Because information on average Vancouver-Seoul airfares is not available, we assume that the average airfare at the given time is US$2,505 which is the average spot airfare for the June 2007-January 2008 period shown on the airlines’ websites. Price elasticity of demand in all markets is -1.2 while the frequency elasticity of demand is 0.12.20 In addition, the route substitution elasticity has a range from -0.85 to -1.2 depending on how close the routes are, and the destination substitution elasticity is assumed to be -0.5.21 Open Skies in the Canada-South Korea market would not change the cost efficiency of either Air Canada or Korean Air due to the small relative size of the market. Asiana and WestJet would enter the market with their system-wide average cost per RPK. The load factors for each airline, because of the competition and unrestricted frequency and seat availability, would decrease from the current levels to 75%. Further assuming that Asiana will enter the market with Boeing 777-200 while WestJet will use Boeing 777-200.
Table 1 and Figure 2 summarize the effects of Canada-Korea Open Skies on Vancouver – Incheon route.
Table 1 Estimated effects of Open Skies agreement with new airline entries
Passenger volume Airfare Frequencies Air Canada 8% - 25% Korean Airlines 76% - 106% Singapore 0% - 0% Asiana Airlines New entrant - - WestJet New entrant - - Total 123% -49.8% 151%
The results shows that the Open Skies Agreement: Would increase passenger volumes on Vancouver-Incheon market from 310,000 passengers currently to 613,000 passengers, an increase of 123%; Would reduce average airfares on the route from $2,505 to $1,257, a 50% reduction from the current average fare. Flight frequency will increase from 1,435 flights currently to 3,292 flight per year, an increase of 151 percent.
Figure 2 gives a graphical view of the changes in passenger volumes and number of airline seats supplied with and without a Canada-Korea Open Skies Agreement.
20 Oum, Waters and Fu, 2007 21 Sonesson 2001
50 OPEN SKIES SOUTH KOREA MARKET ADVISORY GROUP REPORT
Figure 2 Effects of Open Skies in terms of passenger volume and number of available seats
The Comparison of Passengers and Number of Seats before and after Open Skies 1000 900 800
Thousands 700 600 500
Volume 400 300 200 100 0 Air Canada Korean Air West Jet Asiana Singapore Total
Passengers before Open Skies Carriers# of Available Seats before Open Skies Passengers after Open Skies # of Available Seats after Open Skies
Impacts on tourism The effect of an Open Skies Agreement on tourism is calculated by multiplying the average spending per South Korean tourist ($1,693) documented in Statistics Canada by the additional passengers generated by an OSA between Canada and South Korea. Open Skies would bring approximately 381,000 additional passengers between Vancouver and Seoul. Assuming half of the passengers are to Vancouver, then Open Skies would contribute an extra $322 million to the BC tourism industry.
Summary of air services recommendations
KMAG recommends that the Government of British Columbia undertake the following action in relation to air services:
• Actively encourage the federal government to conclude an Open Skies Agreement between Canada and South Korea.
51 SOUTH KOREA SOUTH KOREA MARKET ADVISORY GROUP REPORT
APPENDIX 6 - SOUTH KOREA: REGION PROFILES & TRANSPORT HUBS
Profile: Gyeonggi Province Gyeonggi Province includes the West Coast of South Korea, an area whose importance is increasing with the expansion of Northeast Asian economies. It is also home to Incheon International Airport, Incheon Port and Pyeongtaek Harbour, providing the province with all the conveniences necessary to become an efficient logistics center. In addition, over one quarter of all South Korea's small and medium sized companies are situated in Gyeonggi Province. Among these, the high-tech industry has a particularly high level of importance, putting Gyeonggi Province at the heart of the South Korean economy. It has been recognized as the premier self-governing body in South Korea with the highest level of foreign investment (US$7.5 billion of FDI in the past three years).
Development of Pyeongtaek Harbour
Pyeongtaek Harbor is located in the province’s south-western area and provides the shortest sea route to China. It is one of three South Korean harbours being strategically developed by the South Korean central government. Full-scale development is progressing, including the opening of a regular container vessel shipping lane to China. With its designation as a free trade zone and the infusion of outside capital, the harbour has a very bright future as a trading and logistics hub in Asia.
Development of Northern Gyeonggi Province
Gyeonggi Province has enacted laws to support the area bordering North Korea in preparation for actual unification. Its current project is the restoration of the GyeongEui and GyeongWon railways, ultimately to be connected to the Trans-Siberian railroad and the Trans-China railroad.
Comparison: British Columbia and Gyeonggi
Province of Gyeonggi Province of BC Population (2005) 10.9 million 4.3 million (23.5 million in the Seoul-Gyeonggi Metropolitan area) GDP C$195 billion(2004) C$169 billion (2005) Total Exports C$46.5 billion (2005) C$34.1 billion (2005)
52 SOUTH KOREA SOUTH KOREA MARKET ADVISORY GROUP REPORT
Profile: Incheon Metropolitan City Incheon is located in the mid-west of the Korean peninsula, approximately 28 km west of Seoul. The city covers a total area of 986.45km². In 2005 the city had a population of 2,628,000 with more than 872,000 households. Incheon is rapidly developing into the third largest city in South Korea, with Seoul and Busan being the largest and the second largest, respectively. The local GNP for Incheon is C$31 billion. There are seven industrial complexes in the region, including Namdong and Bupyeong, which together host more than 7,400 companies.
Profile: Pyeongchang County
Gross Area • Total area 1,463.65㎢ • forest land 84% (1229.56㎢) • farmland 10% (152.45㎢) • others 6% (81.45㎢)
Population • 46,347 persons • Male : Female = 23,464 : 22,883
Administrative Districts • 1 Eup, 7 Myons, 1 branch office, 187 administrative Ris, 731 Bans
Education Facilities • total number of schools - 60 • students – 6795
elementary commercial kindergarten middle school high school school high school 20 27 8 2 3
Cultural Properties • National Cultural Properties -10 • Local Cultural Properties – 26
Extract from Pyeongchang County Website: http://new.happy700.or.kr/esite/eindex.htm
53 SOUTH KOREA MARKET ADVISORY GROUP REPORT SOUTH KOREA
Profile: Incheon International Airport Incheon International Airport, about 50 km from downtown Seoul, officially opened in March 2001 as the world’s sixth-largest cargo airport and with the capacity to serve 30 million passengers annually. Once at Incheon International Airport, transit passengers are no more than two hours flying time from Vladivostok to the north, Taipei to the south, Beijing and Shanghai to the west, and Tokyo and Osaka to the east. Incheon International Airport has direct air linkages to most cities in China and Japan with populations of over one million, within three-and-half hours flying time.
The 2nd phase expansion, currently underway, includes more runways and terminals, a rail connection to Seoul, a new bridge and a customs-free area. The expansion, expected to be finalized prior to the start of the 2008 Beijing Olympics, will expand capacities as illustrated in the table below. Current and Projected Capacity of Incheon International Airport
Category 1st Phase 2nd Phase Final Aircraft Movement 240,000 410,000 480,000 Passenger Volume 30 million 44 million 100 million Cargo Traffic 2.7 million tons 4.5 million tons 7 million tons
Profile: South Korea’s Major Seaports Busan Port
Located at the southern end of the Korean Peninsula and serving as the gateway connecting the Pacific Ocean and the continent of Asia, Busan Port is the No. 1 port in South Korea as well as the world’s fifth-largest container port. Surrounded by mountains and islands, Busan Port offers still water surface within the port. In 2006, the port of Busan handled slightly more than 12 million TEUs of container traffic.
Currently, Busan Port is equipped with capacity to annually process 91 million tons of cargo, with 26.8 km of quay wall facility enabling simultaneous handling of 169 vessels. In January 2006, South Korea opened Busan New Port, 25 km west of the existing Busan Port, stepping up a regional race to become the leading shipping hub in Asia. Initially it has three container berths, growing to 30 berths capable of handling eight million TEU per year by 2011.
Incheon Port
Incheon Port, situated on the west coast of the Korean Peninsula, is South Korea’s second- largest port. It is located 500-800 km from major cities on the east coast of China, such as Dalian, Qingdao and Tianjin, and acts as the main base for South Korea-China trade. Incheon Port can simultaneously handle 78 ships of up to 110,000 tons and process 75
54 SOUTH KOREA SOUTH KOREA MARKET ADVISORY GROUP REPORT
million tons of cargo per year. With the largest lock in Asia Pacific, Incheon Port operates eight international trade piers.
Gwangyang Port
Located at the southern end of the Korean Peninsula, Gwangyang Port is positioned centrally to the main Asia-North America-Europe route and is well connected with China's major ports. The 67 km2 of area around Gwangyang Port is a designated a free trade zone. By 2011, Gwangyang Port will become one of the top five ports in Northeast Asia by completing 33 berths capable of handling 9.3 million TEU annually.
55 ASIA PACIFIC TRADE COUNCIL SOUTH KOREA MARKET ADVISORY GROUP REPORT
APPENDIX 7 - ASIA PACIFIC TRADE COUNCIL – MEMBERS AND ADVISORY GROUP
Asia Pacific Trade Council
Chair
Arthur Hara, O.C., LLD
Vice-Chairs
Arvinder Bubber Carol Lee A.S. Bubber and Associates President and CEO Chartered Accountants Linacare Laboratories Inc.
Members:
Charles Kim Andrew Saxton Jr. President CEO Trans-Pac Fibre Inc. King George Financial Corporation
Eva Lee Kwok Jim Shepherd President President & CEO Amara International Investment Corp. Canfor Corporation
Brandt Louie Norman Stark President President H.Y. Louie Terminal Systems Inc.
Pitman Potter Grace Wong Professor of Law and Director Assistant Dean, International Programs Institute of Asian Research Sauder School of Business University of British Columbia University of British Columbia
Ex-Officio Members
Hon. Colin Hansen Richard T. Lee Minister M.L.A. Ministry of Economic Development and Parliamentary Secretary for the Ministry Responsible for the Asia Pacific Initiative Asia Pacific Initiative and the Olympics
56 SOUTH KOREA MARKET ADVISORY GROUP REPORT ASIA PACIFIC TRADE COUNCIL
South Korea Market Advisory Group
Chair:
Tae-Hoon Oum Professor, Sauder School of Business University of British Columbia
Vice-Chair:
Lew Rossner Vice President Rogers Foods Ltd.
Members:
George D. Burke Don Cowan Partner Director, Asia Pacific Taxation Bull Housser & Tupper LLP KPMG LLP
Paul Evans Lindsay Hall Co-CEO and Chairman, Executive Committee President Asia Pacific Foundation of Canada ENGLOBE Enterprises Ltd.
H.Y. Demas Kim Danny Lee Consultant President Kentrexs Ent. Ltd. BL International Co., Ltd.
Kyung-Ae Park Jay Shin Korea Foundation Chair, IAR Shareholder University of British Columbia Boughton Law Corporation
Ex-Officio:
Wayne Robson Director & Senior Trade Commissioner International Trade Centre Vancouver DFAIT
57 ASIA PACIFIC TRADE COUNCIL SOUTH KOREA MARKET ADVISORY GROUP REPORT
Asia Pacific Trade Council Secretariat
Kevin Regan, Executive Director Henry Han, Manager International Services Paul Kan, Senior Advisor Michael Nicholas, Project Advisor Edwina Ramirez, International Business Development Manager Leonel Roldan-Flores, Senior Advisor Glen Scobie, A/Director Trade and Competitiveness Branch Leslie Wada, International Business Development Manager Joyce Yap, Administrative Assistant Philip Yung, Senior Advisor
Special Support
Keisuke Sato, Asia Pacific Foundation of Canada Ron Richardson, Asia Pacific Foundation of Canada
58 SOUTH KOREA MARKET ADVISORY GROUP REPORT LIST OF INDIVIDUALS CONSULTED
APPENDIX 8 - LIST OF INDIVIDUALS CONSULTED
Acknowledgments
The Korea Market Advisory Group wishes to thank the many people whose assistance enabled it to achieve its goals and produce this report.
GENERAL
Agencies and Associations
Asia Pacific Foundation of Canada Yuen Pau Woo, President and Co-CEO
Korea Trade-Investment Promotion Agency Won-Sok Yun, Chief Trade Commissioner Woo-Hyung Jun, Trade Commissioner
Provincial Government
B.C. Stats Dan Shrier, Chief, Trade and Small Business Statistics
Forestry Innovation Investment Michael Loseth, Vice President International Marketing Sonya Zeitler-Fletcher, Manager Market Development
Ministry of Agriculture and Lands Brenda Lennox, Senior Manager Special Projects
Ministry of Economic Development Todd Tessier, Director International Capitol Markets Soo-Kyung Ahn, Senior Advisor, Investor Services Chris Carter, International Business Development Manager
Tourism British Columbia Cam Routledge, Director Overseas
SECTORAL CONSULTATIONS
David Graham, Pacific Span Consultants Richard Brownsey, BC Film Randall Martin, Simon Fraser University David Strangway, Quest University Julian Taylor, Power Technology Alliance Rob Cruikshank, British Columbia Technology Industries Association Cindy Gobin, Tourism British Columbia Stephen Pearce, Tourism Vancouver
59 LIST OF INDIVIDUALS CONSULTED SOUTH KOREA MARKET ADVISORY GROUP REPORT
BUSINESS CONSULTATIONS
POSCO Canada Ltd. Myoung-Kyun Kim, President
Hanjin Shipping J.W. Jang, Regional Manager
Korean Air Kyung-Yong Lee, Vancouver Regional Office Manager Yong-Gook Lee, District Sales Manager
Midas Institute of Technology Young-Sook Hong, President
Hanin Investment Group Kyu-Tae Kim, General Partner
COMMUNITY CONSULTATIONS
United Korean Businessmen’s Association of Canada Yong-Pil Kim, President
Korean Businessmen’s Co-op Association of British Columbia Yong-Hoon Lee, President Myung-Keon Kim, Vice-President
Korean Global Network Jong-Won Lee, Vancouver City Master
Overseas Korean Traders Association Byung-Soo Song, President Dong-Ha Yoo, Vice President
New East Consulting Services Ken Beck Lee, Principal Soomin Yu, Researcher
60 SOUTH KOREA MARKET ADVISORY GROUP REPORT LIST OF INDIVIDUALS CONSULTED
APPENDIX 9 - BC - KOREA STATISTICS
1. BC Export Destinations ($ millions)
2. Imports Cleared Through BC Customs Ports ($ millions)
3. Exports to South Korea - Top 20 Commodities (by HS 2 digit codes) - 2006 ($ millions)
4. Imports from South Korea - Top 20 Commodities (by HS 2 digit codes) - 2006 ($ millions)
5. Canadian Trade in Services with South Korea ($ millions)
6. Canada-South Korea Foreign Direct Investment Stock ($ millions)
7. Immigration from South Korea to BC (by Class)
61
1. BC Export Destinations – Top 20 ($ millions)
Destination Country 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 United States 14,858 16,375 19,371 22,196 22,104 19,666 18,792 20,121 22,880 20,463 Japan 6,002 4,540 4,467 4,891 4,066 3,859 3,660 3,805 4,208 4,706 China 449 458 582 706 727 756 920 1,225 1,361 1,486 South Korea 939 654 737 895 712 725 777 910 1,180 1,365 Taiwan 431 349 352 402 315 339 433 487 513 521 Germany 476 396 300 535 382 321 381 428 500 471 Italy 474 439 446 617 533 429 467 463 569 447 United Kingdom 289 302 319 381 355 337 306 341 458 386 Netherlands 204 251 235 175 212 223 228 325 318 375 India 64 85 84 99 118 120 109 133 206 346 Hong Kong 345 262 265 278 218 208 180 252 321 252 Brazil 103 78 84 121 168 94 147 155 226 199 Philippines 118 70 64 106 56 84 112 120 162 185 Mexico 62 61 42 58 83 79 109 198 243 179 Australia 236 226 244 251 173 187 202 224 204 175 Belgium 292 305 305 488 312 207 161 201 227 171 France 183 176 167 217 168 150 165 181 195 152 Turkey 58 46 51 61 55 90 61 104 152 148 Indonesia 144 125 159 285 110 132 121 171 135 126 Thailand 95 60 84 123 94 101 93 104 102 102
TOTAL (ALL COUNTRIES) 26,699 25,942 29,044 33,639 31,680 28,828 28,264 30,992 35,510 33,415
Source: Statistics Canada
2. Imports Cleared Through BC Customs Ports – Top 20 ($ millions)
Country of Origin 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
United States 11,623 12,526 12,492 13,350 14,075 11,826 11,572 12,698 14,164 15,497 China 1,520 1,886 2,321 2,961 3,351 4,188 4,610 6,105 7,509 8,540 Japan 4,463 5,004 5,745 6,443 6,100 7,181 6,472 4,592 4,608 5,120 Korea, South 617 819 1,084 1,480 1,770 1,970 2,135 2,503 2,307 1,658 Mexico 359 351 362 419 527 618 627 663 730 994 Taiwan 616 665 740 993 981 987 872 870 841 863 Germany 299 310 283 343 323 316 329 386 409 508 Thailand 286 319 339 441 514 472 432 457 411 442 Malaysia 381 352 363 425 384 371 417 421 338 437 Australia 231 331 308 368 366 379 383 374 372 388 United Kingdom 242 235 304 327 247 234 227 328 314 378 Italy 218 218 213 240 243 240 274 280 295 356 Peru 31 44 38 66 72 79 99 113 51 327 Re-Imports (Canada) 337 377 371 355 375 368 346 295 211 250 India 74 95 103 122 134 166 164 177 181 234 France 212 239 178 151 165 158 182 238 221 233 Vietnam 43 60 68 68 75 90 103 146 140 183 Chile 61 61 59 55 65 87 99 103 112 176 Indonesia 165 202 193 173 187 193 167 166 149 173 Sweden 61 57 60 88 74 74 94 94 126 172
TOTAL (ALL COUNTRIES) 23,347 25,732 27,170 30,804 31,641 31,534 31,270 32,879 35,296 38,887
Source: Statistics Canada
3. Exports to South Korea - Top 20 Commodities (by HS 2 digit codes) - 2006 ($ millions)
Total BC S. Korea % Commodity BC to S. Korea Exports of BC Total 27-Mineral fuels, oils & product of their distillation; etc. 477 6,400 7.5% 26-Ores, slag and ash 248 2,152 11.5% 76-Aluminium and articles thereof 191 946 20.2% 47-Pulp of wood/other fibrous cellulosic mat; recovered waste, etc. 174 2,919 5.9% 44-Wood and articles of wood; wood charcoal 91 8,521 1.1% 15-Animal/veg fats & oils & their cleavage products; etc. 35 77 45.6% 29-Organic chemicals 30 195 15.4% 48-Paper & paperboard; art of paper pulp, paper/paperboard 21 1,865 1.1% 02-Meat and edible meat offal 16 73 21.6% 85-Electrical mchy equip parts thereof; sound recorder, etc. 9 671 1.3% 11-Prod mill indust; malt; starches; inulin; wheat gluten 8 21 40.4% 72-Iron and steel 8 260 3.0% 84-Machinery, boilers, mechanical appliances, engines, pts 8 1,559 0.5% 74-Copper and articles thereof 6 77 7.4% 28-Inorgn chem; prec metal compounds, radioact elements, etc. 5 266 1.9% 90-Optical, photo, cine, meas, checking, precision, etc. 5 440 1.1% 98-Special Classification Provisions 5 156 3.1% 03-Fish & crustacean, mollusc & other aquatic invertebrate 5 933 0.5% 21-Miscellaneous edible preparations 4 108 3.9% 41-Raw hides and skins (other than furskins) and leather 2 14 14.4% OVERALL TOTAL 1,365 33,415 4.1%
Source: Statistics Canada
4. Imports from South Korea - Top 20 Commodities (by HS 2 digit codes) - 2006 ($ millions)
Total BC S. Korea % Commodity South Korea Cleared of BC Total Imports 87-Vehicles o/t railw/tramw roll-stock, pts & accessories 721 6,520 11.1% 84-Machinery, boilers, mechanical appliances, engines, pts 222 5,507 4.0% 72-Iron and steel 220 1,194 18.4% 85-Electrical mchy equip parts thereof; sound recorder, etc. 202 4,027 5.0% 73-Articles of iron or steel 80 1,523 5.2% 39-Plastics and articles thereof 45 1,134 3.9% 40-Rubber and articles thereof 41 427 9.7% 76-Aluminium and articles thereof 14 465 3.0% 74-Copper and articles thereof 11 57 19.1% 99-Special Transaction - Trade 9 170 5.4% 28-Inorgn chem; prec metal cmpds, radioact elements, etc. 7 292 2.4% 48-Paper & paperboard; art of paper pulp, paper/paperboard 7 658 1.0% 19-Prep of cereal, flour, starch/milk; pastrycooks' prod 7 239 2.8% 90-Optical, photo, cine, meas, checking, precision, etc. 7 749 0.9% 64-Footwear, gaiters and the like; parts of such articles 5 402 1.2% 61-Art of apparel & clothing access, knitted or crocheted 5 718 0.6% 52-Cotton 4 18 23.0% 95-Toys, games & sports requisites; parts & access thereof 4 1,014 0.4% 83-Miscellaneous articles of base metal 4 163 2.3% 94-Furniture; bedding, mattress, matt support, cushion, etc. 3 1,225 0.2% OVERALL TOTALS 1,658 38,887 4.3%
Source: Statistics Canada
5. Canadian Trade in Services with South Korea ($ millions)
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Exports 436 479 506 400 456 568 681 643 607 706
Imports 307 257 249 166 176 303 229 216 296 350
Balance 129 222 257 234 281 265 452 427 311 356
Source: Statistics Canada
6. Canada-South Korea Foreign Direct Investment Stock ($ millions)
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Canada to 188 172 542 1,234 760 725 749 698 1,364 779 South Korea
South Korea to 112 132 142 168 232 269 274 336 360 364 Canada
Source: Statistics Canada
7. Immigration from South Korea to BC (by Class)
Assisted Self Other Total Family Refugees Entrepreneur Investor Retired Relatives Employed Independents
1987 457 99 - 14 307 8 - 3 26 1988 559 101 - 31 383 10 - 5 29 1989 539 89 - 25 373 - 12 - 40 1990 442 109 - 22 281 - 8 1 21 1991 454 84 - 12 278 5 54 - 21 1992 688 103 - 37 404 16 111 3 14 1993 896 114 - 46 377 39 251 - 69 1994 915 89 - 66 340 36 120 - 264 1995 1,188 65 - 64 489 52 131 - 387 1996 1,097 82 3 67 385 23 149 - 388 1997 1,172 82 - 118 307 38 128 - 499 1998 1,816 130 - 137 295 40 180 - 1,034 1999 2,128 201 - 188 541 69 233 - 896 2000 2,167 195 3 190 558 70 204 - 947 2001 2,826 211 - 266 437 34 202 - 1,676 2002 2,345 190 1 317 311 46 304 - 1,176 2003 2,832 205 3 379 388 16 303 - 1,538 2004 2,272 842 9 139 172 23 427 - 660 2005 2,520 1,119 18 71 243 57 545 - 467 2006 2,327 1,394 1 15 163 38 463 - 253
Source: Citizenship and Immigration Canada
1. BC Export Destinations – Top 20 ($ millions)
Destination Country 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 United States 14,858 16,375 19,371 22,196 22,104 19,666 18,792 20,121 22,880 20,463 Japan 6,002 4,540 4,467 4,891 4,066 3,859 3,660 3,805 4,208 4,706 China 449 458 582 706 727 756 920 1,225 1,361 1,486
South Korea 939 654 737 895 712 725 777 910 1,180 1,365 Taiwan 431 349 352 402 315 339 433 487 513 521 Germany 476 396 300 535 382 321 381 428 500 471 Italy 474 439 446 617 533 429 467 463 569 447 United Kingdom 289 302 319 381 355 337 306 341 458 386 Netherlands 204 251 235 175 212 223 228 325 318 375 India 64 85 84 99 118 120 109 133 206 346 Hong Kong 345 262 265 278 218 208 180 252 321 252 Brazil 103 78 84 121 168 94 147 155 226 199 Philippines 118 70 64 106 56 84 112 120 162 185 Mexico 62 61 42 58 83 79 109 198 243 179 Australia 236 226 244 251 173 187 202 224 204 175 Belgium 292 305 305 488 312 207 161 201 227 171 France 183 176 167 217 168 150 165 181 195 152 Turkey 58 46 51 61 55 90 61 104 152 148 Indonesia 144 125 159 285 110 132 121 171 135 126 Thailand 95 60 84 123 94 101 93 104 102 102
TOTAL (ALL COUNTRIES) 26,699 25,942 29,044 33,639 31,680 28,828 28,264 30,992 35,510 33,415
Source: BC Stats
2. Imports Cleared Through BC Customs Ports – Top 20 ($ millions)
Country of Origin 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
United States 11,623 12,526 12,492 13,350 14,075 11,826 11,572 12,698 14,164 15,497 China 1,520 1,886 2,321 2,961 3,351 4,188 4,610 6,105 7,509 8,540 Japan 4,463 5,004 5,745 6,443 6,100 7,181 6,472 4,592 4,608 5,120 Korea, South 617 819 1,084 1,480 1,770 1,970 2,135 2,503 2,307 1,658 Mexico 359 351 362 419 527 618 627 663 730 994 Taiwan 616 665 740 993 981 987 872 870 841 863 Germany 299 310 283 343 323 316 329 386 409 508 Thailand 286 319 339 441 514 472 432 457 411 442 Malaysia 381 352 363 425 384 371 417 421 338 437 Australia 231 331 308 368 366 379 383 374 372 388 United Kingdom 242 235 304 327 247 234 227 328 314 378 Italy 218 218 213 240 243 240 274 280 295 356 Peru 31 44 38 66 72 79 99 113 51 327 Re-Imports (Canada) 337 377 371 355 375 368 346 295 211 250 India 74 95 103 122 134 166 164 177 181 234 France 212 239 178 151 165 158 182 238 221 233 Vietnam 43 60 68 68 75 90 103 146 140 183 Chile 61 61 59 55 65 87 99 103 112 176 Indonesia 165 202 193 173 187 193 167 166 149 173 Sweden 61 57 60 88 74 74 94 94 126 172
TOTAL (ALL COUNTRIES) 23,347 25,732 27,170 30,804 31,641 31,534 31,270 32,879 35,296 38,887
Source: BC Stats
3. Exports to South Korea - Top 20 Commodities (by HS 2 digit codes) - 2006 ($ millions)
Total BC S. Korea % Commodity BC to S. Korea Exports of BC Total 27-Mineral fuels, oils & product of their distillation; etc. 477 6,400 7.5% 26-Ores, slag and ash 248 2,152 11.5% 76-Aluminium and articles thereof 191 946 20.2% 47-Pulp of wood/other fibrous cellulosic mat; recovered waste, etc. 174 2,919 5.9% 44-Wood and articles of wood; wood charcoal 91 8,521 1.1% 15-Animal/veg fats & oils & their cleavage products; etc. 35 77 45.6% 29-Organic chemicals 30 195 15.4% 48-Paper & paperboard; art of paper pulp, paper/paperboard 21 1,865 1.1% 02-Meat and edible meat offal 16 73 21.6% 85-Electrical mchy equip parts thereof; sound recorder, etc. 9 671 1.3% 11-Prod mill indust; malt; starches; inulin; wheat gluten 8 21 40.4% 72-Iron and steel 8 260 3.0% 84-Machinery, boilers, mechanical appliances, engines, pts 8 1,559 0.5% 74-Copper and articles thereof 6 77 7.4% 28-Inorgn chem; prec metal compounds, radioact elements, etc. 5 266 1.9% 90-Optical, photo, cine, meas, checking, precision, etc. 5 440 1.1% 98-Special Classification Provisions 5 156 3.1% 03-Fish & crustacean, mollusc & other aquatic invertebrate 5 933 0.5% 21-Miscellaneous edible preparations 4 108 3.9% 41-Raw hides and skins (other than furskins) and leather 2 14 14.4% OVERALL TOTAL 1,365 33,415 4.1%
Source: BC Stats
4. Imports from South Korea - Top 20 Commodities (by HS 2 digit codes) - 2006 ($ millions)
Total BC S. Korea % Commodity South Korea Cleared of BC Total Imports 87-Vehicles o/t railw/tramw roll-stock, pts & accessories 721 6,520 11.1% 84-Machinery, boilers, mechanical appliances, engines, pts 222 5,507 4.0% 72-Iron and steel 220 1,194 18.4% 85-Electrical mchy equip parts thereof; sound recorder, etc. 202 4,027 5.0% 73-Articles of iron or steel 80 1,523 5.2% 39-Plastics and articles thereof 45 1,134 3.9% 40-Rubber and articles thereof 41 427 9.7% 76-Aluminium and articles thereof 14 465 3.0% 74-Copper and articles thereof 11 57 19.1% 99-Special Transaction - Trade 9 170 5.4% 28-Inorgn chem; prec metal cmpds, radioact elements, etc. 7 292 2.4% 48-Paper & paperboard; art of paper pulp, paper/paperboard 7 658 1.0% 19-Prep of cereal, flour, starch/milk; pastrycooks' prod 7 239 2.8% 90-Optical, photo, cine, meas, checking, precision, etc. 7 749 0.9% 64-Footwear, gaiters and the like; parts of such articles 5 402 1.2% 61-Art of apparel & clothing access, knitted or crocheted 5 718 0.6% 52-Cotton 4 18 23.0% 95-Toys, games & sports requisites; parts & access thereof 4 1,014 0.4% 83-Miscellaneous articles of base metal 4 163 2.3% 94-Furniture; bedding, mattress, matt support, cushion, etc. 3 1,225 0.2% OVERALL TOTALS 1,658 38,887 4.3%
Source: BC Stats
5. Canadian Trade in Services with South Korea ($ millions)
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Exports 436 479 506 400 456 568 681 643 607 706
Imports 307 257 249 166 176 303 229 216 296 350
Balance 129 222 257 234 281 265 452 427 311 356
Source: BC Stats
6. Canada-South Korea Foreign Direct Investment Stock ($ millions)
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Canada to 188 172 542 1,234 760 725 749 698 1,364 779 South Korea
South Korea to 112 132 142 168 232 269 274 336 360 364 Canada
Source: BC Stats
7. Immigration from South Korea to BC (by Class)
Assisted Self Other Total Family Refugees Entrepreneur Investor Retired Relatives Employed Independents
1987 457 99 - 14 307 8 - 3 26 1988 559 101 - 31 383 10 - 5 29 1989 539 89 - 25 373 - 12 - 40 1990 442 109 - 22 281 - 8 1 21 1991 454 84 - 12 278 5 54 - 21 1992 688 103 - 37 404 16 111 3 14 1993 896 114 - 46 377 39 251 - 69 1994 915 89 - 66 340 36 120 - 264 1995 1,188 65 - 64 489 52 131 - 387 1996 1,097 82 3 67 385 23 149 - 388 1997 1,172 82 - 118 307 38 128 - 499 1998 1,816 130 - 137 295 40 180 - 1,034 1999 2,128 201 - 188 541 69 233 - 896 2000 2,167 195 3 190 558 70 204 - 947 2001 2,826 211 - 266 437 34 202 - 1,676 2002 2,345 190 1 317 311 46 304 - 1,176 2003 2,832 205 3 379 388 16 303 - 1,538 2004 2,272 842 9 139 172 23 427 - 660 2005 2,520 1,119 18 71 243 57 545 - 467 2006 2,327 1,394 1 15 163 38 463 - 253
Source: Citizenship and Immigration Canada