The Republic of Korea (ROK, also known as South Korea) is a mature and industrialised economy that has grown to become the world’s 12th largest economy. It is home to some of the world’s largest and most diversified companies and is a dynamic and vibrant place to do business.
“The ROK is Australia’s third largest export market, largely due to the county’s dependence on imported energy, resources and agriculture, and Australia’s fourth largest two-way trading partner,” explains Senior Trade Commissioner for South Korea, Julie Quinn.
“This year marks a significant milestone in Australia’s bilateral relationship with Korea as the two countries celebrate the 60th anniversary of diplomatic relations. “
The Australian Prime Minister and Korean President have agreed to elevate the bilateral relationship to a Comprehensive Strategic Partnership (CSP). Both countries are working together to progress the economic partnership in the post-COVID era through initiatives like the Low and Zero Emissions Technology Partnership and vaccine cooperation, which will provide opportunities for businesses in both countries.
The level of investment between Australia and ROK has grown significantly over the past decade, from just A$600 million in 2003 to A$49 billion in 2018 (Source: DFAT South Korea Factsheet 2019).
Trade and Investment relationship with the Republic of Korea (South Korea)
Australia’s merchandise trade with Republic of Korea in 2019-20:
- Exports – A$25,827 million Imports – A$10,650 million
- Total merchandise trade (exports + imports) – $A36,477 million
- Exports of services to South Korea – A$1,790 million
- Imports of Services A$601 million
More comprehensive trade data can be found here on the DFAT website.
Free Trade Agreements
The Korea-Australia Free Trade Agreement (KAFTA), which entered into force on 12 December 2014, is a world-class and comprehensive bilateral agreement that substantially liberalises Australia’s trade with its fourth-largest two-way trading partner.
“KAFTA strengthens opportunities by improving market access for Australian companies, creating new services opportunities, enhancing protection for Australian investors in the ROK and safeguarding Australia’s competitiveness in this large market,” says Ms Quinn.
“Despite already being a major market, there is untapped potential for Australian businesses in the ROK across various sectors. ROK consumers demand high-quality food, beverage, consumer goods and education that Australia can provide.
“Australian technology and services can help solve complex problems for its industry as it faces increasing competition from various international markets and transitions from the sectors that have underpinned its growth to new areas such as medical technologies, hydrogen and fintech.”
KAFTA protects and enhances the competitive position of Australian businesses in Korea and will provide tariff reduction or elimination on nearly all Australia’s current exports by value when it is fully implemented.
Ms Quinn says that under KAFTA, more than 99 per cent of Australia’s goods exports to Korea are eligible to enter duty-free or with preferential access. The Agreement has helped eliminate 84 per cent of the ROK’s imports (by value) from Australia.
“For agriculture, Korea eliminated tariffs on entry into force for raw sugar, wheat, bottled wine, and some horticulture. Australia’s competitive tariff and improved market access for major agricultural export commodities will strengthen the food security and supply chain partnerships with ROK.
“While 88 per cent of Australia’s manufactured, resources and energy exports entered Korea duty-free from entry-into-force, remaining tariffs will be phased out by 1 January 2023.
“For Australian services providers, KAFTA provides the best treatment Korea has agreed with any trade partner. The Agreement also helps improve opportunities for Australian investors and investments in Korea and promote investment in both directions.”
The Korean New Deal
‘The Korean New Deal’ announced in 2020 was enhanced as the ‘K-Deal’ in 2021.
It is an ambitious program of investment based on two main policies: the ‘Digital New Deal’ and ‘Green New Deal’, as well as the strengthening of employment and social safety nets.
Ms Quinn says these political and economic strategies will help drive the South Korean business ecosystem.
“The Green New Deal is focused on decarbonization and expanding renewable energy production, with core projects of ‘Green Remodelling’, ‘Green Energy Production’, ‘Eco-friendly vehicles’ and ‘Green and Smart Schools’.
“Funds will be allocated to building and installing solar panels and wind turbines, generating more than 42.7 gigawatts of electricity by 2025, and installing more than 220,000 solar panels on public buildings across the country.”
As one of the first countries to roll out 5G connection technology nationally, Korea is known for having the fastest internet connection in the world.
Under the Digital New Deal, the Government aims to integrate data, 5G network and artificial intelligence (AI) (so-called DNA) throughout all sectors and promote the ‘untact’ industry.
Untact is a Korean buzzword combining the English prefix ‘un’ with the word ‘contact’ to reference doing things without direct contact with others, such as self-service kiosks or online shopping. South Korea’s ‘Data Dam’ project also strongly ties into its push towards “Smart Healthcare” and the key project “Digital Twin”.
Opportunities abound
Ms Quinn notes that some of the most exciting opportunities for Australian exporters can be found in:
Clean energy
On 1 September 2021, the Korean National Assembly legislated an aggressive 35 per cent emission cut by 2030 and net-zero by 2050.
More than 65 per cent of Australia’s exports to Korea are in coal, iron-ore and gas, so our economic partnership is approaching a turning point. There are significant opportunities for Australia to prioritise the Korean clean energy transition, as it will create significant trade and inward investment opportunities. This will create new markets for bulk products such as critical minerals and hydrogen and open vertically integrated supply chains.
Premium food and beverages
“Australia’s clean, green, and safe foods have an excellent reputation in Korea, with Australia now a key partner for Korea in food security. There is a growing demand for premium food and beverages through high-end retail outlets and e-commerce platforms,” Ms Quinn explains.
COVID-19 has driven Korean consumers online, which has happened quite seamlessly – given over 95 per cent of the Korean population are smartphone users. COVID-19 has also driven many Korean consumers to pay more attention to their health and what they eat.
Whole foods, healthier alternatives, natural and organic food products have gained popularity and we are starting to see more Korean importers looking to source functional food products.
There is also stable demand for what Australia is well known for – our beef, lamb, seafood, seasonal fruits and nuts.
Korean food manufacturers are looking to source fresh and highly nutritious food ingredients for home-meal replacement kits, which presents an excellent opportunity for Australian exporters.
Korea’s demand for confectionary and snacks is another opportunity for Australia’s iconic brands to consider.
“We have also seen considerable growth in interest from wine importers and buyers in Australian wine and see plenty of scope for Australian wine exports to Korea. Traditionally, strong bodied reds have been favoured, but there is also growing interest in white varietals and natural wines,” says Ms Quinn.
“The Australian Government’s Agribusiness Expansion Initiative provides $72.7 million to allow a significant surge in trade support services and help Australian exporters diversify into new markets. Austrade is ready to help Australian agri-food exporters expand their business into Korea.”
Medical and biotechnology
Australia has a reputation as a ‘go to’ destination for companies wanting to conduct clinical trials and being open for business when many other nations were not during the COVID-19 pandemic.
Important partnerships in biotech R&D and manufacturing have developed over the past ten years, with Korean companies very interested in Australian expertise in regenerative medicine, digital health, cell-based therapies and RNA technologies.
“Both Australia and Korea have declared their intentions to be major vaccine powers, Ms Quinn continues. “These important partnerships have established a solid foundation for the further expansion of our relationship.”
“We are well-placed to collaborate on RNA-based vaccines and therapeutics in joint R&D, new product development and clinical trials. Australian biotech companies and research institutes working in these areas would be well advised to consider the Korean market.”
AI and big data development will present opportunities for companies working in telemedicine, biotechnology and digital health.
Immersive technologies
In 2020-21, the game industry grew substantially given the stay-at-home restrictions imposed by governments during the COVID-19 pandemic. This has increased the number of game players and consequently, demand from Korean game companies for new content and game technologies is high.
This has created opportunities for Australian game developers and tech and creative game content companies to partner with Korean game companies to increase the amount of Australian game content in Korea’s game platforms.
Challenges to be aware of
“South Korea was prepared for a fast response to the arrival of COVID-19 due to its experience dealing with Middle East Respiratory Syndrome (MERS) in 2015,” says Ms Quinn. “New measures introduced since the MERS outbreak meant that South Korea has been a model for dealing with the new pandemic.”
South Korea’s economy is strong, as are exports, with the country being the first in the world to raise interest rates in 2021. The Government is committed to the Korean New Deal initiatives, which will drive conglomerates and the country towards its ambitious goals.
COVID-19 related supply chain disruptions brought to the fore South Korea’s heavy reliance on imported agriculture and food products and highlighted strong complementarities of Australia’s agrifood exports. This provides Australian premium food and beverage exporters with new opportunities to diversify their markets by looking to Korea.
Australian agrifood exporters face strong competition from local and international businesses. South Korean importers and major retailers are quite committed to their existing supplier relationships, and it takes a lot for them to change these alliances.
South Korean buyers may start a new supply relationship with smaller orders and contracts but if Australian businesses honour these commitments, there is potential for these orders to grow tenfold over time. Some companies may need to adjust their ingredients, labelling and/or packaging to make their products suitable for the South Korean market.
Ms Quinn gives some final advice to companies considering this market: “To be successful in the Republic of Korea, exporters must dedicate Korea-focused marketing efforts and open, regular lines of communication with local buyers and consumers. Exporters also need to stay patient and focus on developing trust-based relationships with local partners.”
Trade and Investment information
Austrade’s website has a Republic of Korea (ROK, also known as South Korea) country page which includes the following information to help exporters:
- Market profile
- Doing Business
- Austrade assistance
Austrade contact information
Ms Julie Quinn
Senior Trade Commissioner – South Korea
Australian Trade and Investment Commission (Austrade)
Email: Info@austrade.gov.au
Contact: 13 28 78
To learn more about how Austrade can help your business, visit austrade.gov.au
Read more: New Zealand: Aussie exporters’ number one destination
Read more: The UK: Aussie exporters discover new opportunities in a familiar market
Keep up to date with Dynamic Business on LinkedIn, Twitter, Facebook and Instagram.
