THE OPPORTUNITIES TO EXPORT TO SOUTH KOREA

Invaluable insights by James Gu, CEO JBN Co Ltd, South Korea

 Tell us about JBN CO Ltd

We provide services for both credit and general insurance. Credit insurance comprises circa 70% of our turnover. We administer credit insurance for companies in South Korea for both their domestic and export sales, and the credit insurance for Korean Conglomerates’ foreign entities with our ICBA partners.

The domestic credit insurance market is monopolized by SGI (fronting company) and the big 3, Euler Hermes, Coface, and Atradius, are reinsurers. The export credit insurance market used to be monopolized by K-Sure (ECA), however, the market was opened to private insurers in 2016. Private insurers such as Hyundai Insurance, KB Insurance, DB Insurance, and Mitsui Sumitomo are the fronting companies and they each have partnered with one of the big 3 insurers. K-Sure ad AIG can issue policies for export credit insurance solely.

General insurance is around 30% of our turnover. We provide services in Package Insurance, Professional Indemnity Insurance, Cargo Insurance, Director and Officers’ Liability Insurance, and Casualty Insurance.

We have two partners and three administrative professionals in our credit insurance team.

Which products/goods are imported on a regular basis into South Korea and why?

(Unit: Million USD)

  2016 2017
Items Price Items Price
1st Crude Oil 44,295 Crude Oil 59,603
2nd Semiconductor 36,557 Semiconductor 41,177
3rd Wireless Communication Device 13,226 Semiconductor manufacturing equipment 19,316
4th Natural Gas 12,170 Natural Gas 15,616
5th Petroleum Products 12,003 Coal 15,179
6th Automotive Vehicle 10,633 Petroleum Products 15,118
7th Computers 9,795 Wireless Communication Device 13,282
8th Coal 9,310 Computer 11,699
9th Semiconductor manufacturing equipment 8,764 Automotive Vehicle 10,902
10th Clothing 8,332 Raw Materials for Fine Chemical 9,875

(Source: Korea Customs Service – Export Customs Data)

The Top 10 Import Items account for 55.8% of total imports. Crude Oil continues to rank first because South Korea can’t produce Crude Oil or other alternative fuel.

 If a business is looking to export their products into South Korea what do they need to know about the culture, the customs and the business and personal etiquette?

 

  1. Korean Culture
    1. Korea has four distinct seasons. Therefore, Koreans have good adaptability to the environment. Koreans are the people who settled in the most countries around the world.
    2. Korea is a peninsular country that is geographically a channel of land and sea. Due to this reason, historically there have been many invasions by foreign powers. In response to such a crisis situation, ‘Ppalli, Ppalli!’, meaning ‘fast, fast!’ became a ‘DNA’ of Koreans. Paradoxically, such fast-moving culture has become a driving force for global IT industries such as Samsung Electronics and LG Electronics.
  • Korea has a history as a single nation of more than 5,000 years. As a result, your personal connections are very important. Therefore, there are many gatherings through blood relations, school relations, and regionalism.

 

  1. Korean Customs
    1. Tradition is very important to Koreans. Thus, older generations form a deeply rooted vertical class culture.
    2. On the other hand, the new generation is very individualistic, and they prefer horizontal relationships and culture. This is becoming the new culture.
  2. Korean Commercial Etiquette (Corporate)
    1. The Korean corporate culture is heavily influenced by the ‘Chaebol’ (Korean Conglomerates). The Chaebols have followed three generations, from founder to grandchildren. They rely heavily on decisions based on specific relationships.
    2. Since the IMF in 1997, the corporate culture of Korea has been changing a lot. It is similar to the corporate culture of global multinationals.

 

  1. Korean Commercial Etiquette (Individuals)
    1. Koreans place great importance on ‘faith and credit’.
    2. One of the characteristic features of Koreans’ trade is’ bargaining. This is expressed as ‘dum’ which means ‘a throw-in’ and ‘eun-ri’ which means ‘discount’. Thus, Koreans like to get more for the same price or get a discount. This is very different from the Western’s ‘fixed price’, so it is unfamiliar to foreign business people.

What sort of market research would you recommend a company does before they begin the process of exporting to South Korea?

  1. Before export, it is not much different from the usual marketing process.
  2. After export, because Koreans value reputation, the after service must be good.

Which products does South Korea export to the rest of the world?

(Unit: Million USD)

  2016 2017
Item Price Item Price
1st Semiconductor 62,005 Semiconductor 97,937
2nd Automotive Vehicle 40,637 Ships and Offshore Structures & Parts 42,182
3rd Ships and Offshore Structures and Parts 34,268 Automotive Vehicle 41,690
4th Wireless Communication Device 29,664 Petroleum Products 35,037
5th Petroleum Products 26,472 Flat Panel Display and Sensors 27,543
6th Automotive Parts 24,415 Automotive Parts 23,134
7th Synthetic Resins 17,484 Wireless Communication Device 22,099
8th Flat Panel Display and Sensors 16,582 Synthetic Resins 20,436
9th Iron and Steel Plates and Sheets 15,379 Iron and Steel Plates and Sheets 18,111
10th Articles of Artificial Plastic Material 9,606 Computers 9,177

(Source: Korea Customs Service – Export Customs Data)

The Top 10 Export Items account for 59% of total exports. Among export items, petroleum products, automotive vehicle, and semiconductors increased year-on-year due to rising oil prices, expansion of investments related to the 4th industrial revolution, and high-end IT equipment. Wireless telecommunication equipment has decreased somewhat due to the increase in overseas production and intensified competition.

Are you hopeful of an improvement in relations between North Korea and South Korea?

South Korea and North Korea was one nation for over five thousand years. In 1950, The Korean War took place, and in 1953, the armistice agreement was reached. The South and the North have been divided for 65 years. Of the five-thousand-year history, 65 years is a brief period. Eventually, South Korea and North Korea will be unified again because the ethnic race is the minimum unit of human history. In conclusion, I hope and believe that the relationship between the South and the North will improve.

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