A nation in constant change, South Korea has experienced a wide spectrum of political and financial turbulence during the last 50 years. Amidst cold-war hostilities from its northern neighbor, South Korea has achieved international prominence as an economic powerhouse. This is a growing market you might wish to consider pursuing.

It’s Back on Track

Since its plunge into financial crisis in 1997, South Korea has worked hard to repay large portions of its foreign debt. Today, it remains a formidable contender in a strategic region. Many of the reforms implemented by President Kim Dae Jung, in response to the 1997 currency collapse, have succeeded in creating a more open market-oriented economy.

The Market Is Expanding

Analysts predict that with its strong private consumption and increasing stock market, South Korea will continue to be an important U.S. export and investment destination. For example, in 1999, it ranked as the United States’ sixth largest export destination, with almost $23 billion in goods. This represented an increase of 40% over 1998. And, in 1998, U.S. foreign direct investment in South Korea, on a historical-cost basis, reached 7.4 billion, an increase of 70% since 1994.

High-Tech Goods Are in Demand

Demand for many imports is rising, especially for high-tech computer and semiconductor equipment. Opportunities also exist in the energy and telecommunications sectors following the privatization of South Korea’s state-owned facilities.

Asia-Pacific nations and the European Union, especially Britain, recognize this growing market potential and are actively pursuing South Korea. Consequently, U.S. firms could expect greater competition in the future.

The Challenges Ahead

Recent increases in South Korea’s monthly current account deficit and short-term debt indicate more improvements are necessary to prevent another economic emergency. Analysts believe South Korea must continue to ease its restrictions in trade, especially in the steel and automotive industries. South Korea’s future is also inextricably linked to its relationship with North Korea.

The Two Koreas

South Korea is on the verge of a period of unprecedented and fundamental change, following its President’s recent historic summit meeting with North Korea’s Kim Jong Il. This was the first-ever meeting between the two nations, which are still technically at war.

Sharing a common history and language, both Koreas have much to gain from increased dialogue and economic cooperation. Greater stability, a likely outcome of the summit, will promote more investment in the South. A unified Korean peninsula would foster many more foreign investment opportunities in the North and South.

The combination of South Korea’s capital and management experience, coupled with North Korea’s educated workforce and competitive wages, would jumpstart the South’s stagnant textile, clothing, and accessories industries. Timely investment ventures in construction and transportation could capitalize on the North’s proximity to China, Russia, and Europe.

This article appeared in April 2000. (CB)
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.




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