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Expanding Opportunities for Australian Business in Innovative Korea

James Choi, Australia's Ambassador to the Republic of Korea

The Republic of Korea (also known as South Korea) is an economic and trade heavy-weight. It is the world's 11th largest economy and the sixth largest exporter. Korean corporations are leaders in research, development and innovation, and are deeply integrated into global value chains.

Australia and Korea enjoy a long-standing and complementary trade relationship. Australia's resource exports have traditionally underpinned our bilateral trade, with our coal, iron ore and gas fueling Korea's steel and energy sectors.

But this resources narrative will gradually change as Korea transitions from capital intensive manufacturing and prepares for the economy of the future.

The Korean Government, business sector and universities are making a big play in start-ups, artificial intelligence (AI), robotics, block chain, big data, the internet of things, biotechnology and renewable energy.

Korea ranks first on the Bloomberg Global Innovation Index 2018, reflecting its performance in science and technology, research and development spending, education and patents.

These investments will ensure that Korea will be at the forefront of developments in self-driving cars, smart cities, smart homes and smart factories.

As it prepares to be the first in the world to deploy commercial 5G mobile technology in early 2019, Korea is creating the enabling environment for it to be a leader in the digital economy.

Given these trends, it is clear that science, technology and innovation, and the services underpinning the new economy, will become key themes for our bilateral trade relationship.

The Australian Government's National Innovation and Science Agenda dovetails well with Korea's priorities.

Australia is ranked equal first in The Economist's Technological Readiness Ranking, which forecasts which economies are best prepared for the digital disruption that is transforming the global economy.

This complementarity paves the way for a new phase in the bilateral trade partnership with Korea under the banner of the "Fourth Industrial Revolution".

The entry into force of the Korea-Australia Free Trade Agreement (KAFTA) in December 2014 is providing a strong platform to diversify our trade relationship by creating new opportunities in services and investment.

KAFTA guarantees Australian services providers access to key areas of commercial interest, including financial services, health services, telecommunications and legal services.

Services account for around 60 per cent of Korea's GDP and 70 per cent of Australia's – but amount to only 5.8 per cent of bilateral trade. There is significant scope to expand our bilateral services trade.

With five rounds of tariff cuts since the entry into force of KAFTA, we have also seen strong export growth in our traditional areas of strength such as energy, minerals, agriculture, food and beverage.

It is encouraging that a recent PricewaterhouseCoopers (PwC) study showed that more than 80 per cent (by value) of eligible Australian merchandise exports to Korea were benefiting from KAFTA tariff preferences.

The level of investment between Australia and Korea is modest but growing. The stock of Korea investment in Australia increased from $4.9 billion in 2006 to $26.3 billion in 2017, but Korea still only ranks as Australia's 15th-largest foreign investor.

GDP and 70 per cent of Australia's – but amount to only 5.8 per cent of bilateral trade. There is significant scope to expand our bilateral services trade.

With five rounds of tariff cuts since the entry into force of KAFTA, we have also seen strong export growth in our traditional areas of strength such as energy, minerals, agriculture, food and beverage.

It is encouraging that a recent PricewaterhouseCoopers (PwC) study showed that more than 80 per cent (by value) of eligible Australian merchandise exports to Korea were benefiting from KAFTA tariff preferences.

The level of investment between Australia and Korea is modest but growing. The stock of Korea investment in Australia increased from $4.9 billion in 2006 to $26.3 billion in 2017, but Korea still only ranks as Australia's 15th-largest foreign investor.

Big building on the water
The Some Sevit complex is made up of three man-made floating islands located close to the southern end of Banpo Bridge in downtown Seoul.

By raising the screening threshold for Korean private investors in non-sensitive sectors, KAFTA has helped reduce barriers to Korean inbound investment and delivered the clear message that Australia is open for business.

This dedicated Republic of Korea edition of Business Envoy showcases the changing nature of our bilateral trade relationship and the success stories of Australia firms who have taken advantage of KAFTA.

It highlights some of the opportunities on offer in one of the world's most innovative countries. There has never been a better time to do business with the Republic of Korea.

 
 
 
 
 
 
 
 
 
Last Updated: 10 October 2018
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