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April 12, 2013 02:00 AM

Trade pacts work for South Korea

Steve Toloken
Assistant Managing Editor
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    Rich Williams

    After talking to an executive from Austrian press maker Engel Holding GmbH at the Koplas show in Seoul last month, it's easy to see the attraction that South Korea holds for some plastics businesses.

    The country is home to large companies that have climbed the manufacturing ladder and are not mainly workshops for other countries — think China or Thailand's industry — but solid global competitors in their own right, with brands known worldwide.

    That's made Korean companies like Samsung Electronics Co. Ltd. and auto component supplier Mobis among Engel's largest customers worldwide in recent years. It's part of the reason Engel recently finished up an 8 million euro ($10.5 million) expansion of its factory just south of Seoul.

    Korea today is the 12th-largest economy in the world. It recently signed free-trade agreements with the European Union and the U.S. that have helped to draw the interest of a number of Western plastics equipment companies.

    At the show, representatives of several of those companies told me the FTAs are helping to drive more equipment exports to Korea, and giving the Europeans and Americans a competitive advantage vs. the Japanese, who don't at the moment have an FTA with Korea.

    The country might be the most successful of the post-World War II Asian tigers. In the 1950s, its per capita gross domestic product was in the range of poorer countries in Asia and Africa. Last year, its per-person income of $32,400 put it on par with the European Union — behind Germany but ahead of Spain and Italy. That's quite a jump in 60 years.

    There's definitely a high-tech feel to Seoul and its 11 million people. The storage lockers at the show grounds used my thumbprint to release my luggage, and the lock on my hotel room door was actually a smartphone-like digital keypad that I programmed with my personal code when I checked in.

    From a more mundane plastics point of view, South Korea is a sizable market. It has 49.8 million people, but its domestic injection molding machine market is 3,600 machines a year. That's equal (in number at least) to the United States,

    which has six times the population and nearly 10 times the GDP.

    Of course finding a niche for your product as a foreign company is the key part, and Korea has several hundred domestic machinery makers and equipment trading companies you'll be competing with.

    But some of those companies seemed unsure of their global niche, and this was where some saw opportunity.

    The head of one Korean injection molding machine maker told me, for example, that bargain hunters will buy Chinese machines and those who need top-end equipment will buy European or Japanese. Fortunately he said he had a strong domestic position but he felt his company needed to work on improving its competitive position globally.

    Korean mold makers, on the other hand, were saying the FTAs looked good for them, with their current price advantages over the U.S. and European competitors now looking better.

    One statistic I saw suggested that the U.S. FTA was working to Korea's advantage. The Korean press reported that the FTA increased Korea's trade surplus with the United States by 40 percent, to $14.6 billion, in the first 11 months of the trade pact.

    That seemed to run counter to the general talk of the plastics show, however, and it's not possible here to take a thorough look at the FTAs. But putting that aside, it's clear that the trade deals and Korea's growing importance in the world economy is leading to more interest on the part of foreign companies.

    Toloken is Plastics News Guangzhou, China-based Asia bureau chief.

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