Thursday, 21 September 2017 Sydney
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Trade Opportunities to Strengthen between Australia & Korea::

With this year marking the 50th anniversary of diplomatic relations between Australia and Korea, trends in trade and investment continue to strengthen, says Martin Walsh, Senior Trade Commissioner at Austrade, Seoul.

Korea has maintained its position as the third-largest merchandise export market for Australia after China and Japan. Investment in Australian minerals and energy has been the traditional area of interest for Korean investors, but Martin Walsh says the Australia-Korea relationship will blossom further this year, with the increasing involvement of Korean companies in manufacturing for the energy sector.

“We’re seeing Korean companies doing business such as building offshore platforms,” he says. “The beauty of this is that the physical export traders are in Australia’s favour, as we export a lot more physical products to Korea than Korea exports to us.”

Since 2007, Walsh has been the Senior Trade Commissioner of Australian Trade Commision (Austrade), at the Australian Embassy in Seoul. His responsibilities include facilitating and promoting trade and two-way investment between Australia and the markets of Korea and Mongolia. Prior to this, Walsh served as Austrade’s National Manager for Infrastructure and Major Projects in Sydney for four years, and also had posts as Trade Commissioner in China and Taiwan.

Austrade – bringing complementary partners together

“Austrade is the Federal Government’s trade promotion facilitation trade agency and we help exporters around the world,” Walsh says. “In particular, we assist Australian businesses in the Korean market, and we also assist Korean companies wishing to invest in Australia.”

Austrade covers a whole range of areas, including food, agri-business, creative industries as well as infrastructure and energy sectors.

One example of Austrade’s recent role includes helping the clean energy sector. “We are helping Australian clean energy technology suppliers in the market, as well as Korean companies that want to partner with Australian companies in Australia as we move towards carbon-pricing and, ultimately, a trading system.”

Major offshore gas developments in Western Australia also illustrate the function of Austrade. “We’re seeing Korean companies doing business such as building the liquid natural gas processing trains for the Gorgon project in Western Australia,” Walsh says. “Hyundai Heavy Industries won a A$3 billion-contract to build that facility for them. Seeing Korea win business like this is quite encouraging, as it helps cement the two-way investment between the two countries.”

works-being-undertaken_opt
Gorgon Project in Western Austraiia.

Changes in this year’s trends

While there is still the traditional interest by Korean companies in the energy sector, in the past year the Queensland floods and the foot-and-mouth disease (FMD) have affected Australia-Korea business trade and investment.

The Queensland floods wiped out some Australian crops in demand by Korea. “For example, some potato growers lost their crops and have been unable to supply the special high -grade potatoes to Korea,” Walsh says. “This has caused difficulties for certain food processors in Korea.” Damage to the wheat crop in Australia due to the floods has further created problems for grain importers in Korea.

Food security concerns including the FMD outbreak earlier this year in Korea have also driven new interest among Korean companies. “The FMD really damaged the strength of the livestock industry in Korea. Many head of beef and dairy cattle, as well as the pork sector, have been destroyed because they are in infected areas or have contracted FMD.

“Dairy shortages in Korea have driven Korean companies to look at investing in value-added agribusiness in Australia in recent months. This includes dairy products such as cheese and milk powder,” Walsh says.

There is also a strong demand for Australian beef to fill the gap where its presence is selling more than US beef in the Korean market. Despite the difficulties, Walsh says he expects to see more interest from Korean in Australia’s agribusiness industries in the future.

Challenges Australian companies face in Korea

When Australian business companies enter the Korean market, Walsh says there are a few challenges. “Korea has a higher cost structure than China, which makes Korea less attractive for Australian investors. There is also the challenge of really understanding the Korean market, as it is not a Western market,” says Walsh. “Even though things such as McDonalds and KFC and all the coffee brands around superficially appear Western, in fact the way of doing business is very different.”

Walsh says often the number of middle-men in business processes makes it difficult for foreign companies to enter Korea. “Korea is one of the few markets where you don’t have an IKEA store,” he says. “The number of middle-men involved in the process of importing in retail is very significant here and the add-on costs mean some of the mega-marts and stores such as IKEA have decided not to come.”

“Australia enjoys a really good relationship with Korea and they view us very favourably”

Overcoming difficulties

Walsh says despite challenges for Australian businesses in Korea, there are ways to overcome them. “You’ve got to pick an approach that works for your product,” he says. “Retailers are complex, saturated market in some areas, so market research is really important and talking to people such as the Australian Chamber of Commerce (Austcham) and Austrade.”

In Australia, Walsh says linking with the Australia-Korea Business Council is also helpful to obtain advice about entering the Korean market.

Looking ahead

“Australia enjoys a really good relationship with Korea and they view us very favourably. We’ve been a friendly country, we fought for Korea during the Korean war, and we’ve been a really reliable supplier of energy and resources to the country over many years,” says Walsh.

There is also a good understanding of Australia in Korea. As trade and investment continues to strengthen between the two countries this year, Walsh says this will be time to lift the profile of Korea in Australia.

To mark 50 years of Australia-Korea formal diplomatic friendship, Austrade hosted an Australian Day promotion in January. Austrade also hosted a tradeshow, Seoul Food and Hotel 2011, in April for the food, beverage and wine sectors.

Joni Sham

copyright Australia Korea 50 Years of Friendship