Recent weeks have seen Korea post a string of gloomy economic figures.
The country’s trade balance went into the red for the first time in two years in January, according to data released by the Ministry of Knowledge Economy last week.
Figures from the central bank revealed a week earlier that gross domestic product grew by only 0.4 percent in the final quarter of 2011, the slowest rate in two years. Consumption by indebted households declined for the first time in three years, slipping 0.4 percent in the October-December period.
Such downbeat indicators showed that Asia’s fourth-largest economy is slowing down more steeply than expected as weak domestic consumption compounds a slump in overseas demand for its goods.
What appeared to have caused most concern for the export-driven economy was the first monthly trade deficit since January 2010, accompanied by the first contraction of exports in 27 months on a year-on-year basis. Last month’s deficit of $1.96 billion, a sharp drop from a surplus of $3.41 billion in December and $2.9 billion a year earlier, was attributed mainly to falling orders from European countries struggling with debt problems, coupled with seasonal factors.
With total exports shrinking 6.6 percent on-year to $41.54 billion in January, shipments to Europe plunged by 44.8 percent. Increases in exports to Asian countries ― 37.2 percent for Japan, 22.3 percent for the 10-member Association of Southeast Asian Nations and 7.3 percent for China ― helped narrow the otherwise wider deficit gap.
With the jump in shipments to Japan resulting partly from the temporary collapse of supply chains in the wake of the earthquake and tsunami last March, Korean companies expect demand for their products in Asian markets, which have a growing consuming class, to continue increasing for years to come.
The emergence of Asia’s middle class with discretionary spending power has led them, like their competitors from Japan, which recorded its first trade deficit in more than three decades in 2011, to shift their focus to digging further into the region’s domestic markets from running manufacturing facilities there for exports to other parts of the world.
In replacing the strategy of “Made in Asia” with “Made for Asia,” Korean companies are setting their eyes particularly on the growing opportunities in ASEAN member states. According to statistics from the International Monetary Fund, the purchasing power parity-based GDP of the five major ASEAN economies ― Indonesia, Malaysia, the Philippines, Thailand and Vietnam ― increased by 42 percent from 2005 to 2010. It is projected to rise by a further 54 percent over five years through 2015.
In a survey of 219 Korean corporate executives, conducted by the Samsung Economic Research Institute last year, more than half chose Southeast Asia as a promising market to replace China. As the region’s main advantages, they cited the potential as a consumption market (58.9 percent) and young abundant labor force (16.0 percent).
The popularity of Korean pop culture in the region is also helping provide more opportunities for Korean corporations, leading to a heightened consumer perception of their products and brands.
Kim Jong-sang, director in charge of Asia at the Korea Trade-Investment Promotion Agency, said Korean consumer goods are very popular with customers in emerging Asian markets.
“The rapid growth in domestic consumption is creating more business opportunities for retailers, in particular,” he said, adding construction companies are also placed to benefit from a wide range of infrastructure projects in the region.
By Kim Kyung-ho (khkim@heralmd.com)
