Our comprehensive assessment of South Korea's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect South Korea, as well as the latest industry developments that could impact South Korea's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in South Korea before your competitors.

Country Risk

South Korea Country Risk

BMI View:

Core Views

  • While we remain relatively constructive on South Korea's economic growth in 2014, as we expect real GDP growth to accelerate to 3.0% from 2.8% in 2013, our forecasts are fairly below consensus. We highlight growing risks from Corporate Korea as an increasing number of chaebols, particularly within the construction sector, are succumbing to the prolonged slump in the domestic real estate sector. Additionally, a slowdown in China's economy, and the ensuing drag on the Korean economy, is very much on the cards

  • While the prescribed targets laid out in South Korea president Park Geun-hye's economic reform plan may appear overly ambitious, the proposed drive towards deregulation and support of the services sector, if realised, will provide the Korean economy with new pillars of economic growth and set the country on a more sustainable path of economic expansion. Also,...

To read the full article Register for Free or Login

South Korea Operational Risk Coverage (9)

South Korea Operational Risk

BMI View:

BMI View: South Korea's labour market is reasonably well suited to attract foreign businesses. It boasts a high level of education and employable skills amid reasonably high unemployment. This means there is a large number of educated, skilled labourers seeking work, representing significant opportunity for employers. However, the major risks involve a shrinking labour force - the result of an aging population - and the limitations and pressure placed on South Koreans by the rigid education system. Overall, South Korea receives a Labour Market Risk score of 71.3, placing it fifth out of 29 states in the Asia region. 

As mentioned, the availability of labour in South Korea is reasonably good, with high levels of basic skills across the adult population, and significant unemployment leading to fierce competition for jobs. The major risks concern future trends of the labour force, with an aging...

To read the full article Register for Free or Login

South Korea Crime & Security

BMI View:

BMI View: South Korea offers a generally safe and secure operating environment for foreign workers and businesses, with a low crime rate and minimal risks from terrorist activity. This makes it one of the safest locations for expatriates in the world. However, the country faces a perpetual risk of interstate conflict with its northern neighbour, with long periods of heightened tensions being the norm, punctuated by occasional armed confrontations. Although there has been no full-scale military conflict with North Korea for several decades, the risk of miscalculation, misunderstanding or belligerent actions leading to war remains high. In addition, cyber attacks, often launched by the North, are becoming a key risk to business activity, particularly due to South Korea's reliance on the internet. South Korea's overall score in the BMI ...

To read the full article Register for Free or Login

South Korea Labour Market

BMI View:

South Korea's labour market is reasonably well suited to attract foreign employers. It boasts a high level of education and employable skills amid reasonably high unemployment. This means there is a large number of educated, skilled labourers seeking work, representing significant opportunity for employers. However, the major risks involve a shrinking labour force - the result of an aging population - and the limitations and pressure placed on South Koreans by the rigid education system. Overall, South Korea receives a Labour Market Risk score of 71.0, placing it fifth in the region.

As mentioned, the availability of labour in South Korea is reasonably good, with high levels of basic skills across the adult population, and significant unemployment leading to competition for jobs. The major risks concern future trends of the labour force, with an aging population and relatively low retirement age indicating that the active labour force of...

To read the full article Register for Free or Login

South Korea Logistics

BMI View:

BMI View: South Korea has a very developed logistics network, with a high-quality and diverse transport network providing good access to international supply chains. Businesses will further benefit from the minimal trade procedures and low trade costs. That said, while utilities costs remain low for now, over the long term we expect South Korea's overdependence on raw material imports to drive up costs if it fails to diversify its energy supply.

South Korea's transport network provides extensive transportation links across the country for both cargo and passengers. Road is the predominant form of freight transport, and extensive and high-quality roads traverse the country. The country's high-quality rail infrastructure, with bullet-style trains such as the Korea Train eXpress (KTX) reaching up to 350km/h, facilitates quick and efficient transport across the island,...

To read the full article Register for Free or Login

South Korea Trade & Investment

BMI View:

BMI View: Trade and investment risks are low in South Korea owing to the country's open economy, relatively low fiscal and trade barriers and minimal red tape plaguing its bureaucracy, as well as the effective enforcement of the rule of law. As a result, despite a dip during the global financial crisis, foreign investment inflows   are recovering, a trend we expect to continue in the foreseeable future. That said, risks remain for foreign investors, notably a number of burdensome taxes and the weak enforcement of physical property rights. For these reasons, the country receives an overall scor e of 67. 1 out of 100 for Trade A nd Investment R ...

To read the full article Register for Free or Login

South Korea Industry Coverage (21)

Agribusiness

South Korea Agribusiness

BMI View:

BMI Industry View

We are optimistic about the long-term prospects of South Korea's agricultural sector. Our view is based on the government's decision to gradually remove barriers to trade and move up the value chain especially to support its growing food exporting industry. Indeed, we believe that the growing demand for exports of Korean should boost domestic agriculture production. Government-led efforts such as the expansion of education and financial support for farmers to allow them entry into the food processing business, plans to modernise the traditional methods of food production, as well as creating new agricultural food districts for exporters and introduce state designation of food exporting companies will benefit the industry over the longer term and help it to remain relevant to the South Korean economy.

Key Forecasts

  • ...

To read the full article Register for Free or Login

Autos

South Korea Autos

BMI View:

Sales

Domestic auto sales have remained resilient despite weakening consumer confidence, with the Korean Automotive Manufacturers Association (KAMA) announcing 1.9% year-on-year (y-o-y) growth for domestic vehicle sales in July, underpinned by new car models being released in the market. On a year-to-date basis, sales have come in at 840,914 units, representing 5.0% y-o-y growth.

Auto sales figures are largely in line with our expectations, and we maintain our forecast of 3.2% growth for 2014, based on a weaker H214. We are, however, raising our sales growth forecast for 2015 from 1.1% to 2.7%, on the back of an expected economic pick-up, with private consumption growth expected to come in at 5.0% in 2015, up from 3.4% in 2014. 

Strikes Fuel Long-Term Production Woes

On the production side, plant workers at...

To read the full article Register for Free or Login

Commercial Banking

South Korea Commercial Banking

BMI View:

...
Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

To read the full article Register for Free or Login

Consumer Electronics

South Korea Consumer Electronics

BMI View:

BMI View:   W e forecast a CAGR of 4. 4 % 2014-2018 to USD 28.1 bn in 2018.  W e expect the South Korean consumer electronics market will remain in positive growth territory over the medium term but growth will be slow due to market maturity and underperform emerging markets in the region. In the short term, high household debt levels will be a constraint on consumer spending , and over the medium term high penetration rates in almost...

To read the full article Register for Free or Login

Defence & Security

South Korea Defence & Security

BMI View:

BMI View:   Continued tension with Pyongyang dominates the outlook for South Korean defence and security. The uncertainty caused by the bellicose regime to the north has driven substantial defence spending increases and will continue to keep Seoul on high alert. In addition to this headline volatility, we are increasingly interested in defence exports as growing South Korean expertise creates new opportunities to export globally. The Middle East and Sub-Saharan Africa will be key areas for this growth.

A significant portion of defence expenditure funds are expected to be used to upgrade South Korea's missile defence system. The Korea Air Missiles Defence system (KAMD), or so called 'kill chain project' will see Seoul move from its German-made PAC-2 missile system to the PAC-3 system produced by American contractor Lockheed Martin. This project is expected to cost the...

To read the full article Register for Free or Login

Food & Drink

South Korea Food & Drink

BMI View:

BMI View:   Total food and drinks consumption in South Korea is expected to increase moderately over the forecast period between 2013 and 2018. The market is relatively mature with per capita spending on food and drinks items already high, which effectively limits the possibilities for more substantial expansion over the coming years. Nonetheless, food consumption growth will be sustained by a stable economic outlook and gradually strengthening consumer spending power, which will offer opportunities for premiumisation.

Headline Industry Data (Local Currency)

  • Total food consumption growth year-on-year (y-o-y) in 2014: +2.8%; compound annual growth rate (CAGR) to 2018: +4.7%.

  • Per capita food consumption growth y...

To read the full article Register for Free or Login

Freight Transport

South Korea Freight Transport

BMI View:

The Korean economy grew at a slower rate in Q214 due to a contraction in domestic consumption. While we expect the fiscal stimulus and accommodative monetary policy to provide a temporary boost to growth, these measures will not take effect until Q414. We therefore maintain our real GDP growth forecast at 3.5% for 2014, and forecast that growth will be marginally stronger in 2015 at 4.1%.

Korea's economy grew more slowly in Q214 at 3.6% year-on-year (y-o-y) compared to 3.9% y-o-y in Q114, with slower domestic consumption growth acting as the largest drag. While exports provided some reprieve, weak domestic factors continue to exert downward pressures on headline growth figures. Contracting household consumption in the wake of the Sewol ferry disaster in April weighed heavily on headline figures, shrinking by 0.3% quarter-on-quarter (q-o-q) in Q214 (compared to growth of 0.2% q-o-q in the previous quarter).

...

To read the full article Register for Free or Login

Information Technology

South Korea Information Technology

BMI View:

BMI View: W e expect spending g rowth in the South Korean IT market will be considerably lower than emerging markets in APAC, but considering the advanced state of the South Korean market, these growth rates are robust , particularly in comparison to EU markets . T he South Korean IT market is forecast to grow at a CAGR of 7. 5 % 2014-2018 to reach a value of KRW 37.9 trn in 2018. One reason for a relatively...

To read the full article Register for Free or Login

Infrastructure

South Korea Infrastructure

BMI View:

BMI View: We see no reason to deviate from our expectations of a continuing slowdown in South Korea's construction sector. This is primarily because of our downbeat outlook towards all of the country's construction sector drivers - namely, weak macro fundamentals for residential buildings, a poor export outlook for non-residential buildings and declining government spending on infrastructure.

Some notable factors that affected infrastructure development in recent quarters were:

  • The slowdown in South Korea's construction industry that we have been calling for appears to be under way. According to latest data from the Bank of Korea (BoK), the South Korean construction industry expanded a seasonally-adjusted 2.4% year-on-year (y-o-y) in Q114, slowing from 3.9% in Q413. Overall building...

To read the full article Register for Free or Login

Insurance

South Korea Insurance

BMI View:

BMI View: Developments through 2014 confirm our view that South Korea's massive insurance sector should continue to achieve steady growth in premiums through the forecast period. Demographic changes underpin rising demand for particular kinds of insurance. Many of the companies have pricing power (in addition to other obvious strengths). Crucially, distribution strategies and product portfolios have been changed in order to boost profitability. This is at a time that government policy is requiring other changes that are shareholder friendly.

2014 will probably be seen by insurers in both major segments of the South Korean market as a challenging period. Interest rates have fallen (from already low levels), undermining the profitability (to the insurers) of some of the products that they are offering. Regulatory decisions have increased costs and interrupted telemarketing sales. In the life...

To read the full article Register for Free or Login

Medical Devices

South Korea Medical Devices

BMI View:

Espicom Industry View: The South Korea n medical device market continues to see sluggish growth . Neverthe le ss, market fundamentals remain strong with a rapidly ageing population and increasing demand for sophisticated medical technology. Medical device imports are likely to come under increasing pressure from locally produced products in certain sectors. Although the domestic manufacturing industry remains fragmented, the number of producers has more than doubled in recent years and domestic output is expected to see steady growth as South Korea seeks to further reduce its reliance on imported products, whilst boosting its share of the global medical device market.

...

To read the full article Register for Free or Login

Metals

South Korea Metals

BMI View:

BMI View: South Korean metals consumption growth is set to moderate in H 214 and 2015 , as the country's exports of manufactured goods are hit by a global economic slowdown and an expected contraction in Europe . South Korea is a major producer of steel and slab zinc, but domestic mining output of ferrous and nonferrous metals is small and reliant on imports for the raw materials required by the metals industry. Domestically produced metals and metal products are fundamental to the country's industrial base, as well as trade.

South Korea has very small reserves of copper and the production level of both mined and refined copper is insufficient to meet domestic demand. The country has to rely on imports to supplement domestic...

To read the full article Register for Free or Login

Mining

South Korea Mining

BMI View:

BMI View: The cooling of the Chinese economy will remove the shine off mining investment in South East Asia . Frontier regions will be the first places where miners pull back their investment as brownfield projects take precedence . Nonetheless, it is certainly not all gloomy in the mining sector. Resilient demand from the power sector will continue to support growth in coal production, while the positive development of the nuclear sector in South Korea fuels uranium mining production.

Despite the rich deposits of untapped minerals on offer, we believe South East Asia's mining sector will struggle to uncover its potential over the coming years. The cooling of Chinese economic growth will remove a crucial pillar of support for mineral prices, particularly industrial metals such as iron ore and copper. For instance, we...

To read the full article Register for Free or Login

Oil & Gas

South Korea Oil & Gas

BMI View:

BMI View:   South Korea's industrialised economy and poor upstream prospects will keep the country a large importer of crude oil and natural gas. Poor crude oil refining margins and high oil prices may turn the country's large petrochemical sector towards gas, which would support the growing importance of gas over oil in the economy. 

...
Headline Forecasts (South Korea 2012-2018)
  2012e 2013e 2014f 2015f

To read the full article Register for Free or Login

Petrochemicals

South Korea Petrochemicals

BMI View:

BMI View: T he South Korean petrochemicals market will suffer from weak growth in automotive, construction and retail segments, according to BMI 's latest South Korea Petrochemicals Report. Korean petrochemicals production will therefore depend on exports, which should be shored up by the country's trade deal with China that gives it an advantage over competitors like Taiwan and should help absorb the large increases in Korean aromatics capacities in the years ahead. However, the US's surge in petrochemicals growth based on rising shale gas exploitation will pose a major challenge to Korea's naphtha-fed industry, leading to a potential squeeze in margins.

South Korea's petrochemical industry is mature and highly integrated, although the country lacks significant oil and gas reserves. In 2013, combined...

To read the full article Register for Free or Login

Pharmaceuticals & Healthcare

South Korea Pharmaceuticals & Healthcare

BMI View:

BMI View:   The domestic pharmaceutical industry will continue to have conflicts with the South Korean government over price controls. As a result of these price controls, growth of the pharmaceutical market will be limited and firms need to expand overseas to sustain their businesses.

Headline Expenditure Projections

  • Pharmaceuticals: KRW16,106.7bn (USD14.71bn) in 2013 to KRW16,590.4bn (USD15.80bn) in 2014; +3.0% in local currency terms and +7.4% in US dollar terms. Forecast unchanged from Q414.  

  • Healthcare: KRW101,399.1bn (USD92.60bn) in 2013 to KRW107,708bn (USD102.6bn) in 2014; +6.2% in local currency terms and +10.7% in US dollar terms. Forecast...

To read the full article Register for Free or Login

Power

South Korea Power

BMI View:

BMI View:   While our medium-term outlook for South Korea's electricity sector remains positive, with fundamental factors such as stable economic, positive demographic growth and supportive public policy all provid ing power companies with opportunities, we note the growing conflict concerns about pollution and safety will weigh on profitability. However, in the short-term we believe the imperative to minimise electricity shortfalls will prevail, which should therefore see the government take a more positive stance to encourage the expansion of generation capacity.

We forecast overall power generation in South Korea to grow at an average of 4.2% per annum between 2014 and 2023,...

To read the full article Register for Free or Login

Real Estate

South Korea Real Estate

BMI View:

BMI View: South Korea boasts a well developed commercial real estate sector with a strong financial sector and an affluent population supporting demand for commercial property. The country's export sector, which is key to economic growth, means the country also has extensive demand for industrial space. While the market is dominated by local firms, including an increasing number of Korean conglomerates, foreign direct investment has been growing steadily in recent years.

The outperformer in the long term will be the retail sub-sector, driven by increasing demand for Western-style shopping experiences, as well as the arrival of international retailers and tourists into the country. Although the creation of new retail space could cause some fluctuation in rental and vacancy rates, in the long term the story is one of solid growth. This is true of all the cities that we cover, but we do note that although the retail...

To read the full article Register for Free or Login

Renewables

South Korea Renewables

BMI View:

BMI View : Our outlook for the South Korean renewable energy sector remains unchanged this quarter, but several recent developments in the regulatory environment pose significant risks to our long-term forecasts.

We are maintaining our 2014 growth forecast for non-hydropower renewable energy in South Korea this quarter as our assumptions for the sector remain relevant. Growth in 2014 will primarily be driven by wind and biomass energy, and solar energy to a lesser extent. We have maintained our long-term forecasts for renewable energy in South Korea this quarter and forecast non-hydropower generation to grow an average of 13.4% per annum between 2014 and 2023.

Key Trends And Developments

  • South Korea replaced its feed-in tariff system with a renewable portfolio standard (RPS) which will...

To read the full article Register for Free or Login

Shipping

South Korea Shipping

BMI View:

BMI View: South Korea's relatively strong Q1 2014 real GDP growth print has prompted us to upgrade our 2014 growth forecast to 3.5% from 3.0% previously. Korean exporters will continue to ride on the economic recovery in the developed markets for now while a recovery in real estate sector may support construction investment. That said, downside pressure is still likely to stem from China's slowing economy, elevated household debt levels, as well as risks of a continued contraction in business investment.

South Korea's economy has got off to a good start in 2014, maintaining its resilience even as economic momentum of some of its major trade partners have slowed. Real GDP growth expanded a seasonally-adjusted 0.9% quarter-on-quarter (q-o-q) in Q1 2014, maintaining the same pace of growth in Q4 2013. On a non seasonally-adjusted basis, real GDP grew 3.9% year-on-year (y-o-y), accelerating from 3...

To read the full article Register for Free or Login

Telecommunications

South Korea Telecommunications

BMI View:

BMI View: South Korea is one of the most advanced markets in the world and is the first nation to have launched LTE-advanced services commercially. Only SK Telecom is still offering 2G services in the market and we expect 2G to be completely phased out by 2015. The key mobile growth driver is expected to be the migration of customers from 3G to 4G, although we see some downside risk to the pace of this transition after the handset distribution law takes effect from October 2014.

Key Data

  • The mobile market has continued to expand, even with penetration above 119% by 2013. Total subscriptions reached 55.982mn in Q114.

  • The fixed-line market is still expanding, mostly due to the growth of VoIP, but it is slowing...

To read the full article Register for Free or Login