Economy

he world economy is expected to grow at a slightly higher rate in 1997 than last year, backed by the steady growth of advanced economies and the high level of economic advances made by developing nations, the Korea Institute for Economic Policy (KIEP) predicted in a recent report. Advanced economies are likely to grow from 2.1 percent to 2.5 percent this year, while developing countries are expected to post an average growth rate of 6 percent, estimated the report. Growth rates in countries that have abandoned economic systems based on central planning for market economies, are forecast to reach 4 percent this year.

Bolstered by steady economic growth, world trade volume is expected to grow at an annual 7 percent rate in 1997, the report also forecast. Trade by advanced countries will rise 5.4 percent this year, while developing countries are likely to see their trade volume surge 11 percent.

he economic gap between South and North Korea continues to widen,with Seoul's gross national product (GNP) reaching over 20 times that of Pyongyang in 1995, according to a report from the National Statistical Office (NSO). South Korea's GNP reached $451.7 billion in 1995, or 20.3 times North Korea's GNP of $22.3 billion.

The GNP gap is up from 17.8 times in 1994, six times in 1985, 3.2 times in 1975 and 1.6 times in 1965. Between 1990 and 1995, the North Korean economy posted an annual 4.5 percent negative growth rate on average, with its real GNP for 1995 amounting to 76 percent of that for 1989. By contrast, the South Korean economy grew by an annual average of 7.8 percent during the period and its 1995 real GNP was 1.6 times that recorded in 1989. During the 30-year period between 1965 and 1995, South Korea's per-capita GNP increased 96-fold, while that of the North rose 5.9 times.

The report also suggested that there is a big gap in external trading between the capitalist South and the communist North. In 1995, South Korea's trade amounted to $260.1 billion, or 126.9 times North Korea's $2.05 billion.

orea will be the eighth largest contributing country to the growth of the world economy over the next five to ten years, the World Economic Forum (WEF) said. The ratings were based on factors such as the size of the economy and growth potential.

Policy

n line with its capital-market liberalization plan, Korea will open a tiny additional portion of its tightly-closed, $85 billion bond market to foreign investors this year.

Beginning January 3, foreigners will be allowed to invest in unsecured bonds issued by domestic small- and medium-size enterprises, while a ceiling on foreign ownership of convertible bonds (CBs) floated by such firms will be raised, the Ministry of Finance and Economy announced.

To be eligible to issue unsecured bonds, small-and medium-size enterprises should be listed or registered on the over-the-counter market. They should also have a credit rating of BB or higher as assigned by one of the nation's three rating agencies. The value of unsecured bond issues will be limited to their net worth, which will be subject to prior approval from the Secu-rities and Exchange Commission.

A ministry official said that about 150 small- and medium-size enterprises meet the requirements and that some 30 businesses will be able to issue unsecured bonds worth $200 million this year alone.

oreign corporations with no production facilities in Korea will be allowed to receive value-added tax (VAT) credits for business-related expenses beginning this year, according to a tax enforcement decree.

Foreign corporations will thus be entitled to receive a refund on the 10 percent VAT paid on their purchases of goods and services here. Accommodation expenses of company officials, advertising fees, utility charges and office rents are eligible for VAT credits according to the revised decree, enforcing the 1996 Tax Law, announced by the Ministry of Finance and Economy.

The introduction of the VAT credit system is designed to match Korea's taxation policy to those of the advanced nations that impose a VAT system, a ministry official said. The initiation of the VAT credit scheme will enable Korean corporations operating in Germany to receive VAT credits as Germany applies a principle of reciprocity on the taxation of foreign firms, he added. To receive credits for VAT payments made for the year, foreign corporations should submit related documents to tax offices by the end of next June.

government office building will be built where the Traffic Broadcasting Station is currently located, near the existing Government Office Building in central Seoul, the Ministry of Construction and Transportation announced. It said that the new building will have 18 stories above the ground and six underground.

This plan and others were approved at a meeting of a committee for the restructuring of Seoul and its surrounding areas, headed by the prime minister. According to the ministry, the new government office building, which is planned to have reception halls, among other amenities, will be used mainly by the Ministry of Foreign Affairs.

The committee also authorized nearly 1,000,000 square meters of the land area reserved for a projected 1.5 million square meter publication complex in Paju, Kyonggi Province, for the development of an industrial area. Publication facilities will be housed in the projected industrial area, the ministry said.

Investment

nformation on investment abroad is now available on CD-ROM, the Korea Trade-Investment Promotion Agency (KOTRA) reports. The "KOTRA Information on Overseas Investment Database" holds information on 32 countries, including 14 from the Asia-Pacific region and the Middle East,10 in Europe and five in Central and South America. It contains information on each country's economic data, industrial strengths and characteristics, as well as market overviews and investment policies. The information contained in the package is estimated to equal 20,000 pages of normal A4 size paper. One of the important advantages of using the CD-ROM includes the ability to view information on two countries at the same time, offering a chance to better compare the two.

Local companies' direct foreign investments have been growing rapidly in recent years and are set to soar in the near future, especially in the Asia-Pacific region. KOTRA expects companies to find the information on the CD-ROM interesting as well as useful for future ventures abroad.

The package is only available through mail order. For more information, call the Hanseul Soft Company at (02)557-7792.

ne-third of Korean-label home electronic appliances was made outside the nation this year, figures from domestic electronic companies showed. The ratio of overseas production in the nation's total home electronic output for the first ten months of last year was 34.7 percent, up from around 20 percent in 1995.

Offshore production was most brisk for car audio systems at 44.3 percent, or 1.35 million units, of the total rolled out of factories in other nations. The number of color TVs manufactured overseas totaled 36.88 million units, accounting for 40.3 percent of Korean companies' total color TV production. The overseas production ratio for VCRs, refrigerators and washing machines ranged between 25.9 percent and 31 percent.

Trades & Markets

ccording to industry figures, Korea has emerged as an "oddity" in the world's paging service market as the country's paging penetration rate has exceeded the unprecedented 27-percent mark. The nation's beeper users totaled 12,266,233 at the end of November, representing a penetration rate of 27.3 percent, one of the highest such rates in the world. The market penetration rate rises to as high as 31.6 percent in the Seoul region, where 6,630,222 of the 21 million residents are subscribing to a paging service.

Korea Mobile Telecom (KMT) had 2,884,988 paging subscribers in the capital area as of November 30, while rivals Seoul Mobile Telecom (SMT) and Naray Mobile Telecom (NMT) had 1,932,959 and 1,812,275 subscribers, respectively.

standardized contract for trade between Korea and China has been developed and finalized, according to the Korea Trade-Investment Promotion Agency (KOTRA).

The "Model Terms of Contract for Sale of Goods between Korean and Chinese Firms and Corpor-ations" was drawn up and finalized by the Korea-China Trade Contract Terms Study Committee. It was signed by representatives of KOTRA and the Chinese Foreign Trade Contract Terms Study Com-mittee at the office of the Ministry of Foreign Trade & Economic Cooperation in Beijing last month.

Such a contract is considered necessary because of the many different trade practices engaged in by the two countries. The contract aims to standardize and regulate what traders from both countries consider to be gray areas in their increasingly international businesses.

aewoo Electronics executives expressed deep shock and concern over the French government's alleged decision to call off the sale of the electronics giant, Thomson SA. In a controversial statement, the French Finance Ministry said it will suspend the proposed sale of the consumer electronics maker's Thomson Multimedia unit to Korea's Daewoo Electronics. The ministry said its policy reversal will also affect the planned sale of Thomson SA's defense electronics unit, Thomson-CSF, to the French Lagardere Group, which is jointly bidding with Daewoo to take over Thomson SA.

Bae Soon-hoon, chairman of Daewoo Electronics, and company executives held an emergency meeting in Seoul to deal with the Thomson issue and decided to work out proper countermeasures through close consultations with its French partner, the Lagardere Group. Shortly after the meeting, Daewoo Electronics issued a statement, expressing deep outrage and shock over the French government's decision to halt Thomson SA's privatization program.

Meanwhile, if France does indeed reverse its promises, Korea's Ministry of Trade, Industry and Energy said Seoul will carefully evaluate France's decision to determine whether or not it discriminates against South Korea.

The Daewoo spokesman stressed that Thomson Multimedia workers' fears for their jobs and working conditions following a Daewoo takeover "are absolutely groundless" as Daewoo plans to expand the number of local employees at Thomson Multimedia in the long term.

he American aerospace company Lockheed Martin (LM) has been selected as the "priority supplier" of the satellite body for the Mugunghwa Satellite (Koreasat) 3, Korea Telecom (KT) announced. Hwangbo Han, director of KT's satellite business division, said in a news conference that LM beat out two rivals - Hughes of the United States and Aerospatiale of France - in the bid to win KT's satellite manufacturing deal.

"LM was able to secure the Koreasat 3 contract because it offered the lowest bid in the second screening stage," said Hwangbo, who refused to reveal the exact amount of LM's bid, but hinted that it does not exceed $100 million. LM, based in Sunnyvale, California, supplied satellite bodies for KT's Koreasat 1 and 2 projects at a total cost of $150 million. The company has successfully manufactured a total of 200 satellites over the past 40 years.

KT plans to hold further negotiations with LM before signing a formal contract by the end of January. Koreasat 3 will be launched in July 1999 and start commercial operations in September of the same year.

Unlike Koreasat 1 and 2, which only covered the Korean Peninsula, 12 of Koreasat 3's 24 communication channels will be designed to cover Southeast Asia.

orea and Chile have signed an accord aimed at boosting bilateral ties in the field of telecommunications. The arrangement was initialed by Vice Minister of Infor-mation and Communication Lee Kye-cheol and his Chilean counterpart, Gregorio San Martin Ricci, in Santiago in November.

Under the cooperation accord, the two countries plan to expand personnel exchange programs in the telecom sector. The accord is also likely to expedite exports of Korean-made telecom equipment, including TDX switching systems and CDMA (code division multiple access) cellular systems, to the South American country. Chile, which gained its independence from Spain in 1918, formed diplomatic ties with Korea in 1962. The trade volume between Korea and Chile topped $1.6 billion in 1995.

G Electronics Inc. succeeded in its bid to be the sole supplier of air conditioners to Libya, thus taking another bite out of the North African market, a company spokesman said. The local electronics firm has signed an agreement with the Arab Industrial Engineering Co. (AIEC), an electric corporation run by the Libyan government to be the country's only air conditioner supplier over the next three years. The contract is estimated at some $42 million, or 36,000 units.

As Libya has a socialist economic structure, products can only be distributed through government designated firms after passing strict screening procedures. Despite the complicated procedures, the competition for such contracts is fierce, because once a contract is won, the firm is designated as the sole supplier of the particular product.

LG outbid such global brands as Sharp of Japan, Carrier of Italy and Airwell of France, advancing a step in becoming a major player in the northern African market. The electronics firm is also planning to provide air conditioner installation know-how, technical agreements and mechanical parts for air conditioners. LG currently distributes air conditioners in Tunisia and has succeeded in taking a 60 percent market share, making it the biggest seller of air conditioners in the Marghreb region.

Events

orea will host the opening game for the 2002 World Cup and the co-host, Japan will be the venue for the final match of the soccer tournament. These points were disclosed by a source close to the meeting between soccer officials from Korea, Japan, and the Federation of International Football Association (FIFA) in Zurich.

The tournament will be officially called "2002 FIFA World Cup Korea-Japan," the source confirmed. Under the decision finalized at the meeting, the match to decide the third and fourth places will be played in Korea. Korean and Japanese officials also agreed to equally share the 32 matches, the source said.

Web Hits

ast December, KOTRA started to provide world wide web users with "Investment Climate in Korea" through the internet. This database covers the procedures of investment, assistance systems offered by the Korean government for the foreign companies, general information on Korea, Korea's industrial information, the investment climate of all the provinces of Korea, and much more.

This multimedia service, including images, graphics, sound, moving pictures, and other various functions, is unique in this kind of on-line information provided in Korea. Also this database is practical for communicating with KOTRA with functions such as visitor registration, bulletin board, and sending investment inquiries. (address: http://www.kotra.co.kr )