Economy

Automobile production will exceed three million units next year, thanks to favorable conditions in the international auto market and the recent fall in the value of the Korean won. The Kia Economic Research Institute published a study on the future of the automobile industry in which it predicted an increase in domestic automobile production of 12.4 percent to 3.2 million units.

With Samsung's auto factories coming on-stream at the beginning of next year, the number of cars manufactured domestically will exceed three million units, allowing Korea to keep its position as the world's fifth largest automaker. The report predicts that domestic automobile sales will rise 9.5 percent from 1.6 million units this year to 1.8 million units in 1998. Passenger car sales will rise 10.0 percent to 1.3 million units, buses 12.8 percent to 167,000 units, trucks 5.1 percent to 266,000 units.

The expectations for the domestic automobile market are based on the hope that the new installment plan introduced in the second half of this year will spur new purchases.

The entry of Samsung in the automobile industry will boost overall automobile production. The introduction of new models by other automobile manufacturers are expected to improve prospects for the automobile market by widening and stimulating consumer choice.

At the same time, the economy is expected to improve in 1998, thus raising consumer purchasing power. In the meantime, exports of cars are forecast to rise 12.4 percent from 1.3 million units to 1.5 million units influenced by the introduction of new models, the depreciation of the won, and the appreciation of the yen, so making Korean automobiles cheaper on the world market.

These positive prospects are expected to offset negative factors such as the entry of the Kia group into bankruptcy protection and saturation of the world automobile market.

Investment

Korea, Mexico Agree to cooperate on CDMA Korea has agreed to match its wired and wireless technology with Mexican satellite technology for advanced communications services. Core technologies in wired and wireless communications are TDX, CDMA (code division multiple access), IMT-2000 (International Mobile Telecommunication-2000), B-ISDN (broad-integrated digital network) and ATM (asynchronous transfer mode) switching system.

The two governments also agreed to exchange telecom experts, to cooperate in the standardization of telecom technology and to strengthen the mutual exchange of field-related information. The agreement was reached September 17 during talks between Korea's Vice Information and Communication Minister Park Sung-deuk and Mexico's Vice Communications and Transportation Minister Javier Lozano Alarcon.

Daewoo Motor Co. signed a joint-venture agreement with Ukrainian state-run automaker Avtozaz in Kiev to manufacture cars, the company announced on September 17. This will be Daewoo's second car venture in the former Soviet Union, following the establishment of the Uz-Daewoo plant in Uzbekistan.

The joint-venture corporation will be capitalized at $300 million in an even split, a spokesman said. The two companies plan to invest $1.3 billion in the joint venture to be located in Zaporizhia where Avtozaz has a factory. Within seven years the factory will be capable of manufacturing 255,000 cars a year. Daewoo will produce 80,000 units of a remodeled 1,100cc Tabria per year, and 150,000 units per year of a trio of the Lanos, Nubira and Leganza models.

Avtozaz, set up in 1960, has manufactured a total of 450,000 Tabrias since 1988 with some 20,000 employees but has been suffered a financial pinch recently with its production amounting to only 3,000 units last year.

Opel of Germany, a subsidiary of General Motors Corp. of the United States, also plans to roll out 25,000 units of its model in a separate contract with the joint-venture company, the spokesman said.

Policy

Foreign workers will be granted the same labor rights accorded to local workers, possibly next year, after undergoing training here for fixed periods. Accordingly, foreign workers will be entitled to the three basic labor rights, legal allowances and severance pays, the Ministry of Finance and Economy said on September 8.

Dubbed the training-employment system, it would replace the current industrial trainee system, which bans giving equal labor privileges to foreign workers.

Under the plan, foreign workers will be granted opportunities to work in Korea after due procedures if they receive training for a certain period, most likely of two years duration.

"The changes are designed to revamp the current foreign manpower system which encourages a number of industrial trainees to desert their original workplaces in search of higher wages,'' an MOFE official said.

Currently, there are 200,000 foreign workers in Korea who are mostly filling the so-called three-D jobs: those which are dangerous, difficult and dirty and shunned by Koreans. Of them, about 140,000 are illegally hired, staying beyond their training periods or working with tourist visas. "With the introduction of the new system, we expect a large proportion of illegal foreign workers to be diminished," the official said.

Trade & Markets

The export of vehicles took a turn for the worse in August, registering the first drop in outbound shipments in six months, the Ministry of Trade, Industry and Energy said on September 25. Ministry officials said the export on a customs clearance basis remained at $700 million in August, a decline of 2.2 percent over the corresponding month last year.

The last time a dip in the export of automobiles was recorded was in February when strikes over new labor laws hit production. "August's poor performance is mainly attributable to the ongoing economic slump which is further affected by the financial difficulties of the Kia group," one ministry official said.

The export of vehicles fell 51.2 percent in January and 10.8 percent in February but began to recover in March, posting an increase in outbound shipments of 21 percent in the second quarter, ministry statistics showed.

Financial difficulties are estimated to have cut exports by Kia Motors and Asia Motors by $200 million each in July and August for a total of $400 in two months.

The ministry said the performance of the first 20 days of last month showed an increase of 7.1 percent in exports but the final 10 days of the month proved to be exceptionally poor.

Meanwhile, the total export of automobiles in the first eight months of this year was tallied at $6,768 million, up 7.9 percent over the same period last year, the ministry officials said.

Korean automobiles are selling well in the European Union, registering double digit increases in sales for July and August. This compares favorably with the situation earlier this year when the nation's car makers posted declines amid sluggishness in European car markets.

Boosted by the sales, Korea auto makers' share of the European car market exceeded the two percent level from June to August. According to data compiled by the European Automobile Manufacturers Association, sales of Korean cars in the European market totaled 26,898 units in August, an increase of 11.9 percent over the same period last year.

This surpassed the average sales growth rate in the European car market of 5.3 percent. In July, Korean auto makers registered a 27.4 percent increase by selling 23,354 units.

Korean automobiles had a 2.0 and 2.2 percent market share in July and August, respectively. The cumulative sales of Korean cars as of the end of August amounted to 185,897 units, up 10.1 percent on a year-to-year basis.

In terms of cumulative sales, Volvo recorded the highest growth rate at 17.3 percent, followed by Japanese car makers which marked a 10.2 percent gain.

Seoul is the third most expensive place to live out of 34 major cities around the world, according to a recent report by the United Nations. With the cost of living in New York held as a base of 100, Seoul's cost of living index was found to be 115, behind Hong Kong (187) and Tokyo (135).

The cost of living of capital cities worldwide is tallied by the UN in order to calculate the appropriate salary and benefits for its personnel dispatched overseas. Last year, Seoul ranked fourth with 177 points, behind Hong Kong (192), Tokyo (155) and Geneva (118). Geneva slid down to 106 points this year, with Seoul taking its position.

Other high-priced cities scoring higher than 100 include Brasilia (112), Buenos Aires (104), Moscow (104), London (104), Vienna (103), and Manila (102). Singapore, Beijing and Brussels tied with the base-line set by New York.

If housing expenses are not considered, Seoul's rankings jumped from 21st place last year to 18th place although its score fell from 98 points to 96.

Other cities experienced a steep drop in their cost of living expenses when housing is not computed in, pushing up Seoul's ranking.

The import of luxury consumer and household products are steadily shrinking due to the protracted economic slump. However, imports of agricultural, fishery and dairy goods have been growing rapidly since their importation was liberalized in July.

According to the Ministry of Trade, Industry and Energy, imports of consumer products in August were down 8.7 percent on those of a year ago to $845 million. The decline is continuing. In July, imports dropped only 2.1 percent compared with the same month last year.

Specifically, golfing goods, imports of which enjoyed a steady increase during the first half of this year, suffered a 13.9 percent decrease in July and a whooping 34.1 percent plunge in August. Clothing slid 4.8 percent and 10.5 percent, respectively.

Imports of cellular phones plunged 75.7 percent in July and 80.9 percent in August while cars tumbled 44.5 and 52.3 percent, shoes 24.5 and 81.1 percent and toys 12.5 and 36.5 percent.

However, imports of meats and fishery products underwent increases in July of 10.2 and 9.7 percent, respectively, despite their downward trend at the beginning of the month. Last month, beef imports rose 96.8 percent and those of pork, 164.2 percent.

Cigarettes imports, which slid during the first half of the year, surged 207.9 percent in July and 128.6 percent in August, defying the domestic movement to prevent smoking on health grounds.

The import of color TVs rose 64.9 percent, video cassette recorders (VCRs) 290.6 percent, and electronic components 180.7 percent.

To paraphrase Henry Ford's famous quip that his customers could buy any color car as long as it was black, Koreans traditionally had their choice of color when buying home appliances - as long as it was white.

However, an increasing number of Koreans are breaking out of their narrow range of choice demanding more diversity of color in major appliances such as washing machines, microwave ovens and air conditioners.

Compared to other parts of the world such as the U.S. or Europe where the white is still the color of choice for many buying home appliances, the Koreans' desire for different colors signifies a revolution within the domestic electronics industry, an industry source explained.

For example, washing machines have been either white or off-white since they were introduced in the early 1970s. Since 1995, though, sales of washers in such colors as navy, green and dark brown have been booming. White washing machines barely register one percent of the total sold.

Similarly, 60 percent of microwave ovens sold are red, with green and blue ovens also showing a strong sales. The majority of microwave ovens made for the export market, by contrast, are white.

While air conditioners are still available only in white, a recent survey revealed consumers would prefer green or wood-patterned air conditioners. In light of consumer demand, air conditioners may soon be available in a variety of colors, the source predicted.

Refrigerators, however have been a conspicuous exception to the trend. While refrigerators are now available in green, black and dark gray, an overwhelming number of consumers still prefer white, probably because a pure image for something that contains food is more desirable. Also, since refrigerators are used by the whole family, a comfortably neutral color rather than something more eye-catching is chosen.

"While Koreans like the color white, this rule does not apply anymore in the case of home electronic appliances. People are preferring more diverse colors," the industry source said.

The Association of Southeast Asian Nations (ASEAN) has emerged as the nation's largest export market. According to the Ministry of Trade, Industry and Energy (MOTIE), Korea's shipments to ASEAN member countries reached $14.02 billion as of the end of August this year, surpassing those made to the United States, which was previously the nation's biggest export market.

Exports to the United States stood at $13.92 billion during the same period. The European Union and Japan came in third and fourth at $10.34 and $9.89 billion, respectively. ASEAN's share of the nation's total exports increased to 15.9 percent while those by the EU and Japan posted shares of 11.7 percent and 11.2 percent, respectively.

Comparison with the same period last year reveals the United States occupied first place, receiving $21.67 billion worth of Korean exports for a market share of 16.7 percent, followed by ASEAN at $20.27 billion with 15.6 percent. Japan and EU bought $15.76 and $15.32 billion worth of the nation's goods, registering 12.2 percent and 11.8 percent shares, respectively.

The sharp increase in exports to the ASEAN region is ascribed to a rise in the number of member nations to nine following the admission of Myanmar and Laos and the member nations' vigorous efforts to expand trade ties with Korea as part of their ongoing economic development plans.

By nation, exports to Singapore totaled $4.2 billion, followed by $2.96 billion and $2.46 billion to Malaysia and Indonesia, respectively. Shipments to Thailand and the Philippines stood at $1.628 billion and $1.577 billion, respectively while those to Vietnam stood at $1.085 billion. Exports to Myanmar, Brunei and Laos amounted to reach $77 million, $20 million and $4 million, respectively.

ASEAN has become the fourth largest exporter to Korea by selling $8.395 billion worth of products during the January-August period of this year. The United States and Japan shipped to Korea, $21.04 billion and $19.04 billion worth of goods, respectively. Imports from the EU reached $12.99 billion.

Trade volume with ASEAN swelled to $22.416 billion, after the United States, Japan and EU at $34.96 billion, $28.94 billion, and $23.34 billion, respectively. The ministry foresees that ASEAN will play an important role in the world economy of the future, saying it is anticipated trade volume in the region will total $707.0 billion by 2000 and $1,273.0 billion by 2005.

"Although the member nations are suffering a setback due to the foreign exchange crisis, their trade with Korea is expected to increase continuously especially in the areas of natural resources,£¢said a ministry official.