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EIS RESEZAICH PAPER N e 10
SOUTH _KOREAN CFENICAL INDUSTRY OPPORTUNITIES
FOR FOREIGN FIRMS
Bridget SPRECKLEY
Octohcr 1983
1 ct 3 "RS
SOUTH KOREAN CHEMICAL INDUSTRY 'OPPORIUNITIES
FOR FOREIGN FUNS
Bridget SPRECKLEY
EURO-ASIA CENTRE
Fontainebleau
October 1983
Copyright 6D
I Overview of the South Korean Chemical Industry
A Heavy Chemicals
B Fine Chemicals
II Analysis of three sectors identified as holding best
opportunities for foreign firms
A Pharmaceutical industry
B Agrochemical industry
C Cosmetic industry
III Information important to prospective importers, licensors andinvestors in South Korea.
A Selling and investment guidelines
B Government supported research and development
C Investor's assessments
Sources and References
I OVERVIEW OF THE SOUTH KOREAN CHEMICAL INDUSTRY
A HEAVY CHEMICAL INDUSTRY
Korea's heavy chemical industry is plagued by the absence of domestic
raw materials and by the overcapacity of large dedicated plants common to
the industry internationally. The profits (EBT) in industrial chemicals
fell by a factor of 2.8 from '81-'82. An initial brief discussion of the
inorganic and petrochemical industries will indicate that opportunities for
foreign firms are largely restricted to the sale of their cheaper bulk
chemicals through the international commodities trading systems. However, a
few niches exist in areas where a foreign firm could invest and use its more
specialised technological base to develop a temporarily protected local
industry.
The Korean fertiliser industry is depressed, 1982 productions of the big
manufacturers was at less than 50% capacity following a trend of reduced
production which started in 1980. Exhibit (I) shows the manufacturers and
their capacities with the production tonnage for the different formulation
components. Fertilisers are all bought by the government through the
National Agricultural Coopertives Federation and distributed to end users at
set prices. In 1980 there was a 20% slump in domestic demand due to a
cut in this government subsidised supplying. However, the present local
usage is unlikely to rise beyond the recovered level as Korea is already
amongst one of the very highest appliers of fertilisers in the world.
This excess capacity of the industry was therefore intended for export.
Although the 1982 exports still stood at 1.17 mT, it seems unlikely that
this can be sustained as now factories in India, China and the USSR reduce
the competitivity of the Korean product. The .48 mT of fertilisers imported
consist largely of potassium fertilisers - far cheaper abroad.
The government undertook a restructuring of the industry in Spring '82
closing the two plants and merging others. One of the plants shut down was
that of Kyungi Chemical, an enterprise in which two Japanese companies (one
of them Mitsubishi chemical) had invested $3.3m.
Resins, being used in the construction industry, are also elements of a
key export industry. Due to the limited availability of quality and
specialised resins domestically we see both high imports and exports and an
industry also not operating at high capacity. There is thus a considerable
import market for quality resins.
The Korean government is at present particularly concerned about the
under-utilisation of Korea's petrochemical base, and is trying to develop
the trees of intermediaries which would change this situation. It would
clearly be economic nonsense for a foreign firm to become involved in the
development of an analine or a propylene plant with markets of 3 and 14 th
tons p.a. respectively. However, given this governmental position, it could
be interesting for a firm to invest in the manufacture of higher value added
speciality petrochemicals - ones which are components of a Korean export
drive - and use this activity as an export base for the East Asia Region.
Major foreign investments in this sector to date are indicated in Ex
(VI) and the process column Exhibit VIII) indicates as well the other
technological transfers which have taken place.
EXHIBIT (I)
FERTILISERS
1982 Production by formulationComponent /TPA
Name (and ownership) Capacity/TPA N P K
Korea General Chemical Corp Urea 231 000 106 260
Yong Nam Chem Co Ltd (KGCC) U 55 300 25 483
C 358 000 65 308 100 061 43 278
Chinhae Chem Co Ltd U 84 100 38 686
(KGCC and Gulf Oil and Int C 180 600 33 280 500 70 21 667Mineral Corp)
Korea Fertiliser Co Ltd U 330 000 151 800
C
Namhae Chemical Corp U 595 000 273 800
C 700 000 102 000 200 000 112 000(75% KGCC 25% Agrico US)
Chosun Fertiliser Co Inc C 75 000
Other (eg Hankook Caprolactam Misc 391 900 33 600 45 600(eg (NH4)2504)
830 200 395 700 176 900
TOTAL 3 000 000 1,402,800
Compiled from Korea FertiliserIndustry AssociationMinister of AgricultureIndustry sources
EXHIBIT (III)
PETROCHEMICAL COMPLEXES IN KOREA
ULSAN PETROCHEMICAL COMPLEX
LOPE (KPCC) 50,000MT/yr
Refinery HDPE (KPIC)280 th b per day Ethylene 70,000(YUKONG) 155,000 MT/yr
Naptha Cracker
(YUKONG)
VCM (KPCC) 60,000
PVC (K. Plastic) 205,000
Ethanol (K. Gen. Chem.) 30,000
Acetaldehyde (K. Gen. Chem)) 24,000
Styrene (Ulsan Pet'Chem) 80,000
Polystyrene (Hannam Chem) 146,500
Polystyrene (Hyosung BASF) 20,000
Polypropylene (KPIC) 105,000
Propylene Acrylonitrile (Tong Suh PC) 77,00081,000
PPG (K. Polyol) 20,000
Butadiene SBR (Korea S.R) 100,00024,000
NCB Petroleum Resin (KOLON PC) 10,00021,200
Cyclohexane (KOCO) 36,000
Benzene Caprolactam (Hankook Capro) 33,00056,000
Alkyl Benzene (E Soo Chem) 33,000
BTX Extr Toluene Maleic Anhydride (Dai Nong PC) 10,000(YUKONG) 72,000
Xylenes88,000
0-Xylene Pthalic Anhydride (Sam Kyung C)38,40030,000
P-Xylene TPA (Sam Sung Pet'Chem) 160,000119,000
Exhibit (III) (cont)
YEO-CHON PETROCHEMICAL COMPLEX
Electrolysis Caustic Soda 227,000Refinery (Hanyang MT/yr380 th bper day
Electro)
(Honam Oil Chlorine L D P E (KPCC) 100,000Refinery) 210,000 MT/yr
Naptha H D P E (Honam Pet'Chem) 70,000Ethylene350,000
E D C (KPCC) 286,000NapthaCracker
V C M (KPCC) 150,000(HonamEthylene)
P V C (Lucky) 150,000
Ethylene Glycol (Honam PC) 80,000
P P (Honam Pet'Chem) 80,000Propylene187,000
Octanol/Butanol (K. Gen C) 55,000/10,000
A B S (Lucky Ltd) 20,000Butadiene50,000(Korea SR) B R (Korea SR) 25,000
Benzene Cumene (Kumho chem) 35,00074,000
BTXExtr. Toluene Phenol (Kumho Chem) 25,000
44,000
Acetone (Kumho Chem) 15,000
Xylene Ulsan
T D I 10,000(Chinyang Fine Chem)
Carbon Black 94,000(Lucky Continental)
Methanol 330,000(Taesung Methanol)
KPCCKPICK PlasticKGCCUlsan P.Chem=Hannam Chem =Tong Suh
P'chemK. Polyol =Korea SRDal Nong
P'ChemSam Kysung =Samsung
P'ChemYukongHonam Oil =HonamK Steel
Chem
Korea Pacific Chemical Corp (50/50 Dow and KEG)Korea Petrochemical Industry Co (50% Marubeni)Korea Plastic Industry Co (Korean Explosives)Korea General Chemical Corp (Public capital)(Korean Dev Bank 37%, Miwon 25%, Hankook Fertilisers 38%)(Miwon Group)(Hanil Synth Fibre and Asahi)
(Toyo Menka 45%, Chin Yang 36%)Korea Synthetic Rubber, (Kumto)(Mitsui Toatsu Chem Inc, Tokyo Menka Kaisha, Dai Nong)
(Mitsubishi, Aekyung)(Samsung 50%, Amoco Chems 35%, Mitsui P'Chem 15%)
ex KOCO (W Gulf Oil) now Sunkyong control.(Lucky and Caltex)(Daelim Ind Co 80%, Lotte 20%)(Daewoo)
EXHIBIT (IV)
NEW COMPETITORS IN PETROCHEMICALS
ETHYLENE 1000 MT/YR Time of Start-up
Australia 500-600 '85
Indonesia 350 '83
Singapore 300 '83
Saudi Arabia 1100 '85
Quatar 250 '84
TOP KOREAN PETROCHEMICALS EXPORTS
Product MM$
PVC 104.6HDPE 26.7PP 26.3PS 16.7LDPE 10.1
Source : Korean Society of Chemical Engineers
EXHIBIT (V)
SUPPLY AND DEMAND IN PETROCHEMICALS IN SOUTH KOREA
1982/Metric Tons per year
Production Import Export SSR Capacity Plans(shipment) % Utilis- to
a b c * ation increaseindustry capacity
(Delayedas partof newcomplex)
FeedstocksEthylene 375,838 - - 100.0 74Propylene 224,877 25,664 - 899.0 84Butadiene 61,682 299 9,572 117.7 83Benzene 89,902 9,216 3,264 993.8 69 +84000for
July '85Toluene 115,631 5,816 5,624 99.8 97 + 172000Xylenes 129,413 65,595 1,176 70.0 109 +2130000-xylene 25,129 10,672 70.2 84P-xylene 83,492 42,591 33,078 89.8 70Cyclohexane 34,540 100.0 96
RMs (partly for resin)Propylene oxide - 14,184 - 0.0Ethylene dichloride 110,009 30,994 - 78.0 38Vinyl chloride monomer 156,854 165,940 502 48.7 74Styrene 64,924 53,591 965 55.2 81Acetaldehyde 8,220 - - 100.0 33
ResinsLow density polyethylene 104,870 38,687 10,698 78.9 69High density p.ethylene 120,162 9,159 26,476 116.8 86Polypropylene 162,533 21,978 26,307 102.7 88Poly vinyl chloride 306,719 1,719 118,108 161.1 86 +1,110000Polystyrene 71,911 2,850 16,753 124.0 43 + 50,000Acrylonitrile butadiene
styrene resins29,558 2,380 8,179 124.4 107 +50,000
RMs (partly for fibres)Acrylonitrile 41,872 122,177 25.5 54Caprolactam 42,024 83,356 33.5 127Terephtalic acid/dimethylterepthalate
154,999 152,271 50.4 97
Synthetic FibresNylon 117,620 8,020 906,90 337 95Acrylic 150,620 6,080 128,920 542 65Polyester 327,710 22,560 300,410 657 60Polypropylene 2,420 80 1,430 226 21PVA 3,990 3,990 0Others 3,540 3,540 0
kL,
ElastonersStyrene butadiene rubber 48,753 8,546 2,125 88.4 49 +5000
underconstruc-tion (SBRLatex)
Butadiene rubber 15,681 7,060 1,738 74.7 62Isobutyl isoprene rubber 15,547 0
OthersEthylene Glycol 79,900 52,262 420 59.7 naCarbon Black 58,293 3,229 1,316 96.8 47Ackyl benzene 12,761 548 418 99.0 39Methanol 103,443 61 6,001 106.1 31Pthalic Anhydride 39,230 23 6,350 119.2 58Moleic Anhydride 10,213 - 7,496 373.1 102Polypropylene Glycol 13,111 168 - 98.7 52Petroleum Resin 7,393 297 3,945 197.4 74Phenol 15,105 4,059 8,359 139.8 60Acetone 8,749 920 1,007 101.0 58Toluene Diisocyanate - 7,294 - 0 02-ethyl hexanol 8,846 25,212 - 30.0 16Butanol 571 4,791 - 10.6 50Acetic Acid 4,658 8,795 - 34.6 15Vinyl Acetate - 14,897 - 0 -Ethyl Acetate 3,242 69 - 97.9 64Propylene glycol 3,116 496 - 86.3 62ME 13,455 - 0 -Methyl Acrylate
__- 12,317 - 0 -
* SSR = a/(a + b c)
Compiled from KPIA and Yukong Petrochemicals
EXHIBIT (VI)
MAJOR FOREIGN INVESTMENTS IN PETROCHEMICALS
Korean Company Line of Business Foreign investor Investmentth US$
Dianong Petrochem Ind Maleic Anhydride Mitsui Toatsu + 3,2641 other
Taesung Methanol Methanol Mitsubishi + 2 10,529
Tongsuh Petrochem Co . Aerylonitrile monomer Asahi Kesei 9,392
Lucky Continental Carbon Black Continental Carbon 2,869
Samkyung Chemical Phthalic anhydride Mitsubishi + 2
Samsung Petrochemical Terepthlalic Acid Amoco + Mitsui
Kukdo Chemical Ind co Epoxy Resin Tohto Kasel
Korea Petrochemical Ind Polypropylene Marubeni + 1Co
2,712
15,720
5,569
21,586
Daehan Resin Chemical Synthetic Resin Nikon Yuki Kagaku 2,742Ind co
Korea Polyol Co Ltd
Polypropylene glycol Toyo Menka + Sanyo 1,167Chem
Korea Synth Rubber Synthetic rubber Japan Synth Rubber 7,359+ Mitsui
Honam Petrochemicals Polyethylene First Chem Ind Corp 41,408Polypropylene
Source: B. Korea August 1983
EXHIBIT (VII)
SOURCES OF PETROCHEMICAL TECHNOLOGIES
Korean company
Product
Process
Completion Date
YUKONG
HONAM
EthylenePropyleneButadieneBenzeneCyclohexane
EthylenePropyleneBenzeneHDPEPolypropyleneEthylene glycol
Kellogg Dec '72Kellogg Dec '72Shell ACN June '73Shell Sulfolane May '70UOP Feb '74
Lummuns Nov '79Lummuns Nov '79Shell Suffolane Nov '79Mitsui Nov '79Mitsui Toatsu Nov '79Shell Nov '79
KOREA SYNTH
Butadiene
BASF
Nov '79RUBBER
SBR
JSR
May '73 - Ju '82BR
JSR
April '80
ULSAN PCHEM Styrene
KOHAP o-andp-xylene
HANYANG E.CHEM Chlorine
KOREA PACIFIC EDCVCM
Monsanto
Apr '78 - May '83
UOP
July '80
Dow Diaphragm Jan '80
Dow
Jan '80Dow Oxy
Dec '72 andNov '79
Dec '72 andNov '79
LDPE
Dow
KOREA PETROCHEM Polypropylene Amoco Aug '72-Dec '78HDPE Amoco Oct '76-Jul '80
LUCKY LTD PVC Chloe Chimie 1984ABS JSR Feb '78
LUCKY CON CARB Carbon Black Continental Nov '69 and Feb '80
HANHAM CHEMICAL PS Own, Cosden Dec '73-Feb '80ABS Sumitomo,
NangatuckDec '73
HYOSUNG BASF PS BASF May '82
TONG SUH Acrylonitrile Sohio Aug '72-Aug '82
HANKOOK Caprolactam DSM May '84CAPROLACTAM
SAMSUNG PETROCHEM Terephthalic Amoco April '80-Oct '82Acid
KOREA STEEL CHEM Carbon Black Ashland Sept '81Phthalic Von Heyden April '83Anhydride
ES00 CHEMICAL Alkyl Benzene UOP March '73-Sept '80
TAESUNG METHANOL Methanol ICI April '76
KOREA GEN CHEM Ethanol Shell Dec '742-EH UCC June '82
SAMKYUNG CHEMICAL Phtholic RP Expt Oct '80Anhydride Von Heyden Oct '72
AEKYUNG Phtholic Von Heyden Aug '68Anhydride
DAINONG P CHEM Maleic Mitsui Toatsu Oct '76Anhydride
KOREA POLYOL PPG Sanyo Nov '75
KOLON P CHEM Petroleum Resin Nippon P Chem Jul '77
KUMHO Phenol UOP/Allied/RP July '80
CHIN YANG FINE TDI RP March '81CHEM
Source : KPIA
of the final volume and include oxidation inhibitors, detergents, anti- foam
agents, extreme pressure agents, pour-point depressants etc. The blending
activity is dominated by the foreign labels. Honam's oil has a Caltex
formulation (Caltex is 50% owner), KOCO has the Gulf recipe and Mobil and
Shell each use their own. There are some local blenders who compete badly,
and one of the M.O.S.T. objectives is to develop a formulation for the use of
Korean producers. So unless a foreign firm is prepared to share or sell its
technology, there is a movement away from further external participation.
Imports are low (26%) and so the existing foreign participants alone will reap
the benefits of the growth.
PHOTOSENSITIVE MATERIALS
These were largely (ie 66%) imported in 1980, the total market being of
110 mn$. In 1981 a black and white film developed for X-rays was put on to
the market, the size of which was 14m$. The development of colour film has
been a national project at KRICT and now Hyundae colour rolls are seen beside
Fuji and Kodak in most parts of the country. A graphic art black and white
film is also now being industrialised. Imports of these materials are now on
the decrease, and any chance of participation in local production has also
been missed as domestic technology is now in use.
DYES
Since Korea is the world's sixth producer of cloth and clothing, the
country rates as an important world market for dyestuffs of all types. Given
the stagnation of the textile industry, there is no reason to believe however
that this market will grow further (approx 170 m$ in 1980). Local production
is developing relative to imports which still however supply 67% of the
demand.
Vat dyes are not made at all in Korea, only 15% of the demand for disperse
dyes is met locally (by a single manufacturer), and only 10% for the reactive
dyes. There are however 4 or 5 manufactureres of reactive dyes and, as this
industry is still in its infancy, the self sufficiency ratio can be expected
to increase. These dyes supercede the vat dyes in energy and water
efficiency. 80% of the basic and direct dyes are already supplied
domestically. 150 dyes are produced at present and the total capacity of the
industry is 10,000 t pa.
Amongst the top producers are Rifa (capacity 4,500t in basic dyes), Lucky
Ltd (3000t), Deakwang (1680t) and Tae Hung. Lucky's new plant, opened in 1980
at Onsan, turns out 2500 t of disperse dyestuff a year, and as the factory was
set up under technical cooperation with the American Colour and Chemical
Corporation, the products meet international quality standards. However, due
to the complexity of the technology, the small local dye manufacturers which
make up the rest of the capacity, do not make the quality grade required for
the export clothing industry.
KIST has defined these smaller dyeing industries as bottlenecks in need of
technical help and the development institutes are carrying out strategic
projects on the synthesis of reactive dyes, and of dye intermediaries ( DH and
DC) so as to alleviate the monopolies of supply on some of these ingredients.
The presence of European companies as importers is already comprehensive.
The potential of other Far Eastern countries is not much more promising: the
Singapore and Phillipine textile industries are both faltering, in Malaysia
there is a small textile industry which is already supplied by one or two
large plants, in Indonesia the textiles are 95% intended for domestic use,
quality dyes are not required. It is unlikely that a Korean based
manufacturer would be able to sell in Taiwan, there the dye industry is more
advanced than in Korea, and in Japan there is effective cartelisation of large
portions of the dye producing industry. Prospects for foreign investment,
having considered both the local and the required market, are limited
therefore to replacement of import markets in disperse and reactive dyes.
Should an import ban on those be recommended, a foreign company with large
sales in the area may judge an investment worthwhile. However, this seems
unlikely given that the government is developing the processes locally and
intends to hand them over to selected Korean firms for whose protection such a
ban would be instituted.
PAINTS
The market is estimated at 135 million t.p.a. Imports are limited (12.8
m$) and restricted to branded paints for specialised uses since only these (eg
chlorinated rubber paint) can carry the 40% import duty and the heavy
transport costs. Thus the market is essentially self sufficient and is
divided in the same way as the production (Exhibit A).
There are three thousand types of paint used, but essentially 40% is used
domestically, 40% in industry and 20% in shipbuilding. Of these it is the
shipbuilding application which is developing most rapidly. The overall market
growth rate however is below the fine chemical average (13%) and appears to
be stabilising, although the expected increase in motor car sales is a good
prospect. Exports are negligable (5m$) but reach US, UK and Australia.
There are 50 paint manufacturers, although the top 7 produce 90% of the
paint. The names and production capacities of the leading producers are given
in Ex (B).
Technically, the standard paints are at an international level of quality.
Foreign tie-ups are favoured by Korean companies for both the technology and
the brand name. The reputation of the company's products is boosted and they
are able to meet the requirements of foreign customers. This is particularly
important in shipbuilding. Ex (C) is a list of the licencing agreements which
have been made, with their values.
Given the importance of brand reputation in competition, there are
opportunities for foreign companies. As an importer however they are limited.
Remembering that mostly the market is one of price rather than quality, an
importer, particularly from Europe can only compete in a speciality product.
As a guide to the prices consult Ex (D) where the ex-factory prices of the
leader are given. Due to the problems of delivery delay for such an importer,
it is more advisable to deal through local stockists rather than through
trading agents.
More interesting opportunities lie in the scope there is for more
technical tie-ups for shipbuilding or industrial uses (a few companies are
thought to be seeking such arrangements, among them Shen Heung and Shin Deng).
Stability of pigments for weathering is one of the technical problems
hampering Korean paint producers.
There is but one investment to date in this and its related fields and
that is that of Ciba-Geigy who put 3.6 m US $ into a joint venture called the
Daihan Swiss Chemical Corporation. It is the largest Korean pigment
manufacturer and it produces organic pigments, pigment preparates and
intermediaries for use in the following industries: paint, painting ink,
plastic, rubber and artist colour.
DETERGENTS,SOAPS AND FATS
The domestic production of powder and liquid detergents is given in
Exhibit (E) with the number of producers and the production shares of the most
important ones. Referring to (Exhibit V) we see that for the basic ingredient
of the synthetic detergent industry, alkyl benzene, the country is effectively
self-sufficient. Indeed, the manufacturer of this product, Esoo chemical is
only using about 40% of its capacity. Production of other surfactants is
approximately 6000 t.p.a. The trade figures for detergents and their
ingredients are given in Exhibit (H). Imports provide about 1/3 of the
ingredient surfactants, these being more specialised products, other than
alkyl benzene.
Essentially, the only two firms operating in detergents are Lucky and
Aekyung. The government regulates the selling price of the end product for
this reason. Competitive selling is carried out more by retail push by
salesmen and advertising than by quality. Margins are therefore not good, and
there is little room for a quality advantage. Opportunities for import
technology development and investment would lie really therefore, only in the
special detergents. Recently, a foreign investment of 1m$ was made by Shell
Pacific Enterprises into a joint venture with Aekyung for the manufacture of
alkylolefin sulphonate, a soft detergent for shampoos and cosmetics. The
plant came on line in July '83.
The toilet soap market, although a highly competitive market is marginally
more profitable than consumer detergents. Exhibit (F) shows the production in
this market. The equivalent statistics for the laundry soap market are given
in Exhibit (G). The trade statistics Exhibit (H) show that the soap industry
is export orientated, and that import levels are negligible when compared to
local production. 65% of soap exports go to the US, the remainder to Asean
and the Middle East. Despite the high exports, production is believed to be
running well below capacity. (Despite the under utilisation of their present
saponification plant, of 9000 t p.a, Aekyung are building a new 8000 t.p.a
unit which they only expect to use at 50% capacity). Yet, given the present
level of economic development any considerable growth in the soap market is
unlikely, indeed the laundry soaps will be. increasingly replaced by synthetic
detergents.
Developments in the soap market take the form of technical agreements.
Western brand names help to boost sales volume but premium pricing apparently
does not then apply. Joint ventures in this field are not facilitated by the
government at present, and approval is hard to obtain for a licencing
agreement for more than 3% royalties. However the following agreement does
exist : Lucky with Henkel (Fa), Dongsan with Procter and Gamble (Dyer) and
recently Aekyung with Unilever (Lux). Pacific Chemical has agreements on
certain cosmetic soap lines. The Lux agreement, for instance, capitalised on
the brand awareness from the US army black market. The soap was launched in
September 1982 under heavy advertising and was priced in parallel with local
brands. The level of technological cooperation is minimal, just 'the recipe'
and monthly quality checks on posted samples. Production is now 25% of the
company's output, this percentage is expected to grow. Aekyung will be
extending its relationship with Unilever to include the Sunsilk shampoo range
in 1984.
The situation for basic olechemicals is outlined in exhibit (I).
The licensing of toilet soap brand names at 3% royalties without premium
pricing, and the import or the licensing of, or the investment in speciality
detergents are the only possibilities for foreign firms.
EXHIBIT A
PAINT - Production/1981
TOTAL 134.190 KL
Emulsion 23,280 KL 17%
Oilbased:Readymixed 9,770 7.3
Enamel 21,730 16.2
Rust preventing 8,870 6.6
Lacquer 7,350 5.5
Varnish 8,750 6.5
Slate Paint 1,590 1.2
Traffic 1,880 1.4
Thinner 18,550 14
Other 32,120 24
TOTAL 134,190 100%
EXHIBIT (B)
PAINT - Capacity of Top Producers
- Konsul Chemical Ind Co 30,000 t
Korea Chemical Co Ltd 24,000 Kl
Daehan Ink and Paint 39,000 t
Sam Hwa Paint Ind co Ltd 10,700 Ki
Cho Kwang Paint Ind Co Ltd 13,000 Kl
Hankook Asbestos Cement Ind Co 9,000 Ki
EXHIBIT (C)
PAINT - Technical Licence Agreements
Korean Co Licence origin
and type
Duration of
agreement
Value of contract
Konsul Jap/Shipbuilding 78/12 to 83/12 10,000$ +2.5%
Jap/Electrical 78/3 to 83/3 40,000 +3%
Korean Chem USA/Heavy duty
plate
79/7 to 84/7 3-4%
Daihan Jap/Industrial 79/2 to 84/2 2.3%
USA/Woodworking 78/12 to 81/12 10,000 +3%
Japan/Printing ink 79/11 to 82/3 1.5-3%
UK/Ship + Container 80/11 to 85/10 3%
Cho Kwang USA/Canning Plate 80/1 to 84/12 3%
Korea Asb Jap/Industrial 79/6 to 82/6 3%
Cement
EXHIBIT (D)
PAINT - Prices ex factory. from 'leader' 1981.
Emulsion. Wh for Exterior 20,990
for Interior 14,340
Ready mixed Wh 25,110
Won/ 18 litres
Enamel Wh 25,570
Lacquer Wh 30,650
Varnish transparent 17,220
Insulation Varnish B1 28,510
Slate paint scarlet 28,800
NB (780 W to 1$)
Source: British Embassy
EXHIBIT (E)
DETERGENT
POWDER LIQUID
Production 46,456 T (Sales 99% 37,932 (Sales 102% of this)
of this)
Producers
Lucky M. Share 70% Lucky 46% M. share
Aekyung 25% Aekyung 45%
Mugung Hoe 3% Tae Peung Yen 6%
Dong San 3%
EXHIBIT (F)
TOILET SOAP
Production
22,000 (Sale is 105% of this)
% Home 81
% Export 19
Producers
Dong San 42% Market share
Lucky 39%
Tae Peung Yanung 8%
Aekyung 6%
NB CR - 95%--- 4 -
Source: MCI 1982 figures
EXHIBIT (G)
LAUNDRY SOAP
Production 190,000T (Sale is 98% of this)
% Home 84
% Exp 16
Producers
Dong San 58th 30.5%
Chun Kwang . 40th 21%
Penung Hwa 34th 18%
Mugung Hoe 34th 18%
Dong Bang 7th 4%
Sham Yang 6th 3%
Ho Nam 2nd 1%
NB CR4 = 87.5%
EXHIBIT (H)
TRADE
Soap and preparations used for soap
Imports 799 T/1237 th$
Exports 37,235T/ 22396 th$
Surfactants and prepared washing agents
Imports 15196T/ 29,119 th$
Exports 1045 T/ 1002 th$
Source: Statistical Yearbook
of foreign trade Office of
Customs
EXHIBIT (I)
OLEIC ACID
Production 1,151 T (Sale is 99% of this)
% Home
79%% Exp
21%
Producers
Chun Kwang 99%Dong San 1%
STEARIC ACID
Production 11,846 T (Sale is 98% of this)
% Sales Home 89
% Export 11
Producers
Peung Hwa 47%Chun Kwang 33%Dong -an 20%
NB CR3 = 100%
GLYCERINE
Production 8,382 T (Sales is 92% of this)
% Home 75%% Exp 25%
Producers
Dong San 45%Peung Hwa 25%Chun Kwang 19%Hugung Hoa 1%
NB CR4 = 90%
Source : MCI, 1982 figures
II. ANALYSIS OF THREE SECTORS
II A ANALYSIS OF THE PHARMACEUTICAL SECTOR
Market Size and Growth
We are dealing with pharmaceutical drug preparations and their raw
materials and excluding chinese medecines, sanitary aids and 'quasi-drugs'.
The Korean market for finished drugs in 1982 valued 1 203 million dollars
and is thus by far the most important fine chemical sector in the country.
The market for pharmaceutical raw materials was $214 million in the same year.
This market is said to be the tenth in the world, which for a country of about
35 million inhabitants, is quite considerable. During the '40s it averaged a
34% growth rate, but there has been a slow down, between 1981 and '82 the
increase was of 22%.
National Health, Government Policy and Market Development
Health standards have vastly improved, although they are not yet at
Western levels. The infection rate of first class epidemics is now reduced to
1% in Korea. For second class, the contamination rates are now as follows:
roundworm 19.8%, leprosy .14%, tubercolosis 2.5%. However there has been an
increase, with the standard of living, of adult chronic degenerate diseases by
which 8.5% of the population is now affected. The expected life span is of 66
years, the average diet contains 2,785 Kcal and 84g of protein a day.
The extent of the medical services is outlined in Exhibit(A), but in
essence, there are now 22 500 physicians and 315 hospitals. There are 12,000
pharmacies and twice as many pharmacists.
There is a social security scheme, and the plan is to cover 94.5% of the
nation by '87. See also Exhibit (A). The situation in 1961 was such that
9.5% were covered by medical care and 28% by medical insurance. The plan has
now incorporated businesses with more than three hundred employees as well as
farming and fishing village inhabitants. The next expansion will add optional
insurance for businesses with over five employees, and for artists, barbers
and other self-employed skilled workers as well as increasing the existing
benefits for special persons (elected officials etc.) It is important to note
however that participants in the pharmaceutical industry feel that any impact
of this health system on sales is still 5 to 10 years away and that, as we
shall see later, its effects are largely on pricing and product outlets.
The real root of this market is not to be found in the institutionalised
systems, but rather in the mentality of the Korean people. The tradition of
Chinese medecine means that people have a far greater tendency to seek
remedies for minor discomforts than a European would expect. This tendency
has been facilitated in recent years by an increase in buying power and it is
this, rather than health care at the national level, which has been a motor to
growth. This growth, furthermore, has not occurred at the expense of the
original Chinese medecines.
Market and Production Breakdown
Imported drugs are only 1.9% of the finished drug market, thus the
breakdown of finished drug production by therapeutic categories (in Exhibit B)
is a pretty accurate representation of the market. The growth rates of the
sectors are also given. In Exhibit (C) there is a further breakdown by
therapeutic use of the top categories in Exhibit (B). Some companies use the
production changes of (Exhibit B) as well as a comparison with the Japanese
position to assess likely movements in the future. See Exhibit (D). For
instance cardio vascular drugs, which are one of the leading groups in Japan
are now growing with the market in Korea. This market can be expected to
begin to grow considerably faster given the high incidence of cardio vascualar
disease, resulting from the high salt diet, which so far goes largely
undiagnosed.
Local production of crude drugs(raw materials) for pharmaceutical products
was valued at $130 mill , 60% of the country's demand of $214 million. This
local production is given by therapeutic category in Exhibit (E). During the
'70s there was a 60% growth as strong protection aided the development of the
domestic crude drug industry, however a slow down to 21% was felt in '80-'81
due to the economic situation, the poor progress in precision fields, the
opening to foreign capital and also the rise in production standard
requirements. From '81-'82 as the economic brake was released and foreign
investors were forced into raw materials production, growth was at 35%.
The Products
In 1981, 267 firms were producing 7273 finished drugs. About 120 of these
items were selling more than 1 million won (about 1.3 th $), indeed 25% of the
total pharmaceutical market is occupied by the top 50 products. See Exhibit
(F) for the names and ranking of these items. The two leading products in
each category are given in Exhibit (G) with their approximate market shares,
to give an idea of the competition in each.
Over 100 different raw materials were produced in Korea in 1981 and the
major 13 are listed in Exhibit (H). A comprehensive list of all the raw
materials produced in Korea with their manufacturers is given in Exhibit (I).
The Companies
Exhibit (J) lists the names, production and growth rates of the top 72
companies in the industry. Although they represent together 71% of the
industry, there is a considerable degree of fragmentation. A comparison of
the shares of the top firms in Korea and in the US shows that the top of the
industry is not that concentrated:
S. Korea U.S
Concentration ratio top 4 16% 26%
CR top 8 24% 44%
It is particularly in the lower echelons that there are numerous companies
with just one or two products. The big companies accuse these participants of
contributing little and causing havoc in price and quality. The price
confusion forces the leading companies to match the small ones. The most
recent production figures for the top 15 companies are given in Exhibit (K).
Brief notes on selected companies Exhibit (1).
Selling
11.6% of sales are at present made through hospitals and clinics, the
remainder through pharmacies via a dual system. See Exhibit (L). Most sales
at the moment are directly through pharmacies because the wholesalers, being
undercapitalised by and large, have a tendency to delay on payments and go out
of business. There are also 2,457 non-pharmacist drugstores or apothecaries
which only handle some drugs, these are decreasing in number as the government
has stopped issuing licences.
Essentially therefore 70% of pharmaceutical use is through
self-medication, with no more than 30% dispensed on the authority of a doctor.
Thus, advertising and promotional expenses ae considerable and very important
in selling pharmaceuticals. Some drugs which would be advertised to doctors
in Europe are mass media (e.g TV, posters) advertised in Korea, for instance
hypertensives, antimycotics, anti-ulcer drugs, anti-inflammatory drugs
No advertising of nutrient drinks is allowed though (they are already
considered to sell enough!) and antibiotics can no longer be advertised.
There is some control on the truthfulness of advertising: a product may be
'good for you' but cannot be claimed as a 'universal cure'. The advertising
infrastructure, (agencies and magazines etc) is said to be well developed. To
promote a drug through the medical channels, one must remember that Korean
doctors expect incentive to differentiate two competing products.
Radical changes in this distribution system are beginning to take place.
Direct sales to hospitals and public health centres are on the increase, and
will rise as the social security system develops. Drug dealers are not
obtaining any new licences, and are therefore declining in number,
pharmacists are also fewer this year. Since people will need to go to a
doctor if they want reimbursement, if prescription and dispensing are not
separated, this decline will continue and will lead to the demise of
pharmacies. The government is also trying to unify the distribution system,
so that all sales to pharmacies are via wholesalers.
Pricing is at present disorderly. Although insurance drugs have fixed
prices, the inconsistency in the distribution means that some pharmacies have
more margin than others and price-cutting occurs between competing outlets,
even without including the parallel problem mentioned earlier between
producers. Some prices of top products are given as an indication of price
levels in Exhibit (C).
Imports
Although imports in 1980 tended to decrease, they have now picked up
again. ,Imports are most important in crude drugs, see Exhibit (M). 60% of
the crude materials for local manufacture are imported. (NB of the crude
materials made in Korea, 30% are for export). Foreign invested companies
import all their ingredients where possible, except for materials like
shellatine for capsules which are available locally. The top imports in raw
materials and finished drugs are given in Exhibit (N). These materials come
in largely from the US and Japan.
Imports on the banned list basically correspond to the raw materials
manufactured locally labelled B in Exhibit (I) with the addition of the
footnote. However, where the local goods are not of adequate quality, or do
not meet the market demand, then an import ban may be waived. Local Aspirin
for instance, because it is made in a small non dedicated plant has serious
stability problems, turning 'sour' within a week of manufacture. Bayer is
therefore allowed to import this product.
The import tariff of 40% on landing price is not generally steep enough to
stimulate local production economically, but if there already is local
production it is hard to compete on price. The tariffs are given in Section
IV A.
There is to be a gradual liberalisation by 1985 which is outlined in
Exhibit (R). The implication is that by then, all the 87 banned raw materials
will be importable, however the wording of those guidelines clearly allows
great flexibility of interpretation.
Exports
Again, see Ex (M) for the totals. In Ex (0) we see that amongst the
Korean exports, which are at present limited, there are many items listed
which are not pharmaceuticals at all, but rather accessories and Chinese
medecines. Korea's medicinal exports have been severely curtailed by the
Communist Chinese who produce these traditional medecines at much lower
pricer. The government's export ambitions (180 m$ for all
pharma/oriental/accessories etc in 1985) will thus rely on the development of
the western medecine sector. These exports go largely to Japan, but also to
the US and Hong Kong - Exhibit (P). The export conditions are easy to meet :
a KPTA (Korean Pharmaceutical Traders Association) recommendation and Ministry
of Health approval.
Government Policies and Controls
It is the 'Drug and Food Affairs Bureau' of the Ministry of Health and
Social Affairs that is concerned with the administration of the pharmaceutical
industry. The Pharmaceutical Systems Section is responsible for the
administration and control of the price, distribution and advertising systems.
The Pharmaceutical Affairs Section studies supply and demand regulates this
through permits for import, export and manufacture. It is also concerned with
standards and safety. There is a separate Narcotics section, and a National
Board of Pharmacy with 44 members in advisory status.
The objectives of the government are to strengthen the competitive power
of the industry to prepare it for full liberalisation in 1986. It also hopes
that it will be able to compete effectively in the export market. In order to
do this, the government is essentially pursuing four lines of action:
restructuring of production, implementation of KGMP (Korean good manufacturing
practices), rationalisation of pricing and distribution and encouraging
foreign investment.
To prevent severe competition between the manufacturers, the government
has made approval for manufacturing more difficult to obtain. This permission
may only be granted if the production is all for export, if the facilities and
economic characteristics of the operation are such that it contributes to the
development of the industry, if the raw materials used are local, if the items
are designated by the administration or if•the provisions are under the
Foreign Capital Inducement Law. There are also some very definite refusals
listed in Exhibit (Q). The government has also published guidelines inducing
merger and abolition of companies, the incentives being in the form of tax and
manufacturing restriction concessions. 20 such operations occurred in 1981.
The government could also use the GMP requirements as a tool for this
restructuring. KGMP standards are to be implemented in 1985 and will bring
drugs to the quality level required for export. Since July 1982 the
government has been 'designating' firms which have achieved this standard and
rewarding them with relaxation of manufacturing guidelines. Those not
designated by 1985 will not be allowed to operate in 1986, and the vast
majority of Korean plants do not meet these requirements today. To support
these standards, the government will also be setting up a drug safety research
centre for 1984.
Wholesalers are required by this year to meet the following requirments:
facility area minimum 264m and capital fund minimum 300 to 500 million Won.
The objective is to rationalise the system and the margins providing a strong
wholesaler link. Through this confidence would be restored in the pricing
system. Non pharmacist drug dealers are being phased out. The policy is to
make the list price obligatory for the top 100 items, which since they
represent 70% of the market, will have a considerable stabilising effect on
the system. The retail price is already obligatory on all packages and 3,232
drugs are listed under the insurance system. These prices give a 45% margin
(designed 12% wholesaler and 33% retailer).
Since the industry is technology intensive and requires sources of capital
and raw materials as well, foreign participation is encouraged. However,
there are restrictive guidelines for this and the governmental research
institutes also develop processes for commercialisation. (Important, see
section IV A for the guidelines and IV B for government research.) In
essence, for a 50% joint venture to be allowed there must now be some
undertaking by the company to produce raw materials. 100% foreign capital
ownership is only allowed if it is all raw materials or all for export.
There are two lines of criticism of the government policies for the
pharmaceutical industry. The Korean Pharmaceutical Industry Association
(KPIA) say that the majority of their members are small and medium enterprises
and that import liberalisation will have a great impact on them. They feel
their facility investments to meet KOMP will be lost if liberalisation occurs
at the same time. Furthermore they ask that manufacturing restrictions
outlined earlier should be lifted before liberalisation so that these
substances can be made locally. They also recommend higher tariffs for
finished drugs, (from 40 to 80%). Foreign observers on the other hand, feel
that the Korean drive for self sufficiency in drugs is economic nonsense (even
the Japanese do not do this). An efficient plant for the production of
quality drugs has a capacity exceeding the demand of the Korean market. No
foreign investor really wants, therefore, to fragment his production base, but
will do so only to preserve market opportunities in the country. It is felt
that the Koreans would do better by concentrating less on making everything
and more on developing a speciality by the time they open their markets.
Status of Foreign Participation
Foreign investment in this industry stands at 34m $, of which 9.9m were
made in 1982. Exhibit (S) is a chronological list of joint venture
establishments. The first series, occuring before 1975 were subject to greater
restrictions and majority shareholdings were rare, now they are more frequent.
Technological licences are listed in the same exhibit. These were more
numerous in the early days when they were sought for trade name purposes but
the government clamped down on this in order to enhance the technological
level. The terms for licensors have been improved, now the agreement may be
for 5 years and 5% of sales in practice, in theory restrictions are more
generous. (<10 years and <500,000 $ + 10% or < 14).
Conclusion
There are opportunities in South Korea for foreign companies with a
product advantage to set up a joint venture. The Koreans are aware of the
fact that many products are in fact, if sometimes only slightly, substandard,
and that to best avoid these problems they need foreign technology. Outside
awareness of the potential of the Korean pharmaceutical market is still in its
-39-
infancy (3-4 years), yet the market is already large and growing, with the
prospects of national health funded developments still ahead. The
rationalisation of production and marketing now underway can only improve the
profitability of the sector.
A company which could therefore identify a niche for some of its
specialities, in view of the existing products on the market and the expected
development of different sectors could set up a joint venture with a local
company to formulate the goods, and thus have developed a price competitive
base for when the market 'opens' in a few years (tariffs will still of course,
exist). Should the investor be obliged to produce some crude drugs on site to
maintain the market opening, government funded efforts to imitate will be a
lot less arduous, if a Korean company is already involved. However, if all
raw materials imports are allowed in 1985 as advertised, there can no longer
be any compulsion of this sort for a company negotiating now, and starting
formulation end 1984.
Hospital needs are growing, and foreign companies which will have more
expertise in supplying this channel could find an advantage there. A product
advantage in the treatment of adult degenerate diseases would also be a good
opening, given the prospects of increase in detection and incidence of these
complaints.
EXHIBIT (A)
MEDICAL SERVICES
Establishments Number Professionals Number
General Hospital 82 Physicians 22 564
Hospital 223 Pharmacists 24 366
Clinics 6344 Dentists 3 620
Dental Clinics 2024 'Oriental' doctors 3 015
Oriental Medecine Nurses 40 373
hospitals + clinics 2328 Midwives 4 833
Tubercolosis hospitals 6 Nurse Aids 61 072
Leprosy hospitals 6 Medical technicians 8 955
Affiliated Clinics 266 TOTAL 114 435
Midwife Clinics 488
TOTAL 123 37
Pharmacies 123 37
Apothecaries
(non pharmacist) 2457
Druggists
(restricted drugs) 655
TOTAL 15 449
NB Utilisation of hospital beds - 78% national hospital
81% general and private hospital
SOCIAL SECURITY EXPANSION PLAN
Total
Percentage CoverageYear Medical
Medical
Medical
of PopulationSecurity
Insurance
Care
1981 37.5 28 9.51982 39.5 30 9.51983 47.0 37.7 9.31984 64.4 55.41985 65.7 56.8 9.01986 71.8 8.91987 94.5 71.8 8.8 Source: Yakup Shinmun
- 41 -
EXHIBIT (B)
FINISHED DRUG PRODUCTION BY THERAPEUTIC CATEGORIES (1982)
In thousands $US equiv
Code Drugs (for) 1981 1982 % Growth
110 Central Nervous System 120 810 142 055 18120 Perepheral N.S 10 335 27 375 165130 Sensory Organ 8 135 9 245 14140 Anti-Allergy 10 995 13 405 22190 Other NS and sensory organ 225 365 62210 Circulatory Organs 27 705 33 590 21220 Respiratory Organs 45 760 44 690 (-2)230 Digestive Organs 123 185 163 855 33240 Hormones 21 700 27 895 29250 Urogenital and Anal 12 835 17 880 39260 Skin 43 930 54 410 24290 Other for each organ 170 170 0310 Vitamins 65 285 60 100 -8320 Nutrients, Tonics 131 305 167 480 28330 Bloody and Body fluid 124 95 15 240 22340 'Agents for artificial vessel' - 345 -390 Other metabolism 67 780 71 465 5410 Tissue Activators 145 315 117420 Anti neoplastic 4 590 14 565 -1490 Other Tissue Cell 1 485 1 745 18610 Antibiotics 182 420 231 380 27620 Chemo therapeutics 30 805 25 865 -16630 Biological Preparations 19 175 23 780 24640 Anti parasite 8 375 10 610 27710 Pharmaceutical aids 1 410 1 075 -23720 Diagnostic Aids 810 1 480 82730 Public Sanitation 13 735 19 680 43740 Miscellaneous agents 7 765 11 715 51790 Drugs not for treatment 2 385 740 -68810 Narcotics 420 495 18890 Narcotics 5 330 4 920 -7
TOTAL 981 090 1187 910 21
12000 RAW MATERIALS 96 810 130 870 35
TOTAL 1077 900 1318 780 22
Source : Korean Pharmaceutical Industry Association
-42-
EXHIBIT (C)
BREAKDOWN OF THERAPEUTIC CLASSES RANKED BY VOLUME - (1981)
Category No of items Production amountthousand (won)
610, Antibiotics 461 142,289,820Antibiotics against gram positive germ 102 30,185,306Antibiotics against gram negative germ 11 1,861,644Antibiotics against Anti-acid-fast germ 45 25,392,114Antibiotics against gram positive germ,
rickettia and virus 34 6,057,032Antibiotics against gram positive and
gram negative germ, ricketia and virus 117 37,035,995Antibiotics against fungus, amoeba and
virus 21 2,811,649Combined antibiotics 81 18,644,956Other antibiotics 50 20,301,120
320, Nutrient 322 102,418,761Calcium preparations 9 42,162Mineral preparations 57 2,226,690Carbohydrate preparations 47 7,925,019Organic acid preparations 1 787Protein and Amino acid preparations 34 18,230,007Internal organ preparation 4 688,510Drugs for children 2 226,525Other preparations 178 73,079,058
230, Drugs acting on digestive organ 970 96,083,863Dental and oral agents 29 914,668Remedies for peptic ulcers 128 18,016,072Stomachics and digestive enzymepreparations 197 31,580,700Antacids 122 14,557,856Anti-emetics and Emetics 30 1,356,163Cholagogues 39 2,263,943Intestinal antiseptics 187 12,998,339Laxatives and Enemas 83 2,915,986Other drugs acting on digestive organ 155 11,480,133
110, Central Nervous System Drugs 991 94,232,334General Anaesthetics 11 977,043Hypnotics and Sedatives 16 51,612Anti-epileptics 22 686,926Anti-pyretics and Analgesics 730 80,553,641Analeptics and Stimulants 13 731,679Analgesics 13 389,809Tranquilizer 108 4,760,279Other agents for central nervous system 78 6,072,340
390, Other metabolic agents 315 48,970,145Lipophil factor preparations 34 1,795,043Antidotes . 106 23,479,006Remedies for habitual poisoning 3 58,652Lactagogues 4 82,229Enzyme preparations other than digestive
enzyme68 8,239,412
Anti-diabetics 14 1,794,290Other Metabolic agents 86 13,521,511
310, Vitamins 586 50,920,891Vitamin A,D preparations 13 13,761,080Vitamin 81 and its preparations 27 239,732Vitamin B and its preparations (Excld B1) 115 4,773,955Vitamin C and P preparations 37 1,352,782Vitamin E and K preparations 72 3,090,292Combined Vitamin preparations 143 13,485,787Multi Vitamins preparations 72 3,431,657Combined and Multi Vitamins with Mineral 33 7,524,068Other Vitamin preparations 56 3,261,533
260, Dermatics 513 34,265,799Organic disinfectants 72 1,380,478Inorganic disinfectants 36 500,094Agents for purulent infections 40 1,667,070Anodyne, Antipuric, Astringent and Anti-
flammatory for topical use 90 14,592,195Agents for Ectoparasitic infections 173 9,262,743Skin Softener 22 1,465,004Agents for Hair 20 1,541,561Other dermatics 60 3,856,650
220, Drugs acting on respiratory organ 387 35,964,024Respiratory stimulant 4 12,914Antitussives and expectorants 349 34,757,512Gargles 4 64,992Other drugs acting on respiratory organ 30 1,128,604
210, Circulatory system drugs 392 21,608,728Cardiacs 32 2,497,995Antiarrhythmic drugs 16 373,817Diuretics 69 1,036,165Anti-hypertensives 62 3,150,231Other Antihypertensive 5 293,940Vasoconstrictors 5 136,425Vasodilators 60 3,304,543Drugs for anteriosclerosis 25 1,025,668Other drugs for circulatory system 118 9,789,941
240, HormonesPituitary HormonesSalivary gland HormonesTyroid and Parathyroid hormonesAnabolic hormones
244• 2
2138
16,925,1135,297
19,655211,86358,014
Adrenal hormones 128 12,384,028Male hormones 27 953,590Female hormones 24 2,518,174Combined Hormones Preparation 13 470,104Other Hormones 7 304,385
120, Peripheral nervous system drugs 196 8,061,102Local anaesthetics 18 284,373Skeletal muscle relaxants 43 2,132,610Autonomic nervous system drugs 33 775,932Antispasmodics 95 4,838,615Diaphoretics 4 18,038Other preparations 3 11,531
620, Chemotherapeutics 282 24,027,516Sulfa drugs 124 5,759,292Anti-tubercolosis drugs 60 6,535,729Anti-leprosy drugs 4 143,658Anti-syphilitics 1 733Furan deriv. Preparations 22 50,509Other chemotherapeutics
.71 11,537,593
(NB 1$ equivalent to 780 won at time of report)
Source : Korean Pharmaceutical Industry AssociationYakup Shinmoon
- 45 -
EXHIBIT (D)
COMPARISON OF PRODUCTION IN SOUTH KOREA ANC, JAPAN(ranked according to S Korea) 1982
Category KOREA
Production (M$) GR
to
JAPAN
Production (m$) GR%
610 231 27 3500 11
320 167 28 461 16
230 164 33 1306 14
110 142 18 1575 10
390 41 5 1504 .2
310 60 -8 1102 18
260 54 24 912 5
220 45 -2 368 5
210 34 21 1790 3
120 27 165 329 -3
240 28 29 398 14
620 26 -16 123 6
630 24 24 648 12
730 20 43 86 4
250 18 39 169 30
330 15 22 410 11
140 13 22 180 23
640 11 27 na
130 9 14 222 17
800 5 -5 na
420 5 -1 506 2
Company source
-46-
EXHIBIT (E)
RAW MATERIAL (CRUDE DRUG) PRODUCTION BY THERAPEUTIC CATEGORY IN S KOREA 1982
Category
Drugs (for) Production (thousands US $ equiv)
110 Central Nervous System 8 393
120 Peripheral N S 405
140 Anti-allergy 387
210 Circulatory system 10 910
220 Respiratory system 2 299
230 Digestive tract 9 644
240 Hormones 2 415
250 Urogenital and Anal 4
260 Epidermic 1 767
290 Others for organs 220
310 Vitamins 2 696
320 Nutrients, Tonics 1 302
330 Blood and Body Fluids 625
390 Metabolic Drugs 4 414
420 Anti neoplastic 313
490 Others for tissue cell 16
610 Antibiotics 47 898
620 Chemotherapeutics 11 469
630 Biological preparations 2 592
640 Antihelminthitics 1 513
710 Pharmaceutical aids 10 694
720 Diagnostic Aids 100
730 Public Sanitation 669
790 Not for treatment 2 444
TOTAL 123,250
(NB Problems of definition cause number discrepancies of approx 5%)
Source: KPIA
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EXHIBIT (F)
PRODUCTION OF BIG ITEMS (1981)
Products ranked Therapeutic Use Manufacturers Produc- GR %tion (m '80-81$ equiv)
Bacchus D Nutrient drink Dong A 52.5 23.6
Wonbi D Nutrient drink Il-Yang 17.9 33.9
Ursa Hepatonic Dae Woong 11.8 64.1
Kanamycin Antibiotic (v.acid-
fast germ)
Dong A 8.18 18.5
Saridon Chon Kun Dang 7.00 55.7
Gas Whalmyungsu Stomach Dong Wha 6.97 29.2
Rifampin 150 mg Antibiotic (v
tubercolosis)
Yu Han 6.93 0.6
Alps D Nutrient Drink Dong Wha 6.77 48.1
Panpyrin Oral Liquid Cold antipyretic
analgesic
6.63 19.6
Pancold A Cold antipyretic
analgesic
Dong Wha 6.03 na
Guronsan Vermont Nutrient drink Yung Jin 5.76 na
Sam Wha Tang Antipyretic analyesic Dong Kwang 5.64 na
Festal Stomach Handok 5.64 na
Albumin Blood preparation Green Cross 5.63 12.3
Biovita Internal antiseptic Il Dong 5.09 33.6
Whalmyungsu Stomach Dong Wha 4.79 24.5
Rhinathiol Cap Bronches Hyun Dai 4.36 346.5
Aminofusin Protein/amino acids Yung Jin 4.32 6.0
Rifodex Cap Antibiotic Chong Kun Deng 4.11 60.8
Aminofusin Protein/amino acids Yung Jin 4.08 46.8
Norumo Puly Antacid Il Yang 4.04 22.5
Gag Myong Soo Stomach Sam Sung 4.00 54.2
Gelfos Anti peptic Ulcer Bo Ryung 4.00 94.3
Mexolon Liquid Digestive Agent Dong A 3.88 59.1
Vibramycin Antibiotic, Pfizer Korea 3.88 6.9
Contac 600 Antihistamine Yu Han 3.84 25.0
Cefamezin Antibiotic Dong-A 3.82 94.0
Thymisin Antitussive and Dae Woong 3.82 37.9
Expectorant
Amcillin Cap Antibiotic (gram +ve) Chong Kun Deng 3.78 64.2
Celestone G Cream Corticosteroid Yu Han 3.76 20.4
Panto P Antipyretic Analgesic Sam Sung 3.69 34.1
Urofam Chemotherapeutic Dae Woong 3.68 225.3
Gemuron Vitamins and Minerals Dee Woong 3.67 19.2
Sam Jung ton Nutrient drink Il Wha 3.61 143.2
Bactan D Nutrient drink Sam Sung 3.59 127.2
Woo Whang Chung Sim Woun Circulatory System Choseon Pharm 3.52 70.3
Choong Wee 5% Dextrose Nutrient injection Dae Han Choong 3.33 12.1
Wee
Nikin Oral Liquid Antipyretic Analgesic Chong Kun Dang 3.29 117.7
Neuer Cap Anti peptic ulcer Je Il 3.25 124.0
Mool Pas A Anodyne, antipuritic
antiflammatory
Hyun Dai 3.24 47.6
Neo Pas Anodyne antipuritic
antiflammatory
Dee Il 3.18 23.3
Bronchicum Antitussive and Pacific Chemical 3.18 143.9
Expectorant
Penbrex Cap 250 mg Antibiotic (gram +ve) Yung Jin 3.12 3.6
Norumo Oral Liquid Antacid Il Yang 3.09 13.6
Kedacillin I V Antibiotic (gram +ve) Han Il 3.07 23.9
Dee II Bend Sanitary Aid Dee Il 3.03 22.0
Evasol Protein/amino acids Dae Han Choong 3.00 43.3
Wee
Pipemic Cap Chemotherapeutic Sam A 2.96 257.1
Plasmanate Blood Preparation Green Cross 2.85 18.5
Plasol Protein/amino acids Je Il 2.80 946.5
Prima Tab Chemotherapeutic Dong A 2.79 862.5
Ryongaksan Antitussive and Bo Ryung 2.79 12.7
Expectorant
F Killer Aerosol 420 mg Insecticide Sam Sung 2.68 -22.0
Sin Sin Pas Anodyne, Antipuritic,
Anti-inflammatory
Sin Sin 2.67 26.3
Lasix Tab Diuretic Han Dok 2.65 25.1
Minocin Cap Antibiotic (broad
spectrum)
Yu Han 2.64 -0.3
H2 Tab Anti peptic ulcer Dee Han Choong 2.60 87.2
Wee
- 49 -
Tagamet Tab Anti peptic ulcer Yu Han' 2.57 3.9
F Killer Aerosol 600 mg Insecticide Sam Sung 2.52 160.4
Home Keeper Aerosol Insecticide Dong Wha 2.46 2.8
Oxymycin Cap Antibiotic (broad
spectrum)
Chong Kun Dang 2.45 36.4
Venapollo A Vitamins and Minerals Yu Yu 2.39 10.6
Skainar Tab Otorhinological Hanil 2.37 88.1
Hanacin Cap Antibiotic (broad
spectrum)
Chong Kun Dang 2.34 27.2
Dae Il Pas Anodyne, antipuritic Dae I1 2.23 -3.8
Antiflammatory
Ssang Kum Tang Antipyretic Analgesic Hanil Corp 2.28 -7.6
Bestase Tab . Stomach Dong A 2.27 29.9
Helocetin Cap Antibiotic (broad
spectrum)
Chong Kun Dang 2.24 -55.1
Pamoxin Antibiotic (gram +ve) Dong Wha 2.22 60.1
F Killer Mosquito Coil Insecticide Sam Sung 2.14 33.2
Legalon Antidote Bu Kwang 2.14 36.4
Compound Ulerimin Anti peptic Ulcer Dae Han Choong 2.12 20.6
Wae
Pancreon F Stomach Yung Jin 2.11 33.2
Lincocin S S 600 mg Antibiotic Korea Upjohn 2.11 147.2
Dulcolax Laxative Boehringer 2.11 34.7
Ingelheim
Amphojel M Antacid Dong 2.10 36.7
Talcid Antacid Bayer 2.10 109.4
Varidase oral Tab Non digestive enzymes Yu Han 2.10 27.4
Amikin Antibiotic Bo Rung 2.06 16.7
Kushim Heart Bo Ryung 2.06 6.4
Antiphlamine Antipuritic, Anodyne Yu Han 2.02 39.3
Antiflammatory
Tathion Antidote Dong A 2.01 5.2
Kimotrosi Metabolic agent Je I1 2.01 317.5
Aspirin Children Antipyretic, Analgesic Bayer Korea 2.00 32.9
Kimotab Tab Non digestive enzymes Je I1 1.94 5.0
Asthma S Antitussive and Il Yang 1.93 29.8
Expectorant
-50-
Aspirin. Anti pyretic Bayer Korea 1.90 62.4
Terramycin Antibiotic (broad
spectrum)
Pfizer Korea 1.85 -8.9
Danzen Tab Non digestive enzyme Hanil 1.83 35.9
Bee Com Vitamins complex Yu Han 1.82 10.7
Amoxapen Cap Antibiotic (gram +ve) Chong Kun Dang 1.77 17.7
Vipax Vitamins and Minerals Il Dong 1.75 6.5
Ssangwha Tang Antipyretic Analgesic Hanil Corp 1.75 313.2
Feldene Antipyretic Analgesic Pfizer Korea 1.71 114.1
Baralgin Tab Antipyretic Analgesic Han Dok 1.69 13.1
Hivinal Multi vitamins Han Dok 1.69 27.1
Talampin Cap Antibiotic (gram +ve) Dong A 1.67 54.9
Ferrum Tab Mineral Nutrition Dae Han Choong 1.65 66.9
Wae
Ativan Tranquiliser Il Dong 1.64 0.2
Coritussal Antipyretic Analgesic Bu Kwang 1.62 45.5
Indopen Antipyretic Analgesic Il Dong 1.62 24.0
Kool Tab Digestive agent Chung Gei 1.61 132.9
Hydergine Circulatory system Dong Wha 1.59 48.7
Myambutol Coated Tab Sulfa drug Yu Han 1.55 -18.5
Kedacillin Antibiotic (gram +ve) Hanil 1.55 -16.6
Cefamezin Antibiotic (broad
spectrum)
Dong A 1.52 -22.0
Japanese B Encephalitis Vaccine Dong Sin 1.52 128.5
Vaccine
Naxen Antipyretic Analgesic Chong Kun Deng 1.50 -20.5
Monotan F Insecticide Pacific Chemical 1.50 46.6
Bacacil 400 mg Antibiotic (gram +ve) Pfizer Korea 1.49 -
Bactrim Tab Sulfa drug Chong Kun Dang 1.48 24.2
Koko Syrup for Children Antitrussive and Sam A 1.48 130.8
Expectorant
Neusan Antipyretic Analgesic Dong A 1.46 102.6
Duspatalin Tab Digestive Agent Dae Han Choong 1.44
Wae
Cephatrex Antibiotic (broad
spectrum)
Bo Ryung 1.44 12.6
Kiung When Antiemetic Bo Ryung 1.42 29.7
Amolex Cap Antibiotic (gram +ve) Yung Jin 1.42 -14.2
- 51 -
Azintal Tab Digestive Agent Il Yang 1.42 -
Vermax Tab Antihelminthetic Yu Han 1.37 14.5
Velosef Antibiotic (broad
spectrum)
Il Sung 1.36 10.3
Plascam Blood preparation Dong Sin 1.33 24.1
.4
.9
.9
.7
.7
.5
.2
.1
.1
.1
.9
.9
.2
.5
.0
.9
.7
.5
.6
.0
.5
.5
.6
.2
.8
.6
.6
.7
.2
14;
-52-
EXHIBIT (G)
PRODUCTS SHARE IN PARTICULAR MARKETS
Product
Company
EstimatedMarket Share
110, General Anesthetics
Anti epileptics
Antipyretics, Analeysics
liquid form
syrup form
AnalgesicsAntiinflammatory
Potent antiinflammatory
Analeptics and StimulantsTranquilizersmajor
minor
Other drugs affecting CNS
Halotan InjEpontal InjKetalar
Orphid TabPhenytoin Na Inj
SaridonAspirin for
ChildrenPanpirin SPancold AKonasyrupNovaking syrup
Naxen TabFeldene Capsule
YuhanPentacocin Inj
Timing Tablet
Trittico CapMetlevil TabAtivan TabZerdasil TabTrenstan Cap
Il Sung 30%Bayer 28%Yuhan 8.6%
Bukwang 72%Sam Jin 28%
Chong Kun Dang 28%Bayer 11%
Dong A 34%Dong Wha 30%Sang A 23%Dong Kwang 19%
Chong Kun Dang 18%Pfizer 12%
6.8%Dae Won 76%
Crown 100%
Kuk Je 20%Dong Wha 18%
Dong 39%Il Yang 12%Sam Jin 86%
210,Muscular Blocking Agents
Antispasmodics
Analysin TabTrancopol TabMioblock InjBuscopan
compositionBuscopanBaralgin
Chung Gei 34%Je I1 26%Yuhan 11%Boehringer 21%
BoehringerHandok 7%
130, Opthalmic vasoconstrictor Sun StarVizine (drops)
Opthalmic antibiotics SindotopTeramycin(ointment)
Otorhinological agents Skinar CapNaviztar
Sam Il 38%Pfizer 18%Kukje 33%Pfizer 22%
Hanil 66%Sam Chung Dang 10%
140, Antihistamines Contac 600 Yuhan 41%Actipid syrup Sam Il 11%
210, Cardiacs Kushim Bo Ryung 85%Cardoinphin Tab He Wae 15%
Antiarrythmics Tenormin Tab Hyun Dai 45%Herban Tab Hanil 30%
Piuretics Laxiz Handok 65%Aldacton Tab Kun Wha 12%
Antihypertensives Bendicon Cap Bayer 36%Esidri Tab Handok 16%
Vasodilators Persanthin Tab Boehringer 19%Linstene Il Yang 13%
Drugs for arteriosclerosis Liparoid Tab Hyn Dai 52%Pantmin Tab Je 18%
Other Drugs for circulatory Hydergine Tab Dong Wha 22%system Decakinone Cap Hanil 20%
220 Respiration stimulants Cytomack inj Yung Jin 100%Antitussives and Expectorants
Zimicin Dae Woong 24%liquids Bronchicum Pacific Chem 13%other Rhinathiolcap Hyundai 18%Ryongaksan Bo Ryung 13%
230 Dental and Oral Agents Insadol Tab U.E.0 28%Drugs for peptic ulcers Noel Cap Je 20%
Togametabling Yuhan 22%H2 Tab Choong Wae 12%
Drugs containing antacid Gelfos Bo Ryung 35%Amphogel Il Dong 12%
Combined digestives (liquid) Gas Whalmyung Su Dong Wha 28%Sam Sung Gas Myung Soo 19%
Digestives Festol Handok 20%Norumo Pulv. Il Yang 14%
230 Antiemetics and emetics Tosmin Dong Sung 51%Spida Hanil 22%
Intestinal antiseptics Chung Ro Whan Dong Sung 16%Lopetin Cap Yuhan 10%Lopetin syrup Yuhan 10%
Lactobacillus preparations Biovita Dong 69%Bentruxacid cap Dong Koo 9%
Laxatives and Enemas Dulcorax Boehringer 81%Picolone drops Sam Il 6%
Other digestive organ drugs Mexolan Dong A 4%Dustpatarine Tab Chung Wae 19%
240 Thyroid and Para-Thyroidhormones
Anabolic HormonesDexamethasone Prep
Dexacolon Tab
Komzivoid Tab
Dacamid CapOradexon InjPacific Chem
Bukwang
SheringYuhan
91%20%
33%Oradexon Tab Yuhan 10%
Prednisolone Predisolone Tab Pacific Chem 33%Sherisolon Shering 14%
Betamethasone Prep Celestamine Tab Yuhan 40%Betamethosene Inj Han 01 22%
Other adrenal hormones Triamcinelone Inj Dong Kwang 33%Dephometral Inj Upjohn 28%
Male Hormones Depovirin Inj Handok 36%Andriol Soft Yuhan 24%
CapsuleFemale Hormones Premarin Inj Kuhn Pung 34%Kumovit Tab Shering 27%
250 Urethral disinfectant Cernilton Tab Dong Koo 100%Oxytocin Methergin Inj Dong Wha 29%Orathsin Inj Handok n.aOxytocin Inj Yuhan 20%
Emmenagognes Salvia Sam Chun Dung 44%Oymenzin-S McNeil 20%
Contraceptives Minibora (30) Shering 29%Sou loop Hanil 22%Lyndiol and Miniol Yuhan 21%
Urogenital organs (otherdrugs)
Betadine Vaginalsupp
Hyundae 18%
Carnes ten Bayer 17%Gynodaktarin Yuhan 17%
Antimenorroidal agents Potanal Handok 35%Coibenal S.0 Tab Handok 20%
260 External disinfectants Potadine Sam Il 31%Betadine Solution Hyundai 30%
For Purulent Infections Celestone G Yuhan 17%Sterocin G Chung Gei 10%
Anodyne Antipuritic Anti- Antiphlamine Yuhan 70%inflammatory (creams andlotions)
Manthoradam lotion Yung Jin 19%
Agents for ecto-parasitic Carmestine Bayer 13%infections Ecolon Hanmi 7%
Skin Softener Lip Clean Sang A 56%Vaselin Gauze Sang A 10%
Anti-dandruff Selson Pacific Chemical 56%Erica C Dong A 44%
310 Vitamin A and D Ganyuku Dae Woong 99.8%Vitamin B Aronamin gold Dong 25%
Beecom Yuhan 22%Vitamin C Yuhan CS Yu Yu 30%
Vital C Yu han 16%Vitamin E and K Grandpherol Yuhan 42%
Torizal Han Mi 16%Multi-Vitamins Gemron Dae Woong 17%
Venapollo-A Yu Yu 12%
-55-
320 Mineral preparations Ferrova Bu Kwang 64%Ferrum S Chung Wae 35%
Carbohydarte Preparations Dextrose 5% Chung Wae 34%Dextrose 5% Dai Han 12%
Protein and amino acid Aminofusin L Yung Jin 19%preparation Aminofusin Yung Jin 15%
Anti Anemia Ferun Tab Chung Wae 37%Maszigen B12 Je 17%
For Babies Varidus Sam A 58%Babylamine Dong 42% .
Other nutrients/tonics Bacchus D Dong A 58%Wonbi D Il Yang 21%
330 Fluid supply Reomacrodex Il Sung 42%Normodex Inj Il Sung 40%
Hemostatics Transamin Cap Je 34%Transamin Inj Je 33%
Anticoagulants Heparin inj Chung Wae 100%
390 Drugs for liver dose Urusa Dee Woong 45%Tathion Tab Dong A 7%
Remedies for habitual PAM Tab Choong Wae 66%poisoning PAM A Tab Choong Wee 34%
Enzyme preparations Kimotab Je 27%Varidase Tab Yuhan 19%
Antidiabetics Diabanese Pfizer 35%Daonyl Handok 21%
Other metabolic agents Komotrocy Inj Je 20%Mirapront N Bukwang 9%
Malignant anti-tumours Futraful Je 53%F.H Je 29%Methotrexate Yuhan 9%
Other anti-tumours Maroviben Inj Sam Jin 44%Madecasol Tab Dong Kuk 15%
610 Penicillin Preparations Hostacillin Inj Handok 22%Penicillin G Handok 13%
SodiumAmpicillin Preparations Ampicillin Cap Chong Kun Dang 22%
Penbrex Cap Yung Jin 20%Amoxicillin preparations Pamoxin Cap Dong Wha 22%
Amoxapen Cap Chong Kun Dang 21%Cephalosporin preparations Cefamezine Inj Dong A 12%Duricef Cap Bo Ryung 7%
Erythromycin Preparations Lincocin Inj Korea Upjohn 23%Erythro Cap Chong Kun Dang 8%
Chloramphenicol preparations Herocetin Cap Chong Kun Dang 32%Chloramphenicol
capMedica 22%
Tetracycline Preparations Vibroinycin cap Pfizer 15%Oxyincin cap Chong Kun Dang 11%
Streptomycin Preparationssulphate
Streptomycin Han Dock 40%
Streptomycin Inj Chong Kun Dang 18%Streptomycin Inj Yuhan 8%
- 56 -
Gentamycin preparations Gentamyin Inj Kukje 26%Gentamyin Inj Dong Sin 25%
Kanamycin Preparations Kanamycin sulphate Dong A 39%Inj
Amikin Inj Bo Ryung 15%Rifampicin preparations Rifodex Cap Chong Kun Dang 46%
Rifampicin Cap Yuhan 33%ABs against fungus Fulvicin Tab Hyndai 55%Mycostatin oint Dong A 15%
Combined ABs Ampliclox Cap Chong Kun Dang 59%Dicloxacilin Dong Wha 11%
620 Sulfa drugs Bactrim Tab Chong Kun Dang 26%Uprin Tab Dong Wha 15%
Ethambutol preparations Ethanbutol Tab Se Shin 43%Myambutol Yuhan 29%
Anti-tubercolosis drugs Tuberactin Inj Kuhn pang 19%Pyazolina Sam Sung 13%Pyrazinamide Tab Yuhan 10.3%
Other chemotherapeutics Prima Tab Dong A 18%Pipemic Cap Sam A 13%
630Vaccines Japanese B Dong Shin 37%
EncephalitisVaccine
Blood preparations Albumin Green Cross 40%Albumin Dong Shin 25%
640Anti-plasmodium Tiberal Tab Chong Kun Deng 35%
Fasigyn Pfizer 21%Antihelminthics Vermox Yuhan 25%
PTI com Chong Kun Dang 17%
-57-
EXHIBIT H
PRODUCTION OF MAIN CRUDE DRUGS (1981)
Raw materials Use Manufacturer Production GR%(millions $)(wrt '80)
Urokinase Fibrinolytic Korea Green 9.40 9.5Cross
Soluble kanamycinsulphate
Amino glycoside(antibacterial)
Dong Myung 3.91 3.9
Trimethropim Chemotherapeutic Dong Wha 2.71 55.8(urinary)
Ampicillintrihydrate
Penicillin anti-biotic
Yung Jin 2.44 5.8
Amoxyllin Penicillin anti-biotic
Dong Wha 2.28 115.6
Cimetidine Anti-ulcer Choong Wae 1.74 28.8
Sulphamethoxazole Sulphonamide Yung Jin 1.74 21.6
Ampicillinanhydrous
Penicillin anti-biotic
Yung Jin 1.74 52.2
Doxycyclinehydrate
Tetracycline anti-biotic
Pfizer Korea 1.64 22.1
Pivampicillin 'hydrochlorine
Penicillin anti-biotic
Choong Wae .76 59.2
Oxytetracyclinehydrochloride
Tetracycline anti-biotic
Pfizer Korea .73 -28.6
Amoxycillintrihydrate
Penicillin anti-biotic
Yung Jin .73 2.1
Sulphamethoxazole Sulphonamide Dong Wha .69 30.8
Source Yekup Shinmoon
-58-
EXHIBIT (I)
LIST OF RAW MATERIAL MANUFACTURERS
15-el
. Manufacturing protection ** past
* now
• Import protection
B banned (see also footnote)
. Underlined are most important RM productions
ITEMS
MANUFACTURERS
B Acetanilide
B Acetaminophen
Acetylsalicylic Acid
Adenosylcobalamine
Albumin Tannic Acid
Amikacin Sulfate
Aluminium Hydroxide Gel
Aluminium Hydroxide Mag-
nesium Carbonate Co Dried
Aluminium Phosphate Gel
B 3-Amino-5-Methylisoxazol
B 6-Aminopenicillanic Acid
B Aminocaproic Acid
B Aminophylline
Amoxicillin
Amoxicillin Monohydrate
Amoxicillin Trihydrate
Ampicillin
Ampicillin Anhydrous
B Ampicillin Sodium and
derivatives
B Ampicillin Trihydrate
Union Fine Chem
Asia Pharm, Sampoong, Union
Fine Chem Sung Do
Hyun Dai, Dan Il
Seoul Pharm
Sung Do
Bo Ryung
Yu Yu, Il Dong, Il Yang
Bo Ryung
Yung Jin
Seoul, Yung Jin
Je
Sam Poong, Inwha
Dong Wha, Chong Kun Dong, Il Dong, Bo Ryung
Seoul Pharm
Bo Ryung, Dong Shin, Chong Kun Dang, Seoul,
Yung Jin, Kukje, Dae Woong
Dong Wha, Bo Ryung
Seoul, Yunq Jin, I1 Dong
Seoul, Chong Kun Dang, Yung Jin, Bo Ryung
Chong Kun Dang, Seoul, Dong Shin, Yunq Jin,
Dai Han Choong Wee
-59-
Dextrous Anhydrous
Dai Han Choong Wae
Glucose Anhydrous
Dai Han Choong Wae
B Aspergillus
Samil
Basic Aluminium Sodium
Hyun Dai
Carbonate
Berberin Tannate
Asia Pharm
Benorylate
Dong
Betamethason
Yu Han Corp, Chung Gei*
Betamethason, Dipropionate * Chung Gei
Betamethasone Valelate
Bezoar
Benzoic Acid
B Benzylbenzoate
Benzoylthiamindisulfide
Bisacodyl
B Bismuth Subnitrate
B Bromelain
B Butyl-p-oxybenzoate
B Caffein
Caffein Anbydrous
Caffein & Sod. Benzoate
Calcium Carboxymethyl
Cellulose
B Calcium Panthotheinate
B Carbarsone
B Castor Oil
Carbocystein
Carboxylic Acid
S-Carboxymethylcystein
B Cephalexin
Cephaloxyl monohydrate
Cephaloridin
Cephalothin Sodium
Cephazolin Sodium
B Chloramphenicol
Chloramphenicol Micronized
and derivatives
Yu Han Corp
Woo Kwnag, Chun Il
Sam Nam
Soo Do
Dong
Kosandang
Korean Heavy Stone
Je Il
Dan Il
Sam Poong, Union Fine Chem
Sam Poong
Yung Jin
Korea Ginseng Pharm, Bolak
Sam Poong
Union Fine Chem
Dong Yang Oil & Fat Chem
Dan Il
Bo Ryung
Chun Se
Dong Shin, Dong Wha, Bo Ryung, I1 Dong
Dee Woong
Yu Yu
Chong Kun Dang
Dong-A, Yu Han
Chong Kun Dang, Kuk Je
Chong Kun Deng, Kuk Je
- 60 -
Chloramphenicol Palmitate Chong Kun Deng, Kuk Je
and derivatives
Chloramphenicol Succinate Chong Kun Dang
and derivatives
B Chlorpheniramin Maleate Sam Poong
Cimetride Dae Han Choong Wae
Cimetidin Dong Wha, I1 Dong, Yu Han Corp
Dai Han Choonq Wae
B Cloxacillin Sodium (oral) Yung Jin
B Cloxacillin Sodium Yung Jin
(injection)
B Cloxacillin Sodium Chong Kun Dang, Dong Shin
monohydrate
Cloxacillin Trihydrate Seoul Pharm
Crostridium I1 Dong
Crude Urokinase Green Cross, Dong-A, Shin-Ra
Cyclandelate Sam Won
Diastase Dong-A, Kyung Ki
B** Diclofenac Sodium Han Dok **
Dicloxacillin Sodium Yung Jin, Dong Wha
Diphenyl Glycin Yung Jin
Diphenylhydantoin Sam Won
Diphenylhydantion Sodium Sam Won
Dizet Kyung Ki
B Dried Aluminium Hydroxide Il Yang, Sam Nam
Gel
Dried Aluminium Phosphate Kang Nam
B Dried Yeast Jeil Universal, Cho Hung
Epinephrine Je
Erythromycin Estolate Yung Jin
B **Ethambutol Yu Han, Chong Kun Dang, **Handok Pacific Chem
B Ethoxybenzamide and salts Dan Il, Dong Wha, Shin Poong
Ethyl Linoleate Han Il Corp
B Ethyl-p-oxybenzoate Dan Il
5-Fluorouracil Je
Furosemide Han Dok
B Futraful Je
Gamma Aminobutylic Acid Je
- 61 -
Ginseng Total Saponin
Glucose-l-Phosphate
Disodium
Glucose-l-Phosphate
Diarginate
Glybenclamide
B Glycerin
B Glyceryl Guaiacolate
Glycyrrhizin Acid
Glycyrrhizin K
Guaifenesin
Pacific Chemical
Dong Shin'
Dong Shin
Han Dok
Lucky
Dan Il, Shin Poong
Kyung Nam
Kyung Nam
Union Fine Chem
Heated Human Plasma Protein Green Cross
Hepto Ferrous Gluconate Shin Poong
Hetacillin Calcium Kuk Je, Yung Jin
B Hetacillin Potassium (Inj) Yung Jin
B Hetacillin Potassium (oral) Yung Jin
Ibuprofen Lysin
Isoaminyl Citrate
Kuk Je
Yung Jin
B Isonicotinic Acid Hydrazid Yu Yu, Asia Pharm
(sodium)
Isonicotinic Acid Yu Han
Methansulfonate
B** Kanamycin Sulfate
Donq Myunq**
Kanamycin Soluble
Donq Myunq
Lipase
Pacific Chem
Liquid Paraffine
Keuk Dong Shell
Loperamide
Asia Pham Yu Han Corp
L-Lysin
Mi Won
Lymecyclin
Kuk Je
dl-Mandelic Acid
Sam Won
Magaldrate
Dong Shin
Magnesium Carbonate
Kang Nam
Magnesium Hydroxide
Yu Yu, Il Dong
Magnesium Oxide
Kang Nam
Magnesium Silicate
Il Yang
B Magnesium Stearate
Yu Yu
B** Mebendazole
Shin Poong**
Meclofenoxate Hcl
Dae Han Choong Wee
- 62 -
Meclofenoxate Phosphate
Mecrizin Hcl
B Metacyclin Hcl
B Menthol
Methylbenacrizin
B dl-Methylephedrin
B dl-Methionin
B Methyl-p-oxybenzoate
B Methylsalicylate
B Metoclopramide
Metoclopramide Hcl
Neusilin
Nicotinamide
Ox Bile Extract
Oxolinic Acid
B Oxytetracyclin
B Oxytetracyclin Hcl
B P-Amino-Salicylicacid
B P-Amino-Salicylicacid
Hydrazide
Pancreatin
Phenbufen
B Phenacetin
Phenylamin Maleate
Phenytoin
Phenytoin Sodium
Phthalidyl Ampicillin
Dee Han Choong Wae
Sam Won
Kuk Je, Pfizer
Kyungnam, Bolak
Woo Chun
Sam Poong
Yu Yu Asia Pharm
Dan Il, Il Yang
Dan Hyun Dai
Dong Wha, Dong-A
Dong Wha
Il Yang
Yu Yu, Asia Pharm
Kang Nam, Bo Ryung
Shin Poong, Je
Pfizer, Chong Kun Dang
Pfizer, Chong Kun Dang
Yu Yu
Sam Sung, Sung Do
Han Il Corp, Kangnam
Bo Ryung, Yu Han Corp
Asia Pharm, Sam Poong, Union fine Chem
Han Dok
Kosan Dang
Kosan Dang
Yung Jin
Pimemidic Acid, Trihydrate Dai Woong, Dong Wha, Shin Poong
Piperacillin
B Pipethanate
Pivampcillin HCL
B Plaridoxim Hcl
Sam Won
B Probenecid
B Proglumide
B Propyl-p-oxybenzoate
Propylenglycol
Pyrazinamide
*Yu Han, Sam Sung*
Il Yang
Dee Han Choonq Wae
Dae Han Choong Wae
Han Mi
Han Mi
Dan Il, Il Yang
Mi Won
Sam Won
- 63 -
B Pyrantel Pamoate Pfizer, Ii Yang
Pyridoxin Hcl Bo Ryung
Riboflavin Buthylester I1 Dong
Riboflavin Lacticaid Ester Dai Woong
•
*
B
Riboflavin Tetrabutylate
Ribostamycin Sulfate
Rifcampicin
S-Lase
Salicylamide
Scolpolia Ext
Soda Lime
Sodium Benzoate
Sodium CMC
Sodium Cyclamate
Sam Poong
Dong Myung
* Chong Kun Deng
Pacific Chem
Dan Il, Sung Do
Il Yang, Kyung Yak
Kong Shin
Bolak
Bo Lak
Cho Hung
Sodium Dihydroxy Aluminium Dae Woong
Carbonate
Sodium Lauryl Sulfate
Tae Dong
Sodium Methan Sulfonate
Yu Yu
Sodium Saccharine
Kum Yang, cho Hung, Je I1 Ind
Sodium Salicylate
Sung Do, Dan Il
Sod Salcylate,
Carbasochrome Asia Pharm
B Sorbitol Lucky
Streptococcus Faecalis Bo Ryung
Stearic Acid Pfizer Korea
B Sulfadimethoxine Yung Jin
B Sulfadimethoxine sodium Yung Jin
B Sulfamethoxazole Donq Wha, Han Mi, I1 dong, Yung Jin, Shin Poong
B Sulfamonomethoxin Je
Sulfazolin Sodium Dong-A
B Sulpyrin Dong-A, Han Dok, Union Fine Chem
Synthetic Aluminium Silicate Il Yang, Kang Nam
Tartaric Acid Kwan Am
Taurin Dong-A
B Tetracyclin Chong Kun Deng, Pfizer, Kuk Je
B Tetracyclin Methylen Lysin Dai Han Choong Wae
B Theothyllin Sam Poong, Bo Ryung
B Thiamin Disulfide Yu Yu, Asia Pharm
B Thiamin Hcl I1 Dong, Asia Pharm, Shin Poong
- 64 -
B Thiamin Mononitrate I1 Dong
B Thiamin Propyl Disulfide Il Dong
B Thiamin Tetrahydrofuryl I1 Dong
Disulfide
Thioctamide Dong-A
Tochopherol Nicotinate Chong Kun Dang
B Trimethoprim Chong kun Dang, Donq Wha t Han Mi, Sam Il, Sam
Won
B Tranexamic Acid Je
Tolnaftate Il Yang
Urokinase Dong Shin, Green Cross
Ursodeoxycholic Acid Dae Woong
Footnote: Also Banned are:
Benzene hexachloride
Gamma globulin
Inositol
Insonicotinic acid hydrazide sodium
Methane sulphanate
Mefenamic acid
Microbial digestive enzymes and lactobacillus of bacillus subtillis stains
Combinations of penicillin and streptomycin or penicillin and sulfa drugs.
D phenyl glycine
Sigma mycin
Sulfa granidine
Tannic acid albumin
Tolampicillin
Formyl rifamycin
Source : KPIA
- 65 -
EXHIBIT (3)
PRODUCTION AMOUNT OF 72 LARGE FIRMS IN 1981 (Production over 1 billion won)
Rank Manufacturers $m GRwrt'80
1 Dong A 113.7 29.52 Chong Kun Dang 64.2 32.23 Yu Han 60.6 20.84 Dong Wha 52.4 36.85 Yung Jin 45.3 8.76 Han Dok 35.7 17.27 II Yang 34.6 35.78 Daehan Choong Wae 33.6 41.69 Dee Woong 32.4 71.2
10 Il Dong 29.6 26.111 Pfizer*Korea 25.9 4.812 Sam Sung Pharm 24.1 45.213 Bo Ryung 23.7 50.714 Hanil 23.1 23.915 Je Il 22.8 50.916 Korea Green Cross 22.6 17.817 Hyun Dai 18.1 59.818 Dong Shin 18.2 41.119 Kuk Je 14.1 11.520 Pacific Chemical 12.9 26.821 Boehringer Ingelheim 11.9 43.6
(Korea)22 Dong Kwang 11.3 70.823 Bu Kwang . 10.45 39.524 Dae Il 10.2 14.325 Bayer Korea 10.1 41.526 Il Sung 9.7 20.227 Kwang Dong 9.6. 23.228 Sam Il 9.4 14.929 Yu Yu 9.2 13.430 Sam A 9.1 57.231 Korea Upjohn 8.6 51.632 Sam Jin 7.9 62.533 Chung Gei 7.8 64.434 Choseon 7.2 50.535 Sang A 6.8 52.236 Tai Kwang 6.3 43.737 Hanil Corp 6.1 31.238 Han All 5.5 34.439 Ahn Gook 5.4 73.140 Dong Sung 5.4 12.541 Dong In 5.3 10.442 Il Wha 5.2 61.243 Medica Korea 5.1 31.544 McNeil Korea 4.9 29.845 Han Mi 4.9 50.346 Dae Han 4.8 23.547 Sin Sin 4.7 22.848 Sam Sung Drugs 4.5 11.249 Dong Myung 4.1 12.9
- 66 -
Rank Manufacturers $m GR%
50 Asia Pharm 3.9 51.451 Shin Poong 3.9 75.252 Dai Won 3.5 9.753 Schering Korea 5.3 58.954 Sam Chun Dang 3.2 53.455 Su Do 3.1 35.956 Kuhn Il 2.0 69.857 Yung Il 2.9 45.758 Shin Il 2.7 54.959 Dong Ku 2.7 103.160 Hae Woi 2.6 39.361 Kyung Nam 2.5 21.762 Korea Central 2.3 75.463 Dong Il 2.2 39.964 Silla 2.0 20.065 Choseun New Pham 1.7 28.166 Dong Bang 1.7 82.767 Soon Chun Dang 1.7 36.968 Nam Kang 1.6 20.369 Ahn Jin 1.6 52.470 Han Yu 1.4 53.771 Hap Dong 1.4 20.272 Sam Hi 1.4 22.7
Total of these Cos 976.3 31.7
NB 72 hold 70.6% of the total market
Source : Yakup Shinmoon
-67-
EXHIBIT (K)
PRODUCTION OF MAJOR COMPANIES IN 1982
Manufacturer Production Growth ratem$ '82/81
Dong A 141 23.4%
Chong Kun Dang 80 24.7%
Yu Han 70 15.9%
Dong Wha 64 21.5%
Yung Jin 51 11.9%
Han Dok 42 18.9%
Il Yang 43 25.1%
Jung Wae 43 28.3%
De Woong 40 23.4%
Il Dong 37 19.9%
Pfizer Korea 28 9.6%
Bo Ryung 34 38.2%
Sam Sung 34 43.0%
Han Il 26 14.2%
Je Il 29 27.9%
Total 762 14.1%
Source:KPIA
-68-
EXHIBIT (L)
DISTRIBUTION OF PHARMACEUTICALS
36%of sales
Manufacturer
Wholesalers774
52.4%Pharmacies12,337
11.6%Hospitals andClinics6659
Numbers of each establishment for the whole country given
PRICES OF LEADING PHARMACEUTICALS
in W ($equal at time to 780W)
Bacchus D
1900Alps D
2900Wombi D
2900Ursa 200Kanamycin 600Saridon 50Gas Wholmyunsu 150Rifampicin 150Panpyrin oral liquid 150Albumin Inj 75Biovita 1700Wholmyungsu 200Rhinathiol capsule 1500Contac 600 100
for 10 units (bottles)for 10 units (bottles)for 10 units (bottles)per capsuleper bottle of capsules (treatment series)per tabletper bottle treatmentper capsule of 150 mgper bottle treatmentper dozen ampoulesper bottle of powder (>treatment series)per bottle treatmentper capsuleper capsule
Source: local pharmacy
- 69 -
EXHIBIT (M)
TRADE
(in millions of US $) 1982
IMPORTS % of '81 EXPORTS % of '81
Crude Drugs
Finished Drugs
TOTALIncluding orientalmedecines, sanitaryaids, quasi drugs
125
23
192.5
138
185
40.7
8.4
91.5
100.7
76.7
Source: KPIA
-70-
EXHIBIT (N)IMPORTS
Raw Materials
Rank Item Grade Unit Quantity Amount(US $)
1 7-Aminodeacetoxy 95%up kg 3,460 688,906
Cephalosporanic Acid
2 Allethrin 90%up /I 7,400 662,000
3 Ascorbic Acid USP 11 75,255 837,278
4 Bacampicillin HC1 95%up II 3,088 688,030
5 Cefazolin Free Acid 98%up II 1,080 1,627,200
6 Cephaloridin BP It 941 741,420
7 Cimetidine 98%up II 9,330 1,885,448
8 Dibekacin Sulfate - II 70 609,000
9 Erythromycin Estolate BP II 7,720 989,974
10 Erythromycin Thiocyanate 75%up II 5,249 512,721
11 Gelatin USP II 202,002 921,027
12 Gentamycin Sulfate II II 1,197 803,140
13 Hyoscine-N-Butyl bromide 98%up II 518 568,165
14 Lactose USP II 655 532,799
15 Limcomycin Hydrochloride II II 3,750 602,502
16 Lysozyme Chloride 80-98%up II 3,057 502,406
17 Minocycline HC1 USP II 809 1,102,000
18 Mosquito Coil Powder - 11 50,905 755,968
19 Normal Serum Albumin - 11 1,090 1,931,400
20 Penicillin G-K - bou 41,963 742,463
21 Penicillin G Potassium - 11 93,000 1,668,000
22 Pipemidic Acid Trihydrate 98%up kg 11,050 2,248,056
23 Piroxicam 97%up II 55 660,735
24 Plasma Protein Fraction - II 432 681,200
25 Prednislone . KP III 11 801 790,475
26 Propylene Glycal USP 11 797,535 976,449
27 Sodium Sulbenicillin 8.4mcg/mg kg 2,050 779,000
28 Standardized Pancreatic Enzyme - II 21,000 584,930
29 Streptokinase & Streptodornas - unit 1,150,000 653,700
30 Tobramycin USP kg 62 922,985
31 Ursodesoxycholic Acid 98%up II 3,710 1,187,000
Source: Yakup Shinmoon
Finished Drugs
Rank Item Form Unit Quantity Amount(US $)
- 71 -
1 Adriamycin Inj 10mg vial 17,167 245,7572 Album-Hepa Capsule 100Cap btl 25,000 144,9203 Colgate MFP Tooth 171mg dozen 176,660 579,0144 Duricef Cap 12'S btl 60,000 375,0005 Didoquin Forte 4% 1/2 Ounce/Tube dozen 23,800 109,4166 Intralipos 10% without
set500m1 btl 15,000 105,000
7 Krestin Powder box 480 124,4808 Licodaine HC1 2% 1.80cc X 50 cat 275,000 128,7759 MMR D.N cc vial dozen 164,000 432,960
10 ZMR dozen 350,000 819,00011 Octocaine HC1 2% 50 cart can 85,000 317,97512 Picibanil btl 3,100 230,38013 Preortan Inj 20 Test X 5 box 5,600 113,71714 Preparation H dozen 9,000 108,350
Suppository15 Specific Disensitising Compleate Set 1,559 190,843
Vaccine16 Tegretol Tab 50 Tab box 28,000 131,04817 Venopland Inj 200 Amp box 1,900 153,53318 Wobe Mugos Dragees 200 dragee pack 8,500 278,008
-72-
EXHIBIT (0)
EXPORTSRaw Materials
Item unit Quantity Amount(US $)
1 Ampicillin Anhydrous kg 12,575 1,460,340
2 Ampicillin Trihydrate II 7,470 675,978
3 Cephalothin Sodium 11 572 564,847
4 Crude Cryoprecipiated II 184,850 978,641
Fraction
5 Empty Gelatin Capsules - - 1,329,744
6 Human Chorionic kg 2,415 1,560,100
Gonadotrophin
7 L-lysine Monohydro-
chloride
II 24,000 161,728
8 Mefenamic Acid II 10,295 181,327
9 Kanamysin Sulfate II 1,750 315,000
10 Sodium Lauryl Sulfate II 73,000 336,357
11 Sulfamethoxazole II 26,390 684,300
12 Tetracyline HC1 II 17,790 494,485
13 Tocopheryl Nicotinate 11 2,105 130,744
14 Trimethoprim 11 34,304 1,507,865
15 Urokinase 11 4,164 11,060,102
16 Saccharin - - 13,681,744
-73-
Finished Drugs
Item unit • Quantity Amount
(US $)
1 Amclo Caps box 20,000 170,000
2 Baby Powder pcs 38,400 129,024
3 Bacchas-D box 5,000 126,630
4 Buscopan Tab btl 40,790 127,578
5 Combantrin Oral Cart 22,000 174,174
Suspension
6 Combantrin Tab box 130,000 121,717
7 Cyanocobalamin Inj vial 868,101 338,466
8 Fasigyn Tab box 11,940 177,590
9 Gelfos It 36,800 258,020
10 Gentamicin Eye/ vial 380,133 143,024
Ear Drops
11 Gentamicin Sulfate Inj 11 530,563 224,273
12 Haemaccel btl 5,800 158,600
13 Lucky Tooth Paste pcs 2,031,260 850,618
14 Minipress Tab btl 76,600 587,939
15 Molton-S 11 574,061 734,518
16 Persantin Tab II 50,000 310,382
17 Woohwang Chungsim Won pcs 300,000 1,200,000
18 Essence of Korean btl 143,208 168,279
Ginseng
19 Jin Sam Jung It 78,195 118,097
20 Korea Ginseng Extract btl 106,560 514,044
21 Korean Ginseng 11 110,736 500,984
Sahmooltang
22 Korean Ginseng Tonic 11 37,464 149,670
Source : Yahup Shinmoon
- 74 -
EXHIBIT (P)
EXPORT BY COUNTRIES AND PREPARATIONS
Country Total RawMaterials
FinishedDrugs in thousand US $
1 Japan 30,049 15,898 2,227
2 US 10,746 4,034 317
3 Hong Kong 9,867 203 2,707
4 WG 7,804 5,580 142
5 Iran 7,479 98 843
6 Pakistan 3,491 1,062 1,941
7 Switzerland 2,744 2,674 -
8 Formosa 1,895 541 548
9 Thailand 1,744 967 192
10 Singapore 1,226 281 248
Source : Yahup Shinmoon
-75-
EXHIBIT (Q)
MANUFACTURING APPROVAL
The government denies manufacturing approval for the following items:
Liquid preparations of antipyretics or antiphlogistics of stimulants orexcitants.
Liquid preps of stomachics, of gastric antacids, of antiemetics, ofdigestive organ agents, of nutrients tonics and alteratives.
Combined preparations of vitamins, of sex hormones
EXHIBIT (R)
OUTLINE OF IMPORTS LIBERALISATION
1 Mid 1982 to mid 1983.
allow - High consumption products where local production does not satisfydemand.
Products made by oligopoly of labs for a period.
Products where imports should stimulate competitivity of localproducts.
Products made by high energy processes.
2 Mid 1983 to mid 1984
Items under extended protection, but where it would be impossibleto secure international competitive power.
Items which would stimulate competition amongst local producers.
Oligomonopolistic items directly relating to national life.
3 Mid 1984 to mid 1985
Items less intensive on skilled labour.
Items which are large consumers of resources
Oligomonopolistic items excluded from 1 and 2.
Refer to Periodic Announcement for Import and Export, Ministry ofCommerce and Industry.
EXHIBIT (S) Cont
TECHNOLOGICAL LICENCING
Company Counter part Country Period
Johnson Korea S C Johnson U.S.A 80 3.13-85 3
Sang-A Mikasa Japan 81 2.23-86 2
Dong-A Dow Chemical U.S.A 80 8. 9-85 8
Yu Han A. B Astra Sweden 80 8. 9-85 8
Dong Wha Leo Denmark 81 8-86 8
Je-Il Daiichi Japan 80 1. 9-85 1
Bo-Ryung Penaten Pharm West Germany 8011 5-85 11
Source: Yahup Shinmoon
EXHIBIT (T) SOME COMPANY DATA.
DONG A
In Group also Rami (Cosmetics), Food, Drink and Bottles.
Pharma Sales (1982) 112.9 m $ with 4.2% net profit on turnover, 5% sales
spent on advertising
Technical cooperation Squibb, Dow. Amano Pharma, Yamanouchi Pharma, Taisho,
Meiji, Fujisawa, Ono.
Daughter Companies joint venture Dong Myung with Meiji Seika Kaisha for
the manufacture of Kanamyin, Gentamycin, Vistamycin,
raw materials
joint venture Korea McNiel.
Subsidiary Daedung Pharma for marketing.
joint venture with Johnson and Johnson for baby
products and cosmetics later
Products Bacchus D (45% of sales)
Antibiotics eg Kanamycin and Cefamycin (15%)
Digestives eg Mexolon, Bestase (10%)
Exports 2% of sales
R and D 3 PhDs and 30 staff
Plant GMP at Anyang since '80 for formulation
Banwol to be a new fermentation and synthesis plant.
New Developments Arrangement with Wellcome expected
Investigating potential of crop protection and software
engineering
YUHAN CORP
Pharma sales (1982) 61 m $ with 6.2% net profit after tax.
-Several joint ventures in minority holding with foreigners.
Shering for antibiotics and dermatologicals.
Cyanamid for Tagmet, Zentel, Auranifin.
Smith Kline and French.
Kimberley Clark for sanitary aids.
Local Joint Ventures Yuhan Chemical Industry for Rifcampycin with KTAC.
Yuhan Rox for Chlorox and disinfectants w private
interests.
Make and sell products of Lederle, Shering, SK and F, Sumitomo, Astra,
Qrganon, Carlo-Erba, Parke-Davis, Gruhental.
Products Antibiotics, (23.8% market share) vitamins (14%).
Epidermal (6.6%), Peptic Ulcer preps (4%).
Exports 4.5% of sales.
R and D Development of new dosage forms, and synthetic
processes.
Plant : GMP at Anyang '76.
CHONG KUN DANG
Sales 1982 80 m $ with 6.1% net profit.
Joint Venture Rhone Poulenc Pharmaceuticals 50/50.
Products Antibiotics, Rifcampicin and sulphamides.
HANDOK REMEDIA
First foreign joint venture, and biggest at present.
33% Hoechst
Sales 36m$ in '81 with 5.4% profit on turnover.
BAYER PHARMA KOREA
50% Joint Venture with a private shareholder.
Sales 1981 104.
Products Aspirin, Talcid (antacid), Canesten (antimycotic) Purex
(skin), Bendigon (antihypertensive)
Raw materials are manufactured in Korea for the
antimycotic and for Biltricide, nematoside.
PFIZER KOREA
Sales 25.9 m$
Joint venture with Central Pharmaceutical Company (50/50),
a company which does not otherwise exist.
Products Doxycycline, Oxytetracycline, Feldene, Vibramycine,
Terramycin, Bacacil.
- 80 -
III B ANALYSIS OF THE AGRO CHEMICAL SECTOR
Market Size and Growth
The pesticide market in fungicides, herbicides and insecticides for rice
and other crops will be considered. Although insecticides and plant growth
regulators are sold in Korea, this is in such small proportions to the whole
that our considerations will largely ignore them.
All agrochemicals sold in Korea are locally formulated, and the annual
sales in 1981 are thus estimated at $ 205 million. This corresponds to nearly
2% of the world market. The growth rate is still considerable at 20%,
although between '78 and '80 it was at 30%.
Agricultural Production and Pest Control
22% of the land is under cultivation, and these 2.19 million hectares
(1981) are utilised at 125%. The planting area for the principal crops is
given in Exhibit (A). So although we see that rice has by far the greatest
acerage, there is a considerable amount of barley, soya bean and red pepper as
well and indeed all non-rice crops together cover an equivalent area to rice.
The tonnage production, which is another indication of pesticide type
requirement, is also given in Exhibit (A). The important pests on rice are
rice blast, sheath blight, bacterial leaf blight, stemborers, planthoppers and
leafrollers. The incidence of infestation and the level of control are
indicated in Exhibit (B). Thus we see that rice blast and the stemborer are
controlled by heavy applications, more than twice a year, of pesticide. The
evolution of this situation is indicated in the second part of that exhibit.
We see that over those three years there was a dramatic increase in the main
rice pests due to a maintained level of control. Other fungal diseases have
required however a complex programme of control for comparatively little
progress, and the infestation by other insects has shown a considerable rise.
The planning area for rice pesticide application was 870% of the total,
consistent with '81, and no changes were expected in 1983.
Government Policy and Pest Control
The slow down in the growth of the market ('81-'82) is attributed to a
change in governmental guidance, which recommended a 30% reduction in
- 81 -
frequency of application to farmers. Thus, although the quantitative growth
in the market cannot be expected to be very great, due to the already heavy
applications, the direction taken by the government in favour of less
environmentally harmful pesticides of better quality promises to cause higher
growth in the value of the market. So in the coming years the growth in
volume cannot be expected to surpass 10%, the growth in value will probably be
of 15%.
The Break Down of the Market
In Exhibit (C) we see the value in US$ of the products formulated under the
summary categories. Products for rice account for some 60-65% of the sales.
In all, herbicides make 20% of the sales while the other two pesticide
categories have about 40% each. There are about 200 products on the market
and the names, volumes and values of each of these may be obtained in detail
from Ref 1. The leading products in each category in 1982 are tabulated
according to volume and their technical suppliers are indicated in Ex (D).
The key products in the minor categories, miticides and plant growth
regulators, are given in the same exhibit.
There are 11 big formulators holding between them 99.5% of the market.
Supply is very concentrated with Hannong Corporation by far the largest seller
and the top 4 holding 71% of the market. The market shares are broken down by
formulator in Exhibit (E).
The Selling of Agrochemicals
Exhibit (F) illustrates diagramatically the two key sales channels. 35% of
sales are made to the National Agricultural Cooperative Federation (NACF),
which buys half of the pesticides for rice, and little otherwise. These
prices are controlled, though not subsidised, and shipments are made directly
to the unit cooperatives or the big farms. The gross margins in this market
are effectively limited to 10%. The 'free market' is more profitable and it
is here that all the non-rice products are to be found. Thus there is market
differentiation between channels as regards the products carried. Some fairly
standard products are carried though in the free market at very low margins in
order to provide a more complete service. In Exhibit (F) there is a summary
of the percentage (in money terms) of products bought by the NACF and an
indicative list of prices as set by them. 'Clearly these and parallel products
have their price limited by their price in this channel.
One agrochemical firm expects the costs breakdown to be as follows: of the
factory price, 65% is active ingredient and 35% includes other ingredients,
packing and formulation and a gross margin. On top of this there is 10% VAT
and 15% on sales promotion and technical development.
Demand for the product is generated through farmer's meetings,
demonstration plots and advertising. Heavy television advertising in July and
August is used, as well as posters and pamphlets etc. Incentives for the
stockists are also used and salesmen try to influence opinion leaders by
approaching the branches of the 140 rural guidance officers. Hannong
dominates the market with their sales division since only the following 5
companies together are equivalent in size. They sell 75% of their goods on
the free market, but since their provincial liason offices sell strictly
through wholesalers many competitors get round them by going directly to the
retailers.
Active Ingredients, Local and Imported
72.4 m$ worth (1982) of technical materials are imported and 40.6 m$ worth
are made locally, local 'self-sufficiency' stands therefore at 35%. The table
in Exhibit (G) summarises the situation for our key categories in terms of
tonnage. Of the active ingredient items that are produced, 98% of the
requirements are met (listed Exhibit (G)). If 35% of the active ingredients
are supplied in Korea, 27% come from Japan, 20% from Europe where Germany has
the lion's share, and 17% from the USA. We see that it is in herbicides that
the import market is least interesting, and in non-rice fungicides that the
market is greatest. Fungicides and insecticides for rice are still imported
in large quantities.
84% of the active ingredients are purchased by the top 11 formulators and
their purchase share and trend is given in Exhibit (H). The active ingredient
supplier determines the firm who will formulate and sell their product. An
arrangement thus arises where the formulation technology is transferred by the
active ingredient manufacturer, who becomes the formulator's exclusive
supplier. Summary profiles of the 3 top formulators are given in Exhibit (I).
The local suppliers of active ingredients are listed Exhibit (3) with their
production levels. These companies are much smaller than the formulators who
command their market but particular ownership or supply relationships assure
their sales. KORAG is for instance a joint venture between Monsanto and
Hannong. 78% of its production is Machette of which 98% is sold to Hannong
(see Exhibit (K) for remaining detail and similar descriptions for the other
major active ingredient producers). There is a fair trade law which would
restrict 100% direct sales to the parent.
It must be noted that although there is local production of active
ingredients, many of the intermediates for these are still imported. In 1981
the total figure for such imports stood at 24.5 m$.
Export and Development
Exports of formulated agrochemicals stood in 1981 at 5m$, 2.4% of
production and 10% by weight of active ingredients were also exported. The
markets are in Europe and South East Asia. Exporters find their greatest
problem is the expertise gap at the level of the general trading companies.
Since it is a recent export, no GTC has yet developed the specialisation, yet
since these relatively small companies need the financial support and the
networks, they use the GTCs while promoting to the buyers themselves. Despite
these handicaps, the Koreans feel that this will be a strong export field and
support the industry with public research funds and financing to producers of
quality goods with competitive marketing methods.
The Korea Technical Advancement corporation, (KTAC) is already
participating in two ventures in this field, Hanjung (Orthrane, Difolatan) and
further involvement of KAIST is expected (eg Carbamate insecticide
intermediates, Plant growth regulators, Pyrethroid and Organophosphorous
insecticides...)
Conclusion
There is concern amongst foreign companies involved in this field in Korea
about two things: there will be a gradual decline in their market share as
local active ingredient manufacturing grows faster than the whole market, the
problems of trademark expressed by the foreign Agricultural Chemical Suppliers
Group. Registration of a product is a sign to the potential copier that it
can be sold in Korea.
However, there is potential for foreign involvement in the sale or
manufacture of active ingredients at present imported. It is a growing
market, with export potential to South East Asia in the medium term, looking
for the sort of quality products which would be within the capability of a
European firm. 'Non-rice' products would be more profitable and there is a
considerable gap in fungicides.and insecticides here.
A 'supply agreement' with a local formulator is one way to approach the
local market, although in the longer term an investment might be considered;
A joint venture, with a formulator for instance, would have the advantages of
participation in the growing tendency towards the local manufacture, of joint
interest in protection of the product and guaranteed sales. (See section IV
for import tariffs and investment guidelines.)
- 85 -
EXHIBIT (A)
CROPS OVER 45,000 HA. IN 1982
Crop Area in hectares
Rice 1,212 300Barley 119 689Naked Barley 190 455Soy bean 202 000Sweet Potato 56 000Radish 53 100Chinese Cabbage 48 900Apple 47 400Red Pepper 120 000Tobacco 50 000Mulberry 45 000
CROP YIELD IN 1981
Rice 5 448Barley 1 218Potatoes 1 663Misc Grains 163Pulses 327Fruit Vegetable 717Leafy/StemVegetable 3 643Root Vegetable 2 086Flavour Vegetable 989Fruits 1 026
Source MOAF
Crop Tonnage (thousands)
-86-
EXHIBIT (B)
RICE (1981)
Infestation(% planted)
Control(% of area planted)
INFESTATION AND CONTROL IN
Disease/Insect
Rice blast 18 260Sheath Blight 41 76Bacterial Leaf Blight 10 48Others 2.5 5
Rice Stemborer 5 250Plant and Leaf Hoppers 45 120Grass Leaf Roller 11 n.a ('79 36)Others 14 n.a ('79 88)
DEVELOPMENT OF CONTROL(Indexed from '79)
1979Infestation
1980Control I
1981C I C
Blast 100 100 56 110 15 93Sheath Blight 100 100 47 62 44 76Bacterial Leaf Blight 100 100 24 205 23 169Others 100 100 86 2,500 65 2900
Stemborer 100 100 14 102 7 91Hoppers 100 100 16 66 20 72Leaf Roller 100 100 23 na 26 naOthers 100 100 243 na 362 na
Source: ACIA
-87-
EXHIBIT (C)
FORMULATION IN 1981 OF PESTICIDE CATEGORIES. (1981)
in millions
in mill-equiv US $
ions kg
Rice Fungicide Seed disinfectantRice BlastSheath BlightLeaf BlightSeedling BlightBlast and Sheath Blight
1.3545.262.11.6.85.28
SUB TOTAL 51.5 25.5
Insecticide Rice Stemborer 35Plant hopper 11.3Fungi-insecticide 1.2
SUB TOTAL 47.5 45.4
Herbicide 21.5 38.7
Non-Rice Fungicide 29.6 5.4
Insecticide 28.5 10.5
Herbicide 14.7 5.5
TOTAL 193.3 131.0
Miticides 6.2 .7Spreaders 2.8 .3Others 3.0 1.3
SUB TOTAL 12 2.3
GRAND TOTAL205.3 133.3
Source: ACIA
-88-
EXHIBIT (D)
KEY PRODUCTS
MAJOR FUNGICIDES (over .5 m$ in 1982)
PRODUCT PEST Q'TY(M/T)
AMOUNT(US$)
SUPPLIERS
1 Fuji-One Rice Blast 745 8,251,950 Nichino2 Dithane M-45 Bitter Rot 1,510.00 3,875,825 RICH, Farmoplant, BASF,
Pannwalt, Karlo, Halm,Mont.
3 Hinosan Rice blast 408 3,553,680 Bayer4 Oryzamate Rice Blast 230 3,220,000 Meiji5 Beam Rice blast 58 2,713,257 Elilly, DEC Local6 Kitazin Rice Blast 447 2,600,754 DOC local, KEC local7 Difolatan Bitter Rot 214 2,055,767 Chevron, HJC8 Topsin Canker 208 1,535,280 Nisso9 Polyoxin Alternaria
leaf spot/sheath blight
20 1,335,991 Kakken
10 Valida Plant Hopper 45 1,316,536 Takeda11 Daconil Bitter Rot 154 1,047,200 Showa Dia12 Kasugamin Rice Blast 17 1,046,316 Hokko13 Neoasozin Sheath Blight 255 1,031,756 SAC, OCI14 Blamycin Soft Rot 49 944,280 Meiji15 Tachigaren Seedling Blight 30 903,762 Sankyo16 Sankel Leaf Blight 200 892,716 OCI,SAC,YIL17 Antracol Bitter Rot 322 636,807 Bayer
Leaf Mould18 Kitavax Rice Blast 25 575,000 JHC
414
TOTAL AMOUNT 37,556,880
EXHIBIT (D) cont
PRODUCT AMOUNT (US$) SUPPLIERSPEST Q'TY(M/T)
1 Paden Rice Stem 728borer
6,274,857 Takeda
2 BPMC Plant Hopper 1,046 5,582,841 KEC, JHC, KSC, DOC,KAOCIL
3 Diaton Stem borer 521 4,711,613 SAC4 Elsan Leaf and Plant 405 3,160,950 KEC,SHC
Hopper/Stemborer
5 MEP Plant Hopper 432 2,896,975 Bayer, Cheminova,Sumika
6 Furadan Plant Hopper/ 189 2,702,420 Bayer, FMCStemborer
7 Dursban Stemborer 349 2,373,602 DOW8 EPN Leaf roller 242 2,050,654 SHC,KEC9 Lebaycid Stemborer 274 1,738,490 Bayer10 Metasytox Aphids 282 1,575,967 Bayer, KEC, DOC11 Decis Leaf roller 2 1,305,000 Roussel12 Reldan Stemborer 143 1,257,676 DOW13 DDVP Leaf roller 280 1,072,145 HJC,SAC14 Ortran Aphids 69 1,061,101 Chevron, HJC15 DEP Leaf Roller 262 1,032,979 SAC,HJC16 Parathion Leaf Roller 157 940,080 Cheil, SAC17 Pirimor ' Aphids 40 760,000 ICI18 Dimecron Aphids 142 720,820 C-G19 Malix Tobacco budworm 85
soil620,500 Hoechst
TOTAL 41,838,677
MAJOR INSECTICIDES '82)
-90-
PRODUCT USE
MAJOR HERBICIDES
SUPPLIERS
(Over 0.4 m$ in 1982)
Q'TY AMOUNT(M/T) (US$)
1 Machete Upland/ 2,057 6,584,512 KoragPaddy
2 Gramoxone Orchoid 557 3,164,515 HNC3 Lasso Upland 373 1,400,850 Korag4 Piperophos Paddy 96 1,030,508 C-G5 Paraco Upland 160 908,107 OCI6 Saturn Paddy 154 547,316 Kimika7 Hitok Paddy 103 469,270 KAOCIL8 Modown Paddy 57 459,840 Mobil9 Round-up 28 452,908 Monsanto10 Bassagran Paddy 42 406,980 BASF
TOTAL 15,424,806
Key to Korean Companies:
KEC Korea Explosives CompanyJHC Jin Hung'Fine Chemicals CoKSC Korea Steel Chemical CoDOC Dong Oh Chemical CoKAOCIL Korea American Organic Chemical Industries LtdSAC Seoul Agricultural ChemicalSHC Seo Han ChemicalsHJC Han Jung ChemicalsOCI Oriental Chemical IndustryDEC Daeil Chemical CoYIL Young Il Chemical CoHNC Han Nong Corp
- 91 -
EXHIBIT (D) Cont
Miticides over .5 m$ in 1981
Trademark Tons US $ millions
Cytin - WP Plictran 134 2.3Pragi - WP OMITE 149 .94Fenbutan - WP Torque 23 .59
Plant Growth Regulators over .5 m $ in 1981
Tons US $ millions
Growth Inhibitor 219 1.27Growth Promoter 57 .69Colouring Promoter. 12 .62
Source: ACIA
EXHIBIT (E)
MARKET SHARES OF THE BIG FORMULATORS (1982)
Hannong Corp 36.4 %Oriental Chemical Industry 13.5Kyung Buk Agricultural Chemicals 13.2Seoul Agricultural Chemicals 8.2Dong Bang Agricultural Chemicals 7.1Misung Agricultural Chemicals 5.9Hankuk Samkong Co 5.7Chunjin and Company Agricultural 3.6ChemicalsYoung Il Agricultural Chemicals 1.7Daehan Agricultural Chemicals 1.7Cheil Agricultural Chmeicals .9
CR4. = 71%
CR8 = 93 6%8 _ .
Company source.
- 93 -
EXHIBIT (F)
DISTRIBUTION OF PESTICIDES
NACF Province County Uniton behalf of level level coopfarmers
FORMULATORS
Wholesaler Dealer150 to 200 4,000
NACF Purchases as % of total
Rice Fungicide 51% Other Fungicide 14%Insecticide 57% Insecticide 6%Herbicide 35% Herbicide 0%
TOTAL 51% TOTAL 8%
(i.e. 91% of NACF purchases)
Source: ACIA
FARMERS
Source:Company
EXHIBIT F (cont)
NACF Prices of top products
Product Unit % Activeingredient
Price $/unit
Fuji - one 1 40 8.1Hinosan 1 30 6.0Kitasin kg 2 0.4Beam kg 75 53Machete kg 6 .6Saturn kg 7 .6Hitok kg 7 .7Modown kg 7 1.2Paden kg 50 7.9BMPC kg 50 5.1Diaton kg 3 .6Elsan kg 47.5 8.1MEP kg 50 7.3Furadan kg 3 0.9
Source: ACIA
Selling Experience Estimates for Formulators
Hannong 8.2% of Sales on Sales and PromotionOCI 6.5% of Sales on Sales and PromotionSeoul 7.3% of Sales on Sales and PromotionDong Bang 12.4% of Sales on Sales and Promotion
Source: Listed Cos
EXHIBIT (G)
SOURCES OF ACTIVE INGREDIENTS (1981)
IN METRIC TONS
LOCAL IMPORTED SELF-SUFFICIENCY %
Rice
Fungicide 1256
2095
37Insecticide 2866
2050
58Herbicides 2975
680
81
Other Fungicide 388
3826
9Insecticide 143
746
16Herbicide 1554
133
92
Source: ACIA
Active Ingredient items made locally (1981)
Technical Name Trade Mark Action
Neozin TechIB TechMedi TechZineb TechCarboram TechTMTD TechPhenazin TechThiopan TechCaptafol TechParathion TechDasuzin TechEPN TechPAP TechPAP TechBP TechMIPC TechDDVP TechDEP TechAcete TechMeta TechMeta TechNitfen TechButa TechAlra TechParaco Tech2 - 4 D Tech2 - 4 P TechChlot TechMH TechEntheplanTomatoton
NeoasozinKitazinSankelZinebKizvax
Phenazin
ParathionDiatoneEPNPAPElsanBPMCMIPCDDVPDEP
Methyl demetonDometTOKMacheteLassoGramaxone2 - 4 D2 - 4 D EthylDo-XMHEntheplanTomatoton
FungicideFungicideFungicideFungicideFungicideFungicideFungicideFungicideFungicideInsecticideInsecticideInsecticideInsecticideInsecticideInsecticideInsecticideInsecticideInsecticideInsecticideInsecticideInsecticideHerbicideHerbicideHerbicideHerbicideHerbicideHerbicide
3 Sheath Blight3 Rice Blast3 leaf Blight3 Bitter Roton Barley
3 leaf Blight3 Rice Blast3 Bitter Rot3 leaf roller3 Stem Borer3 leaf roller3 leaf Hopper3 leaf roller3 Plant Hopper3 Plant Hopper3 leaf Roller3 leaf roller3 aphids3 aphids3 aphidsFor horticulturefor Ricefor Horticulturefor Horticulturefor Ricefor Rice
Herbicide for RiceGrowth regulatorGrowth regulatorGrowth regulartor
-96-
EXHIBIT (H
PURCHASE OF ACTIVE INGREDIENTS PER FORMULATOR
(1982) Remarks
Company Amount %Total
Change81/82
Han Nong Corp US$42,970,949 38.02 6.35% upOriental Chemical Ind 16,705,280 14.78 19.27% downKyung Nong Agr Ch 15,738.524 13.93 18.48% downMisung Agr Chem 7,063,303 6.25 25.10% upSeoul Agr Ch 6,963,726 6.16 0.9% downDong Bang Agr Ch 6,757,188 5.98 23.82% downHankook Samkong 6,459,151 5.71 15.61% downYoung Il 4,202,080 3.72 6.09% upChunjin and Co 3,838,309 3.40 0.67% downD'aehan Agr Chem 1,495,481 1.32 66.46% downCheil Agr Chem 825,600 0.73 21.53% down
TOTAL AMOUNT US$113,019,596 100% 8% down
Source: Tech Mats Stets
EXHIBIT (I)
FORMULATOR PROFILESHANNONG Originated from the Japan Agrochemical Corp and became the Korea
Agrochemical Corp after the war.
50/50 JV with Monsanto to make Round-up Lasso and Machete.
Technical supply agreement with ICI on Gramoxone.
Hanjong, formed with KAIST (see Govt. Research) cooperation,active ingredient maker of the group. Sales in 198269 m$, gross margin, 19.3% and net profit 1.1%.
R and D department of 16 people.
Buys 35% Korea Sister Companiesand SAC
22% Japan
17% US
26% Europe
Michino (also Takeda/Sankyo)
Dow (also Rohm and Hass)
Bayer (also ICl/Sandoz)
OCI Buys 34% Korea Oriental (also SAC)
39% Japan Takeda
24% US Eli, Lily Shevron
Not exclusively an Agricultural Chemical Company. Involvementin other industries means its total sales were 92 m$ in 1982,with a gross margin of 19.6% and net profit of 2.1%.
- 98 -
KUNG NONG was Kyung buk
Keocil was a Joint Venture with a US company, now amalgamatedwith Dong Oh, the other daughter company.
Buys 42% Korea Dong Oh
10% Japan Shows Deamand
24% US FMCRohm and Haas
24% Europe C-GeigyRoussell Uclaf.
DONG BANG Sales 14 m$ in 1982 with Gross Margin at 15.4% and no net profit.
• Buys 30% from Korea Jinheung (SAC)
43% from Japan
SumitomoHoko Chem.
9% from US Uniroyal
18% from Europe
RhodiaShellKarl 0 Helm
SEOUL AGRICULTURAL CHEMICALS
Sales 16 m$ in 1982 with Grass Margin at 23% and 4% net profit.
Buys 38% from Korea SAC (OCI)
7% from Japan (Kumiai)
37% from US Eli Lily
18% from Europe C-G/ BASF
Sources: CompaniesFinancial StatementsTech Mat Stets
- 100 -
EXHIBIT (J)
LOCAL ACTIVE INGREDIENT MANUFACTURERS
Production in 1982 - US$
Korag Co., LtdSeoul Agri. Chem. Co., LtdSeo Han Chem. Co., LtdDong Oh Chem. Co., Ltd.Hahn Jung Chem. IncKorea Explosives Co., LtdHan Nong CorporationJin Hung Fine Chem. Co. Ltd(WKTAC)Korean American Organic Chem.Ind(Now joined W Dong Oh)Oriental Chem. Ind. Co, LtdKorea Steel Chemical Co., LtdCheil Agri. Chem. Co., LtdDong Yang Elanco Co., LtdYoung Il Chem. Co., LtdDaeil Chem. Co., Ltd.
8,438,2705,949,9994,277,0013,172,9713,268,8642,912,7332,742,2652,742,067
1,850,321
2,219,452939,093825,600704,605510,47370,875
Total Amount:
CR4 54% of local production19% of total consumption
40,552,332
(Exchange rate W740/US$ at Aug. 1982.)
Source: Tech Mats Stats
- 101 -
EXHIBIT (K)
RELATIONSHIPS OF ACTIVE INGREDIENT MANUFACTURERS
- KORAG is a Monsanto/Hannong Joint Venture
78% of production is MACHETE of which 98% to HNC
17% of production is LASSO of which 83% to HNC
5% of production is ROUND UP of which 71% to HNC
- HANJUNG is a Hannong/KATC J.V.
27% of production is DEP of which 70% to HNC
15% of production DDVP of which 65% to HNC
53% of *production Captofol of which 68% to HNC
- SEOUL AGRICULTURAL CHEMICAL
79% of production is Diazinon of which 22% to SAC
10% of production is Neosozin of which 18% to SAC
4% of production is DDVP of which 100% to SAC
2% of production is DEP•of which 100% to SAC
2% of production is Parathion of which 100% to SAC
3% of production is Sankel of which 30% to SAC
Much of this technology is European and was therefore obtained from KAIST.
- SEOHAN
60% of production is PAP of which 61% to Samkang
36% of production is EPN of which 15% to Samkang
3% of production is 24D of which 59% to Samkang
Both independent, assume formulation agreement.
- DONGOH a daughter of KYUNG NONG
78% of production is Kitazine of which 91% toKyunbuk Agrochemical
15% of production is BPMC of which 100% to KyunbukAgrochemical
Source: Tech Mats Stets.Companies.
-102-
III C ANALYSIS OF THE COSMETIC SECTOR
Market Size and Growth
We will be concerned with products for skin care, face and nail colouring
and perfumes. Toiletries such as soap and commodity shampoo are excluded
from this treatment.
Domestic output in 1982 totalled 270 m$ and during the first half of 1983,
sales of the Korean companies were of 180 m$. The market therefore rates
around 1% of the world market. It is growing however considerably faster due
to Korea's present stage of economic development. The growth rate over the
last 3 years has averaged 25%. There is also a separate duty free market for
tourists which totalled 6 m$.
Participants in the industry estimate that it will be ten years before the
growth of the cosmetic market runs parallel to that of the economy. There is
also no doubt that the introduction of foreign brand names is stimulating
this growth in sales. Some obsevers feel however that this is only a
temporary situation and that "the cosmetic industry will remain
underdeveloped as long as the customers look for high prices and foreign
labels and as long as the manufacturers, taking advantage of this concentrate
more on raising prices and less on improving quality." Whichever way you
look at it though, there is considerable business potential.
Production Base and Market Breakdown
There are 32 members of the cosmetic industry association and sales
figures are only available for the top 26. The industry is however very
concentrated, with 70% of the sales coming from the top two companies,
Exhibit (A). Profiles of some of these companies are given in Exhibit (G).
The largest sector of the market (60%) is in skin care products which come
in many forms, several of which are listed with the breakdown figures in
Exhibit (B). The men's cosmetic market stands at present at about 8% of the
total, but is growing more rapidly.
-103-
Market Characteristics and Selling
In contrast to Europe, skin care is the emphasis of the Korean market: the
climate is harsh on the skin and the preoccupation in beauty care is with the
complexion. The taste in colours is particular, bright colours are
considered vulgar and colour coordination is particularly important. Due to
the consequent inability to sell some lines of products created by technical
agreements with foreigners, the manufacturers are now moving towards
surveying the market for preferences.
Another aspect of the market which has a considerable bearing on sales
success is the type of selling. 92% of cosmetics sales are made by door to
door sales ladies. Service is personal, and up to 3 months credit is
extended, with purchase in monthly installments. The remaining 8% of sales
are through shops, and companies like Peeres and Shiseido (Pacific) which
rely heavily on this channel are at present at a relative disadvantage.
Illustrations of sales channels are given in Exhibit (D). The saleswomen
receive 35% commission on door to door sales. We see that Pacific Chemicals
has the most comprehensive network and it, like several other manufacturers,
is beginning to develop the department stores of Seoul as an outlet for its
more exclusive lines. Special shampoos and hair products are sold in a
different channel, to beauty parlours. Pacific already uses such a system,
and Hanguk is planning to launch L'Oreal shampoos this way, with training
sessions for hairdressers.
Prices door to door being 'negotiable' are rather hard to establish,
however, Exhibit (E) should give an idea of the pricing of Korean products
and the premium obtained on foreign brand names (2-3 x other prices).
Imported foreign brand products are however 3 times as expensive again.
Companies will produce new brands more than once a year given 20% price
differentials between existing forces of different 'qualities' and older and
newer lines. Some observers say they do this, and recently scramble for
technical tie-ups, because they know the customers attach more value to the
label than to the product. Indeed, seven companies were instructed by the
government to alter their advertising for Korean made foreign brands so as to
- 104 -
distinguish them from the real foreign products. There is no doubt that very
large margins are made on these brand names. Even on the local names,
companies are reluctant to reveal ingredients or cost price. The Ministry of
Health and Social Security conducted some research giving the following
figures:
Retail Price Estimated cost
of manufacture
in Won
A Korean brand milk 5 800 2 930
nourishing cream 3 800 1 920
lipstick 2 500 1 280
Advertising is through television, newspapers, brochures and samples.
Occasionally companies sponsor beauty pageants. Companies expect to spend
10-13% of sales on advertising for local brands, but at a launch of a new
foreign brand, the estimate is 25%. There is a degree of seasonality to the
selling, skin care products are 20% up in autumn and colour in spring.
Imports
A total of 60 million $ of goods were imported in 1982. Included in this
are 90% of the raw materials for the manufacture of cosmetics which are valued
at 18 million US $. Sources are Japan, US and France. Locally only ginseng
base, shampoo detergents and alcohols are available. There is one local maker
of perfume and cosmetic raw materials, French Korean Aromatics, otherwise they
are all imported.
The widely publicised liberalisation of imports is still very limited,
being blocked by an 'emergency' import tariff of 80% on all such products. In
order to import a product the approval of the Health Ministry must be sought,
a 'certificate of free sale' and a specimen must be produced. The authorities
want to be sure the product is sold in its domestic market and is not just
designed for exports to Korea.
There are severe limitations as to who is allowed to import. It must be a
cosmetic manufacturer or a trading group with usual licences of pharmaceutical
products or cosmetic raw materials. This Implies, according to the
regulation, export figures of 1 million $ p.a, a laboratory costing 5 million
won, a depot licenced by the Ministry of Health as well as employing a
pharmacist. This limits the possible companies and effectively Lucky/Bando
Dong A, Daewoo, Pacific Cosmetics, Hanguk and Aekyung are the candidates. The
schedule of products to be allowed is given in Exhibit (F).
Even the Korean radio says that this liberalisation is of little
commercial interest, the price at retail still being too high. Indeed very few
have taken it up. Pacific Chemical is planning to import Dior perfumes, it
reckons it can sell them even though the price is three times the most
expensive on the market now, currently it imports 'Lauder' goods. Hanguk will
also be importing 'Magie Noire' perfumes of the LancOme line.
Exports
In 1982 a mere .3% of production was exported to the value of 835,000 $
and this is largely accounted for by Pacific Chemicals' ginseng line 'Sammi'.
More than three quarters of this went to W. Germany, U.S. and Hong Kong.
There are twelve exporting companies in all though, including also Dong A,
Hanguk, Peeres, ' Jinro/Julia and Richwood Trading Co. Hanguk exports tiny
quantities at present (50 m $) based on one time deals, but is hoping to use
LancOme's network to export in due course.
Development and Opportunities
The liberalisation of imports has been an issue of confrontation between
the Economic Planning Board and the Ministry of Commerce and Industry - the
latter would protect local industry for longer. However, most cosmetic
companies have taken the position that, given the presently forbidding import
duties and the eventual opening of the market, a foreign partner in
manufacture provides the quality and the name which will be necessary for this
future competition, at a price well beneath the imported goods. Foreign
companies have been willing to price their technology at 5.5% of sales, given
that these sales are at a high premium. Although 10% payments are supposed to' -
be permitted, the effective maximum favored by the government due to the
foreign exchange restricions is 5.5%.
- 106 -
Some Korean companies, when faced with this policy decision, have tended
to take the opposite line: not being prepared to sell someone else's brand es
well as theirs they sought to avoid paying expensive royalties. The results
in the last year of Hanguk and Kayang for instance have shown that the growth
in sales, of own brands as well, more than covers the royalty expense.
This trend, favouring technical licensing agreements, is not yet
paralleled by foreign investments. The opening of the sector to 50/50 invest-
ment from abroad in Oct. 1982, has so far been limited to the establishment of
a Johnson/Dong A joint venture in baby care products. Developments can be
expected here when the tariff advantages desgned to benefit on site manu-
facture are in place. The plan is to reduce the tax on raw materials, which
is at present equivalent to that on finished goods. Rami is however said to
be negotiating a joint venture.
Although the market at present pulls away from it, the government is
seeking-4o enoourege-produeers to favour -shop over door to door distritutidn:
As a reaction to the over-pricing, cut price stores started in 1981, sporting
20-40% reductions, and these have shown successful sales of all brands. There
is reason to believe that in the next few years there will be a swing in
pricing and distribution patterns. One new entrant to the market is counting
on this: Aekyung (a soap producer) begins in November to manufacture basic
skin products under license with Cheeseborough Ponds. They will be sold in
large bottles through the company's customary channels (chain stores etc.) at
prices 60% lower by gram weight than existing equivalent products.
In the short-term, therefore, there are opportunities for a firm . with a
brand name to sell it at a premium on the Korean market via a licensing
agreement with a local manufacturer. In the medium term a joint venture may
become a possibility, in which case choice of a partner outside the present
industry may permit exploitation of their conventional sales channels with a
less exclusive product as the market broadens.
- 107 -
EXHIBIT (A)
DOMESTIC COSMETIC OUTPUT
(1982)
Growth Rate- lst half 83
Sales millions US $ Share of total relative to 1stFirm equiv - in 1982 - % half 82 -
Pacific ChemicalIndustry 136.5 48.8 16.3
Hanguk Cosmetics 51.5 18.3 49.3
Peeres Ltd. 33.5 12.0 27.7
Jinto Julia Ltd 20.1 7.2 76.5
Lami Cosmetics 18.0 6.4 23.2
Kayang Ltd. 11.6 4.1 89.8
Pacific Cosmetics 4.4 1.6 38
Han Mi Cosmetics 1.5 .6 50.7
Fl Jim Chemical .8 .3 38.4
Yukan Corp. .8 .3 -44.6
NB: These top ten companies have 99% of the market. However, the listsavailable in the sources extend to 26 companies.
Sources: Korean Commercial Press ReportKorean Chamber of Commerce and Industry
- 108 -
EXHIBIT (B)
PERCENTAGE SALES OF COSMETICS BY TYPE (1981)
Percentage of Total
Skin care 60.5
moisturiser (nourishing) 20.3cream (nourishing) 13.8moisturiser 9.5massage cream 6.8soft moisturiser 6.7cleansing cream 2.1nourishing pack 1.3nourishing oil .3
Make up 19.7Colour (eyes, nailsn lips) 11.8Face Powder 2.9Foundation 5.0
Haircare 16Shampoo 12.3Cream 2.2Rinse 1.5
Perfume/Eau de Toilette
1.1Perfume .3Eau de Cologne .8
Bath 1.0
Others 1.4
Source: K. Cosmetics IndustryAssociation
COSMETICS PRODUCTION - SUMMARY (1982)in metric tons
Cosmetic Cream 1693powder 870lotion 3707
Perfumes 1888
Source: Annual report of the current industry production survey
- 109 -
EXHIBIT (C)
TECHNICAL LICENSING AGREEMENTS IN COSMETICS.
Since the start of these agreements as encouraged by the FCIL (1979) 16companies have been involved. The prinicipal ones are given here.
% Output UnderKorean Company Licensors Agreements Duration
Royalties(% of sales)
Pacific Chemical Clairol (US) .005 5 years $300,000
Hanguk Cosmetics Lanceome/L'Ordal (Fr) 12.0 5 years 5.5%
Peeres Max Factor (US) 1.5 3 years 5.5%
Julia Kose (Jap) 6.0 na na
Kayang Coty (US) 80.1 3 years 5.5%
Pacific Cosmetics Shiseido (Jap) 86.1 5 years 5.5%
Rami Wells (W. Ger) 4.9 5 years 3-5%
Han Mi Chemical Revlon 100 5%
Iljin Chemical na 12.0 na
Tongsong Pharma na 6.0 na na
Hanguk Swallow na 18.1 na na
Bampia na 60.9 na na
Lucky Helen Curtis 5 years 3-5%
Beiersdorf Nivea 5 years 5%
Bo Ryung Penaten 5 years 5%
Complied from . Yakup Shinmoon. Commercial Press Report
N.B. A technology cooperation agreement in this industry tends to involvetechnical experts to assist 1-2 months at the start-up, regularquality controls of samples subsequently, and occasional return consul-tation visits.
- 110 -
EXHIBIT (D)
SALES NETWORKS
- with numbers of participants where available
PACIFIC CHEMICAL
Sales persons
Beauty Salon200
Bath house..
Territorial Agents700
Pacific CommercialCorp.
Door to DoorSaleswomen
16,000
Franchises900
Cosmetic Corners170
CUSTOMER
Supermarkets 1,200
Chain stores 4,000
Dept. stores(Amore line)
HANGUK
Regional agents Saleswomen743 target '83 13,200-target '83 CUSTOMER(exclusive butindependent)
Hanguk consellors2,000(inform about product)
Dept. stores-(LancOme line)-
KAYANG
Sales Agents Saleswomen163 10-20 each
(874 in Seoul) CUSTOMER
Department Stores(new channel 9/83)
Sources: Companies and FrenchEmbassy
EXHIBIT (E)
Prices of Cosmetics Products at Seoul Dept. Store, selected from arepresentative local brand name line and a foreign brand name line.
Midamoa (Peeres) LancOme (Hanguk)
Skin cleansing cream 120g 5600W Crème de Massage 60m1 8500WSkin massage cream(lemon) 11
Lotion adoucissante 150m1Tonique douceur 150m1
Lotion demaquillanteyeux
100m1
Douceur demaquillante 150m1
Nail Varnish 13g 2500 Nail Varnish 14m1
Lipstick std.6g 3000 Lipstick std
Face Powder 14g 6500 Face Powder 13g
Shampoo 200m1 2800Hair Rinse 200m1 3800
For Men
Aftershave 140m1 4000Lemon lotion 11 11
Hair powder 60g 4000Skin cream /1 11
Eau de Cologne 100m1 7000
NB: 780W roughly 1$ at time of investigation
Skin emollient 150m1 5600/6800W Nutribel (emulsionlemon refresher 11 II nourissante hydratante) 75m1 14000WMilk lotion 11 11
Skin softener 11 11 Bienfait du matin 50m1 12000WAstringent If 11 (crème de Jour)Lemon lotion 11 11
9000W8000W
8500
9000
5000
7000
8500
Source : Researcher's observation, Lotte
- 112 -
EXHIBIT (F)
IMPORT LIBERALISATION
from 1/83 Perfume, Eau de CologneEye shadow, liner, mascara, pencil
Hair preparations: tint, oil, dye, cream, spray
Toothpaste
also from 1/84 PowderHair preparations: conditioner, straightener,
permanente
Manicure products: base coat, under coat, nailcream, nail lotion, extender,polish and enamel removers...
Eye lotion and make-up remover
Child lotions, oils and creams
Skin pack and nourishing oils
Shaving creamShampoo
NB: Perfume and cosmetics can be imported to tax free shops without thespecific approval of the health and Social Affairs Ministry.
Sources: French Commercial Reports.Korean Chamber of CommerceKorean Cosmetics Association
- 113 -
EXHIBIT (G)
PROFILES OF SOURCE COSMETIC COMPANIES
PACIFIC CHEMICAL CO.
75% of the companies total sales (140 mW) are in cosmetics. Division I(cosmetics sales) has dominated market for 38 years. Breakdoown of salesin the division (1/2 83) as follows:
Skin Care 52.8 % (holding 50% of this market)Make Up 17.6 %Hair care 12.6 %Men's products 7.5 %Body and Bath 20.9 %Baby 2.0 %Fragrance 1.7 %Others 1.9 %
Sell 900 types of cosmetics under the following brands
Women Men
Amore - the 'prestige" label Quenam with these lines -
Sammi - ginseng. TatkimBuroa - aloe ver y jel.
Mibora and Fanifin are thepopular lines.
Lauder importsDior perfumes to be imported
1979 Licence agreement with Shiseido, manufactured by Pacific Cosmetic(100% subsidiary) and sold through Pacific Commercial Corp. PACIFICCHEMICAL sells most of its own products door to door.
Advertising expediture is 12% of salesThree factories.
HANGUK COSMETICS
In 81 had 61% Gross Margin on Sales and 17.9% Net Profit.
They estimate 50% of their sales in skin care products (17% market share),35% in make-up.Began activities with the technical cooperation of Japanese companies (YuYu/Dando/Nihon Emulsion) Still buy a lot of RMs from Japan.
In 1981 they concluded technical agreements with LANCOME/L'OREAL andlaunched some of those new lines in Feb 1983.
- 114 -
Product lines are as follows:
Women Men
Under the Jutanhak label,each with 20-30 itemsand a 20% price differential
VeragenSaerobonMarmelon
Lancame/L'Oreal 55 items
sold with 40% premium ontop local brand
Mandom labelGatsby - 5 itemsVersus - 8 items
Development of new products in response to Market Surveys (24 surveyors incompany) is .considered of primary importance.
RAMY (LAMI) COSMETICS
Member of Dong A (Pharma) Group.
Cosmetics and hair products manufactured, the latter under agreement withWELLA GMBH (W. Germany).
Contracts to supply Chinaman Corp and Mijoo Co of the US with lotions,milks, cold cream etc...
Negotiating JV. with Estee Lauder.
KAYANG
Prime example of the dynamism of a licensed producer. Launched its own
products 'Nadri' in 79
Technical license with COTY (International Distribution and Marketing - IDM
of UK and Pfizer consumer of US). First products under this agreement in
April 81. Now include skin care, face colour, Nail varnish, Shampoo,
Fragrance and 'Casablanca' for men. The Coty products are estimated to be
70% of their sales in quantity and 80% in value.
- 115 -
IV INFORMATION IMPORTANT TO FOREIGN PARTICIPANTS
IV A. SELLING AND INVESTMENT GUIDELINES
The establishing of a Representative or Liason Office may be the first
move of a foreign company. The operations of such an office are restricted
to non-income producing activities, it must nevertheless report first to
the bank of Korea. To sell products locally, a company can operate through
a combined liason office for supervision and a distribution agent. Selling
agents can operate, either as distributors with inventories for their own
account, or as straight agents who sell on a commission basis. To issue
official selling offers or quotations which will be recognised, an agent
must be registred with the KTAA (Korean Trading Agents Association) which
provides, therefore, a comprehensive directory.
Branches are to apply for registration through the Bank of Korea which
seeks aproval from the relevant ministry. A registered branch may conduct
business for profit and since mid '81 they are allowed import ad export
licences. Branches must pay corporate taxes on their income from Korean
operations and other taxes such as VAT. A branch may be established as a
repatriating or non-repatriating entity. If repatriating, the procedure
for remitting is through designated foreign exchange banks. A branch
cannot manufacture or own shares in a Korean company (or perform financial
services without Ministry of Finance authorisation). In practice, there is
a requirement which severely limits the number of branches: in order to
sell foreign products and issue selling offers in Korea, the branch must be
registered with the KTAA. This membership is rare for foreigners (e.g.
Hoescht operates a selling branch).
* Foreign Capital Inducement law which concerns direct foreign investments,
portfolio investments - i.e, without management participation - loans and
transfer of technology.
Selling licenses for different products may not be available to the
same organisations. Multinationals find, for instance, that they are
unable to sell agrochemicals through a joint venture in pharmaceuticals.
Pfizer Korea is in a strange position as regards Teramycin sales. This
antibiotic is also used to control a plant bacterial disease and this
company must sell this product in Korea via a Japanese agrochemicals
distributor. This explains why multinational companies may set up several
joint ventures in Korea (eg Lilly).
There are guidelines as to the nature of technology inducement licenses
which may be sold as outlined in the FCIL. The service must fall under
one of three categories listed in Exhibit (A) and must comply with the
criteria given in the same exhibit. The other statements in the outline
are minimum 'guarantees' to such foreign licensors:
- payment shall be made by foreign means of payment
- the terms of contract shall be not less than one year
- tax (income or corporation) on such payments exempted for 5 years,
then applied at 50%
- remittance abroad of royalties for imported technologies is
guaranteed.
Royalty agreements may be fixed or fluctuating. Fixed royalties may be
arranged in several ways: on a fixed sum or installment basis, or calcu-
lated on the basis of facility capacity and ratio of operation.
Fluctuating ratios are on the basis of sales, net or volume. The size of
these agreements is limited, and although the guidelines may state that
agreements up to 10% of sales are automatically agreed, in practice limits
are often set below this level by the government. (Details available under
special sectors).
Foreigners may invest in a stock corporation which can, unlike a
branch, manufacture locally in the normal way under the provisions of the
FCIL. The basic rights and guarantees for such investors include the
following:
- 117 -
- property guarantee
- overseas remittance of dividends
- remittance of principal and interest.
- repatriation of capital
- real estate ownership
- reinvestment of dividends
- employment of foreign nationals
- same treatment as Korean nationals
The investment must comply to certain guidelines with respect to percentage
ownership and nature of business. However, there are tax and other
incentives under these FCIL provisions.
Investments may also be made under the FECL (Foreign Exchange Control
Law). Under these conditions there are no guarantees of profit
repatriation nor are there tax holidays. However, an application under
these provisions gives a better chance of entering a business where the
government is not seeking foreign investors, because there are no
inventives which cost the government revenue.
In practice, most foreign investments are made under the FCIL and the
procedure for doing this in outlied in detail (eg Ref. 2). In essence, the
application must be submitted to the Ministry Of Finance. This is reviewed
with relevant ministries and the authorisation is refused or not within ten
days if the invesment is less than $ 3 million. The authorisation allows
the commencement of construction and the import of the capital goods. The
goods for investment must be capitalised within 18 months. The company
must apply after thirty days to a district tax office for a business
license which is certified twice annually. Foreign invested companies must
comply with the regulation that 5% profits each year are retained until
this reaches 50% of capital. Permission is granted to the company to
operate as an exporter/importer if there is evidence that imported raw
materials are for their own use.
In a joint venture, the ratio of directors on the board must be
parallel to the ratio of equity. It is worth noting that the shares
subscribed by foreign equity may be in cash, kind, technology or industrial
- 118 -
property rights. Some foreign joint ventures have therefore been created
with minimal financial outlay. However a foreign investor who has set up a
joint venture is of course prohibited to effect for his own account any
transaction which falls within the class of business carried out by the
company without the consent of the local partner.
The guidelines for FCIL investments (Ref. 8) in the chemical industry
are outlined in Exhibit (B). Thus we can see for instance that an
investment of over 50% for the manufacture of surfactants is impossible,
and that for 50% or less the surfactant must be bio-degradable. The full
extent of the tax system is represented in Exhibit (C). The incentives
under the FCIL are given in Exhibit (D) and the deductions allowed from
income in tax accounting are listed in Exhibit (E). The tax benefits to
foreign companies do vary according to the industry, the manufacturing of
medical products not being eligible for these tax inventives.
Foreign investors may either own or lease land, in practice only
companies in need of a plant site are granted permission to own land.
Locations in industrial estates are "encouraged". They are cheaper and
benefit from a better infrastructure and are more or less mandatory any
way. In all, 26% of the available land on the 23 industrial estates
remains available, see Exhibit (1) for details. The advantages,
qualifications and facilities of the major locations are given in Exhibit
(G). Note that there are two free export zones where an investment ratio
in excess of 50% is allowed if the goods are all for export.
Summary data for investors on human resources, transportation
communications and utilities are given in Exhibit (H). The wage of the
average production worker in the chemical and petroleum industries is 295
equiv. $ US per month and the literacy rate of the population is 97%.
Political activities by unions, acts of sabotage, violence and strikes are
prohibited. There is a temporary law regarding labour unions and foreign
invested enterprises: before entering into collective bargaining
agreements, an application must be submitted to the Ministry of Labour
Affairs. Large Korean companies traditionally adopt a paternal attitude
to their employees providing numerous non taxable benefits, such as
transport, lunches, housing where remote or housing loans, cash gifts for
weddings and funerals.
Import restrictors and tariffs are given in refs 15 and 16. The list
of goods in Exhibit (I) is of those for which import permission is not
automatic, special consideration would be necessary. The tariffs for
chemicals are given in Exhibit (J).
The weighted average tariff rate at the end of 1982 is 11.6% however,
they range up to 150%. There is a plan to gradually replace the present
differential system by 1988 with an equivalent tariff system: raw materials
at 5-10% and products at 20%. At present a flexible tariff system is in
operation and temporary adjustments up or down of 50% may be made as can be
seen in the exhibit. Clearly, some imports which are not restricted are
instead blocked by tariff policy on the product.
Terms of payment. Most commonly payment by importers is by letter of
credit, however, documents against payment and against acceptance are
increasingly used. The procedure of these is outlined in Ref 5. Barter
deals may also be negotiated.
A few exports are restricted, but most items are automatically
approved. The government supports exports and availability of loans etc.
is thus enhanced. Exports from Korea also benefit in entry to Japan for
example from 3rd world country export allowances, making the entry 10%
cheaper than it would be from Europe.
In the field of product protection, patents are guaranted for 12 years
and are not renewable. They are also subject to cancellation if they are
not used 2 consecutive years. If an industrial patent has not been
registered in Korea within one year of its use in the originating country,
it is considered by Korean law to be in the public domain. Chemical and
pharmaceutical companies can acquire only process, not product, patents
(the implications of this are discussed in the next section).
Trademarks are protected by law for ten years, are renewable once, and
must be used to remain valid each year. Foreign investors may use their
own names only if their country is one of the 18 with such an agreement,
otherwise they must operate through the agent.
Trademarks and patents have to be approved by the patent office which
generally restricts registration for those linked to a technology transfer
agreement, foreign equity participation or long term supplier.
EXHIBIT (A
TECHNOLOGY INDUCEMENT LICENCES
The categories under such a service must fall are :
a) A service applying high-level industrial technology.
b) A service for the construction of industrial facilities and
their smooth operation, or for improvement in quality of
manufactured products.
c) A service, the domestic supply of which is impossible.
The criteria to be applied when the authority concerned grants
authorizations or approvals in accordance with the provisions of the
Foreign Cpaital Inducement Act are as follows:
••••■•••
a) Projects which greatly contribute to the improvements of the
balance of international payments;
b) Projects which contribute to the development of key industries or
public utilities;
c) Projects which contribute to the development of the national economy
and the ' social welfare;
d) Projects that contribute to the development of overseas export
markets;
e) Projects for use in the manufacture of machinery, industrial parts
and the development of design industries;
f) Projects that are deemed unprofitable in terms of time and expense
if they are to be developed at home;
g) Projects whose marginal effects are deemed certain in terms of
production and cost.
Technology introduction in the form of raw materials or intermediary goods,
or for the purpose of using trade marks of of utilizing sales effects will
not be allowed.
•••
Source: Korea Chamber of Commerce and Industry
- 121 -11(H11111 (II) INVESTMENT GUIDELINES
Category I - inventments where foreign share may be up to Inn% are. consideredfor the rut Intinetrirsts wafer the condition's atated any)
S1TCGa te N" Monufeclure of Guideline for Permission Competent Ministry
35125 Pesticides 0 Allowed only for manufacture ofagricultural medicines elementwhich satisfies at least oneof the following conditions;
MOAF
1. Items which are not producedin Korea.
2. Items which are difficult tocompound in Korea. •
35139 Synthetic Resins, PlasticMaterials and Artificial
° Allowed only for manufacture ofartificial fibers.
MCI
Fibers, except Glass.
35221 Biological Products ° Allowed only for manufacture ofmedicines which satisfies at least
MOMS/MOAF
35222 Medicinal Chemicalsand Botanical Products
one of the following conditions;
other than Antibiotics 1. Manufacture of base & intermediarymaterials
M
35223 Antibiotics "35224 Medicaments 2. Manufacture of veterinary medicines
whose total products are for exportMOMS/MOAF
3. Allowed only for the manufacture of “35229 Drugs and Medicine base & intermediary materials for
veterinary medicines (Allowed only- -to projects which include highly
advanced technology).
35136 Synthetic Fibres a
35139 Synthetic Resins, Plastic afinterloils tend Mnro-,nude Fibersexcept Glass.
I35211 Paints Hosed on Artificial Resins of
35212 Paints Based on Cellulose a
Derivatives
35213 Other Oil Paints a
35214 Water Paints MCI
35215 Japan a
35216 Paint Related Products N
35219 Paints, Varnishes and N
Lacquers.
35221 Biological Products 0 Allowed only for manufacture ofmedicines which satisfy at leastone of the following conditions;
MOMS/MOAF
35222 Medicinal Chemicals and 1. Manufacture of medicines includingthe production of base & intermediarymaterials which are necessary in viewof domestic demand and supply.
35223 Antibiotics 2. Projects which are expected tocontribute to the improvement ofthe national health and the
35224 Medicaments development of medicines manufaturingsector.
35229 Drugs and Medicines..
3. Projects deemed necessary fordomestic price stabilization.
4. Projects which are expected tocontribute to the development ofveterinary medicines manufacturingsector.
- 121a -
35231
35232 •
35233
35234
Soaps
Synthetic Surface-Active Agents
Toothpaste
Perfumes and Cosmetics
• Allowed only for manufacture of highgrade toilet soap.
• Allowed only for manufacture ofnon-pollution surface-active agents.
MCI
•
MOHS
35239 Soap mul Cloaninq Preparations,Perfumeq, Cosmetics and OtherToilet Preparations.
MCl/MORS
35291 Adhesives and Gelatin • Allowed only for manufacture ofnon-pollution adhesives endindustrial adhesives
MCI
35292 Explosives andPyrothechnic products
3529 3 Matches N
35294 Carbon Black N
35295 Wax and Polishes • Allowed only for manufacture of waxfor household furniture, metal, andspecial cleaner
N
35296 prepared photographic and N
Cinematographic Goods
35297 Printing Ink and Writing Ink MCI
35298 Essential Oils and Related Products
35299 Other Chemical Products. N
35302 Lubricating Oils and Greases
:Category II - Investments where foreign slave may be up to 50% it consideredfor the following, under the contione stated (if any)
SIM
Code N° Manufacture of Guideline for Permission
-...
Competent Ministry
35111 Organic Chemicals, including Cyclical and*
Non-Cyclical Compounds, except Industrial MCI
Cases
35112 Inorganic Industrial Chemicals, except MCI
Industrial Gases
35113 Industrial Gases, except Chlorine and otherHalogens, Natural Gas and Other Crude Hydro-Carbons
35114 Synthetic Organic Dyestuffses
•
35115 Dyeing and Tanning Extracts and Synthetic*
Tanning Materials
35116 Pigment and Colouring Materials x
35117 Gum and Wood Chemicals .*
35119 Basic Industrial Chemicals. "
35121 Nitrogenous Fertilizers«
•35122 Phosphatic Fertilizers "
35123 Potassic Fertilizers "
35124 Composite and Complex Fertilizers N
35125 Pesticides • Allowed only to the projectswhich manufacture agriculturalchemicals end quasi-medicalproducts.
35131 Synthetic Rubber MCI
35132 Condensation, Polycondensationen Polyodditioo Productn
*
35133 Polymerizntion end*
Copolymerization Products
3 1,114 Rcuoocrnted Cellulose nod Chemical «
Derivatives of Cellulose •
35135 Regenerated Fibres
EXHIBIT (C)
DIAGRAM SHOWING PRESENT TAX SYSTEM IN SOUTH KOREA
Income Tax
Corporation TaxDirect Inheritance and Gift Tax
Internal Tax Assets Revaluation TaxTax Excess Profits Tax
Value Added TaxLiquor Tax
National Indirect Telephone TaxTax Tax Stamp Tax
Customs Special Excise TaxTax Securities Transaction TaxDefence TaxTax
Tax
Provinces Acquisition Tax(Do) Registration Tax
Licence Tax
ProvinceTax Inhabitant Tax Ordinary
Special Property Tax TaxCities Automobile Tax(Seoul, Farmland TaxPusan) Butchery Tax
Local Horse Race TaxTax
CitiesCity and (Si) City Planning TaxCounty Community Facility Tax EarmarkedTax Counties Workshop Tax Tax
(Gun)
Source: Korea Exchange Bank
EXHIBIT (D)
TAXES SUBJECT TO REDUCTION AND EXEMPTIONFOR FOREIGN INVESTED ENTERPRISES
Tax Taxation Basis Tax Rates Tax Reduction or exemption
Income Tax onUincorporatedenterprises
Amount of Incomeor earnings
6% - 55% Exemption for 5 years,50% reduction for ensuing3 years, on foreignowned ratio.
Corporation Tax 1) Income in eachbusiness year
20% - 33% Exemption for 5 years,50% reduction for ensuing 3years, on foregn ownedratio
2) Income in liquidation
.Wages and SalaryIncome Tax
Foreign employeesworking in foreigninvested enterprise, orunder technologyinducement contract
6% - 55% Exemption for 5 years
Dividend Income Amount of dividends 25% Exemption for 5 yearsTax received 50% reduction for ensuing
3 years
Tax on Technology Income from 20% - 25% Exemption for 5 yearsIncome supplying technology 50% reduction for ensuing
(royalty) 3 years
Interest Income Gross receipt orderived from intereston loans or deposits
25% Exemption for approvedforeign loans
Customs Duty Ad valorem basis(C.I.F. price)
5% - 100% Exemption for approvedcapital goods
Property Tax Assessed value ofland, vessels, mining
1) Land:0,3% - 5%
Exemption for 5 years,50% reduction for ensuing
district, etc. 2) House &Vessels:
3 years, on foreignowned ratio
0,3% - 5%3) Mine lot:W50/hec
PropertyAcquisition
Acquisition price 2% Exemption for 5 years,50% reduction for ensuing3 years, on foreignowned ratio
NB. VAT is 10% (this is temporary normal VAT 13%) VAT and special excise tax are alsoexempted on capital goods imported by a foreign investor under import authorization forcapitalization Registration tax for stock corporation is 2% of paid in capital.
Source: MOF
-124-
EXHIBIT (E
DEDUCTIONS FROM TAXABLE CORPORATE INCOME
. Accelerated depreciation allowance - 20% is added to normaldepreciation for machinery and equipment used for mining and manufacturing (>12hours day usage)
-40 - 80% for fixed assetsconstructed or installed with 60% or more Korean raw materials or machinery,
-30% for businesses earningforeign exchange.
. 3 years carry-over of loss is granted
. Tax deductible reserve for export losses or overseas market development
. Entertainment expenses (limited to 2% of capital, a. 1% of revenue or8 000 $)
. Deferred charges in organisation or research expense, stock and bond issuingcosts amortised according to allowed time periods
. Foreign exchange losses resulting from installment payments of foreigncurrency liabilities.
EXHIBIT (F)
LAND AVAILABILITY AND OCCUPANCY OF INDUSTRIAL ESTATES (Dec 82)
(Unit: 1,000 m2)
Estates AvailableArea
RemainingArea
OccupyingEnterprises
Masan Free Export Zone 588 8 89
Iri Estates 1,147 115 103Free Export Zone 294 102 17Industrial Estate 853 13 86
Korea Industrial Estate 3,045 372
Gumi Industrial Estate 10,489 390 225
Changwon Machinery 22,260 6,790 125Industrial Estate
Yeocheon Petro Chemical 9,200 1,240 26
On San Industrial Estate 13,190 7,947 16
Ban Weol Industrial Estate. 6,314 2,386 358
Local Industrial Estates 18,882 4,105 826
Incheon 1,003 - 45Sungnam 1,313 174Chuncheon 406 26 27Wonju 301 - 22Chungju 2,044 522 67Daejeon 1,028 - 87Junju 1,326 - 54Kwangju 2,268 43 161Mokpo 370 - 34Daegu 588 - 82Pohang steel related I.E. 5,498 1,673 59Non gong 2,294 1,762Cheon anh 291 - 11Jeong eub 152 79 3
"IL Ay.
:0
Private Industrial Estates 413 - 119Youngdungpo Machinery I.E. 122 - 67Incheon Machinery I.E. 291 - 52
Total 85,528 22,981 2,259
[xHIBIT (6),
PROFILES OF MAJOR INDUSTRIAL ESTATES
Entnte Major Advantages Qualification for Occupancy Eligible Types ofBusiness
Sales in theDomentic Market
foRUlaions on
SaleCharges of Prices
Masan FreeExport lone
1. Application of pertinentlimn and regulations iswaived or eased.
2. On-the-spot completionof administrative affairs
3. Various tax exemptionsand reductions
4. Full support facilities
1. Foreign-invested enterprises100% sole-investment byand foreigners are permitted(Priority to joint-ventures)
2. Domestice enterprises' 3. Definite export prospects
4. High foreign exchangeearnings
22 types of businesscan be housed auto-maticelly. Othertypes can be housedwith the approval ofthe Minister of Com-"Beres and Industry.
All productsshould beexported
lease Plant sites/3.C65Aieach monthStandard Xactory:U$0.915/0eeach month
5. Technical competence6. Extensive labor
requirements
Iri FreeExport Zone
Same as above Same as above Same as above Same as above Lease Plant site:U$0.035/02each monthStandard factory:
.U$0.763/meach month
Korea Export 1. Low land price Domestice enterprises or No limitations No restrictions Sale Sales price variesIndustrialinvestors
2. Full suport facilities joint ventures with foreign(Priority to joint ventures)
Estate
CumiIndustrialEstate
1. Various tax exemptionsand reductions
2. Financial support3. Low land price
Same as above
.
1. Electronic,electronicalyrelated industriesand others.
Same as above
,
Sale U$15.0/s2
4. Fulle support facilities 2. Textiles andothers
. -
Changwon Same as above Same 88 above Materials, Elements Same as above Sale U$21.6/e2Machinery Componenents,
Machinery, Automo-bile components
.
Marine Machinery,etc.
- _
LocalIndustrial
I. Various tax exemptionsand reductions
Any one of the following can Nobe housed
limitations Same as above Sale Sale price varies
2. Low and price 1. Exporting enterprises3. Full support facilities 2. Foreign invested enterprises
3. Specialized and systematizedmedium industries
4. Indigenous local industries„ _.,
FXHIBIT (6) (cunt)
SUPPORT FACILITIES AND TRANSPORTATION IN MAJOR INDUSTRIAL ESTATES
.
Estate Water Supply
.
Harbor Facilities Transportation
• Railroad Seoul - Masan (express) : 5 hra.Susan - Masan (express) : 1 hrs.
Masan Free Export Zone 10,000 tons/day Two 20,000 ton-classvessel wharfs
• Express way Seoul - Masan : 6 hrs.Susan - Masan : 1 hr.Deagu - Masan : 2 hra.
.
Iri Free Export Zone 20,000 tons/day
.
Three 8,000 ton-classvessel wharfs
0 Railroad Seoul - Iri : 4 hrs.Daejeon - Iri : 1 1/2 hrs.
• ° Express way Seoul - Iri : 3 1/3 hrs.Daejeon - Iri : 1 1/2 hrs.
• Railroad Estate 1,2,3 .Yougdungpo : 3 milesKorea Export 32,000 tons/day Incheon Harbor can Estate 4 - Bupyung : 3 milesIndustrial Estate be used (Cargo handing Estate 5,6 - East Incheon : 3 miles
capacity : 11,728 • Express way 30 minutes, Seoul to Incheonthousand MIT) • Air Estate 1,2,3 .Kimo Airport: 9 miles
Susan Harbor can beused
• Railroad Gumi - Seoul : 3 1/2 hra.Gumi - Seoul : 2 hrs.
Gumi Industrial Estate 110,000 tons/day (Cargo handing capacity s° Express Way Gumi - Seoul : 3 hrs.20 million MIT) Gumi - Susan : 2 1/2 hrs.
• Air Deagu- Seoul : 50 min.
• Railroad Changwon - Seoul : 6 1/2 hrs.Changwon Machinery 20,000 ton-class vessel Changwon - Susan : 1 hr.Industrial Estate 200,000 tons/day wharf • Express way Changwon - Seoul : 6 hrs.
• Air Seoul - Susan : 1 hr.
Yeocheon Petro-chemical 172,000 ton-class ° Railroad Yeosu - Seoul : 6 1/2 hrs.Industrial Estate 275,000 tons/day vessel wharf ° Express way Yeosu - Seoul : 6 hrs.
• Air Seoul - Yeocheon : 1 hr.
On San Industrial 20,000 ton-classEstate 275,000 tons/day vessel wharf 0 Express way Yeosu - Seoul : 6 hrs.
. • Air Seoul - Yeocheon : 1 hr.
Ban Weol 1,000 ton-class • Rail road Suweon to Incheon railIndustrial Estate 150,000 tons/day vessel wharf ° Express way Suweon to Incheon Industrial way
. I
Source : HOF
EXHIBIT (H)
HUMAN RESOURCES(Nov/Dec '82)
Summary of labour conditions
Description Remarks
Dismissal
Retirement Pay
Payment of Wage
Paid Holidaysand Leave
Health check
1. Notification 30 days in advance
2. Not notified, payment of 30 dayswage
30 days average wages for eachyear of continuous service
1. No minimum wage2. Additional 50% of ordinary
daily wage3. At least 60% daily wage
1. One day off with pay a week2. One day leave with pay a month3. 8 days leave with pay a year4. 3 days leave with pay a year
Legal holidays (14)
Annual physical examination
After at least 6months working
Company with 16 ormore employees
Overtime,nightwork,or work on holiday
During a period ofclosure
Perfect attendancePerfect attendancePerfect attendance90% attendance
Applies where firmhas 5 or moreemployees
Industrial Accident 1. 60% of average wage Absence from workCompensation 2. 50% - 1,340 days of average wage Disability
Working Hours 1. Standard-8 hours/day48 hours/week
2. Junior workers (13-18 years old)7 hours a day, 42 hours a week(less than 13 years may not beemployed)
NB. 2-4 bonuses a year, each equivalent to a monthly salary, are part of thestandard package.
Source: MOF
14
EXHIBIT (H) (cont.)
TRANSPORTATION
Roads
12 247 km which 24% pavedfreight rates :
one way - for each km. tons .12 $ UScharter - for 2/12 tons and
45 - 85 $ US8 hr. day
Rail 6 100 km of which 75% electrifiedfreight rates : for each 50 km .ton .85 - 1 $ US
Air cargo charge rates, eg Seoul - Munich min $ 62 and rate (<45 kg) 12.7 $
COMMUNICATION
eq to W. Germany
TelegraphTelephoneTelexAir Parcel
Surface Parcel
55 cents per word$ 1205 for 1st 3 mins.$ 301 for 1st 1 min.$ 10 for 1 kg$ 66 for 10 kg$ 5 for 1 kg$ 13.5 for 10 kg
UTILITIES
Price of electricity for industry
Class
Unit
Demand Charge
Energy Charge
Small IndustrialPower
Large Industrialpower (A)
Large Industrialpower (B)
Less than 20 KV orLess than 500 KWwith 20 KV and over
500 KW and overwith 20 KV andover
1,000 KW and overwith 140 KV andover
W 3,921 per KWfor the contracteddemand
W 2,979 per KWfor the contracteddemand
W 1,992 per KWfor the contracteddemand
W 54,58 per KWHfor all energyconsumed
W 51,35 per KWHfor all energyconsumed
W 46,85 per KWHfor all energyconsumed
EXHIBIT (I)
RESTRICTED IMPORTS
Customs Code Description
2817
Hydroxides or Peroxides of sodium or potassium
2832
Chlorates and Perchlorates, Bromates and Perbromates,Iodidates and Periodates.
2842 Carbonates and Percarbonates, commercial ammonium carbonatecontaining ammonium carbanate, soda ash.
2801 hydrocarbons (Toluene, o-xylene, p-xylene, styrene)
2902 Halogenated derivatives of hydrocarbons(vinyl chloride, chloroethylene, chlorofluoroethane,dichlorodifluoromethane, trichlorodiethane, benzenehexachloride, lindane ....)
2903
Nitrobenzene
2904 Propylene glycol (subject to recommendation of KPTA if formedicaments or cosmetics.)
Acylic alcohols and their halogenated, sulphonated, nitratedor nitrogenated derivatives.
Pentaerythri tal
2906 , Phenol
2911 Acetaldehyde
2913 Acetone
2914 Acetic AcidEthyl acetate
2915 Maleic anhydridePthalic anhydrideTerephthalic acidDioctyl orthopthlalates
2930 Toluene disocyanate
2935 Caprolactam
3205 Some acid, basic and cationic dyes
3401 Cosmetic and liquid soaps
Source: Annual Imported Export Notice.
EXHIBIT (J)
TARIFF SCHEDULES
Customs Code Description Normal TemporaryTariff
2710 Lubricating oils/greases 30
2711 Petroleum gases and othergaseous hydrocarbons 10
290101 Unsaturated acylic hydro-carbon - eg butadene 10 OMR
29010407. Styrene 20
3102
31020200
Nitrogenous fertilisersbut,Ammonium nitrate
20
25
3103 Phosphtic fertilisers 20
3104 Potassic fertilisers 0 -
3201/3 Tanning and dyeing estracts 30 -
3213 Inks 40 -
3205 Synthetic organic dyestuffs 30 20
3208 Prepared pigments 30 -
3209 Varnishes, lacquers, paints 40 -If without colour 30 -
3818 Composite solvents forvarnishes
30. -
- 132-
B AGROCHEMICALS TARIFFS
Customs Code Description
General %
(No temporarymeasures)
284814 Arsenates, Arsenites
25
290202 Ethylene Dichloride
10
29030301 Nitrobenzene 20
2907 Halogenated, SulphonatedNitrated or Nitrosated derive 20of phenols or phenol alcohols
29250103 Ethyl Carbamate 20
3811 Disinfectants, Insecticides,Fungicides, Herbicides, PGRsput up in forms for sale. 20
C COSMETICS TARIFFS
Code
Description General TemporaryA
3301 Essential Oils 30
3304 Mixtures of 2 or moreoderiferous substances andmixtures with a basis of oneor more of these substancesof a kind used as rawmaterial, perfumery, food,drink or other industries. 50 60
3306 Perfumery, cosmetics andtoilet preparations,aqueous distillates andsolutions of essential oils 50 60 NB Widely
reported as'emergency'80%
3401 Soap, organic surface activeproducts and preparations 30
3402 Organic surface active agentsand preparations.
IV B GOVERNMENT SUPPORTED DEVELOPMENT
In the early days of the Korean Chemical industry, plants were built by
foreign companies and trouble shooting was carried out by Japanese
technicians. Korea now finds itself in these early industries with no pilot
plants to test process changes and therefore tied to the original factory
supplier for essential materials like catalysts.
Nowadays, for the purpose of developing Korea's technological resources the
government supports research and development organisations. The two which
concern the various chemical industries are KAIST (Korea Advanced Institute of
Science and Technology) and KRICT (Korea Research Institute of Chemical
Technology). The former deals with other fields as well and is an
organisation arising from a merger of the original development centre and a
high level technical college. KRICT was recently created and since its
activities started two years ago, its contribution so far has been limited
when compared to that of KAIST which has been in operation 15 years.
KAIST has 15 PhDs who supervise up to 30 projects at a total value of 1 1/2
million $. On average the project finding is as follows: 71.3% governmental,
28.4 from industry and 2% from overseas. Chemistry and Chemical engineering
account for 18% of the projects, but 30% of the money spent. Government
endowed package contracts, which are where most government money is spent, are
geared in the chemical industry to the 'strategically important fine
chemicals', i.e, those with economic potential for an early commercialisation,
and also to 'bottlenecks in medium industry' (e.g, technical assistance to
small and medium dyeing industries). The Korea Technical Advancement
Corporation (KTAC) is wholly owned by the research institute. Through equity
participation the organisation commercialises products developed under
government sponsorship. Exhibit (T) shows examples of companies thus assisted
and lists other technologies KAIST developed in the chemical field, it also
lists the 'strategic' areas where further such developments will take place on
government initiative.
Thus we see that this organisation has succesfully established syntheses of
several organic pharmaceuticals which leads foreign interests in this field to
call it a 'government founded pirating agency, with no parallel in the world'.
Indeed companies can go and ask the insitute to develop a parallel process to
one patented in the country, paying only a proportion of the project costs.
Furthermore, the institute automatically receives copies of any new process
patented.
This puts foreign investors in the pharmaceutical field in a particularly
tight corner: many 50% joint ventures are established under the Ministry of
Finance guideline condition 'manufacture of medicines including the production
of base and intermediary materials', if they obey this requirement they risk
losing the proprietory information which they spent millions to develop
through the very act of patenting it. Legally the burden of proof is on the
imitator only if the original, and not a superceded patent is held by the
imitated. This is rarely the case in such industries and the procedure to
prove your case is a very lengthy and expensive one. Several stances are
taken by foreign companies, some with burnt fingers avoid introduction of any
further technology, others take a high profile and challenge an imitator with
all the legal might and money of a multinational corporation, ensuring that he
runs considerable financial risks by making such an affront, others adopt a
less expensive line effectively delaying obedience to the guideline.
The new organisation KRICT, with twice as much chemical manpower as KAIST,
is where the exclusively chemical projects will now be carried out. The
second part of our Exhibit (II) lists the 100% government sponsored projects
to take place there. The Chemical Engineering Department is particularly busy
providing pilot plants and process flow analysis for private companies. A few
top companies now have research wings (Lucky, CKD etc). Their activities at
present are limited to the level of end product formulation.
There is no original research taking plae at this stage in Korea and while
the threat to foreign investors is real the benefit to Korea of its present
policies is questionable. The drive for independence felt at every level in
the country means that intermediates must be developed and made on scales that
are often far from efficient. In the longer term, the fine chemical industry
will have to compete directly with the exterior, and its strength will only be
ephemeral if limited specialisation keeps production costs higher and if it
remains without a foundation in original research.
EXHIBIT (1)
KATC COMMERCIALISATIONS
PRODUCT COMPANY dateestablished
Notes
PHARMA 3 Formyl Rifamycin Yuhan Chemical 1980 25%
Antibiotics
(Antitubercolosis)
Company Ltd KTAC
equity
AG CHEM Orthrane (Insecticide) Korea Agricult-
ural
1980
Difolatan (Fungicide) Hanjung Chemical c. 1981
Company
OTHER N Butyl Inorganic
compounds
Handuk co Ltd c. 1981
(PVC Stabiliser)
Rhodium Trichloride Chong Kun Dang c. 1981
(Polymerisation
catalyst)
OTHER TECHS DEVELOPED AT KAIST/KIST
PHARMA Cephalosporin Antibiotic from Penicillin
Ethambutol Antibiotics
Praziquantel lung and liver distoma medicine
Cimetidine peptic ulcer drugs
Futrafur anti cancer drug
Mebendazol antihelminth drug
Ibruprofen anti inflammatory medicine
AG CHEM Organophosphorus broad insecticides for vegetable and citrus crops
Carbamate insecticides for vegetable crops
Pyrethroid contact insecticides - also for household aerosols.
EXHIBIT (II)
GOVERNMENT (100%) CONTRACTS
KAIST Strategically important fine chemicals
Speciality polymers
Nylon engineering plastics
Emulsion polymers for pollution free coating
Thermo plastic polyethylene
Oxizodiline derivatives
fungicides on rice
Mancozeb
Pheromone of rice stem borer
Carbostyril derivatives
Cyanuryl fluoride and reactive red dye
KRICT
Semi conductors and silicone chemistry
Colour film
Additive formulations for lubricant oils
Sweetener like Searle's aspartam
Carbon fibre
Active ingredients in pharma and pesticides (details n.a)
IV C INVESTOR'S EXPERIENCE
Foreign investors in Korea have advantages particular to them and also
export advantages as described in the first section (IV A). However, a
discussion of criticisms and comments based on the experience of European
investors in Korea will put these rules and guidelines into their practical
context. It must first be noted that all of these are subject to the
interpretation of the ministry concerned and the veto of the local industry
association, thus nothing is hard and fast, furthermore translations are often
confusing and appear, in different versions, to be suggesting opposed things.
Although European investors feel that the economy is 'moving in the right
direction' they have found the over-optimistic governmental forecasts
problematic. If the dependence of the Korean economy on the US situation and
oil prices was recognised there would be fewer surprises for unsuspecting
investors.
The beneficial provisions of the FCIL are however upheld, yet the five year
tax exemption clause is not a factor in encouraging investment since new
companies incur losses in the first couple of years which would anyway be
offset against the next. On the administrative side, although requests for
Joint Ventures are now dealt with within a reasonable time frame, foreign
participants feel that more simplification would help. The high job turnover
in the minsistries also means that reliable collaboration is often undermined.
The factors which have induced investment are thus these overoptimistic
forecasts, real or feared restrictions in original business and the protection
expected in servicing the domestic market, the good location as a base on the
'Pacific Rim' and the low labour costs. The government is much criticised for
its inconsistencies which affect foreign invested enterprises on these
sensitive points. When the promised protection is not forthcoming for
instance, the joint ventures suffer considerably, putting into question the
whole investment strategy. There are occasions where the government in fact
acts in the other direction, by putting higher import levies on the components
than on the product. A system of specific assurances as offered in Brazil or
India would overcome this problem.
The government has also been, in some cases, the only agent acting against,
and rendering unrealistic, its own forecast. Furthermore, if countries are to
profitably establish joint ventures in Korea as a base in the Pacific Rim,
then they must have the possibility of serving both the domestic and the
export markets. There has also been a significant upward movement in wage
rates over the last three years and although this upward spiral has been
curtailed by recent control on inflation, any continuing such tendency would
make Korea a less competitive site for investment.
Besides concerns about the need for a more even governmental hand and
greater simplicity, European investors find that there is a 'credibility gap'
in the copyright and patenting procedures and no commitment for a long term
relationship from either the Korean partner or the government. Process
patents (for pharmaceuticals) are scarcely enforceable and given also the
short duration of patents there is little incentive to licence products or
establish joint ventures in Korea if the investment cannot be recovered in
other ways. European participants have found a certain disinterest by the
Korean partner in looking at a joint venture as a long term relationship, and
the government is felt to take an export-oriented approach to foreign
investment under which the investor fades out once he has performed his
catalytic function.
Further difficulties of European investors include the prices of raw
materials and energy which are 3 times higher, the fact that import
liberalisation appears to apply only to local industry, that many ingredients
must be bought from local companies protected by an import ban, and that
payment delays may extend up to 240 days. Some complain of 'administrative
interference' and problems in remittance of technology licence income or
dividends due to short supply of foreign exchange.
There is however a movement to rewrite the FCIL next year on the basis of
an agreement to liberalise direct foreign investment in order to attract as
much capital and technology as possible. Furthermore the movement towards
diversification of sources can only serve as an advantage to European
interests.
The key to a successful investment in Korea which avoids all but the most
serious problems outlined above (product security) is to find a project which
all three parties (government, foreigner and Korean) find in their best
interest. The projects which get squeezed are for instance upstream of a key
export industry and are not of the calibre to cater for it alone, and
equivalent imports must be permitted to keep the strategic industry
competitive. Thus the choice of a joint venture partner is also crucial.
Many foreign businessmen claim that the strength of the contact system in
Korea (school, college, military) is such that a foreign investor would be
seriously handicapped alone. The Koreans prefer to negotiate with the
Japanese, they 'think of profit and not of power' and find that the Westerners
always 'want everything to be clear and organised by themselves'. There is no
doubt that contracts are not viewed in the same way and that the Korean
concept of justice is rather different.
-140-
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KAIST
TECHNOLOGY TRANSFERThe Korean Experience
Dr Bauer
Mr Wipper
Dr Nock, Dr Cook, Mr BisckeMr Yu KN
July 1983
June '83 toJune '84
1982
1980
May 1982
May 1983
BP Far East Ltd
Pfizer Korea Ltd
Rhone Poulenc Group
Hoechst Korea Ltd
Ssanyong Oil
Yuhan Corporation
Mr Cooper
Mr A Staempffi
Mr L Muller
Mr J Hoelzlein
Mr Kim, Chung Nook
Ambassador Hynn
Dr Zeon Y.0Mr Chung, C.Y
Representative
Senior VP
General Delegate
President
Agricultural Div
Managing DirectorManager DevelopmentDepartment.
ChairmanManager OverseasTrading
Dong A Pharmaceutical Co Ltd Dr Kang, Shin-HoMr Chung, Se Hong
Hannong Corporation Mr Choi, Dae Hwan . Manager PurchaseDepartment
Hankook Cosmetics Ind. Co. Mr Kwonn, Koo Sang
Managing DirectorLtd
Mr Oh, Sang-Soo
Manager ForeignTrade
Pacific Chemical F... Co Ltd Mr Lee, Kwang-Ho Manager MarketResearch
President
PresidentManager Production
Assistant Manager,PlanningPlanning (HG DO)(Household goods)Assistant Manager,Marketing (HG DV)Assistant Manager(Plastics Div) 2ndDept Div.
Kayang Co. Ltd
Aekyung Co Ltd
Lucky Ltd
Mr Lee, Sung C
Mrs Chang, Young ShinMr Kim, Yong Nam
Mr Song, C.H.
Mr Park, Chun Deuk
Mr Lee, Y.J
Mr Park, KJ
Ministry of Science andTechnology
Korean PharmaceuticalIndustry Association
Korean Research Instituteof Chemical Technology
Korea Advanced Instituteof Science and Technology.
Korean Chamber of Commerceand Industry
Ministry of Finance
Mr Kim, Se Kwon
Mr Nam, Co SoMiss Ahn, Hae Sung
Mr Lee, Jae H.Dr Ryu, Eung KulDr Oh, Sea-Wha
Dr Song
Mr Baik, J.G
Mr Song, J.J
Councillor forScience andTechnology
Managing DirectorPharmacist,Research
Research DirectorOrganic ChemistryDyestuffs
Economic ResearchDepartment
Deputy DirectorForeign InvestmentPromotion Division
Bank of Korea
Mr Yoon Statistics Division