korean exports

8/14/2019 Korean Exports

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Korea Economic Trends

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Exports to ASEAN from Korea,

China and JapanPARK Bun-Soon Senior Fellow, Samsung Economic Research Institute

I. ASEAN Economy Aected by GlobalFinancial Crisis

Since the outbreak o the global nancial crisis, ASE-

AN exports have plummeted, refecting the huge allin demand rom advanced countries. For instance, ex-ports by major ASEAN countries started to all in thesecond hal o 2008 and, by the rst quarter o 2009,most ASEAN countries suered negative growth o ex-ports o about 30%. While the decline is slowing in thesecond hal o this year, a return to positive growth isnot expected anytime soon.

ASEAN countries have seen imports take a similarroute, with some experiencing a greater drop in im-ports than in exports. As a result, they have posted so-

called recession-type trade surpluses. For example, thePhilippines, Thailand and Vietnam, all o which postedtrade decits in the rst quarter o 2008, saw their tradedecits narrow or turn to surplus in the rst quartero 2009. Indeed, the Philippines was the only countryamong major ASEAN countries to post a trade decit(US$1.7 billion) in the rst quarter o 2009. In the sec-

ond quarter o 2009, Indonesia and Thailand recordedtrade surpluses that represented our-old increases ona year-on-year basis; each o their accumulated tradesurpluses or July and August alone surpassed their

surpluses or the whole third quarter o 2008.

Due to high overseas dependence, industrial produc-tion in ASEAN was hit hard by stagnating import de-mand rom advanced countries. All major ASEAN mem-bers except or Indonesia posted negative growth in theourth quarter o 2008 and saw production deteriorateurther in the rst quarter o 2009. This aected privateconsumption and investment, undermining economicgrowth. Malaysia, Singapore and Thailand in particularposted negative economic growth at the time.

Fortunately, however, as the global economy seemsto be in the early stages o recovery and the decline inexports slows down, it seems unlikely that ASEAN willcontinue its economic decline much urther. Industrialproduction gures or major ASEAN countries in thesecond quarter o 2009 showed a marked improvementcompared to those o the rst quarter, while economic

WeeklyIn

sight

Industrial Production and Economic Growth Rates of ASEAN

2008 2009

1Q 2Q 3Q 4Q 1Q 2Q

IndonesiaIndustrial Production 4.3 4.2 4.3 1.8 1.5 1.5

GDP 6.2 6.4 6.4 5.2 4.4 4.0

MalaysiaIndustrial Production 7.2 3.1 1.4 -9.1 -14.4 -10.9

GDP 7.4 6.6 4.8 0.1 -6.2 -3.9

PhilippinesIndustrial Production -0.4 5.2 4.0 -7.1 -20.2 -13.7

GDP 3.9 4.2 4.6 2.9 0.6 1.5

SingaporeIndustrial Production 12.3 -5.6 -10.9 -10.7 -24.2 -2.4

GDP 6.6 2.5 -0.1 -4.1 -9.5 -3.5

ThailandIndustrial Production 12.6 10.1 7.6 -8.1 -18.5 -9.1

GDP 6.0 5.3 3.9 -4.2 -7.1 -4.9

(Unit: %)

Note: Year-on-year.Source: Country reports o EIU.


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growth has also been on the rise. For instance, second-quarter economic growth rates or Singapore and Ma-laysia increased by 6.0 and 2.3 percentage points, re-spectively, since the rst quarter, indicating clear signs

o recovery. The ASEAN economy is also increasinglybeing viewed in a more positive light. In October 2009,the International Monetary Fund adjusted upward itsgrowth rates or ve ASEAN countries by 0.7 percent-age point or 2009 and 1.7 percentage points or 2010rom gures previously announced in May.

II. Northeast Asian Exports to ASEAN

1. Sluggish Exports to ASEAN

Exports or the three major Northeast Asian econo-mies o Korea, China and Japan have not been spared bythe global economic turmoil. Koreas exports plungedto US$21.1 billion in January 2009 rom US$41 billionin August 2008, while imports plummeted to US$22.6billion in February 2009 rom US$43 billion in July 2008.As or China, monthly exports averaged US$136 billionin the third quarter o 2008 but decreased substantially

to US$64.8 billion in February. Japan posted monthlyaverages o US$68.1 billion in exports and US$68.6 bil-lion in imports in the third quarter o 2008; these guresell to US$39.2 billion and US$ 38.3 billion, respectively,

in February 2009.

Korea, China and Japan have seen exports slow dueto sluggish demand rom ASEAN. In September 2009,year-to-date accumulated exports to ASEAN by Ko-rea totaled US$28.9 billion, a 26% all year-on-year,while those o China and Japan were US$73.1 billionand US$55.4 billion, respectively, dropping 15.9% and29.9%. Koreas exports decreased at a lower rate thanJapans but higher than Chinas; a comparison o thethree rates o decline indicated that only Korea saw itsexports to ASEAN all more than its overall drop in to-

tal exports. For the year up to September, Koreas totalexports on an accumulated basis contracted by 20.7%but exports to ASEAN shrank 26%.

This can also be illustrated by the change in ASEANsportion o total exports or each country: 11.1% in 2009rom 11.7% in 2008 or Korea, 8.6% rom 8% or Chinaand 13.7% rom 13.2% or Japan.

Total Export of Korea, China and Japan

100

300

500

700

900

1,100

1,300

1,500

Jan.2008

Mar. May July Sept. Nov. Jan.2009

Mar. May July Sept.

Korea China Japan

(Unit: US$100 million)

Source: Korea International Trade Association and Japan External Trade Organization.


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Koreas total imports rom ASEAN also declined butnot as much as the drop in imports as a whole. For theyear up to September, Korea imported rom ASEAN24.3% less than the same period last year, while totalimports nose-dived 33.1%. With exports alling morethan imports, Koreas trade surplus with ASEAN is ex-

pected to narrow compared to last year. In the case oChina and Japan, the drops in imports rom ASEAN andtotal imports have been similar.

Exports by Korea, China and Japan to individual

ASEAN countries showed uniform and fairly even de-

clines, including their exports to Singapore, an impor-

tant intermediary entrept in ASEAN and their biggest

market. However, the decline in exports from Korea to

Thailand and Malaysia was much more marked than

exports to the Philippines and CMVL.1 For China, the

decline in exports was less pronounced in the case of

Vietnam, the Philippines and CMVL, while Japan expe-

1 Cambodia, Myanmar, Vietnam and Laos.

rienced a relatively low decrease in its exports to the

Philippines.

Thailand and the Philippines seem to show dierentmarket characteristics. Their imports or the year up toAugust were the slowest among the ASEAN countries.

Although Korea, China and Japan had total exportsto the Philippines all at a slower pace than their totalexports to ASEAN, their exports to Thailand droppeddramatically. This implies that the Philippines is nowbecoming more connected to the network o industriallabor divisions in Northeast Asia, a relationship thatwas quite weak in the past.

2. Sluggish Exports o Koreas Main Products

Competition among the three major Northeast Asianplayers has intensied in their eorts to export to the

ASEAN market. At the same time, the product tradestructure between Korea, China and Japan and ASEANshow characteristics o intra-industry trade and in-

Change in ASEAN Exports and Imports for Korea, China and Japan(Unit: %)

Note: For the year up to September.Source: Korea International Trade Association and Japan External Trade Organization.

-20.7 -21.3

-32.8

-26.0

-15.9

-29.9

-40

-35

-30

-25

-20

-15

-10

-5

0

Korea China Japan

Total ASEAN

-33.1

-20.6

-31.6

-24.3-21.3

-30.0

-40

-35

-30

-25

-20

-15

-10

-5

0

Korea China Japan

Total ASEAN


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ter-industry trade emerging simultaneously. Refect-ing industrial ragmentation and production sharing,Northeast Asian countries export intermediary goodsto ASEAN while at the same time importing some elec-tronic components. Also, they export capital goods toASEAN and import primary goods such as oil, gas, palmoil and rubber.

In terms o intra-industry trade, Korea, China and Ja-pan are in erce competition in the ASEAN market. Ananalysis o the trade structure based on the our-digit

HS code ound that petroleum products (2710), inte-grated electronic circuits (8542), ships (8901) and iron/non-alloy HR plates (7208) were included in the top 10items that the three countries export to ASEAN. AmongKoreas top 10 export items, six items overlapped withChina and Japan.

Also, export items rom Korea are not as diversied asthose rom China or Japan. The top 10 export items oKorea to ASEAN in 2008 accounted or more than 50%o the countrys total exports, whereas those o Chinaand Japan accounted or only about 30% o their totals.This lack o variety can also be seen in Koreas top ve

export items. Petroleum products, Koreas No. 1 exportitem, represented 15.1% o total exports as o the endo September 2009, while integrated electronic circuits,the countrys second bestseller, stood at 13.1%. Theseincreases were disproportionately higher than the per-ormance o the top two exported items or China andJapan, indicating that Koreas top ve items exportedto ASEAN determine the lions share o overall exportperormance.

In terms o ASEAN, the relatively poor export peror-mance o Korea compared to China and Japan is due

to the countrys large dependence on a ew items, owhich exports have become sluggish. Among the topve, only liquid crystal devices (No.5) increased, albeit

marginally. In particular, exports o petroleum products,which were worth US$10 billion in 2008 and account ora th o Koreas ASEAN exports, ell as much as 49.7%in September 2009, almost double Koreas drop in ex-ports to ASEAN. In contrast, the accumulated exports oChinas petroleum products to ASEAN increased 48.1%.Exports in ships and structures, Koreas No.3 exportitem, also decreased more so or Korea than or Japanand China. Koreas ship exports to ASEAN ell 23.1%,whereas those o Japan and China increased 24.6%and 89.6%, respectively. Japan and China signicantly

increased their ship exports to all major ASEAN coun-tries excluded Vietnam.

China is dominating the global market in terms o theelectronics industry (not a traditional industry or thecountry) by substantially increasing exports o elec-tronic goods. Among Chinas top ve export items, allbut wireless phones and integrated electronic circuitshave experienced growth. In addition, exports o com-puters and computer components to ASEAN rom Chi-na have increased signicantly, overwhelming Koreabecause it is competitively weak in these areas.2

III. ImplicationsThe reason why exports to ASEAN rom Korea ell so

much more than Koreas total exports was due to slowtrade in Koreas main export products. Exports o petro-leum products were especially sluggish or the coun-try, in contrast to increased exports or China. Similarly,both China and Japan also increased ship exports. Ko-rea is relatively highly dependant on its top ve exportitems, which include petroleum products and ships,compared to China and Japan, while market conditionsor a ew items are increasingly determining the nature

2 Computers and computer components are designated by the

HS8471 code. Koreas exports o 8471 represented only 6% o Chinasexports o 8471 in 2008 and 3% in 2009.

Koreas Top Five Export Items for China and Japan

Petroleum

Products(HS 2710)

Integrated

Electronic Circuits (HS 8542)

Ships and

Structures(HS 8901)

Wireless Phones

(HS 8517)

Liquid Crystal

Devices (HS 9013)

Korea4,373 3,784 2,535 718 723

(-49.7) (-16.9) (-23.1) (-34.7) (8.0)

China3,031 3,727 3,641 3,686 1,358

(48.1) (-19.8) (24.6) (-28.5) (-26.1)

Japan2,802 4,260 2,147 482 388

(-28.6) (-33.2) (89.6) (-10.0) (8.3)

Note: For the year up to September.Source: Korea International Trade Association and Japan External Trade Organization.

(Unit: US$ million, %)


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o Koreas export perormance in ASEAN. In order orKorea to prevent a sudden drop in its exports to ASEAN,eorts to improve the competitiveness o its main ex-port items are essential.

Also, Korea should make ull-fedged eorts in devel-

oping new export items while at the same time nd

ways to reduce its high dependency on a ew items.

As Chinas entry into markets quickens, competition in

Koreas key ASEAN markets such as petroleum products

and ships will become that much more aggressive. As or

high-tech electronics, steel products and automobiles,

areas in which Korea boasts higher competitiveness

than China, Korea should come up with 1) measures in

technological development and 2) marketing strategies

to maintain/strengthen local competitiveness.

In addition, as seen in the case where Koreas oreigninvestment in Vietnam led to an increase in the exporto parts and intermediary goods rom Korean compa-nies, a signicant increase in exports can be triggeredby oreign direct investment (FDI). Thereore, Korea canlook to FDI as an alternative way to enhance exportcompetitiveness. It should also explore ways to increaseinvestments in components o intermediary goods (i.e.,electronics and automobiles that enable access to localmarkets) or countries which have large market poten-tial, such as Indonesia and Thailand.SERI

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