Cambios en la naturaleza de las relaciones econmicas entre Asia y Latinoamrica

LAEBA 2012, Washington DC

CHANGING NATURE OF KOREALAC ECONOMIC RELATIONS

Dr. Jae-Sung Kwak (Kyung Hee University)
Graduate School of Pan-Pacific International Studies, Kyung Hee University

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2.
3. 4. 5.

Trade Investment Service Sector Integration Development Cooperation Conclusion: New Horizon for Trans-Pacific Cooperation

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Trade Investment Service Sector Integration Development Cooperation Conclusion: New Horizon for Trans-Pacific Cooperation

Korea-LAC has been growing in favor of the former: The region has become an important export destination for Korea

Korea-LAC Trade is concentrated in a small number of countries

Top LAC export items to Korea

LAC exports to Korea are usually concentrated to a few commodaties

Top Korea import items from LAC

Korea-Chile FTA played an important role in the increase of bilateral trade

Observations: Trade between KorLAC

Bi-regional trade grows fast, in favor of Korea Strong country and product concentration
Inter-industry, rather than intra-industry, trade and investment relations Korean FDI induces

commerce, esp. export to LAC Limited role of

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Trade Investment Service Sector Integration Development Cooperation Conclusion: New Horizon for Trans-Pacific Cooperation

LAC has received almost 8% of Koreas FDI abroad

Patterns of Asian FDIs to LAC

Three main patterns of Asian FDI to LAC

Natural

Resource Seeking Efficiency Seeking for Export Market Seeking for Domestic Consumption

To assess the changing nature of Asian FDI in LAC with a special attention to the value chain creation and insertion

POSCO, BRASIL (KOBRASCO)

II. I.

III.

IV. V. VI. VII. VIII.

Stage I: Kobrasco. Iron ore pellet plant.

POSCO, MEXICO
II. I. III. IV. V. VI. VII. VIII.

Stage IV: CGL Altamira.

Stage V: MPC in Puebla and San Luis Potosi

Stage VII: MESDC. Stage VI - VIII: Posco main branch Mexico, D.F.

Samsung, Mexico

II. I.

III.

IV.

V. VI. VII.

Stage II: In house PCB, local vendors Stage IV: Processing plants, Tijuana & Queretaro. Stage V: Marketing and brand creation Stage VI -VII: Distribution networks and dealers.

LG, Brazil
II. I. III. IV. V. VI. VII.

Stage II: In house PCB Stage III: R&D center in Sao Paulo. Stage IV: Runs 2 factories in Manaus & Taubate. Stage V: Marketing and brand creation Stage VI -VII: Distribution networks and dealers.

Investment in Electronics: Escaping from Enclavic Investment

Empresa Samsung da Amazonia Inversionist a Samsung. Republic of Korea Local Partner Forma de ingreso Desde FDI Motives Market seeking: The company has managed to rank second in the Brazilian LCD TV market and has a strong presence in mobile phones and home appliances throughout the region. Market seeking: The company was looking to expand its market share inside Brazil. However, tariffs were excessively high to do it through imports. Resource seeking: cheaper labor and access to components. Market seeking: Samsung has established an international operation in Mexico with broad networks that allow the company to serve not only LAC, but also the US and European markets Resource seeking: cheaper labor and access to components. Market seeking: LG has established an international operation in Mexico with broad networks that allow the company to serve not only LAC, but also the US and European markets

1995 Brazil 1995

LG LG. Republic Electronics of Korea do Brasil Samsung. Republic of Korea Mexico LG Reynosa LG. Republic of Korea

Samsung Mexicana

Complete ownership

1988

1988

Production Chain of Digital TV, Mexico

Purchase of LCD & components LCD Import from Korea, Japan, Taiwan, China Local part suppliers Assembly SAMEX in Tijuana LG in Reynosa Sales Export to US Mexican domestic distrbutor

Local Purchasing of SAMEX (Samsung Mexico, Tijuana)

US$Millions
661 537 25% 13%

20 103 150

43%

445

15 90 143

12
305

72

ETC Packing Electric Press Injection

23 58 52 55 116

120
90 72 168 197

98

240

2006

2007

2008

2009

Korean Vendors for SAMEX in Tijuana area

Name of Corporation Cobuy KOMEX NOSCOM Taewoo Mexico Daedong Corp. Chemtronics Daewon Daeha Cable Samsung SDI Year of Entry 2007 2006 1999 1999 2000 2007 1991 1997 1995 Handling Area Electronic components TV & MNT cabinet Electronic injection and assembly TV Monitor stand base Plastic molding (TV) PBA for LCD/PDP Van-trailer part TV and industrial wire harness, cable assembly Display device

Dongchul Mexico
Seshin electronics Han-il electronics Mexico

1994
2001 1998

Bracket, heat sink

EPS resin PCB assembly

Samsung Mexico Efficiency Seeking

TV Market Share in Brazil: Market Seeking

LG Taubate, Brazil

Observation: FDI

Mexico is the export platform, so the Maquila model persists even if there is a growing number of market seeking investments. Investment in Central America and the Caribbean is essentially textile backup by geographic proximity and low wage. Motivations for investing in Brazil are largely in two folds, market seeking and natural resource seeking, but recent investments in steel sector is motivated by efficiency seeking when steel makers like POSCO produce slab with Brazilian iron ore and export to Asia for further processing. (Value Chain) Furthermore, further exceptions to the existing FDI pattern of Mexico-efficiency seeking and South America-market seeking are found: market-seeking POSCO MPC in Puebla, Mexico are representatives. (Value Chain) Andean countries including Chile are abundant in natural resources, but lacks market and industrial competitiveness.

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Trade Investment Service Sector Integration Development Cooperation Conclusion: New Horizon for Trans-Pacific Cooperation

Service Sector Integration

IT Based Cooperation
Customs computerization project in DR Single Windows in Ecuador IT Data / Training Centers

Infrastructure Upgrades
BRTs in Ecuador, Mexico Elec. Distribution system n DR Airport Modernization in Colombia Look Asia in Colombia

Knowledge Sharing Program

DR, Peru, Brazil

LEOKON KOREA - BRT Bus Rapid Transit

Bus de Trnsito Rpido es un proyecto que determina a una amplia variedad de soluciones de transporte masivo urbajo basada en buses articulados en vias exclusivas. El objetivo principal es el de brindar un servicio de transporte masivo de alta capacidad con respecto al servicio tradicional de bus urbano. El BRT debe tener las siguientes caractersticas: Carriles exclusivos: un carril de una calle o avenida arteria se reserve para el uso exclusivo de los buses. Calles y vas exclusivas: las calles deben ser rediseados para que todos sus carriles sean del uso exclusivo de los buses. Seal de preferencia para buses: dar un trato preferencial a los buses en las intersecciones como por ejemplo extender la duracin del semforo en verde para los buses, o activacin del semforo en verde cuando se detecta un bus. Buses, un sistema de recaudo automatico y control de flota

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Trade Investment Service Sector Integration Development Cooperation Conclusion: New Horizon for Trans-Pacific Cooperation

Development Cooperation

Korean ODA is growing fast

$1.3bil(2011)

>> $3bil (2015)

LAC takes up 7.5% of Koreas total ODA (0008) Sector Specific

Social

Sector health care, rural development..

etc Economic Sector SMEs, SSC, PPP .. etc

Modalities
Loans

(EDCF) Grants (KOICA)

DGA (Direccion General de Aduanas) Computerization Project (DR-EDCF $23mil)

5. Conclusion: New Horizon for Cooperation

Areas

Promotion of trans-pacific value chain in Asia and LAC LAC value chains oriented to Asia Service Sector Integration - Support to LAC regional cooperation initiatives in infrastructure (transportation, ICT, customs) Promotion of South-South Cooperation and Triangulation

Converging Modalities

Trade Investment Service and Projects Development Cooperation

Thanks for your attention

Dr. Jae S. Kwak Dept. of International Development Cooperation

Graduate School of Pan-Pacific International Studies

Kyung Hee University, Korea kwakwak@khu.ac.kr, kwakjaesung@gmail.com