Ministry of Trade, Industry and Energy

Korea and Australia Initialize FTA

Both parties agreed to the official signing of the FTA during the 1st half of this year, and the enforcement of the FTA as soon as possible according to the procedures required in both countries. The English version of the Korea-Australia FTA initialized on February 10 will be disclosed at the FTA website of the Ministry of Trade, Industry and Energy (www.fta.go.kr), and the Korean version (draft) will be disclosed after the disclosure of the English version following the required reviews. date2014-02-14

Automobile Industry Records Record-High Trade Surplus of USD 63.5 Billion for 2013

More notably, domestic sales turned around within five months since last August, prompted by an improvement of consumer sentiment and the effects of new product launches, despite a reduction in the number of operating days, which signals the recovery of the domestic market for the year. * Domestic sales trend (%): (August 2013) 29.4 → (September) -11.0 → (October) -0.1 → (November) -6.0 → (December) -6.7 → (January 2014) 4.0 In addition, the favorable trend is expected to continue as key models* will be launched and demands for RVs will grow. * New vehicles to be launched in the 1st half: Hyundai Sonata (LF), Kia Carnival (YP), Renault- Samsung QM3 Despite the growth of imported car sales in the domestic market, the industry recorded the largest exports in its history as the shares of large-sized vehicles (model-based) and RVs with high added value in exports increased*, the quality competitiveness of domestic cars improved**, the presence of domestic cars improved*** and the supply of parts to overseas plants and global businesses was increased. * Shares of large-sized and RVs in exports (%): (1996) 4.5 → (2000) 20.2 → (2010) 32.9 → (2013) 41.3 ** Korean cars won the high recognition from major evaluation organizations including IIHS and major market survey organizations, including JD Power and Consumer Report, while winning multiple awards including the vehicle of the year awards of many regions (nations). *** Hyundai Motor Company took 43rd place (7th in the automobile sector) and Kia Motors took 83th place (11th in the automobile sector) among the global top 100 brands (Interbrand, September 2013). The automobile industry significantly contributed to Korea’s trade surplus by recording a trade surplus for 30 consecutive years since 1984, and the amount of the surplus has continuously increased. *A trade deficit was recorded from 1977 to 1983, and the trade surplus has been expanded by an average of 34.3% per year since 1984. ○ 1977 - All Industries : -7.6 - Automobile Industry : -1.3 ○ 1984 - All Industries : -13.9 - Automobile Industry : 0.1 ○ 1990 - All Industries : -48.3 - Automobile Industry : 12.6 ○ 1995 - All Industries : -100.6 - Automobile Industry : 69.5 ○ 2000 - All Industries : 117.9 - Automobile Industry : 135.1 ○ 2005 - All Industries : 231.8 - Automobile Industry : 332.3 ○ 2010 - All Industries : 411.7 - Automobile Industry : 458.9 ○ 2013 - date2014-02-13

Korea’s 2014 ICT Product Exports Begin with Stable Figures

date2014-02-11

Local Automakers and Importers Subject to Penalty if Fuel Efficiency Standards Not Met

As of February 6th, the “Energy Use Rationalization Act” is being enforced, following its amendment. In a bid to toughen the government’s energy demand management, the act stipulates that local automakers and importers of foreign vehicles that fail to meet the target fuel efficiency standards for automobiles and violate the Energy Consumption Efficiency Grade Indication System will be subject to the imposition of a penalty surcharge. In addition, to foster the utilization of date2014-02-06

Export and Import Trends in January 2014

○ 2011 - Lunar New Year Holidays : Feb 2 (Wed) to 4 (Fri) - January Export Growth (%) : 44.7 ○ 2012 - Lunar New Year Holidays : Jan 22 (Sun) to 24 (Tue) - January Export Growth (%) : -7.3 ○ 2013 - Lunar New Year Holidays : Feb 9 (Sat) to 11 (Mon) - January Export Growth (%) : 10.9 ○ 2014 - Lunar New Year Holidays : Jan 30 (Thurs) to Feb 1 (Sat) - January Export Growth (%) : -0.2       In terms of detailed export trends, exports to EU countries increased significantly consistent with their economic recovery, while exports to Asian countries and China also increased thanks to the solid sales of IT products. However, exports to Japan continued to decrease commensurate to the weak Yen and exports to Latin American countries. - Export growth by Nation (%): EU 24.7, ASEAN 9.9, China 0.8, USA -2.0, Latin America - 13.6, Japan -19.8 - Growth of exports to Japan (%): 2013 2Q -13.6 → 3Q -10.2 → 4Q -8.9 → January 2014 - 19.8 By item, exports of IT products increased thanks to strong sales of semiconductor products (continuing strong memory chip prices) and wireless communication devices (expanded market dominance), while exports in the automotive industry (decrease in operating days), LCD industry (decrease in panel prices), petroleum products (decrease in unit prices of export products) and shipbuilding industry (delays in delivery) decreased. In terms of detailed import trends, imports of gas increased due to an increase in demand for fuels used for power generation and heating, and imports of steel and petroleum products also increased, while the total amount of imports decreased due to reduced imports of crude oil as a result of a drop in the import volume. - Import growth in 5 major items (5): Steel 20.7, petroleum products 20.7, gas 17.8, coal 7.0, crude oil -4.4 - Import Growth by Use (January 1 to 20, % compared to the same period in the previous year): Raw materials 6.2, Capital goods 2.8, Consumer goods 0.5 - Crude Oil Import Price and Volume date2014-02-04

MOTIE Enhances Economic Cooperation with Central European Countries

The Ministry of Trade, Industry and Energy (Minister: Yoon Sang-jik) selected Hungary and Rumania as its first target countries in the emerging markets in which its market development activities for 2014 will be implemented, and dispatched an economic mission headed by Vice Minister Kim Jae-hong to these countries from January 25 to 29. The economic mission includes government agencies like the Ministry of Trade, Industry and Energy (MOTIE), the Small and Medium Business Administration and the Defense Acquisition Program Administration, and support institutions such as the Korea Chamber of Commerce & Industry, KEPCO, Korea Institute of Industrial Technology, Korea Trade Insurance Corporation and Korea Line Corporation. Hungary is Korea‟s 10th biggest trading partner among the EU countries and is one of the key trade bases from which Korean companies can advance into the Western European and the Balkan markets. Currently, major Korean companies like Samsung Electronics and Hankook Tire are expanding their investments in Hungary, which has included the installation of new factories. In addition, Hungary exited from the Excessive Deficit Procedure (EDP*) in 2013 after 9 years of the EU's budget scrutiny program, and has been focusing on its new “Look East” policy to enhance its economic partnerships with Asian countries. * A country subject to EDP is a member state that has breached or is in risk of breaching the deficit threshold of 3% of GDP, and as such is subject to restrictions on budgeting and EU funds. The economic mission held the first „Korea-Hungary Joint Economic Committee‟ on January 27 and discussed issues related to national cooperation between Korea and Hungary in various fields, including trade investment, creative economy, national defense and SME promotion. * Chief of Delegation:Minister of Trade, Industry and Energy (Korea) , Minister of Economy (Hungary) The parties entered into an MOU in 4 areas, which were establishing a cooperative network for SMEs, specialized nuclear human resource development, cooperation for technical innovation and ECA agreement, and they agreed to cooperate in a comprehensive manner for Korean exports of electronic trading systems and technology in the field of the defense industry. * MOU: KEPCO, KNA - Hungary Budapest University of Technology (nuclear specialist development), Small and Medium Business Administration – Hungary‟s Ministry of Economy (support for SMBs), Korea Institute of Industrial Technology – Hungary‟s National Innovation Agency (technical innovation), Korea Trade Insurance Corporation – Hungary‟s ECA (trade insurance) As well, 2014 marks the 25th anniversary of the establishment of diplomatic relations between Korea and Hungary, and the Chambers of Commerce & Industry of both countries jointly held an economic cooperation forum in which major companies of both countries participated. During his congratulatory address, Vice Minister of Trade, Industry and Energy Kim Jae-hong discussed Korea‟s new creative economy policy and proposed that the two countries pay more attention to promoting world-leading innovative companies through joint research and development and industrial innovation activities using the EU fund. The economic mission is scheduled to visit Rumania and hold a Korea-Rumania industrial cooperation committee to discuss cooperation between the two countries. In this committee, Vice Minister Kim Jae-hong is planning to ask the Rumanian government for cooperation in resolving difficulties* experienced by Korean companies in Rumania. * Difficulties in investment due to the reduction of renewable energy incentives (Samsung C&T Corporation), Rumanian government‟s non-fulfillment of public waters dredging (Daewoo Mangalia shipyard) * (Main agenda of Korea-Rumania date2014-01-29

2013 Foreign Direct Investment (FDI) Trends

The Foreign Direct Investment (FDI) trend in Korea shows a positive growth compared to the trends of the last five years. The FDIs fell slightly in 2013 from a year earlier due to a decrease in investments from Japan following the weaker Yen and other factors. The amount of FDI on a report basis was 14.55 billion USD, down by 10.7% from 16.29 billion USD compared to the same period in the previous year, but up 9.9% compared to the 5-year average, which is 13.24 billion USD. The amount of FDI on an arrival basis was 9.68 billion USD, down by 9.4% from 10.69 billion USD compared to the same period last year, but up 27.9% compared to the 5-year average of 7.57 billion USD. FDI trends by sector on a report basis are as follows: - (By nation) Investments from the USA (3.53 billion USD, down 4.1%) and Japan (2.69 billion USD, down 40.8%) decreased, while investments from European countries (4.8 billion USD, up 76.9%) increased. - (By industry) Investments in the service sector (9.85 billion USD, up 2.6%) increased, while those in manufacturing sector (4.65 billion USD, down 23.8%) decreased. - (By type) Mergers and acquisitions (4.98 billion USD, up 32.8%) increased, while greenfield investments (9.57 billion USD, down 23.7%) decreased. Deputy Director Wi Seung-bok, Foreign Investment Promotion Division(☎ 044-203-4082) date2014-01-29

3rd Regional Comprehensive Economic Partnership (RCEP)

The 3rd RCEP (Regional Comprehensive Economic Partnership) negotiations were held from January 20 (Mon) to 24 (Fri), 2014 in Kuala Lumpur, Malaysia. At the negotiations, the Chief Negotiator for Trade of the Ministry of Trade, Industry & Energy Woo Tae-hee attended as the Head of the Korean delegation, joining representatives from a total of 16 countries including the 10 ASEAN countries* and 6 AFP countries (Korea, China, Japan, Australia, New Zealand, India) that signed FTAs with ASEAN. ※ 10 ASEAN countries: The Philippines, Malaysia, Singapore, Indonesia, Thailand, Brunei, Vietnam, Lao PDR, Myanmar, Cambodia At the third round of negotiations, discussions were held on the methods for liberalizing goods, services and investments, as well as cooperation in the area of standards (competition, intellectual property rights, dispute settlement, economic & technical cooperation, etc.). The details are as follows: - Negotiations were carried out focusing on modalities (negotiation method, negotiation goal, etc.) proposed by various countries in the Trade in Goods Working Group. Also, in the Sub-Working Groups of Rules of Origin (ROO) and Customs Procedures & Trade facilitation, discussions were focused on what to be included in these areas - Working Group meetings were also held for the service and investment sector, respectively, and member countries exchanged opinions regarding liberalization method & elements to be covered in the text In addition to the goods, services and investments sectors, discussions were also held on the standards and fields of cooperation. At these negotiations, the participating countries agreed to establish four Working Groups for competition, intellectual property rights, dispute settlement, and economic & technical cooperation, respectively. In the rules area, Korea’s interested areas, such as Competition & Intellectual Property Rights, were included, thus providing us with the basis to reflect our national interests. Furthermore, it is expected that the negotiations will eventually develop into a comprehensive RCEP, covering a wide range of areas. ※ Our delegates led the discussions in the competition and dispute settlement areas by circulating proposals and making presentations. It was agreed that the next meeting (4th RCEP Negotiations) would be held in China in April. Currently, the RCEP is holding discussions, with the goal of reaching an agreement by 2015, and is scheduled to have four rounds of negotiations this year. 3rd Regional Comprehensive Economic Partnership (RCEP) Negotiations Contact Information East Asia FTA Planning Team, Director Cho Su-jeong (☎ 010-4603-9624) date2014-01-28