The Bank of Korea (the central bank of the South Korean) announced a decrease in their policy rate by 0.5 percent to 2 percent on February 12, 2009, to cope with the first recession in more than a decade due to the global economic crisis. South Korea's export sector also contracted 32 percent in January, representing the worst performance since 1998 because of a sharp drop in overseas demand, particularly in South Korea's key trade partners of China, Japan, USA and European Union. In December, their Industrial Production Index (IDI) dropped 20 percent YoY, indicating that their production sector had been seriously affected by eroding purchasing power. This slowing economy has also taken a toll on domestic consumption as their Retail Sales Index in December 2008 shrank by nearly 5 percent YoY. In addition, their workforce was damaged by unemployment growing to 3.3 percent in December 2008, against the rate of 3.1 percent in November.
KASIKORN RESEARCH CENTER (KResearch) expects that South Korea will experience an economic recession and decelerating exports 2009 in line with the prolonged and unstable global economic downturn. Thai exports to South Korea and South Korea's investments in Thailand have shown continuous deceleration since 2006.
In their international trade, automotive products, computers and household appliances all signaled deceleration in January, with an overall contraction of 50 percent YoY. As a result, South Korea's import demand for relevant products used in those industries will likely drop. Therefore, Thai exports of raw materials and intermediate goods used in those supply chains will be affected. Those items include automotive equipment and electronics, which are major export categories for Thailand. It is expected that Thai exports to South Korea in 2009 will decelerate from 4Q08. The global economic crisis has caused deceleration in South Korean exports, such as automobiles and parts, electronics and household electric appliances. This adverse condition will likely remain throughout 1H09.
Foreign investment in 2008 included 49 South Korean projects worth THB 4.3 billion applying for BOI investment privileges, dropping 5.7 percent YoY in volume and 62 percent YoY in value. South Korean projects that have declined in investment value include mineral ores and ceramics, iron/steel, machinery, service industries, plus electrical and electronic appliances due to global economic sluggishness and political uncertainty in Thailand. South Korean investments in Thailand are expected to decelerate, especially in the electronic and electrical appliance industries in 1H09 due to the current economic situation in South Korea. However, it is projected that South Korean investments in Thailand may improve due to an expected recovery in the global economy around the end of 2009. In addition, the fact that Thai domestic political situation seems to have become more stable this year and the Thai government has formulated economic stimuli to attract foreign investments into Thailand might help attract more South Korean investors to Thailand.
New opportunities for Thai exports and investment will come to pass with the ASEAN-South Korea FTA (AKFTA) on trade and services, which scheduled to be signed in April 2009 and is expected to become effective in 2H09. This will help enhance the competitiveness of Thai exports to par with other ASEAN members that have already received these benefits on tariff reductions. This is an important trade opportunity for Thai exporters to capitalize on more flexible trade privileges with respect to rules of origin, as well as tax privileges per the ASEAN-South Korea FTA (AKFTA.)
A brighter future will likely lie ahead for many Thai export categories to South Korea that include molasses, sewing thread, chilled/frozen shrimp, cassava flour, squid, gems etc. Furthermore, Thai entrepreneurs may attract more South Korean production base investments to our country because Thailand has high potential for it. The expansion of Thai service business with a trade liberalization agreement on the service sector with South Korea will also offer a chance for ASEAN investors – including Thais – to invest more in some businesses there, such as hotels, restaurants, entertainment and cleaning services.
KResearch views that the Thai government and relevant agencies should urgently promote foreign investment to support Thai mega-projects that would upgrade and improve our domestic transportation infrastructure. This will help enhance our competitiveness within the ASEAN region. Also, Thai producers and entrepreneurs should study the details of the AKFTA pact to maximize their benefit from this trade agreement and prepare for tougher competition within ASEAN.
February 25-28, 2009, the Korea Trade-Investment Promotion Agency in Bangkok (KOTRA), in association with the Thailand Convention and Exhibition Bureau (TCEB) will open an international fair to present Korean products in Thailand. There will be more than 60 South Korean SME businesses from six sectors participating in this fair, including the automotive, industrial machinery, electronics, energy and environment, plus the health, beauty and entertainment industries. KResearch views that this fair will help expand business opportunities for Thai businesses. Thai entrepreneurs might arrange trade negotiations to facilitate exporting our products to South Korea, and this might be a means to attract South Korean investors toward investment in our businesses, as well.
Enter the code from the poll
Annotation
This research paper is published for general public. It is made up of various sources. Trustworthy, but the company can not authenticate. reliability The information may be changed at any time without prior notice. Data users need to be careful about the use of information. The Company will not be liable to any user or person for any damages arising from such use. The information in this report does not constitute an offer. Or advice on business decisions Anyhow.