One of the most striking features of the South Korean economy is the hugely important role played by its large conglomerates, or ‘chaebol’ in Korean. The chaebol are led in size by Samsung – which has annual revenues larger than the GDP of Malaysia. Last year Samsung’s flagship electronics division had a turnover greater than Google, Microsoft and Apple combined. Add to this others such as Hyundai, LG and SK – each with revenue in excess of $100bn – and their importance to the Korean and global economy is clear.
Throughout the chaebols’ history, there has been one constant; their ability to adapt and evolve to survive in an ever changing economy. Samsung began life in groceries with $50 of capital, while LG and Hyundai started in textiles and rice respectively. Today, this evolution is continuing, with the chaebol again looking for new growth engines and business opportunities. One particularly interesting trend is their move into new markets, especially the Middle East and Africa.
There are many examples of this shift. Firstly, Ji-sung Choi, the Vice-Chairman and CEO of Samsung Electronics (now the world's largest technology company by sales) is scheduled to visit Nigeria and South Africa this month. Choi has identified Africa as Samsung’s key growth market.
In Kenya, POSCO and Daewoo International will start a $1.3 billion coal-fired thermal power plant business. They will sign a formal contract with Kenya’s state-run electricity company KenGen this month to build the 600MW thermal coal-fired power plant in Mombasa.
The chaebol are also winning big contracts in the Middle East. A Korean led consortium will build four nuclear reactors in the UAE at a cost of $20bn, while Samsung C&T was the primary contractor responsible for building the Burj Khalifa, the world’s tallest building in Dubai. More recently, Doosan Heavy Industries and Construction signed a $124 million deal to build a seawater desalination facility in Saudi Arabia.
Also in Saudi Arabia, SK Engineering and Construction has won three engineering, procurement and construction deals, which involve the work for the inlet and gas facilities, sulfur recovery units, and natural gas liquids fractionation plants. Samsung Engineering, too, has won an EPC contract which involves building four 150MW cogeneration units in the country.
The South Korean government is also working hard to strengthen economic cooperation with new partner countries. Korea’s Foreign Minister visited Algeria in early February to discuss cooperation in nuclear energy. The two countries agreed to proactively push for a nuclear power pact that has been under discussion. They also agreed to pursue the establishment of an African centre for the development of cutting-edge technologies.
These moves into new market are creating new opportunities for British companies, both directly and indirectly. Directly, there are a large number infrastructure project supply chain opportunities in third markets. In the UKTI team in Seoul, we are already working to identify possible opportunities, and are keen to hear from UK companies interested to find out more.
Furthermore, the continued expansion of Korean chaebol overseas is bringing in additional revenues and helping to cement Korea’s position as the world’s twelfth largest economy. As a result, Koreans have more disposable income, indirectly creating more opportunities for UK companies to export here. In 2010, UKTI helped over 400 UK companies to do business in Korea, double the number from 2008.
With this trend set to increase with the introduction of the EU-Korea free trade agreement, there has never been a better time for UK companies to think about developing or deepening links with Korea and Korean companies. Whether developing partnerships in third markets, or exporting to Korea, the UKTI team stands ready to help UK companies take advantage of these opportunities.
If you want to find out more, get in touch with us today
Soomee Moon, soomee.moon@fco.gov.uk
Tom Matlock, tom.matlock@fco.gov.uk
UKTI South Korea