Kpmg Presentation Sm Efinal

MIDDLE MARKET ADVISORY / KOREA DESK

The Korean market for Australian SME's: Opportunities, realities and access

Edward Kim, Partner KPMG KoreaJuly 26, 2007

2© 2007 Samjong KPMG Advisory Inc, a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

Agenda

The Australia – Korea Connection

Opportunities

Overcoming Challenges

Market Access


The Australia / Korea Connection


Korea: A world leading economy

(Source: Korea National Statistical Office)

12th largest economy in the world

PopulationPopulation

Y2006 Y2006

48.548.5 million peoplemill ion people

2525theth in the Worldin the World


Y2006


2525thth in the Worldin the World


Y2006 Y2006


2525theth in the Worldin the World


Y2006



Foreign Exchange HoldingsForeign Exchange Holdings

Y2004Y2004

US $ US $ 199.1199.1 bil l ionbil l ion44thth in the Worldin the World

(Japan: US $ 835.2 billion)(Japan: US $ 835.2 billion)

Y2005Y2005


(Japan: US $ 835.5 billion)(Japan: US $ 835.5 billion)

Foreign Exchange HoldingsForeign Exchange Holdings

Y2006E

US $ US $ 225.3 bil l ionbil l ion44thth in the Worldin the World

Y2005


US $ US $ 680.1680.1 bil l ionbil l ion

1212thth in the Worldin the World(4(4thth in Asia )in Asia )

Y2004Y2004



Y2005Y2005



Y2004Y2004



Y2005Y2005

GDPGDP



Y2004Y2004



Y2005Y2005

US $ US $ 885.0bil l ionbil l ion


Y2006E



Y2005

GDPGDP



ExportExport

Y2004Y2004

Y2005Y2005


US $ US $ 322.1 bil l ionbil l ion


ExportExport

Y2006E

Y2005




ExportExport

Y2004Y2004

Y2005Y2005




ExportExport

Y2006E

Y2005


Y2004Y2004



ImportImport

(3(3rdrd in Asia )in Asia )

Y2005Y2005


Y2006E



ImportImport


Y2005


Y2004Y2004



ImportImport


Y2005Y2005


Y2006E



ImportImport


Y2005





Y2004Y2004

Electronic Goods ProductionElectronic Goods Production

US $ US $ 113 bil l ionbil l ion



Y2006E

IT Goods ProductionIT Goods Production

Y2004Y2004

3.473.47 million Autosmill ion Autos


Automobile ProductionAutomobile Production

Y2005Y2005



Y2006E

3.8 million Autosmill ion Autos


Automobile ProductionAutomobile Production

Y2005



8,3198,319 thousand CG/Tthousand CG/TTop in the WorldTop in the World

Y2004Y2004

Ship BuildingShip Building

10,23710,237 thousand CG/Tthousand CG/T

Y2005Y2005

Top in the WorldTop in the World

17,727thousand CG/TTop in the WorldTop in the World

Y2006E



Y2005


8,3198,319 thousand CG/Tthousand CG/TTop in the WorldTop in the World

Y2004Y2004



Y2005Y2005


17,727thousand CG/TTop in the WorldTop in the World

Y2006E



Y2005


Y2004Y2004

47.547.5 million tonmill ion ton55thth in the Worldin the World

Crude Steel ProductionCrude Steel Production

Y2005Y2005


(China: 349.4 million ton)(China: 349.4 million ton)

Y2006E

48.4 million tonmill ion ton55thth in the Worldin the World


Y2005



Y2004Y2004



Y2005Y2005



Y2006E

48.4 million tonmill ion ton55thth in the Worldin the World


Y2005



Internet Broadband SubscribersInternet Broadband Subscribers

Y2005Y2005

66/10066/100 peoplepeople

3nd in the World3nd in the World(Iceland: 77/100 people)(Iceland: 77/100 people)


Y2005Y2006E


3rd in the World(Iceland: 87/100 people)


Y2005Y2005


3nd in the World3nd in the World(Iceland: 77/100 people)(Iceland: 77/100 people)


Y2005Y2006E


3rd in the World(Iceland: 87/100 people)


Strong connections with Australia

The trading relationship is in excellent shape, with Australian exports to Korea and imports from Korea both at record levels.

Trade surplus stands at $5.4 billion ($6.6 billion taking into account services)Coal, crude oil, iron ore and aluminium are four of Australia’s top five. Beef is the fifth. Services: Tourism and education major industries - a quarter of a million Koreans visited Australia for holidays, education or business last year.

At the end of 2005, Korea had invested over $900 million in Australia, with around two-thirds of this Foreign Direct Investment

includes Posco, SK and Kores’ investment in coal minesthe Korea zinc refinery in Townsville Daesung Group’s macadamia plantations in Queensland.

(Source: Australian Department of Foreign Affairs and Trade / Invest Australia)


Strong connections with Australia, cont.

Australia has invested some $4.4 billion in Koreamost notably through the Macquarie Group’s involvement in infrastructure and other funds here.

AUSTRADE continuing to assist first-time exporters considering the Korean market.

(Source: Australian Department of Foreign Affairs and Trade / Invest Australia)


Opportunities


Why Korea?

Large, increasingly wealthy population (densely populated)

Cleaner market than many other markets in Asia (Source: Transparency International Corruption Perception Index - 2006)

Selected rankings: New Zealand 1; Australia 9; Japan 17; Korea 42; China 70; Vietnam 111; Philippines 121; Indonesia 130

Well developed legal system

Better contract enforceability rating (cost of enforcing a contract) than Japan, Singapore, other Asian countries and the OECD average (Source: World Bank; Export Finance and Insurance Corporation report)

Strong liking of Australia and Australian products / services

Possible FTA, which will improve competitiveness and access for Australian products

Safety: Very safe country; low personal risks; North Korea risk has little business impact


Australia has a strong brand image in Korea

Clean, green, natural, organic, healthy

Fresh, new, colourful, exciting, innovative, creative

Sporting giant, the great outdoors

Strong R & D, excellent core technology base

Desirable lifestyle and world-class education

(Source: AUSTRADE)


Many Australian companies are performing very well

Macquarie Bank has performed exceptionally well in Korea, diversifying its investments from roads to a broad range of industries

Leighton has recently entered the Korean market, and is already making strong inroads into large infrastructure projects and is actively seeking to develop partnerships

Wilson Parking has quickly made inroads into the market, and is looking to expand its range of services

Many SMEs have identified profitable niche markets in Korea

And…

The New Zealand Center for Culture and Education recently won the Australia New Zealand Chamber of Commerce in Korea’s (ANZCCK) “Best SME” award


Many opportunities exist for Australian SMEs

While commodities still represent the majority of Australian exports with Korea, many other opportunities exist for Australian goods and services:

Agriculture: Beef, dairy (inc. processed cheese and milk), certain fruit and veg items, seafood, other processed foods

Clean and green image driving growth for Australian products

Wine

Australian brands well recognized, and growing wine culture

Health products (organics, vitamins, supplements, outdoor lifestyle, fashion, art and culture)

In line with “well-being trend”(Source: AUSTRADE; KPMG Analysis)



Internet services, software / games, telecommunication equipment

Early adopters of new technology

Building and construction materials

Strong construction outlook post 2007

Increasing wealth driving demand for imported construction materials / furniture

Auto parts

Korean buyers now have a much better understanding of Australian capabilities

(Source: AUSTRADE; KPMG Analysis)



Cosmetics

Strong demand for natural cosmetics

Travel / tourism

Education

Growing number of Korean parents want their children educated overseas

Early childhood and on-line education services also hot in the Korean market

Horse racing (Source: AUSTRADE; KPMG Analysis)


… and there are a number of emerging industries in Korea

Tourism / leisure

Lifestyles changing following the start of the 5 day work week, and emergence of the “well-being” trend

Korea still lacking advanced tourism / leisure infrastructure

Strong growth in hotels and support services

Healthcare / aged care

Korea’s population is aging, driving strong demand for healthcare and aged care goods and services


The FTA effect

Korea and Australia currently studying a possible free trade agreement, expected to be completed by year end

Both governments may be in a position to decide whether to proceed with negotiations by mid-2008

Easier access for Australian companies to the Korean market

Lowering or eliminating tariffs, making Australian goods more competitive without impacting your profits

Updated and enforced IP laws to protect SMEs in the technology sector

Customs facilitation, harmonizing customs procedures, standards, and licensing and inspection requirements. This reduces fees, delays, and unnecessary paperwork.

(Source: Australian Department of Foreign Affairs and Trade)


Selected SME success stories in Korea

JurliqueEntered the market in 2002 via Korean distributor, Inchant Korea.Now it has six street shops as well as five department store concession shops.

(Source: AUSTRADE)


Selected SME success stories in Korea

Helen KaminskiInternationally recognised designer of high quality accessoriesDesigns inspired by the beauty of Australia's natural environment Korean distributor, DNH Korea, has successfully marketed brand since May 2003; now in top level department stores in Seoul. Participated in the Australia Day 2005 fashion show in Seoul.

(Source: AUSTRADE)


Overcoming Challenges


It is not all smooth sailing…

A large Australian bank exited the Korean market

One of Australia’s largest manufacturing investors in Korea currently in exit talks

Difficult for SMEs to find market information, identify opportunities, and develop a Korea business strategy


SMEs can overcome the challenges

Finding information and identifying good opportunities

Talk to Austrade, Invest Korea / KOTRA, state trade & investment agencies, professional advisory firms with a Korean presence

Perform in depth market study

Size the market, develop growth projections, identify customers and competitors, understand the regulatory environment, select best market entry route

Initiating contacts - Introductions are vital!

Again - Talk to Austrade, Invest Korea / KOTRA, state trade & investment agencies, professional advisory firms with a Korean presence

Participate in Korean trade delegations

Learn from the success of others by networking with companies conducting business in Korea


SMEs can overcome the challenges, cont

Access to finance & insuranceEFIC Helps Australian businesses exporting and investing overseas by providing finance and insurance solutions beyond what is available in the commercial market.


Get to know the culture and the people

While there are cultural differences, Australians and Koreans share similarities:

Some similarities

Straight forward – to the point

Strong sense of “mateship” among close friends / business partners

Enjoy the outdoors, BBQs and drinking

Some differences

Language (the obvious one)

Koreans very formal in communication / dress

Decision making very centralized in Korea; complicated business hierarchy


Get to know the culture and the people, cont.

Know your counterparts

Essential to perform background checks on key people and corporate intelligence on companies


Market Access


Now is the time...

Develop trading relationships in Korea for viable products / services

Form “win-win” partnerships and joint ventures in Korea or Australia

Seek strategic investment from Korean companies


Business facilitation

Identifying business opportunities

Austrade / DFAT

KOTRA / Invest Korea

KPMG Strategic and Commercial Intelligence / Korea desk

Queensland Government Trade and Investment Office

Government of Western Australia Trade and Investment Office

Tasmanian Tourism Office

Australia New Zealand Chamber of Commerce in Korea

Trade finance

ANZ Bank (Offices in Seoul)

EFIC (Trade finance support)


Summary


Summary

There are challenges inherent in trade international trade, but the benefits and opportunities for growth in Korea are enormous

FTAs are proven to reduce the risks and lower the costs of exporting – start your homework now and get ahead of your competitors

There is a lot of support available for first time exporters to the Korean market.


KPMG’s support network


Dedicated Korean desk and middle market advisory group

Korea desk in Australia

Phil Hennessey, KPMG Queensland Chairman & Head of Korea Desk; Tel: +61 7 3233 9332; email: [email protected]

Brisbane: Daniel Kim, Market Development Manager; Tel: + 61 7 3233 9321; email: [email protected]

Sydney: James Kong; Senior Manager; Tel: +61 2 9335 7119; email: [email protected]

Melbourne: Bo-Mi Kim, Senior Consultant; Tel: +61 3 9838 4137; email: [email protected]

Middle Market Advisory

John O’Donnell, Partner and Head of Middle Market Advisory; Tel: 61 2 9335 8009; [email protected]


Presenter’s contact details

Edward Kim

KPMG Korea

+ 82 2 2112 0770

[email protected]

www.kpmg.com

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Date post:	08-May-2015
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