Australia and South Korea have a close relationship, which has created a number of exciting opportunities for Australian SMEs looking to expand in the South Korean market.
Understanding what these opportunities are, and how to navigate any challenges that may stand in the way of success, will ensure Australian exporters can make the most of the South Korean market.
South Korea is Australia’s third largest export market, with Australian exports to South Korea worth US$20 billion in 2014. With its growing, high-income economy there is a strong demand for Australia’s high quality goods and services in a range of industries.
Three key industries where demand for Australian supply is high is mining (such as coal, iron ore and crude petroleum), agriculture (such as beef, dairy and wheat), and services (such as education and tourism).
Research recently conducted by the Export Council of Australia, the Australian International Business Survey 2015, found that 72 per cent of Australian businesses that operate in South Korea expect business to get better over the year ahead, pointing to a positive outlook for Australian exporters in the Asian nation.
The prospects for Australian businesses in South Korea were further strengthened last year when the Korea-Australia Free Trade Agreement (KAFTA) came into force.
Since KAFTA was established, 84 per cent of Australian exports to South Korea have been made duty free, which will rise to 99.8 per cent once the agreement has been implemented in full. The agreement will particularly benefit a range of food and wine exports, manufactured goods and service providers.
In the first year of KAFTA alone, it is anticipated that trade liberalisation under the agreement will contribute $226 million to Australia’s GDP.
There are some great opportunities for Australian SMEs in South Korea at the moment, however it is important that any SME exporters considering entering this market ensure they are aware of the potential challenges they may come up against.
For example, the local language and business culture can be a concern for Australian companies looking to do business in South Korea. Doing thorough research around the local business culture and employing an interpreter can be invaluable in the early phases of doing business in South Korea.
Another challenge may be access to finance, a common issue faced by many SME exporters. For SMEs exporting to South Korea, help is available from a number of sources.
Talking to your bank is a good place to start, as they can advise you on your best course of action. Efic is also available to provide export finance for eligible SME exporters.
It’s important to be aware of any potential barriers to exporting to South Korea for your business, so you can be prepared to navigate these challenges and capitalise in the opportunities available for Australian exporters.
Andrew Watson is Executive Director, Australian Export Finance and Insurance Corporation (Efic)