South Korea Country Report

THE APPAREL & TEXTILE INDUSTRY OF

SOUTH KOREA TIAN SHI

FASM 420

PROFESSOR LEVY 1

CONTENT

2

03

CURRENT NEWS

04

HISTORY / TRAITS

06

SOCIO ECONOMIC STABILITY

09

ECONOMIC FACTORS

10

TECHNOLOGICAL FACTORS

10

SOCIAL FACTORS

11

POLITICAL FACTORS

11

ENVIRONMENTAL FACTORS

12

BUSINESS ETIQUETTE

14

STATE OF THE GARMENT INDUSTRY

18

SUPPLIERS

20

TRANSPORTATION

22

RISK & BENIFIT

23

TRADE AGREEMENTS

South Korea In the News

Samsung Electronics vice-chairman Lee Jae-yong has been formally arrested in South Korea’s ‘Choi-gate’ case.

The National Assembly passed an impeachment motion against President PARK over her alleged involvement in a corruption and influence-peddling scandal, immediately suspending her presidential authorities.

South Korea will host the 2018 Winter Olympic Games.

37 00 N, 127 30 E 3

COUNTRY TRAITS CAPITAL CITY

LOCATION Eastern Asia, southern half of the Korean Peninsula bordering the Sea of Japan and the Yellow Sea

POPULATION - 2016

50.9

MILLION

SEOUL GDP GROWTH - 2016

2.7%

GDP GROWTH FORECAST

3.1 % 2017-2020 (IMF)

HISTORY Korea was occupied by Japan beginning in 1905 following the Russo-Japanese War. Korea regained its independence following Japan's surrender to the US in 1945. After World War II, a democratic-based government was set up in the southern of Republic of Korea and half of the Korean Peninsula while a communist-style government was installed in the north of Democratic People's Republic of Korea.

South Korea held its first free presidential election under a revised democratic constitution in 1987. In 1993, KIM Youngsam (1993-98) became the first civilian president of South Korea's new democratic era. Discord with North Korea has permeated inter-Korean relations for much of the past decade, highlighted by the North's attacks on a South Korean ship and island in 2010, the exchange of artillery fire across the DMZ, and multiple nuclear and missile tests in 2016.

4

HOLIDAYS New Year’s Day (January 1st) / Lunar New Year (1st of the First Month by the Lunar Calendar) / Korean Independence Day (March 1st) Arbor Day / April 5th / Children’s Day (May 5th)/ Budhha’s Birthday (8th Day of the Fourth Month by the Lunar Calendar) / Memorial Day (June 6th) / Constitution Day (July 17th) / Liberation Day (August 15th ) / Harvest Moon Festival (14th through the 16th of the Eighth Lunar Month) / National Foundation Day (October 3rd)/ Christmas Day (December 25th)

LANGUAGES

CURRENT ACCOUNT BALANCE

Korean

$101.6 billion (2016 est.)

ETHNIC GROUPS

EXCHANGE RATES

Homogeneous

1 USD=1,143 KRW

RELIGIONS

GOVERNMENT TYPE

Christian 31.6%, Buddhist 24.2%, other or unknown 0.9%, none 43.3%

Presidential Republic

MEDIAN AGE total: 41.2 years male: 39.7 years female: 42.8 years

GDP

EXPORTS $509 billion (2016 est.)

EXPORTS - COMMODITIES semiconductors, petrochemicals,auto parts, ships, wireless communication equipment, flat displays, steel, electronics, plastics, computers

$1.929 trillion (2016 est.)

EXPORTS - PARTNERS

Unemployment rate:

China 26%, US 13.3%, Hong Kong 5.8%, Vietnam 5.3%, Japan 4.9% (2015)

4% (2016 est.)

LABOR FORCE 27.25 million (2016 est.)

BUDGET Revenues: $304.3 billion Expenditures: $321.4 billion

IMPORTS $405.1 billion (2016 est.)

IMPORTS - COMMODITIES crude oil/petroleum products, semiconductors, natural gas, coal, steel, computers, wireless communication equipment, automobiles, fine chemical, textiles

5

SOCIO ECONOMIC STABILITY

6

South Korea is one of Asia's powerhouses, and its strong exports sector and willingness to adapt its economy make it highly attractive to investors. It became the first nation to transition from being a recipient of the Organisation for Economic Co-operation and Development aid to becoming a donor itself. With a GDP of US$1.929 trillion in 2016, South Korea is the fourth-largest economy in Asia and the twelfth in the world, as well as being one of Asia's largest outbound investors.

Today, however, South Korea’s economy is at a crossroads. Despite there being an economic downturn last year, Korea’s apparel industry has shown steady growth during the last few years with the rapid embrace of both foreign and local fashions, evolving retail channels, and an increasingly wider variety of apparel in the marketplace. South Korea is also experiencing problems common to post-industrial societies, such as a gap between the rich and the poor, social polarization, social welfare issues, and environmental degradation. Low fertility is another serious challenge to the Korean economy, as is an aging society that will contribute to a slow down in economic growth.

7

8

ECONOMIC FACTORS South Korea over the past four decades has demonstrated incredible economic growth and global integration to become a high-tech industrialized economy. A system of close government and business ties, including directed credit and import restrictions, initially made this success possible. The government promoted the import of raw materials and technology at the expense of apparel and textile goods and encouraged savings and investment over consumption.

Exports from South Korea amounted to US$ 509 billion during 2016 up 36.3% since 2009 when the Great Recession kicked in but year over year down -6% from 2015. South Korea’s top 10 exports accounted for 84.5% of the overall value of its global shipments.

GDP in South Korea is expected to be 1472.00 USD Billion by the end of this quarter, according to Trading Economics global macro models and analysts expectations. In the long-term, the South Korea GDP is projected to trend around 1602.00 USD Billion in 2020.

SOUTH KOREA GDP (US billion)

SOUTH KOREA GDP GROWTH RATE

9

TECHNOLOGICAL FACTORS Due to shifting market conditions Korea refocused its textile industry towards the production of more technical products instead of basic textile and apparel items. It therefore is currently an attractive export market for technical textiles from the United States. Also, Korea possesses a strong knowledge base in textile and apparel manufacturing technology and it has become very competitive indeveloping new technologies for the technical textile market.

There are over one-third of all bilateral trade with the U.S. can be categorized as “advanced technology products”. Over the past decade, U.S. exports have supported product development and other forms of research & development in Korea, setting the stage for longterm relationships with Korean partners in advanced technical textile sectors.

SOCIAL FACTORS South Korea's dense urban centers, developed parks and recreation facilities, high tech infrastructure and ultra modern public transportation systems are just some of the things that have made Korea a recognized hotspot for international business and travel.

To this day, South Korea remains one of the world’s most ethnically homogenous countries. It is believed that the people of South Korea are direct descendants of several migratory Mongol tribes who ventured into the Korean Peninsula about a half million years ago. Today South Korea is home to approximately 49 million people making it one of the most densely populated countries in the world. South Korea currently maintains diplomatic relationships with over 170 different nations.

10

LEAD TIME Export: 8 Days Import: 7 Days

POLITICAL FACTORS South Korea is a republic nation with shared power between the president, legislature and the courts. The South Korean political landscape is in flux following the impeachment of President Park Geun-hye. Though Park remains in office, she was required to transfer her presidential powers to Prime Minister Hwang Kyo-ahn pending final resolution by the Constitutional Court.

Park’s corruption scandal led to a fracturing of the ruling conservative party and increased the likelihood that a progressive candidate might win the presidential election. Progressive candidates advocate greater focus on resolving domestic economic disparity and reforming the economy away from reliance on the large family-owned conglomerates. Progressives would also push for reduced reliance on the alliance with the U.S., reopening economic ventures with North Korea, and

ENVIRONMENTAL FACTORS South Korea occupies 98,477 sq kilometers of the southern portion of the Korean peninsula.The climate in South Korea is temperate with 4 distinct seasons and is characterized by a cold, relatively dry winter and a hot, humid summer. The country is largely mountainous, with small valleys and narrow coastal plains. In this case,The country does not have many natural resources and raw materials of textiles. In order to benefit the environment, the government has set up polices, directives, asa well as promoted environmental education in schools and business communities.

11

BUSINESS CULTURE CONFUCIAN VALUES South Korean society operates according to Confucian values. These state that people should respect authority, respect the collective, behave virtuously, work hard and learn hard, avoid extremes and live moderately. You will find that, if you can demonstrate these qualities, you will be more successful in your business relationships.

12

KIBUN There is the concept of “face”, which is found in many Asian societies. South Koreans strive for harmony in their business and personal relationships. To prevent loss of face, they will avoid confrontation or will tell others what they want to hear rather than tackling issues head on. For example, rather than say “no”, they might say “I’ll try.” This allows both the person making the request and the person turning it down to save face and maintain harmony in the relationship. South Koreans are very protective of their kibun, or personal dignity. If you threaten it, you risk being excluded from future decision-making, so be very careful in your business negotiations and always be respectful and mindful of kibun.

13

BUSINESS ETIQUETTE Relationship building Everything depends on personal relationships so it is important to spend time establishing a good working relationship and building trust with South Koreans.

Sport, families and hobbies are all good topics of conversation. South Koreans may enquire about your personal life, in an attempt to establish your age and status, and to build a relationship with you.

Communication While many South Koreans are comfortable communicating in English, many talented and capable South Koreans are not. Cultural differences also influence communication. Traditional culture favours harmony rather than confrontation often causing Westerners to understand silence as acceptance. South Korea is a country where things can happen extremely quickly. Same day response is the norm.

Meetings The top-down management style of South Korean companies means it is important to show respect for authority. Ideally, the most senior person in the team should enter the room first and greet the most senior South Korean representative.

Business partner will always be offered "Tea" (which can also be coffee, juice, water or something else); it is awkward to refuse so better to accept even if not consumed. Wait until these rituals have been completed to commence business discussions.

14

Handshakes A slight bow, followed by a handshake, is the preferred way of greeting somebody in South Korea. South Koreans prefer a softer handshake and, during the handshake, you may support your right forearm with your left hand. Some senior South Koreans consider eye contact as rude, but that's not the norm. It is advisable to make direct eye contact when addressing South Korean business professionals in order to show honesty and interest.

Body language Body language is an important way of showing respect towards someone older or a more senior person in South Korea, as is using their honorific title when greeting them.

Sneezing and blowing your nose in public is considered rude. If you have to sneeze, try to make it quiet. If you do sneeze in front of somebody, make sure you apologise.

Use both hands when giving or receiving anything like business cards, as it is regarded as polite.

15

APPAREL & TEXTILE INDUSTRY South Korea was the eleventh largest market for U.S. exporters of textiles and apparel and the thirteenth largest market for technical textiles in 2014. This is an increase of 37 percent for total textiles and apparel and 27 percent for technical textiles over 2009.

This can be explained as Korea was one of the first countries to recover from the global financial crisis. This early recovery allowed the Korean economy to rebound in the third quarter of 2009. One of the factors responsible for this quick turnaround was increased export growth.

As Korea continues to rely on export-generated growth and continued demand for foreign direct investment and technology inputs, it will remain a strong trading partner with the United States. Korea has set a goal to become the world’s 4th largest export country in textiles and increase production by 63 percent by 2022. Revenue is expected to show an annual growth rate of 12.6% resulting in the apparel market volume of US$11,214 million in 2021. The korean government wants to boost the textile sector with the goal of creating new jobs, which will lead to growing consumption and higher economic growth.

16

The number of employed personnel reaches 307,032 in South Korea, accounting for 8.3% of the total employed population in the manufacturing sector. The number of Textile & Clothing companies' totals 45,200, accounting for 12.5% of total manufacturers.

Textile fabrics are expected to remain as the primary driver of Korean textile sector exports. Demand increases from Southeast Asian countries and the positive effects of Korea's bilateral free trade agreements with various nations are contributing to the steady Korean textile fabric export rally.

Activewear and footwear recorded positive growth in 2016. South Korea has become a leading Asian country with regard to fashion influence, with the K-popwave spreading across the continent.

Brands have looked to utilise the enormous influence of stars such as G-Dragon, with sales spiking on single Instagram pictures or mentions on social media. In addition, many companies are collaborating on special collections, even for global brands looking to penetrate the South Korean market.

Korea holds the 10th position in the export of textile and clothing products in the world with a share of 2.17%. Among the top export products from Korea, the items majorly constitute of fabrics especially Knitted Fabrics, dyed Knitted fabrics, Woven Fabrics, Other fabrics impregnated with Poly Urethane, Knitted fabric with dyed synthetic fibre; Staple fibres of Polyester; Worn Clothing products; Dyed Warp Knit Fabric; Polyester Synthetic yarn; Tyre cord fabric of polyester.

17

SUPPLIERS Garments

Absolute International Co., Ltd.

Phone:+1 822-584-0131 Address:3f Seo Ho Bldg 1628 25 Seocho Dong, Seoul, South Korea

TOP 3 CUSTOMERS

Old Navy (Canada) Inc. Gap (Canada) Inc. The Gap Inc.Banana Republic Llc

Undergarments Worldex Inc.

Phone: +82 61-381-3383 Website: http://www.worldexint.com Address: 2fl Dalri Bldg 201 18 Dongku Dongkyodong Mapogu, Seoul, South Korea

TOP 3 CUSTOMER

Speed Global Services E.R.Hawthorne Midwest Transatlantic Lines Inc.

Fabric

Myung Jin J&S Co., Ltd.

Phone: +82 70-7012-5516 Address: A-305, Geumo Complex Store, GYEONGGI-DO, Uijeongbu, South Korea

TOP 3 CUSTOMERS

Circle Textile Inc. Circle Trim Dba Circle Textile.

Sun Textiles Llc

18

19

SHIPPERS

ZIM Integrated Shipping Services Ltd. Origin: Busan (KRPUS) Destination:Savannah (USSAV) Transit Time: 26 days Mediterranean shipping company Origin: Busan (KRPUS) Destination:Savannah (USSAV) Transit Time: 24 days

Container Cost (From Busan,SK port) To: Savannah, GA, United States FCL:$2851-3151 Transit Times:27-35 days To: New York, NY, United States FCL: $2461-3273 Transit Times:30-39 days To: Los Angeles, CA, United States FCL:$1955-2558 Transit Times: 26-34 days

20

TRANSPOTATION SEA Virtually cut off from the Asian mainland, South Korea is a seafaring nation, with one of the world's largest shipbuilding industries and an extensive system of ferry services. South Korea operates one of the largest merchant fleets serving China, Japan and the Middle East.

Most fleet operators are large conglomerates, while most ferry operators are small, private operators.

AIR There are 111 airports in South Korea, most of them being domestic with options to fly within Southeast Asia. The Incheon Airport is one of the largest and busiest airports in the world and the most widely used international airport in Korea. Seoul is also served by Gimpo International Airport while mainly serves domestic flights. Other major airports are in Busan and Jeju.

RAIL The South Korean railways are largely government-owned.

Railways are almost all of standard gauge, the SeoulPusan line through Taejeon and the Seoul-Incheon line are double-tracked, and many lines are electrified. Korea Train Express began service in April 2004, as Korea's first high-speed service.

ROAD Highways in South Korea are classified as freeways, national roads and various classifications below the national level. The freeway network serves most parts of South Korea. Tolls are collected using an electronic toll collection system. Total length of the South Korean road network was 104,983 km and it mostly equal to the whole area of South Korea.

21

Republic of

SOUTH KOREA RISKS ·Turbulent political situation ·High labor wages ·Rapidly aging population ·Limited natural resources and raw materials ·Strong competition from China and India ·Dominance of large conglomerates ·Low export on apparel and textile industry

BENEFITS ·Strong economic fundamentals ·Highly educated workforce ·Promotion of creative textile industries ·Advanced technical textile market and manufacturers ·Sustainibilty in mind to protect environment ·Strong trading partner with the United States.

22

Trade Agreements Free trade agreement between the United States of America and the Republic of Korea (KORUS FTA) This is a trade agreement between the United States and the Republic of Korea, and concluded on April 1, 2007. The Agreement includes a special textile safeguard mechanism which will provide for temporary re-application of tariffs or the suspension of tariff reduction, and includes specific cooperation language for enforcing their respective mea­sures affecting trade in textile and apparel goods, for ensuring the accuracy of claims of origin.

Asia-Pacific Economic Cooperation (APRC) APEC is a forum for 21 Pacific Rim member economies that promotes free trade throughout the Asia-Pacific region. It was established in 1989 in response to the growing interdependence of Asia-Pacific economies and could establish new markets for apparel and textile products between the United States and South Korea.

Association of Southeast Asian Nations (ASEAN) This is a regional organisation comprising ten Southeast Asian states which promotes intergovernmental cooperation and facilitates economic integration amongst its members.

This trade agreement managed the economic and security issues with the apparel and textile business in the United States and South Korea.

23

CONCLUSION

South Korea’s apparel industry has shown steady growth during the last few years of both foreign and local fashions.

It is a great choice for garment manufacturing with its increasingly wider variety of advanced technical textile manufacturers and strong trading partnership with the United States.

24

RESOURCES http://www.euromonitor.com/apparel-and-footwear-in-south-korea/report https://www.britannica.com/place/South-Korea https://www.cia.gov/library/publications/resources/the-world-factbook/geos/ks.html https://ustr.gov/trade-agreements/free-trade-agreements/korus-fta https://globaledge.msu.edu/countries/south-korea/government https://panjiva.com/search/global-supplier-advanced?q=knit&saq=korea http://www.zim.com/services/pages/zimlinenetwork.aspx?trade=1&line=ZCP&Service=ZCS https://www.msc.com/routefinder?fromId=4983&isCountryFrom=true&toId=70&isCountryTo=false https://www.statista.com/outlook/244/125/fashion/south-korea#takeaway http://www.heritage.org/index/country/southkorea http://www.korea.net/AboutKorea/Society/South-Korea-Summary http://www.korea4expats.com/article-business-practices-etiquette.html http://www.southkorea.doingbusinessguide.co.uk/the-guide/south-korean-culture http://videocenter.van.fedex.com/learn/south-korea https://www.freightos.com/portfolio-items/freight-rate-calculator-free-tool/ http://web.ita.doc.gov/tacgi/fta.nsf/FTA/Korea?opendocument&country=Korea http://www.tradingeconomics.com/south-korea/imports-of-clothing-domestic-usehttp://atlas. media.mit.edu/en/profile/country/kor http://www.tradingeconomics.com/south-korea/gdp-growth http://www.gone2korea.com/korean-national-holidays/

25

26