{"id":2199866,"date":"2023-01-10T10:54:30","date_gmt":"2023-01-10T10:54:30","guid":{"rendered":"https:\/\/www.nknews.org\/koreapro\/?p=2199866"},"modified":"2023-04-05T16:10:24","modified_gmt":"2023-04-05T07:10:24","slug":"the-untapped-potential-for-south-korean-investment-in-central-and-eastern-europe","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/01\/the-untapped-potential-for-south-korean-investment-in-central-and-eastern-europe\/","title":{"rendered":"The untapped potential for South Korean investment in Central and Eastern Europe"},"content":{"rendered":"

As a result of the rivalry between the U.S. and China, Europe has become one of the most important markets for South Korea in terms of <\/span>trade balance<\/span><\/a> and direct investments. This development has been most evident in Central and Eastern Europe (CEE), a region encompassing Bulgaria, the Czech Republic, Estonia, Hungary, Lithuania, Latvia, Poland, Romania, Slovenia and Slovakia.<\/span><\/p>\n

Many of these countries have received numerous South Korean investments in the automotive and spare parts industries. At the same time, they also have the potential to become consumers of South Korean products, which is still negligible in this part of Europe.\u00a0<\/span><\/p>\n

What\u2019s more, ROK investments in CEE have not yet reached their full potential, and there are many reasons to be optimistic about this underdeveloped relationship.<\/span><\/p>\n

BENEFITS OF CEE<\/b><\/p>\n

For South Korea, CEE is vital in terms of logistics due to its proximity to Western Europe. Further, some of its members \u2014 notably Poland and Hungary \u2014 have <\/span>well-developed transportation infrastructure<\/span><\/a>. Secondly, the CEE\u2019s <\/span>relatively low wage rates<\/span><\/a> in the production and service sectors make it an attractive investment area for South Korean companies to establish branches and subsidiaries.<\/span><\/p>\n

So far, ROK investments in CEE are limited to only a few countries. South Korea was one of the most prominent non-EU investors in <\/span>the Czech Republic<\/span><\/a> in 2020 and in <\/span>Poland<\/span><\/a> in 2021 due to those two countries\u2019 dynamic internal markets and proximity to Western European countries. It has also invested in <\/span>Slovakia<\/span><\/a> due to its indigenous automotive industry.<\/span><\/p>\n

The other remaining countries are less viable for South Korean investments as they have less dynamic economies in terms of demand, such as <\/span>Slovenia<\/span><\/a>.<\/span><\/p>\n

RISKS<\/b><\/p>\n

However, investing in CEE is not without risks. Several CEE countries face common dangers such as weakening business confidence <\/span>as a result of Russia\u2019s invasion of Ukraine<\/span> and an exodus of qualified young people. According to <\/span>U.N. projections<\/span><\/a>, nine of the 10 countries undergoing the fastest population decline worldwide are in Eastern Europe, which will have long-term consequences for economic growth.<\/span><\/p>\n

Although life expectancy has risen and GDP has more than doubled since the fall of the Berlin Wall, the ease of emigration <\/span>exerts<\/span><\/a> demographic pressures on economic growth. In 2019, the International Monetary Fund\u2019s (IMF) deputy managing director <\/span>warned<\/span><\/a> that countries in the region are at risk of getting old before they get rich.<\/span><\/p>\n

Growing inflation<\/span><\/a> threatens to compound these weaknesses, which may jeopardize demand for South Korean products in these countries.<\/span><\/p>\n

However, the most significant risk for South Korean investments in CEE is related to the political situation in Central Europe and Ukraine. Four CEE countries \u2014 Hungary, Poland, Romania and Slovakia \u2014 share borders with Ukraine. Thus, South Korean investments in these countries are at higher risk.<\/span><\/p>\n

By contrast, most South Korean firms and investments in Poland are in its <\/span>Lower Silesia region<\/span><\/a> \u2014 far from Poland\u2019s border with Ukraine. Located in southwestern Poland, Lower Silesia is close to Germany and the Czech Republic and is one of the most important industrial centers in the country.\u00a0<\/span><\/p>\n

As a result, the region is attractive to most South Korean businesses, especially due to the region\u2019s <\/span>wealth of minerals<\/span><\/a> such as copper ore and nickel. However, one South Korean business, <\/span>Daewon Europe<\/span><\/a>, is located in Lublin, which is close to Ukraine.<\/span><\/p>\n

\"\"

Money, June 2017 | Image: Pexels<\/a><\/em><\/p><\/div>\n

ROOM FOR GROWTH<\/b><\/p>\n

There are plenty of opportunities for increased cooperation between the ROK and CEE precisely because the two sides have not yet fully developed their economic, cultural or diplomatic ties. Several solutions are available to boost mutual economic cooperation and investments.<\/span><\/p>\n

First, South Korea and CEE countries can agree to establish direct flights between their main cities. Currently, there are direct flight connections between Seoul, Budapest, Prague and Warsaw. However, the ROK can enlarge this network to include other CEE cities, such as <\/span>Wroclaw<\/span><\/a>, a city in Poland\u2019s Lower Silesia region, as that is the focal point of most of the ROK\u2019s direct investments.<\/span><\/p>\n

Another area of potential expansion is people-to-people cultural exchanges. Improved cultural perceptions of each other will lead to stronger cultural diplomacy<\/span> and can produce intangible benefits in the long run.<\/span> An excellent example of this type of exchange is <\/span>Mihail Ashimov<\/span><\/a>, a famous chef of Bulgarian and Polish descent renowned for promoting CEE cuisine and currently residing in South Korea.<\/span><\/p>\n

A third solution is the establishment of additional bilateral agreements between ROK and CEE universities. By creating opportunities for university students and staff to move between each others\u2019 campuses and acknowledge each others\u2019 degrees and diplomas, South Korean students could obtain diplomas that would be recognized across the EU. An <\/span>example<\/span><\/a> of such a relationship is the cooperation between Geochang International School in South Korea and Hungary\u2019s University of Debrecen.<\/span><\/p>\n

GOING FORWARD<\/b><\/p>\n

Despite the geopolitical instability that Russia\u2019s invasion of Ukraine has caused, many South Korean companies will likely continue to push into European Economic Community (EEC) markets. To do so, they will expand their ties with the CEE as a conduit.\u00a0<\/span><\/p>\n

The CEE possesses many strengths, such as its <\/span>relatively higher birth rate<\/span><\/a> compared to its Western European neighbors. This <\/span>100 million-strong population<\/span><\/a> can serve as a dynamic domestic market and a large workforce with a relatively low wage rate.<\/span><\/p>\n

For these reasons, some South Korean companies have already chosen to invest in Central Europe and to directly sell their products in the region to avoid logistical problems. An example is <\/span>Daesang Corp.<\/span><\/a>, a ROK food manufacturer that established a factory in Krakow, Poland.<\/span><\/p>\n

The ROK and CEE also have symbiotic goals. Seoul seeks to expand its reach to other markets around the world. More immediately, it needs to reduce its economic reliance on China. And CEE countries possess the strengths and economic potential to help South Korea achieve those objectives.\u00a0<\/span><\/p>\n

On the other hand, CEE countries need foreign investments from developed countries like South Korea to improve investors\u2019 confidence in their overall economic viability and to eventually reverse the exodus of their qualified young people.<\/span><\/p>\n

Although ROK investments in CEE might not be top headline stories in South Korean news media outlets, they are set to continue and grow for the foreseeable future.<\/span><\/p>\n

Edited by John Lee<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a>Inter-Korean & Foreign Relations<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

As a result of the rivalry between the U.S. and China, Europe has become one of the most important markets for South Korea in terms of trade balance and direct investments. 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