Growing Korean Influence

In the last few years, more and more Korean companies have upped their ante in Oman. Today, Korean enterprises are all over the Sultanate – automobiles, consumer goods, construction, building materials, marine, etc. Korean exports to Oman are on the rise and many plum projects are going the Korean way. According to market grapevine, Daewoo Shipbuilding and Marine Engineering (DSME) has either bagged the township and tourism related US$20-billion Duqm development contract or is very close to signing the deal with Omani authorities. Economic co-operation between the two countries is expected to go up further even in the small and medium enterprises (SME) sector, with a Korean SME delegation recently holding talks with Omani businessmen in this regard. Insiders see the SME business between the two countries rising to US$11 million in the coming days.

Economic ties between the two countries are also seen getting a fillip following the change in guard in the Korean government. South Korea’s new President Lee Myung-bak, who took office in February, has promised to make the country a better place for business. Akshay Bhatnagar spoke to His Excellency CHO Sung-hwan, South Korea’s ambassador to Oman, on the increasing economic co-operation between Oman and Korea, and the way forward. Sung-hwan, a career diplomat, worked in Korean embassies in the US, Japan, New Zealand, Turkey and South Africa before coming to Oman more than six months ago. Excerpts:

What is the state of economic relations between Oman and South Korea?
Since the establishment of diplomatic ties in 1974, Korea and Oman have witnessed constant and remarkable growth in their co-operation in many fields, specially economic ties and trade relations. The economic relations between the two nations are complimentary. Korea lacks energy and mineral resources, and thus relies heavily on their import from other countries. On its part, Oman is rich in oil and gas resources, but depends mostly on technology sourced from other countries.

Oman is an important energy supplier to Korea, as we import a high volume of oil and gas from the Sultanate. Many Korean companies with excellent reputation for cutting-edge technology are participating in many development projects in Oman – constructing petrochemical plants, desalination plants, dry dock and providing various kinds of management and operation related services. Both countries need to work towards further strengthening the bonding between them.

Kindly share the growth figures in terms of Korea’s import and export from Oman in the last three years?
According to statistics from the Korean customs office, Korea imported US$3,813 million worth of Omani goods in 2007. The figure stands at US$5,129 million and US$3,705 million for the years 2006 and 2005, respectively. In 2007, the share of oil and gas in total imports from Oman was approximately 97 per cent. Korea’s export to Oman amounted to US$542 million in 2007. The figures were US$344 million and US$304 million in 2006 and 2005, respectively. In 2007, automobiles contributed 40 per cent of Korea’s export to Oman. Other major export items included steel products, air-conditioners, auto parts, etc.

What is your growth target in the coming years?
We expect that Korea’s exports to Oman will steadily grow in the coming years, as Oman’s economy is moving at a very rapid pace. Korea’s import volume of Omani LNG is fixed up to 2024, as we have concluded a 25-year-long term contract in this regard. The import volume of Omani oil may vary according to the market situation. We have not set any specific target of export and import to Oman because they may depend on market dynamics.

In which sectors is trade expected to grow between Oman and Korea?
Korean products enjoy wide recognition among Omani consumers. Many Omani residents perceive Korean brands in high esteem. All Korean automobile brands, including Hyundai, Kia and Ssangyong, are recognised as one of the best quality cars in the world and are gaining in market share due to their competitive pricing compared to European and Japanese cars. I believe that more and more Omani residents will buy Korean cars in the coming years.

In the consumer products segment, including LCD and plasma TV, cellular phones, refrigerators, air-conditioners, washer and dryers and microwave ovens, etc., Korean companies such as LG and Samsung have become very popular in Oman and their sale is steadily increasing. As many construction projects are going on in Oman, the demand for Korean construction equipment and steel products will go up.

On the import side, Korea is interested in purchasing more LNG from Oman if the Sultanate can provide it. As stable supply of oil and gas is a priority for Korean economy, Oman will remain as one of the most important economic partners of Korea.

What steps are you taking to boost economic co-operation between the two countries?
Both the countries have maintained excellent relations at the government level. Agreements on investment protection and avoidance of double taxation have been concluded by both governments to create a favourable atmosphere for investment and facilitate the participation of private companies in each other’s development projects.

Both governments have also signed an agreement on co-operation in energy and mineral resources. The first meeting of the Energy Co-operation Committee, based on the agreement, was held in December last year to solidify the relations in energy.

To promote people-to-people and private sector co-operation, the Oman-Korean Friendship Association has been launched recently under the chairmanship of Sheikh Suhail Bahwan, chairman of the Bahwan Group. Many Omani businessmen and companies have expressed their interest by joining the association.

What about the Korean interest in making foreign direct investment in Oman?
I think this is a good time for Korean companies to make FDI in Oman. Korean companies may bring their own finance and more proactively participate in the development projects in Oman in close collaboration with the Omani government. One good example is that the construction unit of Daewoo Shipbuilding and Marine Engineering (DSME) is seriously studying a multi-billion dollar investment plan for the development of Duqm area in co-operation with the relevant Omani authorities. Also some Korean companies, probably forming a consortium, have shown their interest in investing in the energy sector. This new kind of economic co-operation will further upgrade our currently existing good bilateral economic relations.

Is it true that DSME has bagged the Duqm contract that is valued at US$20 billion? Can you tell us more about DSME’s role in the project?
The Omani authorities and DSME are in an advanced stage of discussion. As far as I know, DSME is looking at developing the township, which includes residential, commercial, and other related infrastructure and also the tourism complex in Duqm.

What opportunities do you foresee in the small and medium enterprises (SME) segment?
A Korean business delegation comprising 19 SMEs visited Oman in February. It held business meetings with almost 100 Omani businessmen. The meetings were successful and many Korean companies have agreed to further develop business relations with their Omani counterparts.

Kim Ki-mun, head of the delegation and the chairman of the Korea Federation of Small and Medium Business (Kbiz), agreed to conclude a MoU between Kbiz and the Ministry of Commerce and Industry of Oman, which recently established the General Directorate of Development of Medium and Small Enterprises, for closer co-operation and exchange of expertise in policy making for SMEs. We will be able to see more feasible results of our co-operation in SME business in the not too distant future.

Has there been any sovereign wealth funds (SWF) inflow into Korea from Oman and other Gulf countries?
SWFs from Saudi Arabia, UAE and Qatar are definitely making investments in Korea. I’m not sure about Bahrain and Kuwait. There has been no SWF investment in Korea from Oman. Taking into account the bright future of Korean economy, I hope the SWF of Oman take steps to make FDI and portfolio investments in Korea.

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