Economic Cooperation between Korea
and Algeria : Current Status and Vision
July 4, 2008
Dr. Joo, Dong-Joo ([email protected])
Korea Institute for Industrial Economics and Trade
1
Contents
1. Overview of the Current Status of
Bilateral Economic Relationship
2. Review and Search for Upgraded
Cooperation
2
3
11
Overview of the Current
Status of Bilateral
Economic Relationship
Korea and Algeria : New Partners in the
New Millennium
 1990. 1. Diplomatic Relationship
– Both Embassies Open in Seoul and Algiers
 2003. 12. Algerian Presidential Visit to Korea
 2006. 3. Korean Presidential Visit to Algeria
– Comprehensive and Strategic Partnership
4
Strategic Partnership
Korea-Algeria Joint Task Force (2006. 4.14)
HOT Line
MOCIE→MKE
MPPI→MIPI
KITA
 50 Projects from Both the Government and
Civilian Side discussed
5
Joint Meetings of Korea – Algeria Task
Force
Date
Location
Participants
1
May 22, 2006.
Algiers
44 Organizations from Korea
2
Nov.14, 2006.
Seoul
42 organizations from Algeria
3
June 2-3, 2007
Algiers
58 Organizations from Korea
4
Oct.31, 2007
Seoul
300 Persons from Both Sides
5
July 3, 2008
Seoul
Source: MOCIE
6
Trade Volume Reaching $1.4 Billion
Trade Volume has increased by 39.7% annually during 2001-07
and has grown by 5.3 times, reaching $1415 million in 2006.
Imports from Algeria has grown by 5.7 times, while exports by
5.1 times.
Million $
2001
2002
2003
2004
2005
2006
2007
Average
Increase
Exports
152
186
224
354
340
390
768
38.3%
Imports
114
205
191
240
166
577
647
41.5%
Sum
266
391
415
594
506
967
1415
39.7%
Source : Korea Trade Association
7
Trade Volume Expansion
Source : Korea Trade Association
8
◇ Korean Exports to Algeria
(Thousand Dollars)
2006
2007
Items
Value
Total
increase
Value
Increase
390,606
14.8
768,091
96.6
242,281
11.3
481,432
98.7
1
Automobiles
2
Petrochemicals
38,822
115.6
82,086
111.4
3
General Machinery
26,769
104.3
37,536
40.2
4
Iron & Steel
28,791
1,188.0
37,135
29.0
5
Industrial Machinery
2,703
16.8
32,336
1,096.5
Algeria’s Ranking in the Korean Exports: 70 (2005)→ 67 (2006)→
55 (2007)
9
◇ Algerian Exports to Korea
(Thousand Dollars)
Items
Total
2006
Value
2007
increase
Value
Increase
577,540
247.4
646,508
11.9
1
Crude Oil
415,247
150.1
489,547
17.9
2
Natural Gas
158,931
-
106,213
-33.2
3
LPG
0
-
24,989
-
4
Naphta
0
-
22,463
-
5
Others
0
-
1,221
-
Algeria’s Ranking in the Korean Imports: 59 (2005)→ 44 (2006)→
46 (2007)
10
Mutual FDI is also growing
Million $
From
Korea
From
Algeria
2002
2003
2004
2005
2006
2007
No.
0
0
1
2
1
2
Value
0
0
7.2
0.4
2.9
2.5
No.
1
0
0
1
0
..
0.5
0
0
0.1
0
..
Value
Source: Ministry of Commerce, Industry, and Energy (http://www.mocie.go.kr)
11
◇ Korean Contractors’ Awards in Algeria
$ Million
2003
2004
2005
2006
2007
2008. 1-4
Value
134
1
0
9
5
626
No.
2
1
0
3
3
1
12
Major New Projects
 Daewoo Group, Sonatrach Fertilizer
Plant, $626 Million, 2008-2012
 Space Group, Bougzhle New Town
Design, $4.7 Million, 2007-2008
13
14
21
Review and Search for
Upgraded Cooperation
Materialization of Potential
Needed
 During the last 2 years, both sides have
found the great potential for cooperation
and discussed various projects.
 Now, we have passed the stage of initial
encounter and need to discuss and find
practical ways to prompt the way
15
What we expect from
each other
 For Korean Side
– Access to the Energy, Market (including
EU and Maghreb) of Algeria
 For Algerian Side
– Experiences of industrialization and the
technology, as well as capital of Korea
16
Algeria with Great Potential
 The Second Largest Country in Africa in
terms of Land and GDP
– Land 2,381,740 km2 – More than ten times of
Korean Peninsula, and 3.5 times of Texas
– GDP $89.4 billion (2005) : next to South Africa
 Massive Reserves of Natural Resources
– Petroleum: 12th of the World
– Natural Gas: 8th of the World
 Nexus between Africa, Middle East, and
Europe: Entrance and Exit
– Association Agreement with EU (2005)
17
Korea as a Strong Industrial Producer
 Share and Ranking of Major Industries in the World Market (2005)
Share (%)
Ranking
Shipbuilding
38.0
1
Display
40.7
1
Digital TV
28.0
2
Semi-Conductor
10.2
3
Iron & Steel
4.2
5
Petrochemicals
4.9
5
Motor Vehicles
7.1
6
Textiles
3.1
6
Machinery
2.3
10
Source: KIET (http://www.kiet.re.kr)
18
Vision and Baseline for
Bilateral Cooperation
Regional and Global Power Economies
Algeria for Korea
Korea for Algeria
• Energy Resource Supplier
• Exports & Construction
Market
• Bridge to Africa, Middle
East, and Europe
• Stable Oil Market
• Reliable Contractor
• Industry Partner
• Role Model for Development
(Technology and Experience)
Friendly & Reliable Partnership for Development & Prosperity
19
Evaluation of the Cooperation
 Systematic Network for Bilateral Cooperation – Joint TF
activities unprecedented strategic partnership
 Impressive Expansion of Bilateral Trade and Investment,
but still small considering the Size and Potential of Both
Economies
– Share of Bilateral Trade volume in the Total Korean Trade
0.20% : 55th of Exports, 46th of Imports (2007) ← 0.15%
(2006)
 Many Strategic Projects waiting for Productive Results yet
– Policy Sector Projects going smoothly
– Civilian Projects, especially investment projects are lagging
to bear fruits yet
20
Successful Projects
 Industrial Development Policy Consulting
(KIET)
• Consulting for Industrial Strategy in Six Industries
(IT, Steel & Iron, Automobiles, Pharmacy, Textiles)
and Six Policy Areas (Export, FDI, RD, HRD, SME,
TD)
• First stage successfully finished through Five Joint
Workshops → Second stage to implement the plan
21
Successful Projects
•Personnel Training (KOICA)
•2006 : 80, 2007 : 80, 2008 : 100
•Credit Card Policy Consulting (KDI)
•CATICA Master Plan (KPU)
•Strong Government Commitment
•Funding by the Government and Implementation by
Public Organizations
22
Civilian Projects lagging
 Many Korean companies still find that Algeria
is not an easy market to access, despite its
recent improvement of business environment
Market : Not easy to expect sizable profits
Logistics : Availability of raw materials and
components, as well as skilled labour
Redtape : Regulations unfit international standard
Infrastructure : transportation, communication,
housing, health
Language :
23
Checkpoints for Business
24
FDI Performance and Potential
Ranking in the World
Performance
Potential
2000
2005
2000
2004
Algeria
113
109
83
65
Egypt
105
66
70
81
Libya
135
136
50
41
Morocco
83
43
99
89
Tunisia
71
77
74
69
Source: UNCTAD, World Investment Report 2006
25
A Comparison: Starting a
Business
Algeria
Region
OECD
Procedures (Number)
14
9.7
6
Duration (Days)
24
38.5
14.9
Cost (% GNI per
capita)
13.2
66
5.1
Source: World Bank, Doing Business 2008
26
To Prompt the Way: What
to do?
 For Koreans:
– To take advantage of the potential of Algeria in real and
in advance : the largest market in North Africa where
competitors are not strong yet, and Europe is very close
– to shorten the psychological distance first
• To study French, Arabic, Islamic culture (Algeria may
provide assistance in this area)
– Field Study by Decision Makers
27
To Prompt the Way: What
to do?
 For Algerians :
– To make Algeria business-friendly:
• elimination of red-tape
• acceptance of liberalism including some cultural
aspects,
• improvement of infrastructure
– To make Koreans Algeria-friendly
• Invitation of Korean staff on various occasions
28
Challenges to Overcome:
Korean Economy
 Oil Price Shock and Signs of Recession
 The South-North Korea Relations
 Aging and Decrease of Population
– Supply of Competent Labor Force
 Changes of Global Market Environment
– New Technology
– Natural Resources Supply
– FTA and Globalization
29
Challenges to Overcome:
Algerian Economy
 Heavy Dependence on Hydrocarbon Sector
– Oil & Gas comprising 97% of Exports and 45%
of GDP
 Low Productivity of Industry and Public
Services
– Reform and Upgrade of Public Companies
needed
 High Unemployment and Job Creation
 New Institutions and Skills to fit Market
Economy needed
30
Final Comments
 The Bilateral Economic Cooperation that has been
actively pursued by the firm commitment of the
governments is reaching a turning point → More
Role of Private Sector needed
– Incentives and Deregulation needed
 Firm recognition on the necessity of continuous
expansion of Bilateral Cooperation → will truly help
both economies to overcome the challenges each
faces
31
32