Trade opportunities not to be ... MIST
Editor, Global Trader magazine
Post date: Tuesday, 6th December 2011
It’s not only government ministers who are waking up to the fact that there’s a major challenge to the BRICS countries – and the UK – writes Eric Jackson.
To the north lies the Manchester Ship Canal, once a symbol of the economic power of the British empire, while to the south spreads the lush countryside of Cheshire, where many Industrial Revolution magnates built their magnificent piles. Meanwhile, a few miles down the road is the picturesque village of Daresbury, once the home of Lewis Carroll, the creator of Alice in Wonderland, a tale which knew how to mix paradox with irony and sprinkle it with magic.
So in the setting of the Park Hall hotel, just off the M56, you could excuse the representative of one of the world’s fastest growing economies to be grinning like the Cheshire Cat and thinking how ‘curiouser and curiouser’ the world has become at a Warrington Chamber of Commerce and UKTI event to promote the merits of South Korean trade.
But Choo Kyu Ho, the ambassador to the UK, isn’t the gloating kind. He doesn’t need to be – the statistics about the country’s success, such as GNI of $30,000 per person, don’t so much gloat as blast a message around a world still on the verge of a double-dip recession that this is an economy which, like Alice after nibbling the ‘eat me’ cake, just keeps on growing and growing.
Mr Choo, showing the kind of humility that makes South Koreans such relaxed business partners, joked to established and potential investors in his country: “Our main export used to be wigs made from human hair. Now Hyundai, thanks in some way to the British bank Barclays who bought into the company’s vision of ship building, and the expertise of British designers when the company first went into cars, has grown into one of the world’s leading manufacturers.”
About the country that also boasts the unstoppable Samsung, he pointed out that South Korea had the highest number of PHD students per capita in the world, had robust trade security, was committed to free trade, was the perfect test market, had cutting edge IT and communications, diverse income distribution and trend conscious consumers who are early adopters of new products.
South Korea is one of the countries in the new MIST group, the others being Mexico, Indonesia and Turkey. It’s another snappy acronym coined by Goldman Sachs’ Jim O’Neill, who also invented BRICS, which is now as recognisable in the business world as IMF.
But while MIST may not yet have that familiar ring to it, and there are vast differences within it – South Korea’s high growth, predominantly middle class economy bears little resemblance to the emerging Mexican market with its vast inequalities in wealth and fractious political landscape – there’s no ignoring that the constituent countries are snapping at the heels of the BRICS big brothers of Brazil, Russia, India, China and South Africa on the world economic stage.
As a unit the countries have growth and the kind of potential that seem virtually impossible now in the struggling west. Mexico, despite its bloody drug wars, recorded growth of 5.4 per cent last year and the first half of this on the back of high commodity prices and a strong peso. Indonesia, southeast Asia’s largest economy, has held up well amid a slowing global economy in recent months, though the government has not passed planned reforms such as a land bill to improve poor infrastructure that investors were hoping for this year.
High growth and increased strength is a pattern repeated through the other MIST nations, and at the start of November the rise of the MIST countries was highlighted by a minister of state at the British foreign office, Jeremy Browne, when he said their status on the world stage could overtake that of the UK.
After returning from an official state trip to Mexico, the Lib-Dem MP said: “Mexico, South Korea and Indonesia are experiencing what is by European standards very strong growth and becoming much more important countries in the world.
“We don’t have a God-given right to be one of the richest and most influential countries in the world – that is earned. If we don’t adapt, then we will decline.” Although he didn’t mention Turkey, the same thinking applies to that country too. Sinan Ulgen of Istanbul Economic, a thinktank in the cultural capital, said: “Turkey became a much more attractive destination for investment, breaking a new record in 2007 before the global crisis with $22bn of FDI [foreign direct investment] inflows. We have a large and as yet unsaturated market, which should make it attractive to investors.”
And by 2023 the country hopes to have more than doubled arrivals to 63 million, thereby becoming one of the world’s top five tourist destinations – all part of Turkey’s plan to rise up the global economic ladder, partly by taking advantage of its location as a natural bridge from east to west. At the Park Hall event, Douglas Barrett, the head of UKTI at the British Embassy in Seoul since 2009, marvelled at how only 40 years ago South Korea was an aid recipient and is now one of the world’s richest per capita.
“It was one of the few countries not to go into recession, basically because business and government work hand in hand. Seoul has the world’s best, fastest broadband, everyone in South Korea is middle class,” he said, while pointing out that the UK is Korea’s number one investment destination in Europe with 27.3% of Korean investment in the EU.
“The people are extremely brand conscious. Primark, for instance, could not survive in South Korea. They want something new and different. Paul Smith’s an icon in the country and he has 20 stores there. When he attended an opening at one there were people asking for his autograph. “If I was an entrepreneur I would go into babywear in South Korea – they spend a fortune on it, as most families only have one child and consequently high purchasing power. The people are also very fit – every Saturday half of the population go into the hills to hike – it’s a national obsession, and half of them wear Berghaus.
“The country enjoys a healthy drinking and golfing culture. The deal is not always about the better offer – it may be because they like you, so personal meeting are paramount there.”
What western countries often overlook, too, is that South Korea has a booming tourism industry, and it became the most popular foreign travel destination for Chinese people in the first nine months of this year, partly thanks to the spread of “Kpop” culture.
Some 1.54 million Chinese people visited South Korea from January to September and the annual total of Chinese tourists to South Korea could surpass 2 million by the end of this year.
Along with TV dramas, K-pop bands such as Super Junior and Girls’ Generation have wowed fans around the world, especially in Asia, helping South Korea attract global tourists.
One company that needs few lessons in the merits of investing in South Korea is Elcometer, based in Droylsden, Greater Manchester.
Craig Woolhouse, the sales manager for the company which had been in one family for 200 years prior to 1947 when it changed it name and is now the world’s leading producer of paint thickness gauges, said: “South Korea is a very strong market for us, worth about £1m a year, and we are now looking to go into different sectors with Samwan, our partners there.
“They’ve done a very very good job helping us to get established. Now we want to spend more time with them over there – I’m going on my first trip in the new year – to grow the personal relationships with our clients and gain new ones. I worked with Hyundai 15 years ago and it took time to get to know the market. You do need to build a personal relationship.
“We want to move into cars and white goods. At the moment it is construction based – it is a big part of economy – and we do a lot of pipeline work – they need to be paint coated on the inside and outside, and there are very stringent checks.
“It’s not like the old days with lead paint, which stuck like glue, when you could just slap it on. Now it’s very intricate. We are involved in the preparation and assessment, but I have to say that the increased regulation these days has been like manna from heaven for us.
“We do a lot of work in the Gulf now where a market was created that didn’t exist, and we now do 90 per cent of the region’s business. We educated the market. “We can’t replicate that in South Korea because it’s already an educated market, but nevertheless we’re very hopeful of clinching some major contracts.”
Although not yet trading in South Korea, niche food manufacturer The Hawkshead Relish Company – which only uses local food or food supplied by local suppliers, and which has been visited by the Queen – sees South Korea as a prime future market. Head of marketing Kate Nicholson, who was at Park Hall to listen to the UKTI representatives and the ambassador, said: “My partner, who is a claims consultant, has been out to South Korea and he told me about their obsession with food, and it would be very pleasing to introduce them to products make from Lyth valley damsons – it’s a speciality peculiar to the region, which we have very high hopes for, and I know South Koreans love unique products. I like to be ahead of the competition and would like to be the first such company into that Asian market.
“Also, we would want to speak to hotels – because of all the British and American business people staying in them. “Our company is just 10 years old as it completely artisan with an £800,000 a year turnover. Everything is made by hand using quality products.” Clive Drinkwater, north west regional head of UKTI, said that 40 years ago South Korea’s GNI was equal to that of an emerging African nation.
“Today that GNI is $30,000 – just below that of Japan, it’s an exceptionally wealthy country. They are warm, friendly people who love a barbie with their favourite ingredient Kimchi (cabbage). It’s now the 13th biggest world economy and there are opportunities across the whole of the sectors.” And, of course, the other MIST countries of Mexico, Indonesia and Turkey can boast of the same opportunities.
This article was first published in Global Trader Magazine, Issue 2, Autumn 2011. To read the entire publication, click the ebook.