UAE-South Korea industrial sectors occupy remarkable share of GDPs

Dubai: The UAE and South Korea - two emerging economies - have a lot in common although geographically located poles apart.

"The industrial sectors of both countries occupy a remarkable share of their respective GDPs," a latest report issued by the Dubai Chamber of Commerce and Industry (DCCI) said.

"Nonetheless, a high percentage of the UAE industrial sector is attributed to oil industries as opposed to in South Korea where chemical industries, electronics, and automobiles are major drivers of the industrial sector. Furthermore, the services sector in South Korea represents slightly more than half of GDP while in the UAE it is around 35.8 per cent.

"Lastly, the agriculture sector seems to be marginal in both countries."

The size of the South Korean labour force significantly surpasses that of the UAE due to its larger population size. However, the UAE share of labour force to total population (67 per cent) exceeds that of South Korea (49 per cent).

Expatriate population

"This fact is induced by the specifics of the UAE demographics which is characterised by high percentage of expatriates injected in the labour force (around 80 per cent)," the DCCI report says.

Finally, with regards to international openness, South Korea shows superior non-oil foreign trade volumes (in terms of absolute values) than the UAE due to its superior economy size, population, resources, etc.

Nonetheless, there are tight trade relations between both countries.

South Korea maintains a policy of protectionism through high tariff and non-tariff barriers. The country uses its tariff structure to protect its agricultural products.

Korea has earlier hinted at its intention to conclude a free trade agreement (FTA) with the UAE, that would help a Dh58 billion bilateral trade to jump further.

"Lowering of South Korea's tariff on food was at the centre of the country's FTA negotiations with US, Canada, EU and Asean countries, with South Korea submitting a long list of agricultural produce to be exempted from tariff liberalisation. In addition, South Korea's import clearance procedures remain problematic," the report says.

Imports of new food products into South Korea reportedly take considerably longer to clear from the ports than similar products in other Asian countries. Given the contribution of the agricultural sector in the UAE (2.3 per cent in 2006) is small and consequently exports of foods products - this factor will not cause threat for UAE businesses; especially given that food products are not among the major exports or re-exports from the UAE to South Korea.

However, some concerns might arise if the aforementioned constrains affect the UAE exports/re-exports of fish, crusta-ceans, mollusks and aquatic invertebrates, and/or oil seeds, industrial or medicinal plants and fodder, and/or animal or vegetable fats, oils and waxes, because these products are listed among UAE's major exports/re-exports to South Korea as we will see later in the foreign trade analysis section.

South Korea also imposes non-tariff barriers to protect its industries. For instance, issues related to the inability of US car manufacturers to gain adequate access to the South Korea market have derailed the FTA talks between the two countries.

Long-standing reputation

Canada has also raised concerns for its car industry, as FTA talks between Canada and Korea progress.

Korea has begun to shed its long-standing reputation as a difficult environment for foreign capital.

"However, despite improvements and changes in attitude FDI in Korea is still, to a certain extent, hampered by underdeveloped corporate governance, insufficient regulatory transparency, lingering economic domination by the country's remaining conglomerates "chaebol," an inflexible labour system, and a need for better protection of intellectual property rights," the report says.

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