The Forgotten Miracle the South Korean economy innovation

The Forgotten Miracle: the South Korean economy, innovation, and opportunities for New Zealand June 27, 2018 Presented by Simon Appleton Executive Director of the Korea New Zealand Business Council and CEO of Eastern Bridge Limited simon@easternbridge. co. nz | 0064 22 396 9590

South Korea & New Zealand South Korea Population in NZ 30, 000 (2. 2% growth) Representation in NZ Ambassador Yeo, Seung-bae Tourism Visitors 92, 384 Tourism Economic Value $230 million Largest tourism market 6 th Trade (Export) $2 billion Trade (Import) $2. 1 billion Largest export partner 5 th Export Education Number of students 8, 000 Export Education contribution by economic value $320 million Largest Export Education Market 3 rd NZ Investment in South Korea $839 million South Korean investment in NZ $606 million

Optimism Exports - F&B Optimism - Wine New Zealand South Korea signed a Free Trade Agreement in 2015. - Honey Imports Export Education New Zealand is seen as a loyal friend to South Korea. New Zealand fought with South Korea during the Korean War. Tourism Investment Growing interest between NZ and Korean young people in each others countries (strong take up of working holiday scheme and English teaching) Some tips - First meetings - Names and business cards - Business meetings - Contracts - Relationships Q&A 2015 signing of the NZ KR FTA President Moon Jae In’s economic reforms will also benefit NZ exporters. Strong growth projections for the Korean economy. Increasing a focus on low and middle income earners to reduce inequality.

Optimism Exports - F&B - Wine - Honey Exports – F&B Since the signing of the FTA in 2015 there has only been a modest increase in trade between the two countries, however there F&B exports to Korea has increased by 30% (to $643 million) Imports Export Education Tourism Investment Some tips - First meetings - Names and business cards Korean consumer tastes are changing. Koreans are becoming more adventurous, western food is increasing in popularity. Korean consumers are more aware of food safety. New Zealand has a strong reputation for high quality food products. New Zealand is the 4 th largest supplier of imported fruit and vegetables (we have an advantage due to seasonal differences). New Zealand dominates the Korean market in two products. Kiwifruit (76% of the market) and Buttercup squash (90% of market). Avocados is a rapidly growing opportunity. - Business meetings - Contracts - Relationships Q&A Similar consumer trends to other East Asian markets (presentation and sweetness). Opportunities for fresh produce in Café chains, fresh fruit drinks, smoothies, fruit teas (all increasing in popularity)

Optimism Exports - F&B - Wine - Honey Imports Export Education Tourism Exports – Wine No tariffs. New Zealand is ranked as Korea’s 10 th-largest wine importer, with a mere 1% market share New Zealand’s exports were predominantly white wine (83%), particularly sauvignon blanc, with pinot gris and chardonnay gaining some traction. Red wines (16%) are led by pinot noir with some cabernet sauvignon and merlot. Investment Some tips - First meetings Korea is a major consumer of alcohol, wine accounts for around 5% of alcohol consumption (worth $272 million in 2015). Wine is hampered by not being offered by traditional Korean restaurants. Koreans favour red wine (70% market share) – however this is changing as Korean learn about food pairing. - Names and business cards - Business meetings - Contracts - Relationships Q&A • Western Restaurants, banquet and wedding halls, often associated with hotels, which can be large outlets for wine. • Off-premise channels, such as hypermarkets, department stores, supermarkets and convenience stores, generate the majority of wine sales in Korea. (gift giving is big in Korea)

Optimism Exports - F&B - Wine - Honey Exports – Honey is still protected in Korea has a very strong honey lobby! Imports Export Education Tourism Investment New Zealand is the 2 nd largest exporter of honey to Korea (after the USA) – valued at around 2. 4 million USD Under the FTA NZ producers can sell up to 370 metric tonnes at 0% tariff, however over this the tariff is 243% Some tips - First meetings - Names and business cards (Honey market works on a quota system, only Korean companies can buy a quota. NZ honey sellers must work with a Korean company with a quota. ) - Business meetings - Contracts - Relationships Q&A Comvita and 100% Pure NZ Honey are the largest honey sellers in market. Opportunities around Manuka

Optimism Exports - F&B - Wine - Honey Imports South Korea is a well known producer of electrical appliances, phones, cars etc Imports Export Education Tourism Investment Korea is also a major producer of construction materials and agri–products. Quality control standard is generally high Robotics and automated equipment, (currently speaking with a Korean businesses which sell fruit picking robots) Some tips - First meetings - Names and business cards - Business meetings - Contracts - Relationships Q&A Korean government is very keen to grow exports, support for businesses though organisations like KOTRA

Optimism Exports - F&B Export Education - Wine - Honey Imports Export Education Tourism Auckland is the most popular study destination, however growing interest in the regions. The average Korean spends more than most other students (food, coffee, entertainment, travel) Investment Home comforts are important! Korean parents will often pay more for homestays that can offer Korean food. Some tips Korean international students can also be an important tourist market, future skilled employees as well as conduits to Korean markets for NZ producers. - First meetings - Names and business cards - Business meetings - Contracts - Relationships Q&A

Optimism Exports - F&B Tourism - Wine - Honey Imports Export Education Tourism Koreans are valuable tourists for New Zealand, as large opportunities to increase the value. Korea has one of the most-travelled populations in the world, and outbound numbers are increasing so it has big opportunities for New Zealand. Investment Some tips Korea travel shows often have successful spin-offs throughout Asia. For example the show ‘Daddy, where are we going? ’ and ‘My friend’s home’ which both showcased New Zealand. - First meetings - Names and business cards - Business meetings - Contracts - Relationships Q&A A large majority of South Korean holiday visitors travel to New Zealand on pre-arranged group or semi-structured tour packages organised by tour companies based in South Korean migrants and international students are also great marketers for New Zealand.

Optimism Exports - F&B Investments - Wine - Honey Imports Export Education Tourism Investment Some tips - First meetings • Investment between the two countries is comparatively low when you consider how much trade goes on. • New Zealand is a larger investor in Korea than Korea is in New Zealand • Korean businesses (not Korean migrant businesses) often struggle in New Zealand due to the difference in language, culture and law. • Lack of business specific information available in Korean (particularly when looking outside of Auckland) • Migrant businesses can be found all over New Zealand (think sushi and $ shops) - Names and business cards - Business meetings - Contracts - Relationships Q&A • NZ government wants to increase Korean investment in NZ and has recruited an investment manager at the NZ Embassy in Korea.

Optimism Exports - F&B Tips - Wine - Honey Imports Export Education Tourism Investment Some tips - First meetings - Names and business cards - Business meetings - Contracts - Relationships Q&A • Learn about the market (visit) • Do due diligence • Language is important (interpreters are sometimes necessary while online translations are asking for trouble) • Communication is important and so is patience • When frustration arises remember they will probably feel the same • Do not assume what Korean business people / students / tourists know and don’t know • Be prepared to spend money (not everything can be done on the smell of an oily rag). • Build a relationship (it takes time) • Kiwi speed Vs Korea speed (fast – prolonged silence – bali )

Optimism Exports - F&B - Wine - Honey Imports Export Education Tourism Investment Some tips - First meetings - Names and business cards - Business meetings - Contracts - Relationships Q&A Names and Business Cards • Titles are very important in Korea. • Surnames come first, then given names • Korean people will often select an English name (please do not laugh if the name is unusual) – also, a good idea to learn their Korean name. • Koreans like to deal with people of equal rank / status • Business cards are important, should be bi-lingual (and not in Chinese!) • Business cards are an extension of the person, must be treated with respect. • Card are given with two hands.

Optimism Exports - F&B Business Meetings - Wine - Honey Imports Export Education Tourism Investment Some tips - First meetings - Names and business cards - Business meetings - Contracts - Relationships Q&A • Best to arrange meetings well in advance (do not cold-call) • Meetings usually mid-morning or mid-afternoon, sometimes maybe followed by a meal (depending on the relationship) • Important to be on time • If meetings are cancelled it may mean they simply do not want to talk to you (or not ready to talk to you). • Good idea to have a Korean speaker representing your interests in the meeting. • Gift giving is very important (similar value, senior people get more valuable gifts)

Optimism Exports - F&B Contracts - Wine - Honey Imports Export Education Tourism Investment Some tips - First meetings - Names and business cards - Business meetings - Contracts - Relationships Q&A • Contracts are seen as a starting point rather than as the final goals of a business agreement. • Common to make adjustments to the deal as time goes by (pragmatism? ) • It is important that you be aware of how your Korean colleague/partner views the documents in order to avoid misunderstandings while ensuring that he/she is equally aware of your position. • Invest time and efforts into developing relationships and ensuring the relationship is equal.

Optimism Relationships Exports - F&B - Wine - Honey Imports Export Education Tourism Investment • Guanggi (relationships) are very important in business • Relationships are built over a long period, often through times of adversity. • Gift giving, reciprocal favours all help - mutually beneficial now (or in the future) • Be suspicious of people who claim to have a ‘relationship’ after only a couple of meetings. Some tips - First meetings - Names and business cards - Business meetings - Contracts - Relationships Q&A

Optimism Exports - F&B - Wine - Honey Imports Export Education Tourism Investment Some tips - First meetings - Names and business cards - Business meetings - Contracts - Relationships Q&A Thank you Q&A