CHAPTER ONE INTRODUCTION 1.1 Background of MATRADE Malaysian Trade Development Corporation (MATRADE) is an agency was established in March 1993 under Ministry of International Trade and Industry (MITI). MATRADE were there to promotion and also assisting Malaysia’s enterprise to be in the international arena besides making Malaysia as a premier exporting nation. MATRADE has serve for the government and they had the branch in 40 countries such Seoul, London, Frankfurt, Paris, Chennai, Bangkok, Cairo and five local branch in Penang, Johor, Sabah, Sarawak and Terengganu. These branches actually become the network for MATRADE Headquarters in Kuala Lumpur to get any information about trading in the country besides assisting the Malaysian and foreign company to look for the market and also the product. The branches also helping Malaysia to make good relation with foreigner through business networking with the business society in the country and having business meeting to make them know about Malaysia 1
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
CHAPTER ONE
INTRODUCTION
1.1 Background of MATRADE
Malaysian Trade Development Corporation (MATRADE) is an agency was established in
March 1993 under Ministry of International Trade and Industry (MITI). MATRADE were
there to promotion and also assisting Malaysia’s enterprise to be in the international arena
besides making Malaysia as a premier exporting nation. MATRADE has serve for the
government and they had the branch in 40 countries such Seoul, London, Frankfurt, Paris,
Chennai, Bangkok, Cairo and five local branch in Penang, Johor, Sabah, Sarawak and
Terengganu. These branches actually become the network for MATRADE Headquarters in
Kuala Lumpur to get any information about trading in the country besides assisting the
Malaysian and foreign company to look for the market and also the product. The branches
also helping Malaysia to make good relation with foreigner through business networking
with the business society in the country and having business meeting to make them know
about Malaysia and the products. In this research, we will look how the MATRADE doing
their operation to help Malaysia trade expansion in the global market and also giving the best
to all.
1.2 Objective of MATRADE
MATRADE’s objectives are to raise the profile of Malaysian exporters in foreign markets,
to disseminate timely and relevant information and market intelligence to help Malaysian
companies gain a competitive edge in foreign markets, to introduce Malaysian companies to
1
foreign importers seeking Malaysian suppliers and to undertake activities to promote the
export of Malaysian goods and services in overseas markets.
1.3 Mission and vision of MATRADE
A government agency like MATRADE owes its existence to the legacy and dreams of the
leaders of the nation, giving MATRADE a strong and meaningful mission
“Promoting Malaysia's Enterprises to the World”
to develop and promote Malaysia’s export to the world and its functions are to promote,
assist and develop Malaysia’s external trade with particular emphasis on the export of
manufactured and semi-manufactured products and, on a selective basis, imports, to
formulate and implement a national export marketing strategy to promote the export of
manufactured and semi-manufactured products, to undertake commercial intelligence and
market research and create a comprehensive database of information for the improvement
and development of trade, to organise training programmes to improve the international
marketing skills of the Malaysian exporters, to enhance and protect Malaysia’s international
trade interests abroad, to represent Malaysia in any international forum in respect of any
matter relating to trade, to develop, promote, facilitate and assist in service areas related to
trade; and to advise the Government on matters affecting or in any way connected with trade
and to act as the agent of the Government or for any person, body or organisation on such
matters.
2
As a Government linked Agency under the direct supervision of the Deputy Minister of
International Trade and Industries Dato’ Mukhriz Mahathir, MATRADE has a strong
vision,that is to:
“Positioning Malaysia as a Globally Competitive Trading Nation”
1.4 Practicum in Review
Job Description, Assisting the Trade Commissioner in daily duties and additional events
scheduled by the Corporation. The duties of the Trade Commissioner in linking Malaysia to
the host country is vital in making international trade, especially Malaysian exports to other
countries. This establishment allows Malaysian products and services to be provided in
various countries with minimal risk.
To accomplish this goal, the Trade Commissioner is initially the eye on the ground. For the
MATRADE Seoul office, the Trade Commissioner is a specialist in the rules and regulations
of the host country especially in sectors of international trade, the does and don’ts of local
business culture, also an essential ice breaker for the traders from both sides.
In this particularly sensitive role, the Trade Commissioner is also tasked in collecting vital
statistics on the trade between the countries, the particulars on the developments of various
sectors, the needs of the local market, the chances for Malaysian producers in various fields
of Malaysian expertise to enter the ever booming Korean market.
Interns Involvement: By just being here, as a student I’m able to observe the working
environment, the challenges of promoting trade between countries and also the difficulties
and perceptions of OECD nation like Korea towards Malaysia.
3
Other than that, I have been tasked to collect statistics, mainly on current situations, namely
Situation Report (SITREP) and Market Alerts (MA), which are both an essential part of the
Trade Commissioners duty (Key Performance Index). These documents allow the
MATRADE Malaysia to analyze and arrange for a better strategy in tackling trade between
Kuala Lumpur and Seoul.
First stop of the learning process, was juggling multiple tasks at the same time, setting
priorities by due dates, not by the date of tasks issued. This multiplied with the tasks and
involvement of the trade office with the Malaysian Embassy here.
Current Tasks, The social visit of Yang Di-Pertuan Agong and Permaisuri Agong
accompanied by the International Trade and Industries Minister to Korea was a special task
to MATRADE as the accompanying minister was to be briefed and accompanied by the
Trade Commissioner. This involved serious data collection and event management.
Although supervised and assisted by various departments the heavy load of duty was resting
on the Trade Commissioner. The event planning and secretariat was placed in the
MATRADE Office. The extended work time and detailed work plan showed the intensity of
working in a foreign mission, the importance of bilateral relations – also bilateral trade in
short.
In the speech of YB Minister of International Trade and Industries of Malaysia, he stated that
“Malaysia as the seventh largest trading partner of Republic of Korea we have to intense the
safeguarding of Malaysian interest and Malaysian trade to maintain if not move up the
ladder. As to Republic of Korea as the third largest trading partner of Malaysia, we look
forward in improving all necessary needs of Koreans in Malaysia”. This remark shows the
importance of bilateral relations between Malaysia and Korea.
4
CHAPTER TWO
THE REPUBLIC OF KOREA ECONOMY
2.1 Economic view
South Korea economies are on the basis of business-friendly policies towards 2011-2015.
External trade lies crucial to the South Korean economy. In order to avoid won from rising
too sharp in the international foreign-exchange market, the authorities has been implemented
some policies including modest capital control. The South Korea’s economy are getting
stabilize and the main focus are shifted to the structural issues. Four decades ago South
Korea are nobody until it can be labeled into the most poorer country but the condition
changed when its join the trillion dollar club of economies in 2004 and now already
enjoying as the world’s 20 largest economies.
Meanwhile the role of the government is importing raw materials and technology at the
expenses of consumer goods helps the economy to strengthen. The Asian financial crisis
affected South Korea until it have to suffer insufficient of foreign reserves, the extensive of
foreign borrowing and high debt ratios and massive short-term borrowing from the other
nations. Korean government has taken a numerous measurement to overcome its domestic
problems such as greater openness to foreign investment and imports.
Another problems emerged by the end of 1997 when South Korea was in the midst of a fully
fledged foreign-exchange crisis. At this time South Korea are forced to secure an emergency
loan from the International Monetary Fund (IMF) or else they will have to face serious
problem as the economy would collapse.
5
In terms of Gross Domestic Product (GDP) growth indicates South Korea are recovering
from the crisis which shrank by 6.7 percent in 1998, grew by 10.9 percent in 1999. In
August 2000, the IMF release South Korea from its restructuring program. Growth
moderated to about 4-5 percent annually between 2003 and 2007. This figure is gradually
decreasing to 0.2 percent during the economic downturn in late 2008. Several reasons made
the South Korea’s economy recovering from its disadvantage situation such growth of an
export, low interest rates and an expansionary fiscal policy and growth exceeded 6 percent
in 2010.
South Korea Economic Policy
Decision that taken by Bank of Korea (BOK) on its latest monthly monetary policy are very
surprising as it will implementing another widely anticipated increase in its main policy
interest rates, the official cash rate. The factor that forced BOK to react is the accelerating
pace of home-loan growth to maintain its benchmark rate at 3 percent. In April the
outstanding balance of home-backed loans reaching 24.9 percent of nominal GDP in 2010
that is equivalent to W292.3 trillion. With the stable mortgage lending rates below 7 percent,
the possibilities of housing loan crisis will not be happen at the moments.
The fiscal policy adopted by South Korea government are still practiced, these all include
tax cuts for the individuals and tax concessions for firms that were implemented in late 2008
and 2009 plus range of incentive that hold its purpose to boost economic activity. In 2010,
public expenditure are recorded high because a lot of projects already reach its
6
implementation stage. Strong cyclical recovery resulted the budget to shift from deficit
equivalent to 1.7 percent of GDP in 2009 to an estimated surplus of 1.2 percent in 2010.
Monetary policies in South Korea are still stick to its main policy interest rate, the official
cash rate. Since the early year indicate that inflation are under the target of BOK’s. As we
know South Korean economy relies heavily on external demands, it is complicated to
strengthening domestic demand and tighter product markets. On the other sides, BOK likely
to maintain an accommodative monetary stance because they are concerned at highly
leveraged household sector when it comes to problems as the interest rate increased.
South-North economic ties
Bilateral trade between these two brothers was first legalized in 1988, rose to almost $1.82
billion in 2008 before declining sharply thereafter. South Korea already became second
largest trading partner to the North Korea after its main partner. China. The trade is related
to the out-processing or assembly works that undertaken by South Korean firms that took
place in Kaesong Industrial Complex. South Korea actually funded much of the project in
North Korea before it is stopped under the Six-party Talks.
The cooperation between these two nations becomes trigger to the hope for reunification. In
2000 North-South Summit the two Koreas reconnected their east and west coast railroads
and roads from South Korea to Mountain Geumgang in North Korea. However this
understanding were not able to stand long because the incident torpedo launch by the North
Korea on the South Korean warship Cheonan in March 2010. This resulted the ties between
the two Korea were severely damaged.
7
This event shows the North Korea always have no intention to cooperate with the South
because they themselves are not willing to ended their wars. For them the different of
ideologies that already nurtured are very strong and they are not willing to sacrifice their
own ideology for a mere reunification. To show their unwillingness a lot of things they done
to escalate the unrest and then damaging ties between them especially created by the
Democratic People Republic of Korea.
2.2 Rules and regulation
External Trade Act is one of the laws that regulated by Foreign Trade that function as to
governing the export and import goods. While the Foreign Exchange Management Act are
concerning foreign exchange matters such as the settlements of export or import payments.
The collections of tariffs and customs clearance were under the Customs Act. The main
purpose having trade regulations is to promote external trade and facilitate fair transactions.
Country that have intention to import their goods to South Korea will not facing problems
because there is no license required but the importer just have to fill in the declaration of
importation. Besides there is also a system that control the goods arrival.
When dealing imports and exports with South Korea several important matter should be
aware of such anti-dumping regulations under supervise of Foreign Trade Act, the Korea
Trade Commission (KTC) investigates and determines injury to the Korean industry
resulting from imports. This can be seen through the plywood products from Malaysia that
they detect it will harm the plywood product in South Korea itself. Although there is some
8
situation where the importer can be caught in a non conformity situation his products will
have greater chances to be systematically controlled.
Procedures of control involve checking correspondence of products based on the Korean
rules this is includes standards, phytosanitary rules, and fumigations. This means the
procedure of control not only involve presenting documents regarding the equivalence of the
goods imported. Furthermore, each of the procedure should be detail or else another problem
will surely emerge.
But there is some product that listed under “Negative List” whereby it will be regulated or
forbidden. That’s why these products should have a license that acquired on the basis of a
case delivered when it is already studied by the competent Ministry and the consultation of
the corresponding professional associations.
Another important thing is the import quotas and licenses. Regarding the import license it
should be acquire directly from the Ministry of Trade and Industry. The president of a
foreign bank is delegated to issue an import license in all cases of trade except counter-trade
that have different procedure. These import licenses are valid in one year-period time.
Customs duties
Harmonized Customs System were applied by South Korea, this condition means the duties
are calculated Ad valorem on the CIF value. By this Korean Customs also have the authority
of the implementing the legislation. 8 percent is the most average customs duties (0 percent
to 2 percent for raw materials, 5 percent for semi-manufactured products, 8 percent for
9
manufactured goods). Difference for the agricultural products the taxation will get stronger.
Special case goes to this product as it could have certain number of tariff quotas, for which
the duties are either reduced.
Government are completely controlled the import of rice. The government only accepts the
entry of rice for the purpose of industrial and importing food rice for the buy and sold
purpose to the consumers will be automatically rejected. The “rights of the adaptation” were
applied by the South Korea to protect its commodity. Starting from 2000, 27 products are
considered as the “rights of adaptation” notably seafood, agricultural products and textiles.
Import taxes
South Korea also imposes some other taxes which include special excise from 10 percent to
20 percent which is applied to not only luxury goods but also to automobile vehicles and
certain consumer goods. Some of the things that are considered as luxury goods such as
sunscreen or washing machine. All of these products are classified under special excise
because South Korean government intended to make sure the sustainability of their home-
products in the international market. These taxes are applied to the good’s customs cleared
value.
Whereas for the liquor tax it differs from one product to another according to its type. Beer
are imposed higher than its group make up into 115 percent, for fruit-based liquors are only
30 percent as the lowest taxation imposed and spirits make up to 72 percent. Other taxes
included transportation; make up to 20 percent on vehicles and educational taxes reach about
30 percent which applies on the amount of the other special taxes.
10
2.3 Market opportunities for Malaysia’s export
Korea is one of the nation that still search for their own identity, new culture that different
from their regular practice and they are able to adapt will be their own lifestyle. For instance
food, there are many international foods that already have their influence throughout South
Korea from the western style to the Asian cuisine. All of these foods are accepted as their
own new tradition. Malaysia as a country that particular about choosing food especially for
the Muslims seeking halal food. Halal food can became one of the potential eating style to
compete in South Korea.
One of the reasons that make Halal food became necessity in South Korea because of the
increasing Muslim population and Muslim tourist in this country, although they are minority
but still it has the significant. Malaysia that is already known as the major producer of halal
food and a well established trade mark in Halal Certification should have the ability to
penetrate South Korea market.
This interest of South Korea in halal industry can be proven through the commitment shown
by one of the Korean company, PentaGlobal. This company established few months ago that
does Halal industry consultation related matters in Seoul. They were also responsible for
importing halal raw material and some of their ready-made product were distributed and
exported to Malaysia.
Having a Malaysian halal food restaurant in South Korea will bring a long term good
prospect because this will function as focal points of gathering among Malaysians. To make
this things succeed this kind of restaurant will be required to attract more visitors from
11
Malaysia. Furthermore by setting this restaurant will also add new advantage to the
Malaysian food in abroad as it varieties can be promoted to the not only South Korean
society but also foreigners who reside in the country and foreign tourists who is visiting
South Korea.
Indirectly this effort also helps to promote Malaysia’s tourism industry and further to
promote Malaysian food products to the global. The setting up of a Malaysian halal food
restaurant will also pave away for exports of Malaysian food products to South Korea such
as spices, curry powder, coconut milk/powder, sauces, and other agricultural produce.
Another material that is potential is wood. Malaysia already craves its name as a land that
has abundant resource. Veneer, plywood and sawn timber are the main form of timber that is
mainly imported to South Korea. RM 1 billion is recorded last year only for Malaysia export
activities involving timber and timber-related products to South Korea.
Malaysia always improving its promotional efforts through specific activities with the South
Korean importers. Branding also help to boost the potential timber for imports. Through
branding the timber industry can leverage on the reputation and sell their products and not so
much generating revenue through a low-price strategy.
Wood company from South Korea are more prefer Malaysian wood compared to wood
imported from United States and several area in Europe. They claim that these woods are
very durable, have its own standard of quality and suitable for any type of furniture and
wood-based product. One of the company, Ladder Korea claims that wood from Malaysia
12
are not easily infected by termites and other insects. This make the products can be used for
longer period.
Rubber also one of the great opportunity for Malaysia to export specifically the Technically
Specified Natural Rubber (TSNR). TSNR is a dry natural rubber graded or the basis of
technical parameters. South Korea mainly imports technically Specified Natural Rubber as
raw material. The exports for this rubber product to South Korea are increasing in terms of
both volume and value since 2001. About total of US$240 million South Korea’s imports
are worth of Technically Specified Natural Rubber in 2003. These figures were increase
sharply to 66.1 percent compared with US$144.8 million in 2002.
13
CHAPTER THREE
THE COOPERATION BETWEEN MALAYSIA AND REPUBLIC OF KOREA
3.1 Bilateral Trade between Malaysia and Republic of Korea
For 2010, bilateral trade between Korea and Malaysia totaled US$15.6billion, up 31.5 per
cent as compared with the corresponding period of 2009.
Bilateral trade between the two countries was in favor of Malaysia, recording trade surplus
of US$3.4 billion for 2010.
Table 1: ROK’s Bilateral Trade with Malaysia
(Unit: US$ million, %)2009 2010 2010/2009
Value Value Growth
Total 11,899 15,646(14th): 1.8% share 31.5
Export 4,325 6,115 (16th): 1.3% share 41.4
Import 7,574 9,531(13th): 2.2% share 25.8
Balance of
Trade-3,249 -3,416 -
Note: % indicates change from the corresponding period of previous year. Source: Korea International Trade Association (KITA)
ROK’s Export to Malaysia
Korea’s export to Malaysia registered US$6.1 billion, up 41.4 per cent as compared with
2009. Malaysia placed the 16th major export destination for Korea, accounting for 1.3 per
cent share in Korea’s global exports.
14
For top five export products to Malaysia by 2-digit in HS Code classification, electrical
Based on HS 6-digit, major export products to Malaysia were optical devices (for electronic
calculators, opto-electronic watches, TVs, and monitors), tankers, memories, other apparatus
of radar/navigational aid, TV cameras), printed circuits, processors & controllers, passenger
cars (with engine capacity of 1,500 – 3,000 cc), other fuel (jet fuel, kerosene, engine oil),
acrylonitrile-butadiene rubber, and flat-rolled steel products.
Table 2: ROK’s Export to Malaysia by Major Product
(Unit: US$ million, %)
Rank Hs code Commodity
2009 2010
Value Inc. Rate Value Inc. RateMarket
Share
Total 4,325 -25.4 6,115 41.4 100.0
1 85 Electrical machinery and equipment and parts thereof
1,280 -38.6 1,422 11.1 23.3
2 90 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus, parts and accessories thereof
8 80 Tin and articles thereof 111 -27.8 190 71.0 2.0
9 90 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus, parts and accessories thereof
91 -43.2 183 101.4 1.9
10 38 Miscellaneous chemical products 130 -33.4 172 32.8 1.8
Note: Ranking and market share were based on value in 2010.% indicates change from the corresponding period of previous year.