Enter into Russian Market with EUAU
- KITA suggests expansion measures for Korea-Russia
economic cooperation… development of the Far East and energy cooperation are
It has been argued that a free trade
agreement (FTA) with the Eurasian Economic Union (EAEU) should be hurried in
order to target the Russian market.
EAEU is an economic union launched in
2015, with 5 member countries, including Russia as the main member and Kazakhstan,
Belarus, Kyrgyzstan and Armenia. It has a population of 180 million with a
gross domestic product (GDP) of 1.7 trillion dollars. The region also possesses
20 percent of world’s natural gas reserves, and 15 percent of oil reserves.
According to the "Recent Trends
in Russian Economy and Expansion of Economic Cooperation between Korea and
Russia’ issued by the Institute for International Trade (President, Shin
Seung-kwan) of the Korea International Trade Association on June 19, Russia is
trying to attract investments for the development of the Far East, which
accounts for 36 percent of its territory and it will be a great opportunity for
Korea and Russia also have important interface in
terms of diversification of overseas market and supply and demand of energy
resources. Russia needs to advance into the Asia-Pacific region and reduce its
dependence on resources, and Korea needs to find new markets and secure stable
supply of energy resources. In particular, the recent free trade agreement
negotiations with EAEU, which is underway, could be a win-win opportunity based
on complementary industrial structure between the two countries.
Although EAEU has abundant resources,
it has an economic structure only focusing on primary products and the energy
industry. Therefore, there is a strong demand for fostering high-tech
industries such as bio and IT and participating in global value chain. In
contrast, Korea is actively participating in the global value chain by
exporting technology intensive products such as chemicals and equipment.
However, Korea’s dependency rate on imported energy reaches 95 percent and it
is essential for the country to secure stable supply of resources.
Russia’s economy was stagnated due to
oil price collapse and the sanctions from the western countries but it has been
recovered since last year. The country’s GDP growth in 2017 recorded 1.5
percent in three years and
1.5 ~ 1.8 percent of growth is expected in the next three years.
Russia is responding to Western sanctions from the United
States and the EU with fostering import substitution industries and the recent
rise in oil prices is also favorable for the Russian economy.
Kim Hyun-soo, a researcher at the
Institute for International Trade of the Korea International Trade Association,
said, "As Russia moves the focus of its foreign trade from Europe to Asia
Pacific, there are opportunities for Korean companies." He also stressed,
"Korea need to preempt the Eurasian market ahead of its competitors such
as China and India through a fast-paced free trade pact with EAEU."