KITA News and Reports
  • Enter into Russian Market with EUAU FTA
    2018-06-25

    Enter into Russian Market with EUAU FTA

     

    - KITA suggests expansion measures for Korea-Russia economic cooperation… development of the Far East and energy cooperation are important -

     

    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 Korean companies.

     

    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."

     

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