Koreans interested in a free trade agreement with the DR

Koreans interested in Pedernales airport and free trade agreement with DR

Un accord de libre-échange permettrait de réduire le prix des véhicules coréens tels que Hyundai et Kia.

Korean culture, with its K-dramas, K-pop and unique cuisine, has become better known in the Dominican Republic in recent years, but Koreans still do not consider this Caribbean country among their preferred tourist destinations. A flight of 18 to 30 hours separates them.

But there is a sector of South Korea to which the Dominican Republic generates special attention: the business sector. And among its objectives is the international airport that the government of Luis Abinader seeks to build in Pedernales and, bilaterally, a free trade agreement that would allow the sale of Hyundai and Kia vehicles at a lower price.

“The Pedernales development plan is a good approach for Korean companies,” says Jaewook Yoo, general manager of Korea Trade-Investment Promotion Agency (Kotra) in Santo Domingo. “If we can, we are honored to be in those development activities.”

The Pedernales, Cabo Rojo Tourism Development Project is conceived to be executed in four phases, over an average of 10 years, and an estimated investment of US$2.245 million, for which the government is seeking investors.

In the first phase, an investment of $1.3 billion is stipulated for the construction of 4,700 hotel rooms, with the goal of increasing them to 12,000 at the end of the project. The government has informed that the first hotels will begin construction in mid-2022.

This first phase also includes the construction of an international airport in southern Pedernales. The government projects that when it has completed its fourth phase, it will receive 963,155 international passengers.

Yoo explains that Korea’s Incheon International Airport handles the third largest amount of air cargo in the world and the fifth largest amount of air passengers. The operator of that terminal, with a Korean consortium, won a new airport construction project in Chinchero, Peru, near the town of Cuzco.

“So the first Korean-made airport is now under construction in Peru. And from that experience, we are trying to expand the technologies to other areas as well,” he says.

“We are waiting for the official bidding,” Yoo says of the project in Pedernales. But he does not rule out that, if they have the opportunity to talk to President Luis Abinader or other high officials, they are open to show them their interest and availability for financing.

FREE TRADE AGREEMENT WOULD BENEFIT VEHICLE PRICES

Last year, the Dominican Republic expressed its willingness to join the free trade agreement between South Korea and Central America, through the Vice Minister of Economic Affairs and International Cooperation, Hugo Francisco Rivera Fernandez, who was representing the country in a visit to that Asian nation.

This treaty between South Korea and Costa Rica, El Salvador, Panama, Honduras and Nicaragua, came into force in March 2021.

Yoo anticipates that both countries are working on it and understands that, probably in June, for the 60th anniversary of diplomatic relations between both states, there could be a statement regarding the official negotiations on the agreement.

The official guarantees that, if the Dominican Republic joins this free trade agreement, the price of Korean vehicles, for example, Hyundai and Kia, which are marketed in the country, would be reduced due to the impact of the agreement on customs costs.

The Dominican vehicle fleet -excluding motorcycles- closed 2021, with 13.1 % (297,272) of vehicles of Korean origin, Hyundai, Kia and Ssanhyong brands, among others, only surpassed by the Japanese who dominated 62.9 % of the pie.

“There will be lower prices, not only for vehicles, but also for maintenance, spare parts, service,” Yoo estimates. “I think they can expect that after the free trade agreement, not only for cars, also for other products.”

KOREANS WANT MORE CONSUMPTION OF THEIR PRODUCTS

Diplomatic relations between the Dominican Republic and South Korea began in 1962 and will be 60 years old in 2022.

It was in 1980 when the embassy of that Asian country was opened in Santo Domingo. A year before, the trade of products between the two countries was approximately 4 million dollars. In the last 40 years the amount has increased, and by 2021 it was US$403 million, reports Yoo. In that year, Korea exported US$311 million to the Dominican Republic and Quisqueya US$92 million to Korea.

Korean migrants began to arrive in the Dominican Republic at the end of the 1980s and beginning of the 1990s, among these businessmen who were looking for a new market in the face of the economic crisis in their nation. The businessmen opted at that time to invest in the textile sector, due to the country’s proximity to the United States market and cheap labor. Investments then diversified to other branches, such as energy, cosmetics and consumer products, and technology.

Yoo points out that in 2006, following a visit by then President Leonel Fernández to Korea, both states agreed to transfer information technology from Korea to the Dominican Republic. Thus, the Asian nation provided US$23 million to modernize the Dominican Customs service and also the know-how of its engineers. With this cooperation, Yoo indicates that the customs processing time was reduced from two days to two hours.

He adds that, by 2021, the Korean company LG H&H invested US$10 million to acquire a sanitary products manufacturing plant in the Piisa Free Zone Park, in Haina, San Cristóbal.

That year, Posco E&C, one of the Korean companies leading the construction sector in engineering, won a project with its partner for the construction of a natural gas terminal in Boca Chica.

Netflix productions have also contributed to the boost of Korean entertainment in the West and, in the process, the country and its culture. “Recently, a lot of Korean culture is spreading in Latin America, even in the Dominican Republic,” says Yoo. “And it basically resulted in increased demand for Korean consumer goods, not just Korean music and dramas, snacks, Korean cosmetics and all consumer goods. So we and Korean companies see that here is the potential for Korean consumer goods to expand their market.”

The official comments that large retail chains in the Dominican Republic ask them what kind of Korean products they have available. “Previously, Korean food and goods from Korea were only sent to Koreans established here, which is about 500 people. But now many Dominicans like to buy Korean food,” says Yoo. And that preference is also motivating companies to expand the consumer market.

Yoo points out that previously the Dominican Republic was, for Koreans, a place to provide cheap labor. “Korean companies were looking to reduce the cost of manufacturing in the Dominican Republic, but not anymore,” he says. He indicates that the level of productivity is good and so is the free zone and investment system.

“They need to install manufacturing facilities close to the U.S. market, so, in that sense, the Dominican Republic provides a very good alternative. Logistically the Dominican Republic is very close to the United States and has very good relations with the United States, so there are no risks concerning political issues,” he notes.

He points out that Korean companies have preferred the Mexican market to set up in. In Mexico there is a Kia vehicle production plant in the Pesqueria area in Monterrey, Nuevo Leon. “But as more companies go there, prices increase and the labor force is limited”, reflects the official.

He indicates that, at the automotive level, the Dominican Republic is not an ideal destination for the assembly of vehicles, due to the fact that the local market is not so large and exports would be more expensive because they would have to be made on ships, but it offers attractive opportunities for Korean businessmen to invest.

He lists as the first, the opportunity to establish a new regional value chain to access the U.S. and European markets, due to the geographic proximity and political stability. Second, infrastructure development projects, mainly in information and communication technologies and energy. And third, the growing consumer demand for new products and culture in the domestic market.

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