Analysis

GCC and South Korea kick off fresh round of trade talks

October 25, 2022, 12:09 PM

Korea's chief negotiator, Kwon Hye-jin, greets GCC delegates in Seoul on October 24

Negotiations for a free trade agreement resumed in Seoul on Monday
Agenda includes goods and services, investment, digital and IP rights
South Korea’s trade with the GCC totalled $46.6bn in 2020

The sixth round of trade talks between the GCC and South Korea has started in Seoul.

The negotiations began on Monday and are scheduled to run until Friday. The two sides resumed talks on a free trade agreement earlier this year, following a 13-year hiatus.

The agenda for the sixth round includes goods and services, investment, digital trade and intellectual property rights, Saudi Press Agency reported on Tuesday.

The GCC members – the UAE, Saudi Arabia, Bahrain, Kuwait, Oman and Qatar – are key trading partners for South Korea. Trade with the GCC totalled $46.6 billion in 2020, accounting for 78 percent of Seoul’s total trade with the wider Middle East.

South Korea has also increased its reliance on Saudi crude oil, with shipments rising for the third consecutive month in September.

Asia’s third biggest crude importer took 30.65 million barrels of crude from Saudi Arabia in September, up 30.3 percent from a year earlier, said analysts at S&P Global, citing data from the Korea Customs Service.

In the first three quarters, shipments from Saudi Arabia totalled 254.65 million barrels, making up 32.6 percent of the overall refinery feedstock imports.

“South Korean and a slew of other Asian refiners are expected to depend more heavily on Middle Eastern supplies” as European refiners absorb more US, North Sea and West African crudes, according to S&P Global.

Earlier this month, South Korea and Saudi Arabia agreed to strengthen cooperation in hydrogen, entertainment and other fields, said Seoul’s Ministry of Trade, Industry and Energy.

The agreement was reached during a virtual meeting between Lee Chang-yang, Korea’s trade minister, and Khalid Al Falih, the Saudi investment minister.

“The two ministers vowed to upgrade their economic cooperative ties, as the two nations marked the 60th anniversary of their diplomatic relation this year,” the trade ministry said in a statement.

In January, a meeting of the Saudi-Korean Business Forum culminated in 13 investment agreements in areas such as clean energy and manufacturing, smart infrastructure and digitalisation, capacity building, SMEs, healthcare and life sciences. The Public Investment Fund and Aramco also signed a number of deals with leading Korean companies.

The UAE also has strong economic ties with South Korea, with bilateral trade up 19 percent to $1.3bn in the first quarter of 2022, according to Abdulla Saif Al Nuaimi, the Emirates’ ambassador to South Korea.

He told state news agency WAM last month that the UAE-South Korea relationship was enhancing many sectors, including nuclear energy. In 2009, Korea Electric Power Corporation (KEPCO) was awarded the contract to build the UAE’s first nuclear power plant, Barakah.

Korean and UAE flags are flown from the Barakah nuclear power plant. Reactor No 4 is now under construction. Picture: Emirates Nuclear Energy Corporation

Korean companies to build green energy plant in UAE

In June this year, three South Korean companies – KEPCO, Samsung C&T Corporation and Korea Western Power – signed an agreement to build a $1bn green hydrogen and ammonia production plant in the UAE.

The plant will produce up to 200,000 tonnes of green ammonia a year, said their UAE partner Petrolyn Chemie.

South Korean foreign direct investments in the UAE stood at $2bn as of 2019, Al Nuaimi added, while the UAE’s investments in South Korea were $637m as of 2020. More than 200 South Korean companies currently operate in the UAE.

Earlier this month, South Korea and Oman agreed to boost cooperation on energy and other areas to ensure stable supply chains.

In 2021, Oman was the fourth-largest liquefied natural gas supplier to South Korea, accounting for 9.6 percent of Seoul’s total LNG imports.

During the first nine months of this year, bilateral trade reached $4.47bn, already higher than the $3.39bn for the whole of 2021.

South Korea is also one of Qatar’s main LNG buyers and investors. Trade between the two countries exceeded $10bn in 2021.

Latest figures from the Observatory of Economic Complexity showed South Korea exported $45.3m and imported $856m from Kuwait in August, resulting in a negative trade balance of $811m. Exports have increased by 78 percent over the past year while imports rose by 41 percent.

The OEC figures also showed that South Korea exported $19.6m and imported $116m from Bahrain in August, resulting in a negative trade balance of $96.4m. Over the past year, exports rose by just under 10 percent while imports soared by 234 percent, driven by rising demand for minerals.