SINGAPORE - While South Korea might be more famed for its food, culture and electronic products, it also has some of the the world's busiest ports, and Singapore firms have taken note.
The country's wharves offer a host of opportunities to local logistics companies, said Mr Damon Ghang, a director at the Korea Trade-Investment Promotion Agency.
"The logistics market in Korea is somewhat under-developed compared with other developed countries... Korea is located in the middle of North-east Asia and we have a sizeable market," he said.
South Korea's logistics industry generated about US$47 billion (S$58.6 billion) last year, growing 5.5 per cent over the preceding year.
A new shipping lane that will open with the retreat of ice in the Arctic Ocean will attract more traffic and enhance the country's status as a hub for the North-east Asian region, Mr Ghang added.
The new route will be 7,000km shorter than the route via the Suez Canal, and will reduce travelling time between China and Europe by an average of 11 days.
"Instead of focusing only on volumes, however, we hope to focus more on value-added processes, like combining business clusters together and providing a whole mix of maritime services," said Mr Ghang, who spoke to The Straits Times on the sidelines of an event held last month in Seoul for foreign investors.
He highlighted two of South Korea's major ports, Busan and Incheon.
Busan, which handles more than half of South Korea's total international cargo, is the world's fifth-largest container port by volume. It also has an annex, Busan New Port.
Incheon is a transport hub with a port, international passenger terminal and airport.
Logistics companies Mapletree Logistics and Freight Links Express are among the Singapore firms that already have a presence in South Korea, said Mr Ghang.
Mapletree declined comment for this report while Freight Links Express could not be reached at the time of publication.
Despite the opportunities available, the South Korean market is dominated by domestic firms, which can be an imposing barrier to setting up shop there, Singapore logistics companies told The Straits Times.
"Apart from high labour and land costs, a major challenge is that traditionally, Korean companies are more used to working among themselves than partnering with foreign businesses," said a spokesman for YCH Group.
The company, which began operations in South Korea in 2009, has three logistic facilities operating in Seoul, employing more than 50 people.
"Fortunately, the South Korean government has been showing a lot of support for foreign businesses investing in the country... Korean companies are also realising that having foreign partners who can bring a different skill set, network or industry contacts, can also be strategic for growth," said YCH's spokesman.
Yang Kee Logistics is working with a partner in South Korea to establish a presence there, said a company spokesman. The firm is keen to provide warehousing services in Busan New Port, though the project has been delayed due to "government changes in zoning and policies".
Foreign companies face strong competition from entrenched domestic firms while large Korean conglomerates usually have their own in-house logistics arm. Global logistics companies like DHL, Schenker and UPS are also fighting for a slice of the pie.
"There is a degree of market saturation in Korea, and the problem is exacerbated by nationalism - preference to deal with local companies - and the strength of the conglomerates," said Yang Kee's spokesman.
Mr Ghang said the South Korean government is keen to draw more investors into the industry, and will provide perks like tax rebates and help with finding local partners.
"Conglomerate domination can be a barrier for foreign companies, but the government is keen to draw more foreign investment into the country and will assist with forming foreign-domestic joint ventures," he added.
chiaym@sph.com.sg
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