By Park Sang-soo
SEOUL, Aug. 31 (Yonhap) -- A trade pact with Peru is expected to help South Korean companies accelerate their inroads into the South American country and gain greater access to resource development projects there, experts said Tuesday.
South Korea and Peru agreed Monday to eliminate or cut tariffs on goods within 10 years after the deal takes effect. Both sides expect the accord to be signed in November of this year.
Peru marks the second South American country with which South Korea has sealed such a trade pact. In April 2003, South Korea signed a free trade agreement (FTA) with Chile, Seoul's first free trade partner.
"The deal will help boost overall competitiveness of Korean goods in the South American market," said an official at the Federation of Korean Industries (FKI), South Korea's largest business lobby. "It will also help South Korea gain access to energy development projects," he said.
The Korea Trade-Investment Promotion Agency (KOTRA), the country's trade promotion agency, said exports of autos, heavy machinery, TVs, computers and others whose tariff rates are up to 17 percent are expected to increase sharply after the deal comes into effect.
Currently, South Korean automakers, led by Hyundai Motor Co., claim 23 percent of the Peruvian auto market. The free trade deal will help boost the market share to more than 30 percent, the trade agency said.
Tariffs on South Korean autos with engine displacements of 3,000 cc or more will be abolished right after the deal takes effect, and tariffs on South Korean automobiles with an engine capacity of less than 3,000 cc will be scrapped in five years, according to the agreement.
"The free trade deal will help more South Korean companies have a chance of making inroads into the market in advance, outpacing their rivals," said an official at KOTRA.
Experts also said the free trade deal may help South Korea secure stable supplies of energy resources and accelerate its move to develop resources in the country.
Peru holds roughly a third of the world's key resources such as zinc. South Korea's annual imports of key resources such as copper amount to about US$900 million.
"South Korea will be able to increase its investment in resources development projects in Peru," the KOTRA official said.
Nine South Korean companies, led by SK Energy Co., are already involved in resource development projects in Peru.
Last year, the state-run Korea National Oil Corp. (KNOC), bought a 50 percent stake in a U.S.-owned Peruvian energy company for $450 million, increasing its presence in resource-rich Latin America.
"As of last year, South Korean firms' investment in oil development projects in Peru amount to roughly $800 million," said an official at the commerce ministry. "The free trade deal will help increase bilateral cooperation in resource developments as well down the road."
SK Energy Co., South Korea's largest refiner, also began mass production of liquefied natural gas (LNG) at a plant in Peru this year.
The plant has an annual production capacity of 4.4 million tons of LNG, which is equivalent to two months' worth of consumption in South Korea, according to the refiner.
SK Energy owns a 20 percent stake in the LNG plant, while U.S. energy firm Hunt Oil Co. holds a 50 percent stake.
The South Korean company has been conducting the exploration of oil and gas in Peru since 1996, holding its stakes in four gas and oil fields.
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