FTA With M. East to Raise GDP by 0.5%
By Yoon Ja-young
Staff Reporter
A free trade agreement (FTA) with Gulf Cooperation Council (GCC) will pull up the gross domestic product (GDP) by 0.54 percent, a recent report showed.
``GDP is expected to grow by 0.54 percent with the Korea-GCC FTA, when considering the capital accumulation effect,'' said Park Bok-yeong, head of the Middle East and Africa team at the Korea Institute for International Economic Policy, at a public hearing on the accord, Tuesday.
The GCC is comprised of six countries around the Persian Gulf ― Saudi Arabia, Kuwait, Qatar, Bahrain, the United Arab Emirates and Oman.
Park estimates the accord will create 8,384 jobs, expand annual exports to the region by 4.9 percent or $260 million and imports to Korea by 2.4 percent, or $700 million.
The accord will increase Korea's exports to the region in virtually all categories of industries as the GCC countries have little competitiveness in the manufacturing sector, according to Park. He said electric and electronics goods will see the biggest boost in exports, followed by metal, nonmetal, steel, ceramics and textiles.
Currently, crude oil and oil goods take 96.9 percent of total imports from the region. Since the government has been imposing only a 1 percent tariff on the crude oil, the scrapping of tariffs on these following the FTA is not likely to increase imports much, the economist estimated.
Only 2 percent of the total goods in trade are vulnerable even if Korea opens the market to GCC countries, according to Park. They are oil and chemical goods, aluminum goods and some textiles.
``The FTA with the GCC could lure oil money to invest here, strengthen energy security through economic integration, and minimize disadvantages even if other countries sign an accord,'' Park said. The European Union, the United States, Japan, China and India are some of the countries currently discussing free trade agreements with the GCC.
The GCC is Korea's fifth largest trade partner as of 2006.
Korea is noticing its increasing importance as a strategic partner. Korea and the GCC agreed on the need to push for an FTA when President Roh Moo-hyun visited the Middle East last March, and had prior consultations with officials in November.
The presidential transition team also said the Middle East Society, incorporating Korea and 18 Arab countries, will be set up to strengthen energy cooperation