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Working Paper Abstract

An Assessment of the South Korean Market for Value-Added Wood Products

Rosemarie Braden, Bob Tichy. (51 pp)

The South Korean (Korea) market for wood frame housing and building materials has gained more attention from US manufacturers and exporters in recent years. From the end of the Korean War until the recent Asian economic crisis, the Korean economy demonstrated strong growth, making it the eleventh leading economy in the world. Rising consumer incomes have enabled more families to purchase single-family homes. Within this sector, wood frame homes are becoming more prevalent. The Korean government has almost reached its goal of providing a 100% housing supply. The Ministry of Construction and Transportation (MOCT) is redirecting its previous mission to focus more attention on building and promoting higher quality housing and more aesthetically pleasing living environments. As such, attention to wood frame housing as an alternative to high-rise concrete construction is increasing.

Despite the Korean governmentÕs activities to allow greater access to its consumer markets, US exporters still face many challenges. Some of these obstacles are specific to wood construction, such as inadequate building codes and lack of technical training. Other obstacles are more generic, including limited information about the import and distribution process, limited port facilities, and domination in the housing sector by concrete construction. Few market reports regarding the wood frame housing industry exist; many that exist are outdated. In order for US exporters to improve their competitiveness in this market they must develop a better understanding of the residential construction industry, business practices, and consumer and government perceptions regarding wood frame housing in Korea. The US wood products industry is also in need of information regarding building codes and safety and testing requirements for wooden building materials as a means to encourage the MOCT to modify Korean building codes to accept wood as a safe building material.

The Asian economic crisis has had a profound impact on consumption of luxury goods, particularly wood frame homes and building materials. The Korean economy suffered a loss in investor confidence as a series of corporate bankruptcies occurred and the accumulation of bad loans revealed unstable business practices among several of the country's largest corporations and lending organizations. Consequently, domestic production and consumption declined, unemployment increased, and the overall health of the economy declined. The Korean won devalued against the US dollar, causing the price of imported goods to double. Industry experts estimate that the economy will begin to recover within 2-4 years. Therefore, this report has been written in light of this assumption and describes the wood products industry for the most part during its growth phase, which immediately preceded the Asian economic crisis.

This report is the result of a market research project conducted in Korea from February 21-March 6, 1998. Two researchers traveled to Korea and interviewed builders, importers, and members of academia involved in the wood housing construction sector to learn about tariff and non-tariff barriers to wood frame housing and wood construction materials. The researchers also investigated the prevailing building codes related to wood frame housing and future market opportunities. This report offers background information about the Korean market for wood products, the building construction sector, and the environment for foreign businesses, in addition to suggestions for approaching this market.

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