Market Overview
Water and Wastewater
According to the Ministry of Environment of South Korea, in 2018, the water and wastewater treatment market was worth US $26,785 million. Korea’s clean and wastewater sectors are well-established and highly saturated. Korea’s water supply rate is over 99.3%, and the penetration rate of sewage is 93.9%. Since most of the infrastructure has been built, the biggest market demand is maintenance-related technology and services.
Solid Waste Management
In 2018, the Korean waste management market was worth US $23,552 million. Korea boasts one of the highest global rates of recycling waste collection, which was 89.3% in 2019. The high recycling rate is driven by the unique Korean garbage collection system. It requires residents and businesses to separate wastes and collect them according to papers, plastics, metals, and the rest. Unfortunately, recycling results in low profit margins, where mainly small companies participate in this system with the support of government subsidies. Private enterprises handle 60% of the household wastes in Korea, whereas local governments handle the most of wastes in developed countries such as Germany and Japan. In 2014, 81% of the household wastes, excluding those sorted and collected for recycling, were combustible. Since Korea’s land area is small, and space is limited, the Korean government is actively seeking to reduce the amount of waste going into the landfill. Therefore, the Korean government prefers to incinerate waste before sending it to landfill. Korea has a unique waste management system and is based upon specific technologies developed in Korea.
Air Pollution Control
In 2018, the air pollution control market in Korea was worth US $5,152 million. According to the World Health Organization (WHO), fine dust, or particulate matter, in the air is a serious health threat in Korea, as it contains nitrates, black carbon, and mineral dust that can penetrate the cardiovascular system if inhaled. Yonhap News reports that in 2019, South Korea recorded the worst air quality among the 35 richest countries.
The South Korean air pollution control market is growing every year. In 2018, the market accounted for 5.7% of the total environmental technology and engineering sector. The air pollution control equipment sector consists of sales of goods, services, and testing/analysis.
The government monitors and regulates emissions of air pollutants and hazardous air substances under the Clean Air Conservation Act. In May 2019, Korea announced a revised bill with more strict guidelines, where emission standards were strengthened by 30%. Additionally, the revised bill set new standards for previously unregulated substances. As of 2020, South Korea enforces regulatory limits on 11 air pollutants and 32 hazardous air substances, which is an increase of 14 hazardous air substances from the previous bill.
Korea’s 60 coal-fired plants are the main sources of air pollution. These plants accounted for 37% of the country’s total power generation in 2020. The country has the highest share of the world’s super and ultra-super critical power plants in operation. The government is taking measures to retrofit the plants with carbon dioxide capture and storage, selective catalytic reduction, and flue gas desulfurization systems. In fact, in 2016, even though Korea’s coal‐fired power plants were relatively modern and large, with newer steam parameters, the Trade Minister announced further air pollution control measures and the closure of ten of the 30-year-old coal-fired power plants by 2025. In addition, the government plans to close all the remining coal-fired power plants by 2050 to achieve carbon neutrality. Also, by 2024, outdoor coal storage facilities will be replaced with indoor storage facilities.
In 2018, the government passed the enforcement decree of tightening air quality guidelines for fine dust. Under the modified rules, the standards for particulate matter were adjusted to match the standards of Japan and the United States. The government also plans to modify enforcement rules under the Clean Air Conservation Act to strengthen the standards for fine dust watch and warning systems.
Carbon Capture Utilization and Storage
At this time, the market value for carbon capture utilization and storage is not clear because most of the related technologies are not yet commercialized. However, analysts forecast that the market will grow as the Korean government enacts efforts and targets to achieve carbon neutrality by 2050. On June 15, 2021, the Ministry of Science and Information and Communications Technology announced a carbon capture utilization research and design innovation roadmap plan. The plan focuses on the goal of achieving carbon neutrality by securing 14 commercial carbon capture utilization products by 2030 and price competitiveness at the existing market price level by 2040.
Market Opportunities
The U.S. is considered a global leader in many environmental technologies, and companies with competitive technologies and services have the potential to penetrate the Korean market. There are opportunities in the air pollution technology, environmental consultancy market, and carbon capture utilization in Korea. However, the Korean government is interested in developing its own technologies instead of adopting foreign technologies; therefore, U.S. companies should consider co-developing such technologies with Korean research institutes. To learn more about areas of possible collaboration, U.S. companies should participate in related conferences and network with Korean academia and research institutes.
Sub-Sector Best Prospects
- Continuous emissions monitoring systems
- Dry sorbent injection technologies
- FGD systems
- Activated carbon injection technologies
- Volatile Organic Compound (VOC) control
- Dioxin abatement
- Pollution abatement technologies for the automobile and oil refinery industries
- Ambient air quality monitoring equipment
- Source emissions measurement technologies
- Analytical and laboratory testing goods and services
- Fuel vapor control systems
- H13 or above high-end air purifiers (optionally with carbon filters)
- Carbon capture utilization and storage (CCUS)
Competitive Landscape/Market Entry
Competitors
Korea’s research and design spending is among the top five in the world, as it focuses its efforts on developing its own technologies. Korean products, services, and technologies may not be the most advanced, but they are typically more economical. This sector has a high level of competition and is price sensitive. Currently, most end users prefer price over quality, so U.S. companies often face difficulties in penetrating into the Korean market based on price points. Additionally, Korea often needs customized technologies and products that are better suited for the Korean market. Korea is a relatively small country, so waste treatment facilities in Korea are often smaller than the ones in the U.S. An executive of a Korean wastewater treatment technology company commented that U.S. sewage treatment products are too big for Korean facilities. Korea is a leader in several different industries including OLED, semiconductor, ship building, steel, and others. It is important for Korean companies to develop essential environmental technologies applied to their manufacturing processes within those industries.
Market Entry
To enter the environmental technology market, U.S. suppliers should partner with qualified and capable Korean companies that maintain existing sales networks to serve end-users and are fully aware of the regulatory changes that drive the market. Exhibiting at local environmental trade shows can also be a good platform to explore the market and gain exposure to end-users.
Trade Barriers, Intellectual Property, and Taxes
The original U.S.-Korea Free Trade Agreement (FTA) was implemented on March 15, 2012. As of January 1, 2020, 98.8% of U.S. products enter Korea duty-free. The U.S. Department of Commerce’s FTA Tariff Tool can help U.S. exporters identify the harmonized system number for their products and the associated tariff rates over the next ten years. Korea has a flat 10% Value Added Tax (VAT) on all imports based on the customs value plus duties and domestically manufactured goods. Tariffs and taxes must be paid in Korean Won within 15 days after goods have cleared Customs. Duties are assessed on a Cost-Insurance-Freight (CIF) basis. The main mode of customs evaluation is the transaction value method. Other methods under the World Trade Organization appraisement hierarchy may be used if there are doubts about Korean Customs valuation methods on the stated value.
The Republic of Korea is a member of the World Trade Organization and has signed subsidiary agreements, including the Trade Related Aspects of Intellectual Property (TRIPS) and the Government Procurement Agreement. Korea has been a member of the OECD since December 1996.
In any foreign market, companies should consider several general principles for effective protection of their intellectual property. For more background information, please review Stopfakes.gov for more resources.
For an IPR snapshot of Korea, please follow the link to https://2016.export.gov/southkorea/iprtoolkit/index.asp.
Finance
The Korean financial system is frequently hard-pressed to meet the demands for financing and capital for international commercial transactions. This is related to the mandate that banks hold Bank for International Settlement Reserves (BIS) capital adequacy ratios above 7% and are stricter on loan requirements for small and medium-sized enterprises and independent business owners. Foreign companies in start-up operations with a Korean partner often need to invest financial resources for the joint venture, while their Korean partner makes in-kind investments, such as land or facilities, for their share of equity. Joint-venture companies and foreign firms often work with branches of foreign banks for local-currency financing, although the branches of foreign banks control a small portion of available Korean Won. Sources of Korean Won financing have included domestic commercial banks, regional banks, and specialized banks, including the Korea Development Bank, the National Agricultural Cooperative Federation, the Industrial Bank of Korea, and the Korea Housing Bank. Interest rates in South Korea increased to 0.75% on Aug 26, 2021, compared to a record low of 0.50%.
Most of Korea’s social overhead capital projects are funded through Project Financing. Project Financing is also used for the financing of private sector projects, including real estate development and buyouts of financially troubled companies. Several Korean and foreign banks provide Project Financing and offer venture capital investment programs for social infrastructure projects, private projects, and SMEs in Korea. These banks support companies through direct equity investments, although domestic companies generally have access to local funding as well as to informal and secondary financial markets charging higher interest rates. Debentures are also used as a financing alternate, although they are slightly more expensive than bank financing. Finally, financing in the form of long-term debt is available from the Korea Development Bank but is generally for high priority industries. The state-run Export-Import Bank of Korea (KEXIM) finances overseas projects, where Korean companies participate in a consortium and typically undertake the entire process, from construction to operation of the project.
For the list of major U.S. and local banks in Korea, consult:
http://export.gov/southkorea/usefullinks/majoruskoreanbanks/index.asp
Trade Events
International Exhibition on Environmental Technologies (ENVEX)
http://www.envex.or.kr/eng/main/index.asp
ENVEX is the biggest environmental exhibition in Korea with 250 exhibitors and 43,000 visitors, including 1,100 overseas buyers. Every year, ENVEX introduces new environmental technologies and products to the Korean market. Attendees and exhibitors can take advantage of Biz Matching program that connects buyers and suppliers.
Contact Us
Jinjoo Lee, Commercial Specialist – U.S. Commercial Service Seoul, Korea – Email Jinjoo Lee.
Jinjoo Lee
Jinjoo Lee joined the U.S. Foreign Commercial Service in Seoul, Korea in July 2014. Jinjoo covers the franchising, retail, consumer goods, food processing and packaging, and environmental technology sectors. Her major duties include conducting market analysis, reporting market intelligence, counselling U.S. businesses, supporting trade promotion and trade policy activities, and facilitating export assistance programs.
Jinjoo received her MBA from the IESE Business School in Barcelona, Spain and her B.S. and M.S. degrees in Food Science from the University of California, Davis. She is fluent in English and proficient in Spanish.
