Oh Young-il, a senior research fellow at the LG Economic Research Institute warned in a recent report that Korean household appliance makers could lose market share in Russia to Chinese and European rivals unless they act now.
Korea's exports to Russia have recorded yearly growth that ranges from 60 percent to 80 percent since 2000, but the rate dropped to 40 percent last year.
Mr. Oh, a Russia specialist, pointed out that Korea exported household appliances worth U.S. $330 million to Russia, whose population is 150 million, last year, while it exported $1.5 billion worth of household products to Finland, whose population is only 5 million. That is because Korea sells products to Russia through Finland, Germany, and the Netherlands in order to avoid high tariffs of 15 percent.
"About 40 to 50 percent of household appliances sold in Russia are through this indirect way," said Mr. Oh.
But he said that Russia is aiming making their customs policies more transparent to enter the World Trade Organization, and so it will be more difficult to export products in this manner.
"If Korea stays with the current method of exports, it could lose position in this fast growing market," Mr. Oh said.
In addition, foreign rivals, including BSH Bosch und Siemens Hausgerate of Germany and Electrolux of Sweden, which are building local production lines criticize such indirect exports.
While Korean products are very popular in Russia -- Samsung and LG products are said to dominate nearly half of the market, generating $4 billion in sales last year -- as of April only LG Electronics has begun building a plant near Moscow to make televisions, washing machines, and refrigerators.
"To keep market share in Russia, Korean manufacturers should build local companies and focus on high-end products," Mr. Oh said. (JoongAng Daily)
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