2. Logistics & Distribution Korea Where Success Knows No Limits 1. Status of the Global Logistics Industry3 2. Status of Korea’s Logistics Industry4 3. Competitiveness by Industry and Type5 4. Government Policies7 5. Overview of Foreign Direct Investment9 6. Success Cases12 Index

3. Status of the Global Logistics Industry Overview of the global logistics industry  Transport Intelligence estimates that the global logistics market amounted to EUR 981 billion in 2011, with an expected CAGR of 2.4-3.0% over the following five years.  The market is expected to grow significantly, to be valued at USD 8.1 trillion in 2020. 3 Ti, “Global Contract Logistics 2012” Global trade breakdown by region

4. Status of Korea’s Logistics Industry Overview of Korea’s logistics industry 4 Source: Statistics Korea, The Bank of Korea (2013)

5. Competitiveness by Industry and Type Sustainable increase in competitiveness  Korea ranked 25th (3.52 points) in 2007, 23rd (3.64) in 2010, 21st (3.70) in 2012 and 21st (3.67) in 2014, narrowing its gap with advanced countries in the logistics market and enhancing its competitiveness to a certain extent. Korean logistics industry’s ranking in terms of the World Bank LPI World Bank, “Logistics Performance Index,” http://lpi.worldbank.org/ 5 Rankin g

6. 6 Incheon – Best airport (Incheon Intl. Airport) worldwide – Strong intermodal logistics – 3rd largest port in Korea – Large scale rear market Ulsan – 4th biggest liquid cargo port worldwide – Oil hub of Northeast Asia (~2020) Pyeongtaek – 4th largest container port in Korea – Largest car exporting port in Korea Yeosu Gwangyang – 2nd largest container port in Korea – Specialize in cargo shipping to China – Steel & oil cluster Busan – 6th biggest container port worldwide – Specialize in transshipment cargo – Hub port of Northeast Asia Competitiveness by Industry and Type Korea’s major logistics infrastructure

7. Government Policies Policy incentives and related laws 7 7 01 Free Trade Zone Companies investing in free trade zones are eligible for various incentives under the Foreign Investment Promotion Act. - Number of necessary documents for export/import procedures, required dates and container fee are relatively low 02 Free Economic Zone Foreign-invested companies in free economic zones are granted the “most-favored status” in accordance with the Special Act on Designation and Management of Free Economic Zones and are entitled to incentives available in special economic zones, such as free trade zones and foreign investment zones. Industries restricted for foreign investment In the coastal water passenger and cargo transportation segments, where foreign investment is restricted, foreign investment is allowed in the inter-Korean passenger and cargo transport businesses only when the investment is made in partnership with South Korean companies and the foreign equity ratio is less than 50%. In the air transportation segment, international, domestic and small air transport are open to foreign investment when the foreign equity ratio is less than 50%. 03

8. Government Policies Incheon Free Economic Zone 8 Key logistics-related projects period

9. Overview of Foreign Direct Investment Status of foreign direct investment 9 2014 Logistics & Distribution Multimodal transport Cargo transportation Warehousing & storage Terminal operation Comprehensive logistics service Main Investment types

10. Overview of Foreign Direct Investment Reasons to enter the Korean logistics market 10 A competitive advantage in global networks Large quantity of transported goods via joint-entry with global shippers Full financial support by parent companies Successful cooperation with Korean partners

11. Overview of Foreign Direct Investment Overview of investment attraction 11 Logistics Port & Shipping  Numerous logistics companies from around the world are operating in Korea.  Hutchison, Dubai Ports World and Port of Singapore are operating port terminals.  Over 100 shipping companies are calling in our ports.

12. Success Cases Success cases by type 12 Detergent, hair loss products, hair remover - European household products are shipped to Japan after inspection and labeling at the Busan Port. - Raw materials are produced in Japan and processed at the Busan Port to be reshipped to Japan. Cost savings worth KRW 200,000 - 300,000 per TEU. Car knock-down case - Production in Korea and Japan, knockdown part kits in Busan, Korea, assembly in Russia - 200% lower tariff compared to finished-car exports, cost savings of KRW 600,000, capacity per TEU increase from two to three cars Designer chair (USA) assembly production - Furniture imports from the USA and Europe or materials made in China, Korea and Japan are assembled at the Busan Port before being shipped to Japan. - 20 - 30% cost cut per TEU (low labor expenses and materials costs) Turkey ISKO’s textile export to Levi's - Turkish textiles are warehoused at the Busan Port to be shipped to the USA and China, which saves time and inventory costs.

13. Success Cases Logistical Model of Company B 13  Background – Increased import of fresh fruits to Asia – Individual system of each country → High logistical cost – Need for a cutting-edge logistical system & hygiene & safety – Company B’s know-how about hygiene & safety + Busan port’s location → An Asian hub port of fresh fruits Refrigeration Classification Packaging Branding May, 2013: Completion of investment (USD 13 mn. ） Busan Port →Manufacturing Logistical Hub Logistical model: Trans-shipment of fresh fruits

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