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10 Emerging Markets to Watch

SOUTH KOREA

Growth is slow at only 2 percent, but South Korea provides a dynamic technology hub, brimming companies in IT, chemicals and auto parts

A highly developed, stable, democratic republic with powers shared between the president and the legislature, South Korea is "one of America's closest allies and greatest friends," as President Barack Obama has put it. Korean is the official language, but English is spoken widely. The country has a population of about 49 million. Despite GDP growth of only 2 percent in 2012 to about $1.2 trillion, the nearly 100,000-square-mile country remains a preferred destination for foreign investment. By the end of 2012, foreign shareholders owned nearly 35 percent of the stocks traded on the Korean Stock Exchange.

Opportunity

The country is a technology hub, with information technology, chemicals, automotive parts, logistics and other sectors concentrated in the region. In a 2013 statement, the U.S. Bureau of Economic and Business Affairs called South Korea a "high technology manufacturing powerhouse." The Korea-U.S. Free Trade Agreement, which went into effect in March 2012, means that U.S. investors, with few exceptions, will be treated the same as South Korean investors when working on deals in the country. The agreement establishes a legal framework around establishing, acquiring and operating investments in South Korea.

Challenges

Before South Korea's December 2012 elections, foreign and domestic business faced increased regulatory scrutiny. The country's president, Park Geun-hye, reportedly plans to increase support for small and medium-sized businesses, which could have an impact on foreign investments and investors. The country's growth is also expected to remain only moderate because of its already developed economy, aging population and inflexible labor markets.

Notable Deals

South Korea, between 2012 and the first quarter of 2013, has hosted many technology transactions.

In May, Philadelphia-based specialty chemical company Chemtura Corp. (NYSE: CHMT) grabbed full control of South Korean chemical company DayStar Materials LLC, which it started as a joint venture in 2011. Terms of the deal weren't disclosed. Craig Rogerson (pictured), CEO of Chemtura, said that DayStar would be "uniquely positioned to meet the high-purity metal organic precursor supply requirements of LED chip manufacturers throughout Asia," a market that is "growing at a staggering rate."

"Our subsequent acquisition of 100 percent of the venture places us geographically in the midst of the light-emitting diode (LED) market that is growing at a significant rate," says Chemtura spokesperson John Gustavsen.

Chemtura acquired sole ownership of DayStar to establish fully-integrated manufacturing, quality, service and distribution capabilities for DayStar's portfolio of electronic-grade products, according to Gustavsen. The company's electronic-grade trialkyl products are used to make chemicals for LED goods.

"It is much better for these customers and for us to supply domestically into our fastest growing markets," Gustavsen says, of Chemtura's expansion.

The country was also host to five software deals with U.S. companies. In February, Bundang-gu, South Korea-based Weebzen Inc., bought Gala-Net Inc., a Sunnyvale, Calif., online gaming software developer, for $17.5 million. In October, 3D Systems Corp., headquartered in Rock Hill, S.C., merged with Inus Technology Inc., a Seoul-based software developer, in a deal valued at $35 million.

Also in October, Daegu, Korea-based KOG Corp. bought the remaining stake it did not already own of Kill3rCombo, an online gaming software developer headquartered in Irvine, Calif. In June 2012, Seoul-based UBCare Co. Ltd. bought an interest in PlatinumMD, a health care software developer headquartered in Santa Ana, Calif., for $3.4 million. And in May 2012, South Korea-based I & Eye Software Inc. paid an undisclosed amount for NFA Group Inc., a digital rights-management software developer based in Austin, Texas. Other participants in technology transactions in the country included PS Tech Co. Ltd., LG Electronics Inc., Sam Dong Co. Ltd. and MagnaChip Semiconductor Corp.

Future

The chemicals industry, including the market for light-emitting diode components, is expected to see continued growth. "These markets for our customers are growing very quickly, particularly in South Korea and elsewhere in Asia, which will drive increased demand for our metal organic products," says Gustavsen.