E-Commerce in Korea

Ministry of Commerce, Industry and Energy Republic of Korea

Contents Chapter 1 Introduction Chapter 2 Overview of the Infrastructure

I. Status of Personal Computer Usage

1. Structure of Usage in General 2. Usage by Educational Institutions

II. Internet Infrastructure 1. Number of Websites in the kr Domain 2. Number of Hosts 3. Allocation of IP Addresses 4. Proliferation of Broadband Connections

III. Characteristics of Internet Usage 1. Internet Users 2. Demographics of Internet Usage 3. Internet Access

IV. Internet Access Services 1. Internet Service Providers (ISP) 2. PC Communication Service 3. Web hosting Service Providers (WSP)

V. Mobile Internet 1. Mobile Internet Users 2. Mobile Internet Service

Chapter 3 E-Commerce Market I. Overall Market Trends

II.. Trends by Transaction Type 1. B2C (Business to Consumer) 2. B2B (Business to Business) 3. B2G (Business to Government)

III. E-Commerce of Small and Medium Enterprises Chapter 4 Major E-Commerce Issues and Impediments

I. Major E-Commerce Issues

1. Protection of Privacy 2. Consumer Protection 3. Intellectual Property Rights 4. Security & Certification 5. E-Payment

II. Impediments

Chapter 5 Government Policies

I. Regulatory Framework for Promoting E-Commerce 1. E-Commerce Mediation Committee 2. eTrust & isafe 3. Privacy and Consumer Protection 4. Protection of Intellectual Property Rights 5. Security & Certification 6. E-Payment

II. Government Policies and Initiatives 1. Basic Direction 2. Major Policies and Initiatives

Chapter 6 Related Organizations

Table Contents <Table 1> PC Usage in Korea ------------------------------------------------------3 <Table 2> IT Networks in Schools ------------------------------------------------3 <Table 3> PC Availability for Educational Purposes ----------------------------4 <Table 4> PC Communication Service Subscribers ---------------------------11 <Table 5> Mobile Internet Users -------------------------------------------------12 <Table 6> Mobile Internet Service -----------------------------------------------13 <Table 7> New Entrants into the Mobile Portal Market ----------------------13 <Table 8 > Volume of E-Commerce Market-------------------------------------14 <Table 9> Number of General/Specialty Retailers -----------------------------15 <Table 10> Number of Companies by Transaction Type ---------------------15 <Table 11> Transaction Amount of Internet Shopping Retailers -------------16 <Table 12> Transaction Amount by General/Specialty Retailers ------------16 <Table 13> Transaction Amount by Operation Type --------------------------16 <Table 14> B2B by Operator -----------------------------------------------------18 <Table 15> Volume of B2B by Operator ----------------------------------------18 <Table 16> Volume of B2B by Industry -----------------------------------------19 <Table 17> Volume of B2G -------------------------------------------------------20 <Table 18> Transaction Amount by E-Commerce Players -------------------20 <Table 19> Volume of E-Commerce Purchases by Product Type -----------21 <Table 20> Number of Disputes Field and Resolved --------------------------25 <Table 21> E-Commerce Dispute Mediation -----------------------------------25 <Table 22> Dispute Types ---------------------------------------------------------25 <Table 23> Business Model Patents in Korea ----------------------------------27 <Table 24> Certification Authorities(CAs) in Korea --------------------------28 <Table 25> Korean Certification Market Forecast -----------------------------28 <Table 26> The Ratio of Transaction Amount by Payment Methods -------29 <Table 27> Impediments to B2C -------------------------------------------------30 <Table 28> Impediments to B2B -------------------------------------------------31 <Table 29> Law and Regulations on Consumer Protection ------------------33 <Table 30> E-Business Manpower Supply/Demand --------------------------36 <Table 31> Progress of B2B Network Implementation Support Project ---37 <Table 32> IT Implementation Support to 30,000 SMEs ---------------------38 <Table 33>2002 Major Tasks of E-Commerce Policy -------------------------39 <Table 34> E-Commerce Related Organizations and Contact Numbers ---44

Figure Contents <Figure 1> Number of Websites in the Kr Domain -----------------------------4 <Figure 2> Number of Hosts in Korea by Year (1993-2001) ------------------5 <Figure 3> Subscribers by ISP Service in Korea --------------------------------6 <Figure 4> Number of Internet Users and Access Rate in Korea -------------7 <Figure 5> Internet Access by Gender --------------------------------------------7 <Figure 6> Gender Composition of Internet Users ------------------------------7 <Figure 7> Internet Users by Age -------------------------------------------------8 <Figure 8> Locations for Internet Access ----------------------------------------8 <Figure 9> Internet Usage by Time -----------------------------------------------8 <Figure 10> Frequency of Internet Access ---------------------------------------9 <Figure 11> Purpose of Internet Usage -------------------------------------------9 <Figure 12> Reasons for Dissatisfaction with Surfing Experience ----------10 <Figure 13> Number of ISPs in Korea ------------------------------------------10 <Figure 14> E-Commerce Utilization by SMEs -------------------------------22 <Figure 15> Adoption of E-Commerce -----------------------------------------22 <Figure 16> Management of Users’ Private Information ---------------------23 <Figure 17> Impediments to the Growth of E-Commerce--------------------31

Chapter 1 Introduction The spread of the Internet and Internet-based e-commerce are rapidly changing the paradigm for economic activities of nations and enterprises. The global economy is fast being converted into an e-commerce system, and the size of e-commerce is expected to exceed $7 trillion in 2004, as compared with $430 billion in 2000. In order to compete in a unified global market, businesses all over the world are involved in life-or-death rivalry, and the EU and other nations such as the United States and Japan are engaged in a fierce contest in a bid to take the lead in e-commerce. Governments in developed countries are focusing on establishing infrastructure and improving relevant institutions and eagerly attracting skilled manpower from abroad. Under these circumstances, Korean companies are accelerating their efforts to facilitate e-commerce, while the Korean government is endeavoring to come up with industrial policies central to e-commerce, by establishing the Basic Act on Electronic Commerce in 1999, "Comprehensive Policies for e-Commerce Development" in 2000 and "e-Business Initiative in Korea" in 2001. If the Korean government’s strategies are implemented as planned, e-commerce -- which has been delayed due to absence of cooperation among enterprises and lack of investment capability of small and medium enterprises (SMEs) -- will be disseminated throughout the nation’s entire economy. The size of the e-commerce market after 2003 will be worth over 150 trillion won and some 4.2 trillion-won (0.87% of GDP) added value will be created every year. As a result, Korea is expected to take off as an advanced country in the digital era in which both traditional and new industries will develop in harmony. In this context, this report is designed to examine the possibilities for growth of e-commerce by reviewing the current status of and prospects for e-commerce in Korea. Firstly, the report will examine the e-commerce infrastructure, followed by the status of each e-commerce area, major e-commerce issues, and finally it will examine problems and key policies of the government. E-commerce is expanding in Korea as the number of Internet users increases, thanks to a rise in the distribution of computers and the rapid development of information technology. Also, with B2B flourishing since 2000, e-commerce is projected to grow significantly, both qualitatively and quantitatively. The Internet is being widely disseminated at a rapid pace in Korea thanks to the vastly increased distribution of computers and the growing number of PC communication subscribers since the late 1980s. This reflects Korea’s well-established IT infrastructure and positive government policies supporting the information and communication sector. In particular, broadband networks such as the cable Internet and satellite Internet are growing exponentially, proving that Korea is one of the most advanced countries in terms of establishment of broadband networks (OECD, 2001). Expansion of broadband networks is very significant in that they enable users to gain faster and easier Internet

access to high-quality and high-quantity contents, thereby contributing to the nation becoming an information superpower. Based on this "new economy"-based Internet and knowledge infrastructure, industrial efficiency can be enhanced and various forms of e-commerce facilitated, leading to the creation of new business, strengthening global competitiveness and also raising living standards. While B2C has shown remarkable growth, development of the B2B and B2G sectors has been relatively weak. E-commerce utilization in SMEs, for example, is currently found to be insufficient. However, the B2B sector is expected to improve, due to traditional companies and "dotcom" businesses combining to form strategic alliances between offline companies promoting e-commerce in the traditional industries, and also the reorganization of competitive structures between companies based on the development of a new cooperative business model. In order to facilitate B2B, it is essential to enhance the compatibility of related regulations and offer attractive tax reductions. Moreover, it has been pointed out that it is essential to expand the telecommunications infrastructure and support the informatization of SMEs. In accordance with global legislation related to e-commerce, Korea has established and enforced various Acts and regulations, such as consumer protection and electronic payments. Since enacting the "Comprehensive Policies for e-Commerce Development" in 2000 and the "e-Business Initiative in Korea" in 2001, Korea has been promoting various projects, such as creating infrastructure by establishing and standardizing B2B networks in industries, developing technology, and fostering manpower. Projects on international cooperation for the global B2B market and the expansion of e-commerce in other regions are also being encouraged. Korea is continuing to identify policies and tasks in order to keep up with new changes in the market, with the Korean government, private institutes and research centers participating in the process.

Chapter 2 Overview of the Infrastructure I. Status of Personal Computer Usage 1. Structure of Usage in General As of December 2000, there were 18,615,000 personal computers being used in Korea. Of these, 11,060,000 PCs were used in the home, 5,152,000 by private enterprise, and 2,403,000 by the public sector. The sample group of households in the table below represents residential households (Korea National Statistical Office, National Household Population Survey 2000). The sample groups for private companies and public entities were organizations with five or more employees (Korea National Statistical Office, Basic Survey of Business Entities 2000). The figures for "Others" in the table refer to non-IBM compatible computers (i.e., Macintosh, etc.) <Table 1> PC Usage in Korea (1,000 PCs)

Desktop

Sample Group 486 or

lower Pentium Pentium2Pentium

3 or higher

Notebook Others Total

Number of PCs

Total 1,342 3,388 4,064 7,586 2,014 221 18,615House-holds 14,311,807 973 1,473 2,421 5,522 548 123 11,060

Corporate 362,326 252 1,089 962 1,387 1,395 67 5,152Public 25,314 117 826 681 677 71 31 2,403Source: National Computerization Agency, December 2000

2. Usage by Educational Institutions As of 2000, 10,018 elementary, middle, and high schools in Korea operated their own IT networks. Most schools had broadband access to the Internet via the national information superhighway. Leased lines connected the schools via the District Office of Education to the Municipal/Provincial Offices of Education. There were also schools that were directly linked to the national high-speed network. <Table 2> IT Networks in Schools

No. of Schools 10,018 No. of Schools with Their Own IT Networks Set-Up Rate(%) 100

Elementary School 5,268 Middle School 2,674 School Type High School 2,076

Source: National Computerization Agency, Internet White Paper 2002 In addition, 431,981 PCs were available at over 10,000 schools as teaching/learning aids.

In particular, 340,854 PCs were provided to teachers to improve the PC to teacher ratio from 1:1.4 in late 1999 to 1:1 by the end of 2000. <Table 3> PC Availability for Educational Purposes (No. of PCs)

486 586 Total Elementary School 7,114 228,219 235,333

Middle School 9,981 111,278 121,259 High School 4,859 70,530 75,389

Total 21,954 410,027 431,981 Source: National Computerization Agency, Internet White Paper 2002 II. Internet Infrastructure 1. Number of Websites in the kr Domain In 1993, there were only 612 websites in the kr domain. The number peaked at the end of 2000 at 517,354 and then began to decline. Because of the economic recovery, the number of kr websites has begun to slowly rise again.

[Figure 1] Number of Websites in the Kr Domain,

Source: KRNIC (Korea Network Information Center), April 2002 2. Number of Hosts The number of hosts is widely regarded as a reliable index of the level of Internet usage. In Korea, the number grew from over 460,000 in 1999 to approximately 690,000 in 2001.

[Figure 2] Number of Hosts in Korea by Year (1993-2001), Source: KRNIC, March 2002

3. Allocation of IP Addresses New IP addresses are regularly assigned by APNIC (Asia Pacific Network Information Center). All IP addresses in Korea are of the Class C variety and are allocated to Korean ISPs based on the IPv4 system. As of November 2001, there were 22,985,216 IPv4 addresses in Korea. IPv6 is the next generation 128-bit Internet address system standardized by IETF (Internet Engineering Task Force) in 1996, which superseded the 32-bit IPv4 address system. Thirteen organizations in Korea possessed their own 35-unit IPv6 addresses as of April 2002. 4. The Proliferation of Broadband Connections The Korean government formulated its Basic Informatization Promotion Plan in 1996 to elevate Korea into the "IT Power−eKorea”. The plan is being implemented in phases and is progressing as planned. It will be completed in 2010. In December 2000, Korea succeeded in building a broadband Internet network covering 144 regions around the country two years ahead of schedule. As a result, broadband Internet access, scarcely available just a few years ago, is now being enjoyed by more than 8 million households, more than half of all households in the country. A total of 10,018 elementary, middle, and high schools around the country enjoy free broadband access. An OECD (Organization of Economic Cooperation and Development) report dated October 2001 states that Korea is the most advanced country in the world in terms of broadband Internet network connections. Although Internet access via cable was the most common form of high-speed access until 1999, xDSL service has now become the most widely-used means of access since 2000.

[Figure 3] Subscribers by ISP Service in Korea,

Source: KRNIC, March 2002 III. Characteristics of Internet Usage 1. Internet Users As of December 2001, 24.38 million Koreans (56.6% of the total population) over the age of 7 accessed the Internet at least once a month on average - an increase of 5.34 million from 19.04 million at the end of 2000.

[Figure 4] Number of Internet Users and Access Rate in Korea,

Source: KRNIC, December 2001 2. Demographics of Internet Usage A. Internet Access by Gender As of December 2001, 63% of males and 50.2% of females in Korea accessed the Internet on a regular basis. The growth rate of usage among females was higher, narrowing the gender gap in Internet usage.

[Figure 5] Internet Access by Gender,

Source: KRNIC, December 2001

[Figure 6] Gender Composition of Internet Users,

Source: KRNIC, December 2001 B. Internet Access by Age Group As of the end of 2001, 93.3% of all Koreans between the ages of 7 and 19 used the Internet, making this the most active Internet-user age group. The second most active Internet-user age group was young adults in their 20s at 84.6% usage.

(Unit : 10,000 people)

[Figure 7] Internet Users by Age, Source: KRNIC, December 2001

3. Internet Access

A. Location of Access The home is becoming by far the most preferred location for accessing the Internet. This is most likely due to the increased availability of different types of high-speed service.

(Unit : %)

[Figure 8] Locations for Internet Access,

Source: KRNIC, December 2001 B. Internet Usage Period Since December 2000, the ratio of those who used the Internet for less than two years decreased; while the ratio of those using it for more than two years increased.

(Unit : %)

[Figure 9] Internet Usage by Time, Source: KRNIC, December 2001

C. Access Frequency Over 60% of Internet users report that they surf the Internet almost everyday.

(Unit : %)

[Figure 10] Frequency of Internet Access,

Source: KRNIC, December 2001 D. Purpose of Internet Usage While searching for information was the primary purpose for Internet usage, many Koreans now regard the Internet more as a place to check e-mail, watch a movie, listen to music, or conduct online banking transactions. (Unit : %)

[Figure 11] Purpose of Internet Usage,

Source: KRNIC, December 2001

E. Dissatisfaction with Internet Experience

Major complaints with regard to net surfing were slow speed (56.1%), followed by unreliable access, lack of quality information, privacy infringement, lack of security, and high cost -- in that order.

(Unit : %)

[Figure 12] Reasons for Dissatisfaction with Surfing Experience,

Source: KNP (Korea Netizen Profile), October 2001 IV. Internet Access Service 1. Internet Service Providers (ISP) An NSP (Network Service Provider) provides network lines to ISPs and other large organizations. In Korea, an NSP is not separately categorized but defined as part of ISPs. NSPs in Korea such as Dacom, KT, Korea PSINet, Hanaro Telecom, Thrunet, and GNG are companies that have nationwide backbone networks. An ISP is an organization that receives IP addresses and domain registration service from KRNIC (Korea Network Information Center) to offer leased lines, high-speed Internet access, and other services to organizations and individuals. With 10 ISPs folding before February 2002, there were 92 ISPs as of March 2002.

[Figure 13] Number of ISPs in Korea,

Source: KRNIC, March 2002 2. PC Communication Services PC communication is a form of online service that enable PC users to communicate with each other by building their own networks or in which a PC communication service provider may offer various information services to its subscribers through its own

communications network. Since PC communication service was first offered in Korea in 1986, PC communication has been considered as the absolute means of searching for information online. However, the rapid proliferation of multimedia-based Internet services induced PC communication service providers to gradually cut back their text-based services and shift their attention to the expansion of their web-based service platforms. Moreover, PC communication access service is now being provided free of charge through alliances between PC communication service providers and high-speed Internet service providers. Such partnerships have resulted in increased profits for PC communication service providers through the offering of paid contents, while the partnerships allowed high-speed Internet service providers to increase the number of their subscribers. The number of users of PC communication service rose from about 9 million in 1999 to 16 million as of December 2000. This number is expected to rise further due to the rapid growth in the number of subscribers using various free web-based services, rather than due to the increase in paid-service users. <Table 4> PC Communication Service Subscribers (1,000 people)

Chollian (Dacom)

Hitel (KT)

Nownuri (Nowcom)

Unitel (Samsung

SDS)

Netsgo (SK

Telecom)

Channeli (LG

Internet) Total

1999. 2,165 1,977 1,230 1,927 881 623 8,803Dec

2000. 2,268 2,157 1,308 2,103 969 683 9,488Jun

2000 3,134 3,030 1,634 3,111 1,745 1,001 13,655Oct

2000 3,736 3,424 1,787 3,541 2,182 1,314 15,984Dec 2000 3,999 3,501 1,832 3,650 2,297 1,528 16,807

Source: Internet White Paper 2001(National Computerization Agency) 3. Web Hosting Service Providers (WSP) A WSP maintains websites on behalf of corporations or individuals. It receives domain registration service from KRNIC (Korea Network Information Center) and, in turn, builds websites for individuals or corporations. A WSP also offers services like web content development and web hosting. WSPs in Korea numbered only about 500 at the end of 1998. It rose to over 600 by the end of March 1999, and then sharply increased to around 850 by June 1999. This means that more than 400 companies started up within just a six-month period. V. Mobile Internet Mobile Internet service providers in Korea include the five major mobile phone carriers

and low-speed wireless data service providers such as Airmedia and Intec Telecom. The low-speed wireless data service companies have found it an uphill struggle to compete against the mobile carriers, who offer much higher data transmission speed, capacity, and quality, giving them dominance of the Korean mobile Internet market. 1. Mobile Internet Users Since LG Telecom first launched its mobile Internet service in May 1999, the number of mobile Internet subscribers in Korea surpassed 15 million in December 2000. Although this is an astonishing rate of growth, considering that five years passed before the Internet achieved 16 million users, this figure only represents the actual growth in the number of mobile Internet device users. In other words, active mobile Internet service users represent only 27.4% of the entire user base. When asked their reasons for not using the service, the majority of older users responded that the service was “not necessary" and most users in the younger age bracket responded that the usage charge was too high. Clearly, lower charges and higher transmission speeds are the major prerequisites for creating higher demand for mobile Internet service. (KRNIC, May 2002)

<Table 5> Mobile Internet Users (1,000 people, %) No. of Subscribers Ratio (%)

Total 15,785 100 SK Telecom 4,812 31

Shinsegi Telecom 734 5 KT Freetel 4,713 29 KT n.com 2,141 13

LG Telecom 3,385 22 Source: Ministry of Information and Communication, December 2000

2. Mobile Internet Service WAP and ME are the web browsers of choice for Korean mobile Internet service providers. - WAP: Phone.com has signed commercialization agreements for mobile Internet

protocol with LG Telecom and Shinsegi Telecom. Ericsson is the solution provider for SK Telecom.

- ME: Microsoft is supplying ME equipment to KT Freetel and KTn.com through mobile internet joint business agreements.

Mobile carriers are now aggressively pursuing strategic alliances with companies specializing in Internet content and solutions in order to stimulate demand for mobile Internet service and to offer a wider range of services.

<Table 6> Mobile Internet Service by Korean Mobile Phone Carriers SK Telecom Shinsegi

Telecom KT Freetel KT n.com LG Telecom

Service Name n.Top i-touch017 Persⓝet M-Life EZ-i

Browser WAP (Ericsson)

UP(Phone. com) ME(MS) ME(MS) UP(Phone.

com) Content

Language WML HDML M-HTML S-HTML HDML

Image Format BMP BMP BMP BMP BMP

Service Launch

Dec, 1999 (First)

Feb 2000 (Second)

Dec 1999 Sept 1999

Oct 1999 (First)

Feb 1999 (Second)

May 1999

Source: Korea Internet White Paper 2001 (National Computerization Agency) At the same time, however, mobile phone carriers in Korea intend to forge strategic alliances to go beyond merely offering content and solutions; they are advancing into the mobile portal business themselves. <Table 7> New Entrants into the Mobile Portal Market

Carrier Description

SK Telecom

Provides private wireless home pages to n-Top users. Wireless home page offers not only a venue to introduce the home page owner, but also PIM (Personal Information Management) features including text management and voice mail transmission/reception

LG Telecom

Offers phone page service via “Ez-I,” LG’s own mobile Internet service site.

Mobile Carrier

KT Freetel

Integrated mobile portal service where services from existing Internet portals such as Lycos, Chollian, Daum, Unitel, and Yahoo Korea are converged with KT’s own mobile Internet service.

Lycos Set up Web page for mobile users with “Portal to Go,” mobile Internet development platform from Oracle.

Daum Offers mobile Internet service to check incoming web mails and access community services.

Wireline Internet Portal

Naver Service with “Naver X Mobile,” mobile Internet browser developed by Naver.

Nowcom Runs “Motizen,” a mobile portal site PC Com Service Provider Chollian Runs “Mobile Chollian,” a mobile portal site

Source: Korea Internet White Paper 2001 (National Computerization Agency)

Chapter 3 E-Commerce Market The snowballing proliferation of the Internet and the attendant explosion in e-commerce is rapidly transforming the corporate economic landscape around the world. Riding the crest of this wave, Korea is actively promoting electronic commerce as an integral feature of doing business. Companies are making significant investments in ERP (Enterprise Resource Planning) and Internet-based e-commerce systems. Korean companies have been especially aggressive in leveraging their advanced information technology to enhance their own internal efficiency while utilizing the Internet for IOS (Inter-Organizational Systems) implementation to build efficient and effective relationships in and out of the company. The Korean government is supporting the efforts of the corporate sector by investing extensively in basic communications infrastructure as well as in public dissemination and education on information devices. As a result, e-commerce in Korea is recording vigorous growth as companies and individuals alike are taking advantage of the new business paradigm. In this chapter, we will take a brief look at the trends in Korea’s e-commerce market and examine its status according to transaction type. I. Overall Market Trends The total volume of e-commerce in Korea increased from $47.93 billion in 2000 to $99.15 billion in 2001, up more than 250% in just one year. B2B has emerged as the major type of e-commerce and the growth of B2C has been particularly remarkable. Thanks to the increasing public awareness of the benefits of e-commerce and government policies to facilitate e-commerce, this trend is expected to continue. <Table 8 > Volume of E-Commerce Market

(US$ Billion, %)

2000 Ratio

2001 Ratio

Growth rate

B2C 0.61 1.3 2.15 2.2 252.5

B2B 43.61 91.0 90.79 91.6 108.2 B2G N.A. - 5.86 5.9 - Other 3.71 7.7 0.35 0.3 - 960 Total 47.93 100.0 99.15 100.0 106.6

Source : Korea National Statistical Office, June 2002 II. Trends by Transaction Types 1. B2C (Business to Consumer)

A. B2C e-Commerce in Korea 1) Size of Internet Retailers in Korea Both general and specialty retailers are involved in e-commerce operations, with most specializing in retail sales (84.8%). A total of 1,529 companies offer both online and offline sales operations, and 747 operate only online sales. <Table 9> Number of General/Specialty Retailers (No. of Companies, %)

2001 2002

Feb. Feb.

Month on Month

Variance

Year on Year Variance

% Dec. Jan.

% Grow

th rate

Growth rate

Total 1,867 100.0 2,166 2,212 2,276 100.0 64 2.9 409 21.9General retailer 278 14,9 320 326 347 15.2 21 6.4 69 24.8

Specialized Retailer 1,589 85.1 1,846 1,886 1,929 84.8 43 2.3 340 21.4

Source: Korea National Statistical Office, April 2002. <Table 10> Number of Companies by Transaction Type (No. of Companies, %)

2001 2002

Feb. Feb.

Month-on- Month Variance

Year-on-Year Variance

% Dec. Jan.

% Grow

th rate

Growth rate

Total 1,867 100.0 2,166 2,212 2,276 100.0 64 2.9 409 21.9Online 586 31.4 690 720 747 32.8 27 3.8 161 27.5

On + Offline 1,281 68.6 1,476 1,492 1,529 67.2 37 2.5 248 19.4Source: Korea National Statistical Office, April 2002. 2) Sales Volume In February 2002, Internet shopping retailers recorded US$337.1 million in sales, an increase of US$2.9 million (0.9%) over the previous month. B2C accounted for US$278.5 million (82.6%), an increase of US$3.6 million over the previous month. Table 10 below shows sales volumes by general and specialty retailers and the volume by type of transaction. In February 2002, general retailers accounted for 73.5% of all Internet sales, nearly three times the 26.5% share of specialty retailers. Those companies that operated both online and offline sales recorded the lion’s share of the sales volume

(63.1%) compared to those with only an online presence (36.9%). <Table 11> Transaction Amount of Internet Shopping Retailers

(US$ Million, %) 2001 2002

Feb. Feb.

Month on Month

Variance

Year on Year Variance

% Dec. Jan.

% Growth rate

Growth rate

Transactio

n Amount

182.3 100.0 295.0 334.2 337.1 100.0 2.9 0.9 154.8 84.9

B2C 136.2 74.7 246.2 274.9 278.5 82.6 3.6 1.3 142.3 104.5Source: Korea National Statistical Office, April 2002. <Table 12> Transaction Amount by General/Specialty Retailers (US$ Million, %)

2001 2002

Feb. Feb.

Month on Month

Variance

Year on Year Variance

% Dec. Jan.

% Growth rate Growt

h rateTotal 182.3 100.0 295.0 334.2 337.1 100.0 2.9 0.9 154.8 84.9Gen.

Retailer 121.8 66.8 200.0 234.2 247.8 73.5 13.6 5.8 126.0 103.5

Spec. Retailer 60.5 33.2 95.0 100.0 89.3 26.5 -10.7 -10.7 28.8 47.6

Source: Korea National Statistical Office, April 2002 <Table 13> Transaction Amount by Operation Type (US$ Million, %)

2001 2002

Feb. Feb.

Month on Month

Variance

Year on Year Variance

% Dec. Jan.

% %

Chan-ge

%

Chan-ge

Total 182.3 100.0 295.0 334.2 337.1 100.0 2.9 0.9 154.8 84.9

Online 74.2 40.7 110.9 116.3 124.3 36.9 8.0 6.9 50.1 67.4

On/ Offline 108.1 59.3 184.1 217.9 212.8 63.1 -5.1 -2.3 104.7 96.9

Source: Korea National Statistical Office, April 2002

3) User Base Approximately 20% of all Internet users in Korea are identified as B2C e-commerce users. According to an Internet consumer behavior survey of 1,000 residents in the Seoul Metropolitan Area conducted by KISDI (Korea Information Society Development Institute) in December 2000, about 18.2% of all respondents reported making a purchase through the Internet. According to a survey conducted by Eye Click during about the same period, about 18.9% of the total Internet population reported having made purchases from an Internet shopping retailer at least once. B. Challenges and Prospects for the Korean B2C Market As of February 2002, there were 2,276 B2C shopping retailers, who recorded sales of US$278 million in February 2002 -- an increase of US$142 million from US$136 million in February 2001. Despite the impressive growth in revenue, the retailers seemed unable to realize any profits due to high credit card fees, logistics costs, and other such challenges. According to figures released by KISDI, only 3.8% of shopping retailers had begun to break even in 2000. At the same time, foreign competition is heating up. Global Internet portals such as Yahoo and Lycos are gaining increasing popularity in Korea. Amazon.com, for example, has formed a strategic alliance with Samsung Corporation to sell Amazon books through the Samsung Internet Shopping Mall. The advance of Internet mega global players into Korea is expected to stimulate growth of the Korean e-commerce market while altering its competitive landscape. Another factor that seems to be driving the growth of e-commerce in Korea is the strategic significance of e-commerce to large businesses. Although large companies pursue e-commerce without any distinction between B2C and B2B, such a strategy has a substantial impact on e-retailing. Samsung Corporation operates the Samsung Internet Shopping Mall, which has the highest sales of any such website in Korea. Samsung Corporation is rapidly emerging as an active player in e-business. Along with its partnership with Amazon, it has also established a joint venture with AOL (America Online) called AOL Korea. A Samsung Group affiliate, Samsung Securities, on the other hand, is the leader in Internet stock trading in Korea. The strategic value placed on e-commerce by major companies has prompted competitors to also jump on the e-commerce bandwagon, promoting even more active e-commerce between partner companies. 2. B2B (Business to Business) A. B2B e-Commerce in Korea 1) Volume of B2B by Operator According to a business e-commerce survey for the third quarter of 2001, the volume of B2B transactions amounted to US$22.74 billion, a 22.4% (US$4.16 billion) increase over

the previous quarter (US$18.58 billion). <Table 14> B2B by Operator

Classification Description Purchaser

Driven Sellers access e-commerce site run by the purchaser.

Seller Driven Purchasers access e-commerce site run by the seller. Based on the Driver

Brokerage Driven

Sellers and purchasers access B2B e-commerce brokering site for trade.

Partner Based Trade

Refers to migration of offline transactions to online environment. Trading partners here are typically large companies and their trading partners (outsourcing partners, etc.) with long-standing regular trading relationships. Currently purchasers and sellers are the drivers of this type of trade. Because of the transaction characteristics, it can be defined as a part of SCM (Supply Chain Management).

Existence of Competition

Open Type Trade

Trade is based on openness and competition – the two major characteristics of e-commerce – and there may be any number of trading partners. Mostly bidding or open transactions.

E-commerce by operator is classified in Table 13. Purchaser-driven trade accounted for 76.5% (US$17.4 billion) of all B2B e-commerce in the third quarter of 2001, which represents a 19.5% (US$2.83 billion) increase over the previous quarter. Of this volume, partner-based trade accounts for US$14 billion, or 80.6%. Partner-based trade refers to transactions with partner vendors with which the company has had a long-standing regular trading relationship for procurement of components and raw materials (electronics, automotive parts, steel, etc.). Open-type trade totaled US$3.38 billion to account for 19.4% of purchaser driven trade. This shows that open trade based on competition among suppliers for MRO (Maintenance, Repair, Operation) and standardized parts and materials is very active. Seller-driven trade amounted to US$4.55 billion, a 36.9% (US$1.22 billion) increase over the previous quarter. More specifically, partner-based trade amounted to US$4.2 billion and open type trade amounted to US$350 million, accounting for 92.3% and 7.7%, respectively, of all seller-driven trade. Brokerage-driven trade is making steady inroads. It amounted to US$790 million, or 3.4% of B2B commerce, which is a 14.3% (US$110 million) increase over the previous quarter. <Table 15> Volume of B2B by Operator (US$ Billion, %)

3Q 2001 2Q 2001 % Variance Growth rate

Total 18.6 22.7 100.0 4.1 22.41)Purchaser- Driven 14.6 17.4 76.5 2.8 19.5

-Open Type − (3.38) (19.4) − − -Partner-Based − (14.0) (80.6) − − 2)Seller-Driven 3.3 4.55 20.0 1.22 36.9-Open Type − (0.4) (7.7) − −

-Partner Based − (4.2) (92.3) − − 3)Brokerage- Driven 0.6 0.8 3.4 0.2 14.3

Source: Korea National Statistical Office, March 2002. 2) Volume of B2B by Industry Manufacturing, wholesale/retail, and construction are the top three B2B e-commerce industries, in that order. <Table 16> Volume of B2B by Industry (US$ Billion, %)

Purchaser Driven Seller Driven Total %

Sub Total

Open Type

Partner Based

Sub Total

Open Type

Partner Based

Broke-rage

Driven

Total 22.7 100.0 17.4 3.4 14.0 4.6 0.4 4.2 0.8

Manufact-uring 17.8 78.3 14.0 1.7 12.3 3.8 0.3 3.5

Utilities (Electricity, gas, water

supply)

0.2 0.9 0.2 0.2

Construction 0.9 3.9 0.9 0.9 Wholesale/

Retail 3.2 14.0 1.8 0.1 1.7 0.61 0.01 0.6 0.8

Transport-ation 0.2 1.0 0.2 0.2

Communi-cation 0.3 1.4 0.3 0.3 0.1 0.7

Other Svc. Industries 0.1 0.5 0.1 0.09 0.01 0.03 0.01 0.02

Source: Korea National Statistical Office, March 2002. B. Prospects for B2B in Korea In 2000, Samsung Group, SK Group, Lotte Group, Kolon Group, and Cheil Jedang became the pioneers of Internet business in Korea. Many offline companies joined forces to establish e-commerce entities like Asia BtoB Ventures, GTWeb Korea, and eNtoB to create the foundation for cooperation in the online environment. Such movements impacted not only related group affiliates and outsourcing partners, but also other companies, leading to the formation of business alliances based on cooperative business models in the online environment. Changes in the competitive milieu for businesses are also anticipated, and the merger of traditional bricks and mortar players with emerging dot-com players will become a top priority for the business community. A case in point would be a strategic partnership between a leading dot-com and a powerhouse of offline world who intend to expand their business horizons into e-space. Large marketplaces

have already been established in the MRO market including Korea ePlatform, NtoB, GTWeb Korea, and I-market Korea. General manufacturing concerns such as the steel industry are also actively pursuing the construction of their own marketplaces. This in turn is expected to accelerate innovation in corporate purchasing strategy and distribution networks while intensifying competition among expendable material suppliers and e-marketplaces. 3. B2G (Business to Government) A. B2G e-Commerce in Korea 1) Volume of B2G The volume of B2G e-commerce for the third quarter 2001 generated by 56 government entities (37 central government agencies and 19 local government organizations) amounted to US$1.11 billion. Most of the activity transpired among the central government organizations. Materials and equipment/machinery seem to be the top two categories of transaction in B2G e-commerce. <Table 17> Volume of B2G (US$ Billion, %)

2Q 2001 3Q 2001 Variance Growth rate Total 1.3 1.11 -0.19 -15.1

Purchasing of Products and Services 1.0 0.8 -0.2 -22.2

Construction 0.32 0.34 0.02 7.3 Source: Korea National Statistical Office, March 2002. <Table 18> Transaction Amount by E-Commerce Players (US$ Billion)

Transaction Amount for 3Q 2001

Total Purchase of Goods and Services

Construction Contracts

Total 1.11 0.77 0.34 Central Government

Organizations 1.103 0.769 0.334

(Public Procurement Service) (0.8) (0.5) (0.3)

(Other Organizations) (0.3) (0.2) (0.1)

Local Government Entities 0.007 0.001 0.006

Source: Korea National Statistical Office, March 2002.

<Table 19> Volume of E-Commerce Purchases by Product Type (US$ Billion, %)

Total Expenda-bles

Furnish-ings

Equip-ment/

Machi-nery

MaterialsOther Type

Products

Soft-ware Services

Volume of E-Commerce Purchases

0.78 0.03 0.02 0.3 0.36 0.1 0.005 0.001

% 100.0 3.7 2.0 31.8 47.3 14.3 0.7 0.2Source: Korea National Statistical Office, March 2002. B. Prospects for B2G E-Commerce in Korea Unlike B2B and B2C e-commerce, which grew only about 10% in the second quarter over the first quarter of 2001, B2G e-commerce expanded by about 89% (as reported by the Korea National Statistical Office, December 20, 2001). Despite such phenomenal growth, Korea’s B2G is still in its infancy stage. The future looks bright with increasing interest in realizing e-government and more government procurement taking place in the e-commerce environment. However, turning the promise of B2G into reality might be easier said than done. The biggest hurdle lies not in system development, but in the operation of other information systems, management, and operational procedures. In other words, the government will likely require much more time to adapt to the new method of doing business with suppliers. The government’s preference for granting contracts to suppliers chosen at random based on existing relationships rather than open bidding has also been identified as a problem in stimulating B2G. III. E-Commerce of Small and Medium Enterprises According to a report by the Small Business Corporation (2000), e-commerce among small- and medium-size enterprises in Korea is still in its infancy stage owing to a lack of expertise and inability to take full advantage of the benefits of e-commerce. Only 20% of SMEs said that they are actively leveraging the Internet as a platform for promoting their businesses. As can be seen in the diagram below, more than 50% of all SMEs generate almost no sales from e-commerce. The shortage of dedicated resources, lack of investments, and outmoded business practices have been cited as the main challenges in promoting e-commerce among SMEs.

[Figure 14] E-Commerce Utilization by SMEs,

Source: Small Business Corporation 2000

Compared with 1999, however, the number of companies which adopted e-commerce rose in 2000 (14 companies → 24 companies), and increased awareness of the e-commerce market is expected to boost sales. The report also said that the ratio of companies which generated less than 5% of the total sales from e-commerce dropped from 37.5% in 1999 to 12.5% in 2000, while that of companies which would generate 5 to 10% was expected to rise.

[Figure 15] Adoption of E-Commerce,

Source: Small Business Corporation 2000 Of the SMEs surveyed, 7.5% reported that they were currently engaged in e-commerce, with 60% doing B2B and 40% focusing on B2C (Small Business Corporation, 2000).

Chapter 4 Major E-Commerce Issues and Impediments I. Major E-Commerce Issues 1. Protection of Privacy A. Corporate Policies on Privacy Protection According to a report (KRNIC 2001) of a survey conducted on 125 companies, 107 companies (86%) were identified as having privacy policies. Among them, 106 companies (98%) have stated their policies on their websites, with many stating their intention of keeping confidential all private information collected. But when asked whether they had announced changes in their policies regarding protection of privacy, only 33 companies (35%) answered affirmatively. In other words, users may find it difficult to keep track of changes in his or her rights and responsibilities as regards private information in the possession of companies. Furthermore, 100 companies, or 80% of the respondents, said that they had staff responsible for managing private information. Of these, 63 companies (65%) have created a management-level position for private information protection. The other 34 companies (35%) still have not taken any steps to ensure privacy protection or have assigned someone not related to the task to the position. This shows that there are still significant shortcomings in privacy protection and associated rights. In relation to user rights regarding privacy, companies typically hold private information from the time the user joins as a member until he or she cancels the membership. Most companies follow established procedures when users want to view or change their information or want to cancel membership. Ninety-five percent of the responding companies (114) reported that their websites convey information on how to discontinue membership.

[Figure 16] Management of Users’ Private Information

Although Korean Act stipulates that consent of a legal guardian is required when collecting private information from children under the age of 14, 33 companies reported that they have not yet established such procedures. Most companies who disseminate promotional e-mail messages (90%) said that they offer ways to block their promotions. Sites containing information that may be harmful to youths are required to indicate that their sites are "hazardous". Most companies (92%) indicated that they make such announcements on their websites. But on the subject of relief from privacy infringement, only 26 companies said that their websites state that request for relief can be made to external third parties such as the Personal Data Protection Center of the Korea Information Security Agency. B. Cases of Privacy Infringement and Responses The Korea Information Security Agency states that it received 12,329 complaints on privacy infringement through November 2001, which is roughly a 530% increase over the previous year. Based on that figure, 18,000 to 20,000 complaints on privacy infringement are expected in 2002. Damage, infringement, and misusage of private information by other persons were the primary types of privacy infringement reported in 2000, followed by reception of unwanted information, non-compliance with requests for private information queries, requests for changes or deletion, and collection of private information without consent from users. Resolution of complaints was the most frequent response to complaints followed by self-correction and reconciliation between related parties. 2. Consumer Protection Consumer protection entails establishment of fair competition/trade practices, protection of consumer rights, and resolution of e-commerce related disputes. In the area of fair competition and trading practices, major issues include dissemination of false and/or exaggerated advertisements and information via the Internet, disputes related to domain name usage, network fraud, and unfair competition arising from other unfair collective actions. In consumer rights protection, major concerns are protecting consumer rights in online purchasing, eradication of unfair trade practices, preventing harm to consumers, and protection of privacy. Lastly, in the area of dispute resolution, major concerns include conflicts between jurisdictions and overlapping applicable Acts and identifying alternatives to legal action for effective dispute resolution. A. E-Commerce Dispute Resolution With the rapid increase of e-commerce, the number of disputes filed for resolution with the E-Commerce Mediation Committee more than quadrupled from 308 cases in 2000 to 1,310 cases in 2001. Although the total number of disputes filed rose more than 5.5 times from 83 cases in 2000 to 457 cases in 2001, the number of cases resolved rose from 62

cases in 2000 to 346 cases in 2001, representing an increase in the resolution ratio from 87.3% to 95.8%. <Table 20> Number of Disputes Filed and Resolved Total No. of Disputes Filed Resolved Cases (Resolution Ratio)

2001 83 62 (87.3%) 2002 457 346 (95.8%)

Source: E-Commerce Mediation Committee, 2001 <Table.21> E-Commerce Dispute Mediation

No. of Cases Description 2000 2001 Mutual

Agreement Parties agreed to the Committee recommendation 48 183

Settlement Accepted proposed settlement 14 163 Rejected proposed settlement 2 9

Non Compliance

Did not comply with the Committee recommendation for agreement and settlement 7 6

Withdrawal Applicant withdrew mediation request 9 23

Dispute Resolut-

ion

Others Out of scope of e-commerce, unable to contact defendant, etc. 3 70

On-going 3 Total 83 457

Source: E-Commerce Mediation Committee, 2001 <Table 22> Dispute Types

No of Cases Dispute Type 2000 (%) 2001 (%) Delivery-related (delay/failure) 34(41.9) 183(40.0) Cancelled contract, returned goods, refund 4(4.8) 126(27.6)

Defect in product 4(4.8) 48(10.5) Contract change, non-fulfillment 2(2.4) 20(4.4)

Privacy protection 10(12.0) 28(6.1) False, exaggerated ad 7(8.4) 18(3.9) Error in price registration 6(7.2) 5(1.1) Dissatisfaction with customer service 6(7.2) 7(1.5)

Domain related 5(6.0) 3(0.7) Copyright related 2(2.4) 1(0.2) Discontinuance of Internet shopping retailer 1(1.2) 6(1.3)

System error 2(2.4) 2(0.4) Others 0(0.0) 10(2.1) Total 83(100) 457(100) Source: E-Commerce Mediation Committee, 2001

B. Consumer Protection The Cyber Policy Planning Team of the Korea Consumer Protection Board investigated the level of consumer protection at over 200 Internet retailer sites with a 39-item survey that asked about, among other things, how the websites handled or provided private information, service contract information, pricing and delivery information, payment methods, privacy protection, consumer complaints, and requests for private information (May 2001). Comparing the survey findings with those of the May 2000 survey, overall compliance with e-commerce consumer protection improved, showing a movement toward making e-commerce more consumer-oriented. However, there still seem to be few websites that fully abide by the consumer protection guidelines. When asked about whether they were providing information about the website operator, most shopping sites answered that they displayed such information on the operator as the name of the CEO, business registration number, and address on the websites. Sites that have obtained certificates like eTrust or isafe were found to offer more operator information than other retail shopping sites. These certificates are awarded to websites judged to satisfy established standards to allow consumers to purchase products or services in a convenient and trustworthy e-commerce environment upon review of their policies on consumer protection and privacy protection along with purchasing procedures. Nevertheless, only 54.5% of surveyed websites displayed their service contracts on their websites, and only 26.5% of the companies were found to use standard agreements. When asked in the May 2000 survey about whether they were offering information on how to unsubscribe from membership, 12% answered that they provided such information. That figure rose to 35.5% in the 2001 survey. This change signifies that Internet shopping retailers are paying more attention to the needs of consumers. Still, response to customer complaints was identified as an area where the most improvement was required. Actions taken in response to customer complaints are still weak, and most seem to have no interest in handling customer complaints, although this should be one of the basics of consumer-oriented corporate management. 3. Intellectual Property Rights The Acts on e-commerce intellectual property rights include the Intellectual Property Rights Act, as amended on March 27, 2001 by Presidential Decree. Among the revisions made, the Act allows the Minister of Culture and Tourism to specify the scope of content to be copied by a computer, etc. and confirm usage of books and others along with changes thereof in ways other than information display via computer screens and other interfaces. In addition, the revision of the Enforcement Decree of the Computer Program Protection Act enacted through Presidential Decree on July 16, 2001 vests in the Minister of Information and Communication the authority to specify protection and restriction on programs owned by foreigners as well as the scope of programs available for usage. A case of interest might be Soribada.com - an MP3 swapping site. It was sued by copyright holders for infringement. The court’s final judgment is expected to be delivered in late June, and the government plans to launch a massive crackdown in July on illegal

copying, prevalent on online music swapping sites. The Ministry of Culture and Tourism announced that it would establish an illegal music site investigation team in June with two online search specialists to shut down illegal sites that hamper the growth of the Korean music industry by offering music free of charge on the Internet. At the same time, to resolve disputes around domain names, the Ministry of Information and Communication set up the Domain Name Dispute Mediation Office in August 2001 with experts from the private sector. The Office will begin arbitrations in October, and it will be responsible for mediating disputes on kr domain names that are being registered or renewed. Although business models were not subjected to protection under the Patent Act, the Review Criteria for Computer-related Inventions was revised in 1998 to recognize recorded media where software is recorded as patents. As such, computer-related inventions are now deemed to use the Act of nature, and when specific means that can use the invention for industrial purposes are provided, the invention may be patented. Although there is still some confusion about the BM patent in Korea, the General Guidelines for Internet Patent Review and Guidelines for E-Commerce Invention Review were promulgated in February and August 2000, respectively, to be used as guidelines for BM patents. <Table 23> Business Model Patents in Korea

1995 1996 1997 1998 1999 2000 68 67 93 117 513 8302

Source: Korea Information and Communication Promotion Association 4. Security & Certification The Basic Act on Electronic Commerce and the Electronic Signature Act are the two Acts related to security and certification in Korea. The Basic Act on Electronic Commerce gives e-documents the same legal force as written documents. The Act was formulated to improve the viability of e-commerce, protect consumers, and to help implement government policies for promoting electronic commerce. The Electronic Signature Act was passed in February 1999 as a means to ensure the identity of the other party in remote communications in non face-to-face situations and to guarantee the integrity and authenticity of electronically signed documents. Both the Basic Act on Electronic Commerce and the Electronic Signature Act came into effect on July 1, 1999. According to the Ministry of Information and Communication, as of May 14, 2002, there were 3,031,001 users of e-signature certificates in Korea. This was a 26% increase over 2,409,065 users identified in the first quarter. With the increase in the users of certificates, the role of certification authorities is becoming increasingly important.

<Table 24> Certification Authorities (CAs) in Korea CAs Certification Area (Certification Mark)

National Computerization Agency Government, public organizations (NCAsign) Korea Financial Telecommunications and Clearing Institute Financial (Yessign)

Korea Securities Computer Corporation Securities (Signkorea) Korea Information Certificate Authority Inc. Private sector (Signgate)

Crosscert Domestic/international web servers (Crosscert, Verisign)

KTNET Electronic trade (tradesign) Also, the Korea Certification Authority Central (http://www.rootca.or.kr) has established evaluation guidelines for e-signature certificate management to be used to review CA operations. As shown in the table below, the certification market is expected to record rapid growth in Korea. <Table 25> Korean Certification Market Forecast (US$1,000)

1999 2000 2001 2002 2003 Server certification market 352 852 1,868 3783 6628

Private certification market 452 576 1,326 3,702 7,375

Content verification service market 0.9 5.3 20 108 394

Certification outsourcing service market

12 46 225 841 2,485

Total 816.9 1,479.3 3,493 8,434 16,882 Source: Korea Information Society Development Institute, 1999 The Ministry of Information and Communication plans to ensure the interoperability of e-signatures so that people can use single certificates for e-signature for different e-commerce trades. The Ministry plans to take the necessary measures required at government level such as developing technical standards for e-signature interoperability and push certification authorities and financial institutions to reach agreement on ensuring interoperability at the earliest possible date. However, CAs and financial institutions are still at loggerheads about details on installing leased lines, identifying parties responsible for lease payments, and distribution of service fees. On the other hand, six Asian countries including Korea and Japan have begun to recognize each other’s certificates in April 2002 to open new venues for e-trade. The Pan-Asian E-Commerce Alliance (PAA) recently linked the Korean system via its member KTNET to other PAA member countries to establish a pan-Asia e-trade system covering Korea, Japan, China, Taiwan, Hong Kong, Singapore, and Malaysia. Pilot e-document services based on interoperability of certificates have been underway since April 2, 2002.

5. E-Payment A. B2C Internet shopping retailers, which account for the bulk of e-commerce in Korea, use the following payment methods: <Table 26> The Ratio of Transaction Amount by Payment Methods

2001 2002

1Q 4Q Feb Mar 1Q

Quarter on Quarter Variance

Year on Year Variance

Total 100.0 100.0 100.0 100.0 100.0 - - Online Deposit 28.9 26.8 24.8 24.5 24.8 -2.0 -4.1

Credit Card 68.2 70.0 72.0 72.1 71.9 1.9 3.7e-Money 1.0 2.1 2.0 1.9 2.1 0.0 1.1Others 1.9 1.1 1.1 1.6 1.3 0.2 -0.6

Source: Korea National Statistical Office, May 2002 B. B2B in Korea (Bank Common Network) Banks such as Shinhan, Choheung, Hana, Korea Exchange, and the Industrial Bank of Korea—all major players in corporate finance—have developed and are currently offering products that allow corporate customers to settle payments online through B2B transactions. Furthermore, a system that can handle business-to-business bill payments online among banks has been developed with the participation of eight banks including Korea Exchange, Choheung, and Woori under the initiative of the Korea Financial Telecommunications and Clearings Institute. The system has been in operation since March 2002. More banks are expected to join the system in the latter half of 2002. C. International B2B Bolero.net was established in 1994 with 50% equity ownership each by SWIFT, the operator of a global financial network for the banking industry, and TT Club, a mutual insurance association of the global shipping industry. Its commercial B2B service, which started in September 1999, aims to become the electronic alternative for all paper-based transactions arising in trading including L/Cs of banks and B/Ls of shipping companies. Most banks in Korea including Korea Exchange, Choheung, and Woori have expressed keen interest in using bolero.net to offer their own foreign exchange services. Among them, Woori Bank is already a member of the bolero.net service. Mid- to large-size trading companies like Samsung Electronics, POSCO (Pohang Iron and Steel), and Hanjin Shipping have also joined bolero.net to build their own global supply chain management system. KTNET has signed a strategic partnership agreement with bolero.net to link bolero’s service to KTNET’s trade automation service for the Korean trade community.

TradeCard supports country-to-country trade. The countries that transact via the TradeCard system include Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the Netherlands, Norway, Portugal, Singapore, Korea, Spain, Sweden, Switzerland, Taiwan, the U.K., and the U.S. Korea Exchange Bank and Choheung Bank are offering financial services for pre- and post- export operations to TradeCard member companies in Korea. II. Impediments The growth of e-commerce is also giving rise to related problems. Korea possesses the basic requisite conditions to foster a thriving e-commerce such as an advanced IT infrastructure, rising investments in e-commerce led by large companies, and robust growth of the e-commerce market. However, despite the fact that external indices are showing rapid growth, e-business implementation by the business sector as the new engine for growth in the digital age is still lagging behind advanced countries. The reasons the government cites for the delay in the proliferation of e-commerce include lack of collaboration among businesses; uncertainties about the outcome; insufficient investment resources among small- and medium-sized companies; lack of corporate innovation and sincere pursuit of nontransparent business practices; lack of standardization; shortage of trained manpower; and the absence of a standardized payment system ("e-Business Initiative in Korea," Ministry of Commerce, Industry and Energy, 2001). Problems inherent in Korea’s B2C and B2B e-commerce are described in <Table 26> and <Table 27>, respectively. <Table 27> Impediments to B2C

Area Problem

Operation of virtual store

- High logistics costs - Lack of marketing strategy - Limited product range and no differentiation with others - Lack of features for customers on the website (More focused on

functions related to product display) - Difficulty in “special agreement for non-slip sales” with credit card companies and high fees

Consumer experience - Delay in proliferation due to “Digital Divide” - Lack of trust

Basic environment

- Internet charges are relatively expensive vis-à-vis average income - Lack of security measures against information manipulation and/or privacy infringement - Weak consumer protection measures (refunds, exchanges, and etc.) - Lack of diversity in e-payment methods - Weak foundation to promote growth of high value-added multimedia

content industry Source: Ministry of Commerce, Industry and Energy, 2001

<Table 28> Impediments to B2B Area Problem

Inefficiency and lack of awareness in business operation processes

- Potential for efficiency improvement was not fully realized as information technology was introduced without attendant improvements in business processes - Lack of information exchange and sharing between businesses - Overlapping in electronic and paper documents

Unreasonable and nontransparent trading practices

- Non-transparent market tendencies - Preference for face-to-face transactions owing to antiquated trading

practices

Inefficiency in manufacturing industry structure

- Failure to utilize strategic partnerships (Vertical integration) - Large business-oriented monopolistic industrial structure and lack of open cooperation for e-commerce owing to excessive emphasis on competition

Immature IT environment of SMEs

- Inferior IT environment - ERP system implementation too costly - Reduced investment resource due to lack of funds

Inadequate regulatory framework

- Delay in e-commerce proliferation resulting from regulatory issues

Source: Ministry of Commerce, Industry and Energy, 2001 As shown in the diagram below, the primary reason for the relatively slow growth of e-commerce as identified by Korean companies engaged in e-business is a lack of standardization. Non-participants in e-business found that system implementation cost and lack of expert manpower are the major problems. ("Survey Findings on the Status of E-Business," Korea Institute for Electronic Commerce, 2002)

[Figure 17] Impediments to the Growth of E-Commerce

Chapter 5 Government Policies I. Regulatory Framework for Promoting E-Commerce Well aware of the need to establish a regulatory framework to handle major issues in e-commerce, the Korean government is endeavoring to eliminate the stumbling blocks to the robust growth of e-commerce. 1. E-Commerce Mediation Committee A rapid growth of e-business could lead to a torrent of consumer harm and disputes between trading parties. This, in turn, may hamper the players from taking full advantage of the major benefits of e-business—cost reduction and high speed. The E-Commerce Mediation Committee was established in recognition of the fact that arbitration led by experts would be more useful than other conventional means of adjudication or mediation as e-commerce disputes entail more technical aspects specific to e-business than areas that can be resolved with an understanding of Acts and regulations (Article 28 of the Basic Act on Electronic Commerce and Article 15 of the Enforcement Decree of the Act). The Committee mediates disputes stemming from e-commerce between consumers and e-commerce providers, and between e-commerce partners (payments, delivery, service provided by telecom companies, etc.). Upon receipt of a request for dispute mediation, the Committee brings the parties to the dispute together to first recommend possible avenues of settlement. If such settlement is not achieved within 10 days or if the parties require arbitration from the Committee, a Mediation Team of one to three persons is set up to prepare and present a reasonable compromise to the parties. Establishment of the E-Commerce Mediation Committee means that Korea has an arbitration system simpler than court proceedings that is more accessible and affordable to consumers and e-commerce trading partners who lack the expertise and ability to conduct Actsuits. As all procedures are carried out in strict confidence, consumers and companies are able to protect private information and/or business secrets. A case that can take years to resolve through the judicial process can be resolved within only 45 days. The timeframe can be even further reduced by the use of the information communication network (Cyber Mediation Center) throughout the mediation process. 2. eTrust & isafe The eTrust certificate is a mark awarded to website operators that satisfy certain set criteria upon evaluation of consumer protection and privacy policies of the commercial website and purchasing process. A website must offer a convenient, safe, and reliable e-purchasing experience to customers. Isafe offers the ePRIVACY mark and I-safe mark to promote awareness of privacy protection and security to create a foundation for trust between individuals (users) and operators (suppliers) through active self-regulation.

3. Privacy and Consumer Protection In recognition of the importance of privacy protection, Korea has set up both a regulatory framework and means for self-regulation. The Korea Information Society Agency (KISA), in particular, has been authorized to oversee privacy protection in the private sector pursuant to the Promotion of Information Communication Network Usage and Information Protection Act (hereinafter referred to as the "Information Communication Network Act"). The Personal Data Dispute Mediation Committee established within KISA has established a regulatory framework as a response to the call for strengthened privacy protection measures and aims to secure various effective means for addressing privacy infringement and complaints while facilitating the players in the economy and society to take the initiative for privacy protection. The Committee is also pursuing various projects to create the social foundation for better privacy protection in Korea. Although there are such Acts as the Basic Act on Electronic Commerce, which directly regulate e-business, most existing Acts and regulations are geared to ensure fair trade and consumer protection or define e-commerce as a general form of information communication service. For details, please refer to Table 28 below. <Table 29> Acts and Regulations on Consumer Protection

Relevant Acts Details

Basic Act on Electronic Commerce

- Privacy protection; ensuring safety of computers, etc. used for e-commerce; display of facilities, equipment, and information on cyber retailers; information provision to consumers; government’s obligation to protect consumers, etc. - Establishment and operation of e-commerce dispute mediation entity; development of measures to mediate disputes - Measures for quick and fair handling of consumer damage; use (with necessary revision) consumer damage indemnification standards of Consumer Protection Act; establishment a center handling damage compensation

Consumer Protection Act

Prevention of harm to consumers; cooperation for consumer protection; develop display and ad standards; information provision; relief for consumer rights infringement; develop measures to protect consumers and related organizations; requests for recompense for damages; dispute mediation, etc.

Information Communication Network Act

Privacy protection; obligations of information communication service providers

Visiting Sales Act Regulations on mail order/telephone order sales; penalties for false displays/advertisements

Act for Fairness of Displays/Ads

Prohibits false advertisements; notification of important displays/ advertisements

Unfair Competition Prevention and Business Secret Protection Act

Prohibits unfair trade practices such as intentional confusion with products and sales activities of others, etc.

Monopoly Regulation and Fair Trade Act

Prohibits unfair trade practices such as false displays/ advertisements, and unfair collusive actions

Installment Transactions Act Regulation on installment contracts and rights of purchasers

Regulations of Contractual Terms and Conditions Act

Obligation to specify, disseminate, and explain user agreements; regulates agreement content including invalid unfair regulations and restriction on exemption clauses

Framework Act for Informatization Promotion

Protecting rights of information communication users

Telecommunication Work Business Act

Prohibits actions hampering fair competition; regulates user agreements; protects users; provides for matters on damage compensation and burden of proof for telecommunication service providers; protection of communication confidentiality, etc.

Electronic Signature Act Provision of certification related regulations and services; privacy protection, etc.

Criminal Code Punishment for fraudulent actions with computers, etc.

Commercial Code Regulates branding such as usage of brands that might confuse their owners

Source: National Computerization Agency, 2000 4. Protection of Intellectual Property Rights The Korean Acts on intellectual property rights are diverse and cover a wide range of issues. The major pieces of legislation include the Copyright Act, Computer Program Protection Act, Patent Act, Design Act, Utility Models Act, Trademark Act, and Unfair Competition Prevention and Business Secret Protection Act. The Civil Code and Commercial Code also have clauses applicable to intellectual rights protection. Korea amended the Copyright Act in January 2000 to reflect the WIPO agreement of 1996. The Computer Program Protection Act was also partially amended in December 1998, followed by a full revision in January 2000. Although there are no specific legal mechanism covering intellectual property right

disputes regarding Internet domain names, the Seoul District Court cited the Unfair Competition Prevention and Business Secret Protection Act in its October 8, 1999 judgment which banned the use of domain names that copy well-known brand names. Currently, the active on-going discussions for the need to establish Acts for database protection and allowing patents for e-commerce business models are drawing much attention in Korea. 5. Security & Certification Formulation of the Electronic Signature Act began in 1998. It was enacted on February 5, 1999 and went into force from July 1, 1999. On July 7 of the same year, the E-Signature Certification Management Center was established within the Korea Information Security Protection Agency to implement the full force of the Act. 6. E-Payment Vigorous efforts are being exerted towards enacting Acts on e-payment. Concomitant with the rapid growth of the e-finance industry, which includes Internet banking and on-line home trading of stocks (HTS), the enactment of the Basic Act on Electronic Finance Trading (tentative name) is under serious consideration. Efforts are also underway to establish a basic framework for regulating e-finance trading that covers: handling of trade orders, restrictions on trades, cancellations/changes to trade orders, termination of trading contracts, confirmation of trading details, storage and viewing of trading records, error handling, response to accidents/malfunctions, notification methods and their validity, responsibility for and exemption from loss compensation, changes of service contracts, and priority in service contracts. II. Government Policies and Initiatives The Korean government began to implement a variety of initiatives and policies to promote e-commerce at the government level based on the Comprehensive Policies for e-Commerce Development adopted in February 2000. The national strategy for promoting e-business(e-Business Initiative in Korea) was established in April 2001 to build an e-business network across industries, strengthen the participation of the public sector, expand the e-business operation base, and globalize the scope of e-business. This chapter discusses e-commerce policies and initiatives of the Korean government for 2002. 1. Basic Direction First, the government will fully promote e-commerce as a means to realize structural innovation and strengthen Korea’s corporate competitive edge. To this end, applicable Acts and regulations including those for electronic approval processes, e-trade, and consumer protection will be continually fine-tuned and standardized as needed. The government will also systematically expand the necessary infrastructure by promoting the development of necessary technologies, recruiting professional human resources, and

expanding the high-speed information network. This will foster a strong foundation for e-business across the national economy. Second, to respond more effectively to the changes in the international economic landscape due to the WTO New Round, China’s entry into the WTO, and increasing uncertainty over the global economic conditions, the Korean government will play an active role in the globalization of e-business. To this end, cooperative ties with Japan and China in the area of e-commerce will be strengthened to build the framework for e-business cooperation in Northeast Asia. It will also pursue a global strategy for e-business by building an e-commerce cooperation network with such countries as the U.K., Finland, and Singapore. Korea will also actively participate in international dialogue within the WTO, ASEM, OECD, APEC, and other international forums to respond effectively to changes in international practices. 2. Major Policies and Initiatives The Korean government’s efforts for promoting e-commerce go beyond fine-tuning the aforementioned Acts and systems. A. Expanding the e-Commerce Infrastructure Expansion of the e-business infrastructure requires efficient information communication networks, technology development, and standardization. The government has already formulated its High-Speed Information Communication Network Advancement Plan to complete the construction of the information superhighway by 2005. With the demand for e-business professionals expected to exceed 290,000 by 2005, a comprehensive survey on the supply and demand for e-business manpower needs to be conducted and be used as a baseline in the training of required professionals. The availability of the human resources required by businesses is one of the most important conditions necessary for ensuring the successful proliferation of e-commerce. <Table 30> E-Business Manpower Supply/Demand (1,000 people) 2002 2003 2004 2005

Demand 1,290 1,397 1,487 1,588

Supply 1,076 1,159 1,229 1,301

Shortage 214 238 258 287 Source : Korea Institute for Industrial Economics and Trade, 2001 E-commerce professionals include not only those with expertise in IT and business operations, but also professionals in e-manufacturing who have expertise in both IT and manufacturing technology. With the goal of developing such professionals, the government supports the establishment of an industry/academia consortium in 2002 that will be responsible for developing and offering graduate school courses on e-business. Government also plans to establish an e-business cyber academy for women to foster

more female e-business professionals. The E-Business Human Resources Development Center established in November 2001 will train over 300 e-business lecturers each year. Support will also be provided to other e-commerce training centers to help educate and build a large pool of e-business specialists. At the same time, the Korean government plans to support the growth of e-learning, or learning through the Internet, as a viable market by leading standardization and technology development efforts. It will also push hard to turn e-learning as a feasible vehicle for export. Because technology development and standardization constitute other important aspects of the e-business infrastructure, the Korean government will expend about US$4.9 million on the development of e-commerce application technology and next generation technology with high potential in 2002. The government will also actively support efforts to build an ebXML framework, standardization of e-documents and an e-catalog, and international standardization activities for the development and dissemination of e-commerce standards. B. Building the e-Business Network The government plans to expand the e-business network across industries by first building an industry-specific B2B infrastructure and developing different application models. As a first step, the Korean government will lead the effort toward building the B2B network for 30 industries. These will include 20 industries already receiving government support and 10 other industries selected in March 2002. It will also promote collaboration among common basic services in payment, credit guarantee, and logistics. <Table 31> Progress of B2B Network Implementation Support Project

Nine industries (Electronics, automobiles, steel, shipping, machinery, textiles, power generation, distribution, and biotechnology) First * To be implemented after 2000 through efforts led by an association (Biotechnology

will start in 2001) 11 industries (Watches, fasteners, tools, agriculture and livestock, construction, fine chemicals, molding, petrochemicals, corrugated packaging, furniture/timber, and logistics) Second * To be selected through public competition via online/offline consortium * 1st year project currently underway since July 2001 (Petrochemicals started in October 2001) 10 industries (semiconductor equipment and automation, new ceramics, nonferrous metals, ophthalmic optics, toys, construction facilities, animation, paper, environmental technology, and credit guarantee) Third

* Selection focusing on offline while maintaining consortium approach (March 2002) * Created common functional area to select credit guarantee fund

Supporting SMEs in their efforts for e-business implementation is a prerequisite for the growth of e-commerce. The government extended support to 30,000 small- and medium-sized companies for their IT projects through April 2002. The original plan called for IT support to 30,000 companies by the end of August 2003, so this plan was completed more

than one year ahead of schedule. <Table 32> IT Implementation Support to 30,000 SMEs (No. of SMEs)

Support Stage IT Consulting

Basic Info S/W

ERP Imple-

mentation

IT Support in

Production Operation

Collabor-ative IT Imple-

mentation

Total

Requested 246 32,452 2,343 39 140 35,220 Decided 246 28,003 2,103 38 70 30,460

Completed 164 4,686 554 9 5 5,418 Underway 82 23,317 1,549 29 65 25,042

C. Globalization of e-Business With the objective of promoting e-trade, the Korean government is participating in building the Korea-Japan e-trade network and the PAA (Pan-Asian e-Commerce Alliance) project, where six East Asian countries (Korea, Japan, China, Taiwan, Hong Kong, Singapore, Malaysia) are working together to build a common e-commerce network. It is also carrying out a pilot project with Germany to build an ASEM e-trade network. Furthermore, the International Expert Forum for e-Commerce Consultation has been established to respond to and help formulate Korea’s position on international debates and discussions on major e-commerce issues while strengthening cooperative ties for e-commerce within multilateral cooperative bodies like the WTO and ASEM. Korea also plans to actively participate in ASEM collaborative programs aiming to identify and eliminate barriers hampering the growth of e-commerce within the region. At the same time, government level cooperation is actively being pursued with such countries as Japan, China, and the U.K., among others. The third Korea-Japan e-commerce policy consultation meeting was held in Kagoshima, Japan in March 2002. The fourth meeting is scheduled to be held in Kyongju, Korea. The fourth meeting is expected to confirm the foundation for the bilateral e-commerce trade through agreement on joint establishment of an e-marketplace and trade EDI implementation. As to China, Korea has established a bilateral e-commerce policy consultation forum where specific action plans such as the one for creation of a Korea-China joint site will be developed to enhance bilateral cooperation in e-commerce. Based on the agreement on Korea-U.K. e-commerce cooperation concluded in December 2001, Korea hosted an e-commerce expert round table for the joint development of technology in Seoul in January 2002. The first Korea-U.K. e-commerce policy consultation meeting will be held in London in September 2002. The Global e-Business Support Center was established under KOTRA (Korea Trade Investment Promotion Agency) in June 2002 to support the advance of Korean e-business companies into the international arena. It provides up-to-date information and helps companies identify potential partners. Regular consultative meetings to support the international advance of e-business operators will also be held.

The table below is a summary of the major tasks to be carried out under Korea’s e-commerce policy <Table 33> 2002 Major Tasks of E-Commerce Policy

ㅇ Establish lower ordinances including the Basic Act on Electronic Commerce

ㅇ Streamline applicable regulations and systems for e-finance trade, e-trade, e-notarization, resolution of international disputes, consumer protection, etc.

ㅇ Establish the Basic Act on Electronic Financial Trade

Preparing Regulatory Framework —

ㅇ Develop ways to resolve disputes around cyber squatting

ㅇ Network enhancement including upgrading of Internet access network

ㅇ Ensure availability of e-business professionals - Establish graduate school programs for e-business, cyber

academy for women

ㅇ Develop measures to promote growth of e-learning industry

ㅇ Support technology development for e-business

ㅇ Support e-commerce standardization

ㅇ Expand logistical infrastructure

Expand Operational Base for e-Commerce —

ㅇ Build standard integrated B2B e-payment system for all financial institutions

ㅇ Build integrated e-procurement system for government

ㅇ Link different e-procurement systems and build procurer-driven system

Promote e-Commerce in Public Sector

—

ㅇ Introduce e-business to insolvent companies receiving public funds

ㅇ Support B2B network implementation

ㅇ Support IT implementation of 30,000 SMEs

ㅇ Digitalization of major industrial complexes

ㅇ Support e-commerce of agricultural, fishery and livestock products

Building e-Business Network for all Industries —

ㅇ Build CALS/EC base for construction industry

ㅇ Focus on e-trade including Korea-Japan e-trade network, PAA and ASEM e-trade network, etc.

ㅇ Strengthen multilateral cooperation in the WTO and OECD, etc.

ㅇ Strengthen bilateral cooperation including organization of Korea-Japan e-Commerce policy consultation meeting and conclusion of Korea-China e-commerce cooperation agreement

Globalization of e-Commerce —

ㅇ Establish global e-business support center Source: Ministry of Commerce, Industry and Energy, 2001

Chapter 6 Related Organizations Under the leadership of the government, various organizations are striving to promote e-commerce through research and project implementations. The following is a summary of some of the more representative organizations and their activities. More organizations and their contact numbers are listed in the table below. 1. Ministry of Commerce, Industry and Energy (MOCIE) As the government ministry responsible for overseeing e-commerce, MOCIE administers: implementation of the Basic Act on Electronic Commerce, organizing e-commerce policy consultative meetings, e-commerce standardization, e-commerce related technology and manpower development, e-commerce related international activities, formulation of industrial informatization promotion plans, survey of e-commerce market size, consumer protection in e-commerce including dispute resolution, development of B2B networks, and IT implementation for SMEs. The Agency for Technology and Standard under MOCIE is responsible for e-commerce technology and standardization including: electronic transactions related communication messages, e-document standards, e-data exchange technology, e-payment systems such as e-money and financial trading, classification and development of search technology for e-catalogs, encryption for electronic transaction, security and certification technology, electronic transaction software, and Internet application technology. 2. Ministry of Information and Communication (MIC) MIC is the ministry responsible for information communications, radio, broadcasting, postal service and postal finance matters in Korea. MIC is focused on promoting e-commerce by creating the necessary infrastructure including: the streamlining of e-commerce Acts and regulations including the Electronic Signature Act, establishment of the information superhighway, standardization, and manpower development. 3. Ministry of Culture & Tourism (MCT) MCT supports the digital content industry to promote e-commerce by assuring the protection of intellectual property rights by revising the Intellectual Property Rights Act as well as a variety of other activities. 4. Korea Institute for Electronic Commerce (KIEC) A special legal entity established pursuant to the Basic Act on Electronic Commerce, KIEC is a private organization that fosters e-commerce under the auspices of the MOCIE. It is responsible for: the standardization and dissemination of electronic transaction standards such as e-documents, etc., management of the eTrust mark, management of the E-Commerce Mediation Committee, operation of ECRCs (Electronic Commerce Resource Centers) to promote local e-commerce, projects supporting e-commerce

technology development, operation of the HR development center, and international cooperation for fostering e-commerce. In addition, the Electronic Commerce Resource Center was established by MOCIE to foster a national competitive edge in the digital economy and to promote e-commerce activities. The Center is working to informatize industries and promote e-commerce activities. 5. Korea CALS/EC Association (KCALS) KCALS aims to improve the competitive strength of e-commerce technology while acting as the bridge between the private sector and the government to reinforce Korea’s industrial competitive edge. KCALS combines the Korea Electronic Trade Association (under MOCIE), which promotes e-business from the demand side as a user of e-commerce, and the Korea Electronic Trade Technical Association (under MIC), which cultivates a favorable business environment and supplies relevant technologies through e-commerce from the supplier side. With the goal of advancing e-commerce, KCALS is working on: pilot B2B projects in various industrial sectors, international cooperation, e-catalog standardization, financing with basic industrial funds, the Gold Card and other industrial support programs, e-business entrepreneur associations, DB and consulting service, e-business training and publishing, operation of committees to deliberate policy matters, and organization of PR events and projects. 6. Korea Chamber of Commerce & Industry (KorCham) KorCham offers a wide range of services as the promoter of Korean commerce and industry, the national economy, and balanced development of local communities. Also, as a representative of the industrial sector, KorCham lobbies to protect the rights and interests of business. Global network linking chambers of commerce around the world via KorCham have been set up to support the overseas activities of Korean companies and to promote informatization by offering B2B infra services. 7. Korea Trade Network (KTNET) KTNET functions as the Internet backbone in building the e-trade infrastructure among companies and countries. It offers all the necessary supplementary services for trade operations from identifying trade partners through existing network services to EDI services which can handle every aspect of trade including customs clearance, logistics, and payment settlement. KTNET also provides DB services; supplies communication means via the Internet; and also builds systems. 8. National Computerization Agency (NCA) NCA first opened as a government-invested organization under MIC in 1987. It is engaged in activities to support informatization efforts including projects for national informatization and e-documentation of existing data by accelerating the construction of the information superhighway to make Korea a powerhouse in the field of knowledge and

information. 9. Korea Information Security Agency (KISA) KISA was established as a government-invested organization under MIC to formulate policies and technology measures for information protection to enable the safe distribution of information while fostering sound business practices for the information and communication industries. KISA is also working on development and standardization of information protection application technology. The Agency is also committed to promoting industrial growth through operation of the e-signature certification management center and raising public awareness of information security. It also operates the "118" consulting service (hacking/virus consulting support center), where people can dial the number or access the website to receive information on hacking and virus attacks. 10. Korea Information Society Development Institute (KISDI) KISDI is a government-invested research center under MIC that researches ways to realize a true Information Society and overcome the obstacles inherent in different sectors of the society that hamper informatization. KISDI’s research results are used as input in designing a the national plan for creating the Information Society and economic policies in the area of information and communication. 11. Korea Consumer Protection Board The Board is a special public entity created under the Ministry of Finance and Economy. It was established on July 1, 1987 pursuant to the Consumer Protection Act to protect the basic rights of consumers and to promote efficient and healthy consumption. To respond quickly and effectively to newly emerging consumer issues related to the advent of the digital economy and proliferation of e-commerce, the Board is engaged in: research on the regulatory framework needed to protect consumers engaging in online transactions and to offer policy alternatives; monitoring e-commerce activities and investigating cases of unfair trade practices; providing comprehensive consumer information on e-commerce and consumer protection; and, consumer education. 12. Integrated Forum on Electronic Commerce (ECIF) ECIF is a non-profit private organization established to promote e-commerce and improve the national competitive edge through consultations and coordination in e-commerce standardization and organizing promotional efforts led by the private sector. It is also responsible for: development of an e-commerce standardization roadmap; making policy recommendations; ensuring consistency and relevancy as the channel for handling e-commerce standardization efforts in Korea and abroad; increasing synergy by representing Korea in international standardization activities; active participation in international standardization efforts and developing joint response mechanisms; and leading Korea’s largest private sector market-oriented standardization effort.

<Table 34> E-Commerce Related Organizations and Contact Numbers Organization URL Contact Number

Ministry of Commerce, Industry and Energy (MOCIE) www.ecommerce.go.kr 82-2-503-9636

Ministry of Information and Communication (MIC) www.mic.go.kr 82-2-3704-9114

Ministry of Culture & Tourism (MCT) www.mct.go.kr 82-2-750-2114

Korea Institute for Electronic Commerce (KIEC) www.kiec.or.kr 82-2-528-5009

Korea CALS/EC Association (KCALS) www.kcals.or.kr 82-2-551-1452∼63

Korea Chamber of Commerce & Industry (KorCham) www.korcham.net 82-2-316-3114

KT NET www.ktnet.co.kr 82-2-6000-1114

National Computerization Agency (NCA) www.nca.or.kr 82-331-260-2114

Korea Information Security Agency (KISA) www.kisa.or.kr 82-2-3488-4083

Korea Information Society Development Institute (KISDI) www.kisdi.re.kr 82-2-570-4114

Korea Consumer Protection Board www.cpb.or.kr 82-2-3460-3000

Integrated Forum On Electronic Commerce (ECIF) www.ecif.or.kr 82-2-316-3361

E-Commerce Mediation Committee (ECMC) www.ecmc.or.kr 82-2-3453-0404

E-Commerce Research and Development Association (ECA)

www.b2b.or.kr 82-2-558-9822

Korea E-Commerce Organization (KECO) www.keco.org 82-2-3424-3145

CommerceNet Korea (CNK) www.commoercenet.or.kr 82-2-774-8558

Global Commerce Association of Korea (GCA) www.gcakorea.org 82-2-6242-2312

Korea Network Information Center (KRNIC)_ www.nic.or.kr 82-2-2186-4500

Korea Electronic Payment Forum www.kepf.org 82-2-6336-0570

Korea Certification Authority Central www.rootca.or.kr 82-2-3488-4314

eTrust Certification Association www.etrust.or.kr 82-2-528-5011

eGovernment site www.egov.go.kr

Korea Culture & Contents Agency www.kocca.or.kr 82-2-2166-2144

Federation of Korean Information Industries www.fkii.or.kr 82-2-780-0205