17/09/2021
Asia- Pacific Doing business
Did you know that South Korea has become one of the top 10 business-friendly economies in the world?
It’s no surprise really since there has been an innovative governmental reorganization leading to efficient laws, a transparent marketplace and clear investment incentives. The country also suffered much less of a decline in GDP than other countries amid the pandemic – GDP decreased from $1.65 trillion in 2019 to $1.63 trillion in 2020 – thus lifting South Korea to 10th place for the world’s biggest economy.
As you can see already, doing business in South Korea is a smart move, but here’s why.
Note: This summary is taken from the full TGS Doing Business Webinar co-hosted with the French Korean Chamber of Commerce and Industry (FKCCI). This webinar covered the economic potential of the South Korean market in its entirety.
Should businesses invest in South Korea in 2021?
You already know that the answer to this question is a resounding YES, and the reasons are as follows:
- South Korea is a geographic favorite: nestled between two great powers, Japan and China, South Korea is often overlooked, but it shouldn’t be! It is perfectly located as a gateway to these markets and its 1.7 million consumers.
- South Korea has the world’s 10th largest economy: as we said above, GDP didn’t decline as much as other countries during the pandemic (in Q2 of 2020, GDP growth only fell 3.2% compared to 14% in France) and it is already showing signs of recovery in certain industries (e.g manufacturing and services). This shows that the economy is resilient and stable!
- South Korea has a good economic forecast for the near future: the industry production index and the IMF predicts that South Korea will only keep getting stronger thanks to recovery trends seen in exports, investment and consumption. A record low interest rate (0.5%) will also help with this. Predictions for the future include a GDP of US$1.81 trillion in 2021, US$2.05 trillion in 2024, and US$2.22 trillion in 2026.
- South Korea is a key global player in exports: currently ranking in 7th place for major exporting countries, South Korea is a world leader in electronics manufacturing, including semiconductor chips, computers, mobiles and batteries. In fact, there was a massive increase in demand for these (+57%) in 2020, so this has been a key driver for the country’s recovery. Today Korea’s FTA (free trade agreement) covers 84% of global GDP.
- South Korea has a highly skilled and resilient workforce: South Koreans are known for being extremely disciplined, hard-working, loyal, motivated, well-educated and eager to excel. That’s probably why the employment rate is higher than a lot of other countries (66% of the population) and has remained stable.
What makes South Korea a sound investment for the future?
The South Korean government is incredibly enthusiastic to welcome international investors who wish to do business here, so as a result, they provide quite a few incentives. Here are the main reasons that investors are attracted:
1. Innovation and Infrastructure
South Korea is the most innovative country (according to Bloomberg’s Innovative Index) with one of the world’s best digital infrastructures. It is also well-connected with respect to docks, airports, roads and rails.
2. Korean New Deal
The recovery plan that was launched last year has had 140 billion dollars dedicated to it. It is split between the green deal (where there is a large focus on renewable energy and electric cars etc) and the digital deal (which focuses on AI, smart healthcare, and the establishment of a big DNA project).
3. Consumption Trends
South Koreans are tech-savvy consumers and have greatly contributed to the country’s domestic market in the last decade. This didn’t stop throughout the pandemic either. 2020 saw a 5.5% increase in consumption due to more online sales (+17%). The trend was labelled ‘revenge shopping’ as automobile and luxury goods sales soared. Since February 2021, a further 10% increase has been observed from offline sales (+14%).
4. Foreign Direct Investment (FDI) incentives
In 2020, 21 billion dollars was invested in South Korea, especially in I.C.T areas such as AI and cloud computing. The first quarter of 2021 shows the same trend as investment increased by a further 45%. Why? Because there are many investment incentives such as:
- Cash grants
- Lower startup costs
- Low rents on land
- Tax rebates
- Free trade zones
- And many more…
TGS can help you benefit from investing in South Korea
South Korea is a leading choice for investors because it places a very high priority on business continuity, among other things. Now you know why it is good to do business in South Korea, you may want to know how.
FKCCI can help you with this. They can support you from prospecting and networking to marketing, human resources, and legal support. In short, FKCCI can help you maximize the opportunities that South Korea offers for your business.
TGS is an entrepreneurial and innovative network with a focus on sustainable business development. We help you collaborate, recreate and innovate in the South Korea and around the world.
FAQs
Infrastructure and innovation
By global standards, South Korea has enviable innovative physical and digital infrastructure, with bandwidth and telecommunications interconnectivity as impressive as its rails, roads, airports, and docks.
Is doing business in South Korea good? ›
South Korea, the world's 13th largest economy and a leader in high-tech industries, offers strong opportunities for U.S. businesses. However, exiting the pandemic, Korea's economic growth has been relatively slow, recording 4.15 percent growth in 2021 and 2.59 percent growth in 2022.
What is the business culture in South Korea? ›
Korean business people are good negotiators so be patient and gentle, but firm. Also ensure you are as dignified as possible and don't push too hard. Expect a 'price war' but don't give in easily, as Koreans are persistent and admire this quality in others.
Which country is the best for international business? ›
Here are the top 10 best countries for international expansion in 2022:
- India.
- Philippines.
- China.
- Ireland.
- Singapore.
- Japan.
- United Kingdom.
- Brazil.
South Korea - Summary. Korea has a unique language and its own writing system, “Hangeul,” which was invented by King Sejong (1397–1450) during the Joseon dynasty. Korean are very proud of this remarkable achievement.
What is the most successful business in Korea? ›
The country is a major exporter of electronics, automobiles, steel, and other manufactured goods. As of May 2022, Samsung Group remained the largest business group operating in South Korea, with a revenue of approximately 379 trillion South Korean won.
How easy is it to do business in South Korea? ›
In 2020, the ease of doing business score in South Korea was 80. That year, the ease of doing business in South Korea ranked 5th in the global ranking.
Is Korea a good country to start a business? ›
Every year, the World Bank Group releases its "Doing Business" report, which ranks the best countries to do business in, based on 10 key indicators. In 2020, the top five countries best to start a business in were New Zealand, Singapore, Hong Kong (China), Denmark, and South Korea.
What is South Korea doing business ranked? ›
It ranks as the 10th largest GDP in the world for 2020. Its trade volume is also the 8th largest in the world, based on 2020 data. At the same time, doing business in Korea is relatively simple: it ranks as the 5th in the World Bank measure of ease of doing business.
Who is the No 1 business man in South Korea? ›
Jay Y. Lee, leads as the 1st in South Korea, with $10.53B in Technology sector. Followed by Seo Jung-jin, 2nd in South Korea, making waves in Healthcare at 387th globally, and Cho Jung-ho, 3rd in South Korea, contributing significantly to Finance & Investments at 515th globally.
South Korea is a strange country, where capitalism, socialism and communism blend and coexist. Our economic system is capitalist, our social structure is socialist, and our mindsets are communist. We adopt capitalism for our economic development, but strive for socialist welfare and demand equal distribution of wealth.
How does South Korea conduct business? ›
As in many Asian cultures, punctuality is seen as a sign of professionalism and respect in South Korea. Arriving at business meetings on-time or even early goes a long way toward making a positive impression. Being even a few minutes late could be interpreted as a lack of commitment or interest in the business at hand.
What do Koreans value the most? ›
Hard work, obedience to family, protection of the family, and proper decorum among family members are very much Korean values, even in the modern world.
How is South Korea different from the United States? ›
Koreans may avoid confrontation and use indirect language to convey their message, while Americans may see this as evasive and prefer a more direct approach. Additionally, in Korea, hierarchy is important in communication, and people may use formal language and titles when speaking to those in positions of authority.
What are the advantages of South Korea's economy? ›
The Republic of Korea has achieved remarkable success in recent decades in combining rapid economic growth with significant poverty reduction, with real gross domestic product (GDP) growing on average by 5.7% annually between 1980 and 2023.
Why is South Korea economically successful? ›
Government initiatives played an important role in this process. Through the model of export-led industrialisation, the South Korean government incentivised corporations to develop new technology and upgrade productive efficiency to compete the global market.
How has South Korea benefited from globalization? ›
Since South Korea has started globalization, Korea's economic focus shifted to media and cultural content during the 1990s, and Korean culture gained worldwide recognition during the 21st century. South Korea culture was favoured by other Asian countries, especially for television dramas that captured Asian viewers.
What is South Korea's competitive advantage? ›
Korean firms' competitive advantage lies in converging technologies, so they should continue to quickly and efficiently combine commercially viable technologies that exist today. However, Korea also needs to develop certain foundational technologies that can serve as the basis of converging technology.
