South Korea – Background
Officially called the Republic of Korea, South Korea lies on the southern part of the Korean peninsula in East Asia. The country resides in the North Temperate Zone, has a predominately mountainous terrain and has a population in the region of 50 million people. The capital city and the largest city of the country is Seoul, which has a population of some 10 million.
The country is a presidential republic and is classified as a developed country and it is the world’s 15th largest economy. The economy is largely export based with its production concentrated in the electronics, shipbuilding, automotive, machinery and petrochemical industries.
Immediately following the Korean war in the 1950’s, South Korea was one of the poorest countries in the world with a GDP per capita in 1960 being recorded as just $79 which was on a par with most Latin American countries and some sub-Saharan countries at that time. Since then, fuelled by foreign aid and domestic encouragement, the country has introduced modern technologies at a rapid pace and has rapidly increased its production particularly production for export.
South Korea has moved on to have one of the world’s fastest growing economies from the early 1960’s through to the late 1990’s and is still one the world’s fastest growing developed economies today. The country is known as one of the Asian Tiger economies.
South Korea has virtually no natural resources of its own and also suffers from overpopulation in what is a very small territory. Its economy is fuelled by manufacturing for export and it is in the top ten of the world’s largest exporters.
Although the country did suffer quite badly in the 1997 Asian Financial Crises and it does sometimes suffer from the effects of the ongoing potential of military conflict with North Korea, the country has been complimented by the IMF for its resilience in a financial crisis and it was one of the few developed economies that was able to avoid recession in the most recent global financial crisis.
The capital city and the main central business district (CBD) is Seoul which is classed as a ‘mega city’ with a population of over 10 million. The city itself is the developed world’s largest city and the metropolitan area of the Seoul Capital Area is the world’s second largest metropolis with a population of some 26 million people.
Even though the city only accounts for 0.6 percent of South Koreas total land area, the city is a major business centre and generates approximately 21 percent of the country’s total GDP. The city is the home to many international corporations including the headquarters of Samsung, Kia and Hyundai as well as many international banks and financial institutions.
Despite a slowdown in more recent years, the economy of South Korea remains strong with forecast growth of up to 3.6 percent per annum in the coming years and the government of the country are keen to encourage continuing foreign investment.
South Korea - Opportunities
In a country with such high growth, an ever increasingly wealthy population yet limited natural resources, there are many opportunities for foreign businesses in South Korea.
The government of South Korea is planning continued investment in public services to promote long term growth and to increase national productivity still further. Particular areas marked for investment are in education, medical care and professional services. The country is the world’s 10thy largest consumer of energy and it is now focusing its efforts on creating greener more sustainable sources of energy to fuel its economy.
Owing to the lack of its own natural resources, South Korea is a very heavily import dependent economy. The country is a net importer of foods and the demand for consumer ready foods is steadily growing. The population of South Korea is also becoming more health conscious as they become more affluent so demand is shifting in the types of foods as well. Another sector being boosted by the increasing affluence is the building sector. As demand for more western style housing increases so does the demand for building materials and equipment.
Korean parents believe that their children will have better prospects in the world if they can speak fluent English and the government of the country are promoting this trend too. The rising personal wealth of the nation coupled with the increasingly international nature of business in the country is fuelling demand for education services, particularly in foreign languages.
Consumer demand is increasing for luxury home IT and technology products such as home automation products, home security products, electronic home appliances and mobile communications technology. On a larger scale, the government is also planning a major broadband expansion project in the country which offers opportunities to specialists in the field and will also further increase demand for home computing technology.
Historically, the South Koreans have worked a five and half day week, working Saturday mornings as well as the weekdays. This is changing to a five day week and will provide South Koreans with more leisure time. There has already been an increasing interest in sports and cultural events which provides opportunities for businesses in these sectors and the change in working hours is set to fuel this interest even further. The sporting interest of the population is also expected to be increased with the coming of the Winter Olympics in the country in 2018.
In the past, South Koreas imports have been primarily food, energy and the raw materials needed for its export manufacturing industries. As the wealth of the nation continues to grow and its population begin to have more free time, opportunities are arising in areas such as sports, leisure and the arts as well as an increasing need for financial services, such as offshore pensions, as well as food and beverages.
South Korea – Setting up in Business
The South Korean government actively encourages foreign investment in its economy both directly and indirectly. And 1998, South Korea passed a Foreign Investment promotion Act which put in place incentives for foreign investors such as cash grants, tax relief, support for industrial sites and other financial incentives.
As with most countries, a company wishing to have a presence in South Korea may elect to set up a representative or liaison office. Such an office may represent the company and carry out marketing activities but is not permitted to make any sales in its own right. The alternative to this is to set up a branch office which will be able to trade but which will also have to file accounts and pay local taxes.
If a separate, South Korean legal entity is required, the process for the formation of a limited liability company as follows:
1. Register company with Start-Biz
Launched in 2010, Start-Biz is an online, an automated registration system for the formation of new companies. The system guides the user through each step of the process from searching the company name to registering with the tax authorities and makes the creation of a new company very simple and straightforward. When any other authority's web site is needed, Start-Biz will direct the user accordingly.
2. Make a company seal
3. Pay corporate registration tax
The registration fee is payable to the Supreme Court Registry. Start-Biz will automatically direct the user to the appropriate website.
4. Pay fees for National Pension Fund, Employment Insurance, Industrial Accident Compensation Insurance and Public Health Insurance Program
Start-Biz will direct the user to appropriate websites.
The whole process, from start to finish should only take around four days in total to complete and the automation of the one-stop-shop system, Start-Biz makes the process far simpler than in many other countries.