South Korea’s innovative governmental reorganization has led to the nation hovering on the top of the World Bank’s ranking of ease of doing business in different countries. Indeed, efficient laws, transparent marketplace and the government’s enthusiasm to welcome international investors have resulted in doing business in South Korea a smart move.

If you already run a business elsewhere and are looking to expand it in Asia, there is no place like South Korea and no better time than now to go for it. The reason behind this is that South Korea’s post-registration procedures that were earlier necessary to be complied with at the time of setting up or expanding a business, have now been eliminated.

The Index of Economic Freedom and businesses characterizes South Korea as ‘largely free’ and both, old, as well as new companies, encounter minimal red tape interference from the government.

As a regular rule, in practice, the Confucian principles and code of conduct drives the South Korean culture and even business practice. Confucian values comprise respecting those who seem decent, a quality that is gained via dedication, labor, abiding by rules, mutually agreeable decisions and time and energy used in establishing links. This is evident in the Korean saying, “Make a friend first and client second”.

The broad database and guidance spread across on the World Business Culture website is a great help to whoever intends to do business in South Korea get the know-how about the country’s business and economy.

In the meanwhile, this piece articulates the advantages that Korea offers for business expansion in Asia.

Appetizing Incentives

Foreign Direct Investment (FD) incentives are instrumental in reimbursing foreign investors in South Korea for their financial inputs, at the same time also lowering their launching expenses. The present tax regime provides a tax rebate to international enterprises having the ability to play an important role in the Korean economy.

Simultaneously, the government helps these companies set up their industrial establishments (or help them acquire a good site location) and supports them with financial aid.

Government-assigned free trade zones drive a lot of expansion, along with minimal bureaucracy in manufacturing, distribution and trade; reduced land and buildings rents; tax credits; and single-window administrative unit. Also, streamlined custom reporting processes are implemented in a variety of value-added planning operations.

The government has also built free economic zones to support companies in free trade zones, so as to drive logistics at key global hubs and set up a welcoming residential environment for foreigners. Till date, the government has marked six free economic zones.

Geography

Placed strategically with China on one side and Japan on the other, South Korea is very close to more than 60 cities having more than a million inhabitants (average 3 hours away by flight).

South Korea has extensive free trade agreements (FTA) with the Association of Southeast Asian Nations, a provisional accord with India, an FTA with the European Union and a number of other nations.

Smart Customers

South Korea’s computer geeky consumers have brought a lot to the growth of the country’s home market in the last ten years. Korean cell phone and home appliance makers— popular for their high-grade products all over the world— have been successful, thanks to their perceptive local customers.

This is why for technology companies such as Microsoft, Motorola and eBay, as well as consumer sector firms such as Procter & Gamble and L’Oreal, South Korea is a bench test for their upcoming products.

Brilliant Framework

South Korea is well-anchored with respect to docks, airports, roads and rails. It is evident that foreigners thinking of investing in Korea would be successful in touching upon statutory limitations, commitments concerning the said investment and likely union matters.

The outstanding sources for this information are the American Chamber of Commerce in Korea and the U.S. Embassy Seoul respectively.

Prospects and Pain Points

On one hand, we got acquainted with the many world-renowned strong points of Korea, there is also an array of domestic challenges. As per the latest economic report, South Korea’s population is dwindling faster than that of any other OECD (Organization for Economic Co-operation and Development) country.

Birth rates in Korea have gone down to 1.19 children for every single woman, a rate that going forward in the long-term - would affect to make the population extinct by 2750, as specified by official government forecasting. In the wake of this decline of the population, the Korean Development Institute predicts sluggish GDP growth from the present figures of approximately 4% to 2.75% in 2030.

That is indicative of the fact that economic growth will mainly be based upon labor productivity (higher the labor productivity, more will be the economic growth). Korea’s population that is growing old seems to have an unclear tomorrow.

There are rare provisions of social welfare schemes. Old-age pension and wealth management are the latest innovations. So far, in Korea, the family has been a financial social cover.

However, Korean society is reinventing itself. Sprawling across a period of 40 years, to 2000, Korea’s per capita income has increased from 10% to 60%. With this rise in incomes, an increase has also affected inequality and shrinking family units.

Over and above, the wealth that has been collected is more than what can be adjusted in Korea’s local financial markets. Consequently, pension fund managers are inclined to find places outside of Korea to make investments.

Korea’s government is sensitive to the challenges that face it. Thus, its latest development plan is aimed at diversification of its industry and home electric appliances - heavy economy, using innovation to drive growth.

Seeing the past track record, this comes across as a logical step: The Kia (Hyundai) factory in Slovakia is so ahead of time as far as its robotics is concerned that, it is a picture-perfect location to shoot Terminator 6. The facility that began operations in 2007, has emerged as among the few car factories across the world that can build as many as 8 types of models with a common effect. 

Innovation can change other unripe zones of the economy like services, agriculture and water resources management, particularly in the event of getting aid in the form of investment and technical support from abroad. Foreign businesses keen on expanding in Asia should collaborate with corresponding Korean firms that have moved much ahead in expansion.

Koreans are glad to have something that makes them more capable. In the event of a foreign company that brings in any type of a value-added factor, the potential of starting and developing a fruitful and profitable business liaison is very high. If plans and designs progress well, perhaps those companies’ directors and officers can call it ‘business better than usual’.

Conclusion

South Korea's extraordinary rankings for ease of doing conducive business are driven by quite a few contributing factors that work in tandem. These include the nation’s topmost digital infrastructure and skilled human resources, appended with decades of investment in an internationally-acclaimed learning system.

Reforms initiated and churned out by the government have made it the entry and exit conditions for foreign capital more profitable. Likewise, its capital markets are in the midst of the most developed in the developing global scenario.

If you are looking to expand your business and set up an office or a company in Korea, we would be happy to help. Get in touch with us for details.