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.
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.
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.
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.
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.
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’.
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.
In the aftermath of the Asian financial crisis in 1997, South Korea committed to liberalizing its economy and promoted foreign direct investment (FDI) to open its market to foreign investors. FDI allows foreign investors to acquire and own stocks or shares of Korean companies. According to UNCTAD's 2020 World Investment Report, South Korea’s FDI stocks increased from US$ 135 billion in 2010 to US$ 238.5 billion in 2019. Other forms of FDI include a contribution to Non-Profit Organizations (NPO) and offering long-term loans to domestic companies. Acquisition of stocks or shares of a domestic company guarantees your participation in technology transfer and the management of the company you invested in. As a foreign investor, your investment in South Korea will be facilitated and legally supported by the Foreign Investment Promotion Act. You can also rely on the Rules on Foreign Investment to guide your business operations or Consolidated Public Notice to protect your investment. The South Korean government has cultivated a conducive environment for doing business, with robust measures and policies to help you make the most out of your investment and business capabilities. These measures have enticed investors from across the world and increased inbound investment steadily in the past 15 years. Now is the perfect time to invest in South Korea. Why Invest in South Korea? South Korea is appealing for foreign direct investment for many reasons. The Korean Government has been reducing tax incentives and increasing cash grants. In January 2019, the government increased cash incentives for foreign companies to around $46 million (50 billion KRW) to entice investors. Cash grants now drive the government’s comprehensive incentive program for foreign investors, which include industrial site support, financial support for staff training, and many more. Companies that invest in the IT sector and related industries qualify for generous cash grants provided by the central and local governments of Korea on a matching fund basis. From January 2020, the number of eligible technologies was expanded to 2,990 in 33 fields, which now includes high-tech products like IoT emotional diagnosis and biometric authentication payment. But South Korea has more to offer foreign investors than FDI cash incentives. Investors are also attracted by the country’s rapid economic development, specialization in ICT, and strong industrial base, high-potential emerging sectors, and expanding market. Factors to Consider Before You Invest in South Korea In 2009, financial, insurance, and other services made up 64% of inbound investments, compared with 35% invested in manufacturing. Investment opportunities have diversified over the years to include trade, hospitality, real estate, ICT, transportation, and many more. Industries like semi-conductors, auto manufacture, logistics, displays, and environmental products and services are attracting more investors. Under the Foreign Investment Promotion Act, foreign investors can set up a company, foreign branch, or liaison office. Even you'll need to invest in opening a branch in South Korea; it will not fall under FDI since it is not locally incorporated. A liaison office conducts functions like market research and R&D but cannot undertake profit-generating business in South Korea. To set up a local corporation, you’ll need to invest a minimum of around US$ 100,000 (100 million KRW) and does not have a maximum limit. On the other hand, establishing a domestic branch of a foreign company in Korea does not have any limits. Before setting up a business in South Korea, you have to consider how the implications of identification. The act recognizes foreign investors and foreign-invested companies as separate entities and requires independent accounting and settlement. The Foreign Exchange Transactions Act identifies a branch and headquarters as a single entity, which requires consolidated accounting and settlement. The foreign-invested company pays taxes based on domestic and overseas income, while taxes for the branch and liaison office considers income from domestic sources only. How to Establish a Company in South Korea Since the early 2000s, the government has focused on simplifying the FDI process and established a one-stop services platform to help foreign investors and multinationals invest in South Korea. The FDI procedure starts with foreign investment notification, which is conducted by your foreign exchange bank or accredited agencies like Pearson & Partners. Then, you remit your investment via customs or exchange bank before proceeding to the registration of incorporation at the court registry office. You will be notified once your business registration and incorporation process is completed. Then, you transfer your paid-in capital to a corporate account and wait for a notification confirming the establishment of your foreign-invested company. How to Set Up a Stock Company in South Korea The Commercial Act of South Korea recognizes five forms of companies, and three types of business forms are available to foreign companies, including the stock company. Each of these business forms has distinct registration requirements, minimum investment limit, and differ in terms of scope. The procedure for establishing a company may differ slightly depending on the degree of commitment or how much you invest in South Korea. There are two ways of setting up a stock company in South Korea. You can use either promotion or subscriptive incorporation, but both procedures involve registration of incorporation that takes about two weeks to complete. Registration tax is charged for both promotion and subscriptive incorporation, which costs around 0.4% of the capital you’ll be investing. You will also have to pay 20% of the registration tax for local education tax. If you invest in stock companies established in overconcentration control areas, the total costs accrued from both taxes can increase by up three times more. Other charges include registration application fee to get revenue stamp of the Supreme Court and notarization fee. The most important step in this procedure is filing your business registration, which should be completed within 20 days from the day your stock company opens its doors for business. To avoid issues down the line, hire an expert in South Korea’s FDI like Pearson & Partners to help you establish a company. South Korea is ranked 5th globally in the Doing Business 2020 ranking by the World Bank. It has laid a solid foundation across all sectors that will guarantee its position as a global business hub for many years to come. You can rely on Pearson & Partners to help you become part of South Korea’s inspiring journey and join the long list of the success stories of the FDI. Contact us today to start your journey.read more
Seoul, the capital city of South Korea, belongs to the league of Asia Pacific’s highly sustainable workplace markets, along with being a cultural hub of the region. Korean cuisine, cinema and pop music have an immense influence all over Asia, transforming the city into a tourist resort of global appeal, while Seoul’s rank as a business hub, depends on the might of its financial services sector and the power of Korean chaebols (corporations) makes it a well-liked investment terminus. Close to 10 million people have their homes in Seoul, but the bigger built-up area houses 25 million, which is close to 50 per cent of the population of South Korea. The city’s key sectors are finance, manufacturing and retail. The internet speed provided within the country is among the worlds fastest and public WiFis can be easily reached. The city proudly carries three primary office districts: the CBDGwanghwamun, the Yeouido Business District (YBD) and the Gangnam Business District (GBD). These CBDs are the country’s heart and soul and longest-serving business districts and also the major shopping areas of Seoul. They take account for a diverse range of businesses. Though research statistics show a CBD vacancy rate of 16.7%, however, it has exhibited a significant rise in rents since the past few months. Gwanghwamun – Rise through the Ranks as Seoul’s Premium Business District Gwanghwamun, in the heart of Seoul, rules the topmost position in the listing of the country’s business districts, on the parameters of annual sales and sales volume per individual. Business districts can be ranked on the basis of the statistical data of geography, population, sales, type of business and consumer’s trends of consumption, as well as information on a map. According to a report, places around Gwanghwamun Station registered the highest sales of 5.8 trillion won ($4.6 billion) in a single year, around approximately eight times hike as against the 2013 review. The area’s separate sales were reported at 3.9 million won. After blending with the sale figures of adjoining areas like City Hall Station and Jonggak Station, the overall sales figure in the area would exceed 12.7 trillion won. The swift upsurge of sales near the Gwanghwamun region can be ascribed to the clustered population who went out in public through the whole-month duration torchlight procession and other end-of-the-year events conducted at Gwanghwamun Square. On the other hand, Apgujeong Station in the swanky Gangnam district was placed at 19th position, a sensational drop from number three, five years ago. Areas near Gangnam Station that registered its best volume of sales in 2013, were positioned at 13th. Apart from key business districts in Seoul; Nam-gu in Ulsan, Jung-gu in Busan, places adjoining Seohyun Station in Seongnam and Beomgye Station in Anyang, Gyeonggi Province showed up in the top 20 list. Yeouido This YBD is present on a tiny island of the Han River, has been in the limelight for its financial residents – the Korea Stock Exchange lives there along with media firms. Lately, it has turned into a hub for foreign-owned businesses, majority of them have shifted to Seoul IFC development; having a combination trio of office high-rises, a hotel and a shopping arcade. Built by AIG, presently it belongs to Brookfield. The office market in the YBD is still getting used to Seoul IFC’s working premises and Q1 vacancy was 24.4%. Yeouido sprawls across 8.4 square kilometers of island sculpted by the Han River in western Seoul. The island gets its fame as the big economic district of Seoul, a registered address for several investment enterprises and banks. Additionally, the island holds the National Assembly where the regulations and political decisions of paramount importance to Korea are conceptualized and framed, the governing agencies of the Korean financial sector just like Financial Supervisory Service, Korea Financial Investment Association and the exemplary buildings like IFC SEOUL and 63. Yeouido has grown up and matured as a financial district from the last 70's when the KRX (Korea Stock Exchange) shifted base to Yeouido from CBD. Because the district identity looks similar to a financial and banking nuclear center of the city that is geographically placed on an island with a park, YBD is usually known as the Wall Street of Korea. Gangnam Gangnam is stationed in Seoul, south of the Han River, which splits through the city. It is among the several bridges of the city that bridges Gangnam with the adjoining areas to the north of the Han and also city centers. GBD (Gangnam Business District) used to be a farming area running in the reverse gear until 40 years ago. Nevertheless, this area has made its footprint as the educational, commercial and focal point in Korea and is armed to the teeth with administrative buildings on Gangnam-daero and Teheran-ro, centered on the Gangnam Station area. Every kid who loves to dance is familiar with ‘Gangnam Style’, - YouTube has more than 3 billion official views of this video. However, a considerably smaller number of people are aware that Gangnam belongs to Seoul in the capacity of a major office district. Gangnam houses several hi-tech and media agencies and another name for it is the Beverly Hills of Seoul. It is a highly robust office market, owing to limited resources and available positions of only 5.1%. GBD is at number two, on the scales of biggest business districts in Seoul, with reference to the entire leasing area of grade A & B office buildings. Conclusion Seoul has numerous universal districts. The evolution in the number of foreign nationals is most likely to hit the roof with schemes for foreign investment sectors throughout the town. When global firms make an entry into the Korean market, one of the initial choices to decide where in Seoul to set up their office. Now we have an overview of the three major business districts that are high-density areas, dotted with office buildings. Seoul’s Metropolis area comprises 400 logistics centers of area 10,000 sqm or more, with 25% of overall retail online sales. With these statistics, exceeding expectations for the sector is an understatement. Contact us for clarity and in-depth knowledge of the best place for your new company to operate.read more
Who can apply for D-7 visa?D-7 visa is issued to “dispatched foreign professional/supervisor/employee of a firm that is engaged in the business activities in Korea.”Eligibility and requirements Foreign professionals at a Korean branch office sent from the foreign company Foreign professionals at the domestic headquarters of a Korean company that has advanced into the overseas market. - Worked at a foreign company/organization and sent to the foreign company’s affiliate/subsidiary company, branch, or other offices in Korea as an “indispensable professional specialist.“ - The applicant is waived for the one-year work experience, 1) If planning to work in key industries or in national projects or, 2) the employer company has inducted $500,000 or more of business operational fund into its Korean office. - Worked at an overseas branch office of a listed Korean corporation or public organization for at least one year and was dispatched to the main office in Korea. - However, if the Korean headquarter has invested less than $500,000 into its overseas branch/local office, one is not eligible to apply for the D-7 visa. How long is it valid?When granted a D-7 visa, the maximum length of stay is 2 years, but it can be extended upon application. Dispatch orders should be issued by the company headquarters, even if the employee is dispatched from a branch. The dispatch order should state the dispatch period.Are you applying for your visa in Korea? Contact our Korea visa expert Team in Pearson & Partners.read more