Republic of Korea Business Guide
Introduction
South Korea, officially known as the Republic of Korea is an East Asian state on the southern half of the Korean Peninsula. To the north, it is bordered by North Korea (Democratic People's Republic of Korea), with which it was united until 1945. To the west, across the Yellow Sea, lies China and to the southeast, across the Korea Strait, lies Japan. Approximately one-half of South Korea's population lives in or near the capital Seoul, the country's largest city. Seoul is one of the most populous metropolitan areas in the world.
Korea traces its founding to 2333 BC by Dangun Wanggeom. Korea's history has been turbulent throughout, with numerous wars, fighting invasions from both China and Japan. Since the establishment of the modern republic in 1948, South Korea struggled with the aftermath of Japanese occupation (1910-1945), the Korean War (1950-1953), and decades of authoritarian governments, undergoing five major constitutional changes. While the government officially embraced Western-style democracy from its founding, presidential elections suffered from rampant irregularities. It was not until 1987 that direct and fair presidential elections were held, largely prompted by popular demonstrations, and South Korea has been a multi-party democracy since that time.
Economy
The South Korean economy has advanced rapidly since the 1950s and is now the 12th largest (nominal value) economy in the world. South Korea is also among the world's most technologically advanced and digitally-connected countries; it has the fourth highest number and proportion of broadband Internet users among the OECD countries and is a global leader in electronics, digital displays, semiconductor devices, and mobile phones. South Korea also leads the world in the shipbuilding industry, headed by prominent companies such as Hyundai Heavy Industries. South Korea exported ships to the value of 15.09 billion USD in 2004 and is currently the world leader in shipbuilding.
Since the Asian financial crisis of 1997, however, the corporate landscape has changed considerably as a result of massive bankruptcies and government reforms. The crisis exposed longstanding weaknesses in South Korea's economy, including high debt-to-equity ratios, massive foreign borrowing, and an undisciplined financial sector. This led to two rounds of financial and industrial restructuring; once in 1997 and again following the collapse of Daewoo in 1999. Daewoo's collapse has been recorded as one of the largest bankruptcies in world history. By 2003, just over one-half of the 30 largest chaebol from 1995 remained.
Between 2003 and 2005, economic growth had slowed to about 4% per year, an enviable figure in much of the rest of the world. A downturn in consumer spending, attributed to massive personal credit card debt, was offset by rapid export growth, primarily to China. In 2005, the government proposed labor reform legislation and a corporate pension scheme to help make the labor market more flexible, and new real estate policies to cool property speculation. In 2006, South Korean economy has recovered its growth rate to 5.1%, and its outlook for 2007 is foretold positively.
Market Overview
National Capital: Seoul • Population: 48.4 million • Land Area: 98,477 sq km (slightly larger than Indiana) • GDP: USD 797.4 billion (2006) • GDP Growth: 5.0% (2006) • Industries: Electronics and electrical products, motor vehicles, shipbuilding, mining and manufacturing, petrochemicals, industrial machinery, textiles, footwear. • U.S. Exports to Korea: USD 32.46 billion (2006) • U.S. Share of Korean Imports: 10.9% (2006) • Korea’s Imports: USD 309.3 billion (2006) • Korea’s Exports: USD 325.7 billion (2006) • U.S. Trade Balance: -USD 13.37 billion (2006) • Korea’s Import Trade Partners: Japan (16.8%), China (15.7%), U.S. (10.9%), Saudi Arabia (6.6%) (2006)
Market Challenges
Korea continues a process of economic liberalization and deregulation. The Korean government has yet to adopt a hands-off policy where the economy and trade are concerned. The market is advanced in most sectors and competition from Korean companies is considerable. Protection of Intellectual Property Rights is crucial. Register your Intellectual Property before you come into the market. See the latest "Exporter Guide" prepared by the Foreign Agricultural Service's Agricultural Trade Office in Seoul for updated information on this topic.
Market Opportunities
U.S. companies will find excellent niche markets for their goods and services across virtually every sector. • Best Prospects for U.S. exports are in the following sectors: • Automotive Parts and Accessories • Broadcasting Services and Equipment • CNC Machine Tools • Computer Software • Cosmetics • Defense Industry Equipment • Drugs and Pharmaceuticals • Education and Training Services • Electrical Power Systems • Engineering Services • Medical Equipment and Devices • Pollution Control Equipment • Radio Frequency Identification Technology • Security Services and Products • Specialty Chemicals • Travel & Tourism • Wireless Broadband Equipment and Services. The U.S.-Korea Free Trade Agreement (KORUS-FTA), currently under negotiation, aims at the removal of trade and investment barriers thereby easing American business access to the Korean market. More information is available from the office of the United States Trade Representative. Korea is a highly advanced, tech-oriented economy that can utilize and generate significant demand for state of the art technologies. Korea has several mega-projects underway aimed at establishing the country as an international business center for North-East Asia, as well as a major financial and logistics hub. Korea has a steady and diversified growth of 4.6%, with SMEs taking on stronger and more dynamic roles with the economy, opening new opportunities for partnering with U.S. SMEs. Korea has strong military ties with the U.S. and continues as one of the top markets for U.S. defense equipment in the world. Korean fascination with the “American Lifestyle” and related Americana, continues to draw interest and attention among Korean consumers.
