Introduction to South Korea and Business Environment
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Published: Mon, 5 Dec 2016
South Korea is a country in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the China to the west, Japan to the east, and North Korea to the north. South Korea has undergone an economic miracle and its official development assistance has been increasing rapidly too; it is one of few countries to have moved successfully from a recipient to a donor in the last two decades.
The South Korean political system is classified under the constitutional democracy governance which is divided into three major categories which are executive, judicial and legislative in the order of descending hierarchy.
The president, the head of state, is elected by popular vote for a five-year term. The prime minister, the head of the government, is appointed by the president with the consent of the National Assembly. The single-chamber National Assembly has 299 members who are elected for four-year terms. Of these, 245 are directly elected in single-seat constituencies and 54 by proportional representation
South Korea’s economy has boosted and have come a long way after the affect of the 1997 Asian financial crisis. South Korea was one of the poorest countries in the world in the 1950s, but its rapid transformation into a high-tech industrialized society has made it one of the richest. Annual income per person rose from under $100 in the early 1960s to over $20,000 in the late 2000s.
South Korea has a market economy which ranks 14th in the world by nominal GDP and 12th by purchasing power parity (PPP), identifying it as one of the G-20 major economies.
South Korea is one of the few developed countries that is able to avoid a recession during the global financial crisis, and its economic growth rate will reach 6.1% in 2010, a sharp recovery from economic growth rates of 2.3% in 2008 and 0.2% in 2009 when the global financial crisis hit. The unemployment rate in South Korea also remained low in 2009 at 3.6%.
South Korea GDP Growth Rate
Since 2007 to 2010 there is an immense growth in GDP because extremely competitive education system and a highly skilled and motivated workforce are two key factors driving this knowledge economy.
In 2009 there was a drastic fall in GDP (as shown in graph) the reason for such a fall was rapidly aging population and structural problems that are becoming increasingly apparent.
The agricultural sector of South Korea contributes only 4% to the total GDP where only 7% of the total labor force is employed. This is largely due to the scarcity of arable lands and heavy industrialization.
The services sector – banking, insurance, retailing, healthcare and tourism – accounts for about 55 percent of GDP. The economy was little affected by the 2008 global recession, contracting 0.2 percent in 2009 and recovering swiftly in 2011.
South Korea Inflation Rate
The current inflation rate of South Korea is 3.50.
The inflation rate in South Korea was last reported at 3.3 percent in November of 2010.
From 1966 until 2010, the average inflation rate in South Korea was 8.35%.
The industrialization and urbanization of South Korea, especially Seoul, have brought many changes to the way Korean people live. Changing economics and lifestyles have led to a concentration of population in major cities, with multi-generational households separating into nuclear family living arrangements.
Some important facts about South Korean culture and society:
. South Koreans prefer to do business with people with whom they have a personal connection. It is therefore crucial to be introduced by a third-party.
They view contracts as loosely structured consensus statements that broadly define agreement and leave room for flexibility and adjustment as needed.
Under no circumstances insult or to criticize in front of others.
South Koreans are extremely direct communicators. They are not averse to asking questions if they do not understand what has been said or need additional clarification.
Business Meeting Etiquette adopted by south Koreans
The most senior South Korean generally enters the room first.
It is a good idea to send both an agenda and back-up material including information about your company and client testimonials prior to the meeting.
The main purpose of the first meeting is to get to know each other.
Meetings are used to understand a client’s needs and challenges. They lay the foundation for building the relationship.
Have all written materials available in both English and Korean.
The country’s specialization into science and technology has assisted in its rapid economic growth making it the thirteenth largest in the world.
Amongst the list of sophisticated industries that South Korea concentrate include automobiles, construction, computers, electronics, robotics, semiconductors, shipbuilding and most importantly biotechnology, which is a major competitive advantage of the country.
Robotics has been included in the list of main national R&D projects in Korea since 2003. Robotics are also incorporated in the entertainment sector as well.
Since the 1980s, the Korean government has invested a lot in the development of a domestic biotechnology industry. They are mainly in the production of hepatitis vaccines and antibiotics.
Recently, research and development in genetics and cloning has received increasing attention.
High-technology exports (% of manufactured exports) in South Korea
This is a chart with historical data for High-technology exports (% of manufactured exports) in South Korea. High-technology exports are products with high R&D intensity, such as in aerospace, computers, pharmaceuticals, scientific instruments, and electrical machinery.
We can clearly see that since 1988, South Korea has achieved an incredible record of growth into the high-tech modern world economy.
Till 2000, the growth is immense but sudden after 2000 it has declined Economists believe that growth potential has fallen because of a rapidly aging population and structural problems that are becoming increasingly apparent.
South Korea’s legal system combines elements of European civil law and Anglo-American law.
The judiciary is highly professional and fairly independent, but it is not entirely free from government pressure.
Korean legal system does not have jury. Court composed of 1 or 3 judges hears cases.
It is now very controversial in Korea how to enhance the participation of people into the judicial system.
Since the mid-2000s, South Korea has ranked around 40th position in Transparency International’s corruption perceptions index, which covers close to 180 nations.
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