Starting a Business in South Korea

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Starting a Business in South Korea

A hi-tech juggernaut South Korea rests between the two Asian giants China and Japan. The country features a sophisticated and affluent populace, world-leading infrastructure, and a plethora of business opportunities for companies involved in industries like electronic manufacturing and shipbuilding.

Economy of South Korea

The economy of South Korea is a highly developed mixed economy  dominated by family-owned conglomerates called chaebols. It is the 4th largest GDP in Asia and the 10th largest in the world. South Korea is known  for its rise from one of the poorest countries in the world to a developed, high-income country in just a few generations. This economic growth has been described as the Miracle on the Han River,  which has brought South Korea to the ranks of countries in the OECD and the G-20. South Korea still remains one of the fastest growing developed countries in the world following the Great Recession. It is included in the group of Next Eleven countries that will dominate the global economy in the middle of the 21st century.

South Korea’s mixed economy ranks 11th nominal and 13th purchasing power parity GDP in the world, identifying it as one of the G-20 major economies. It is a developed country with a high-income economy and is the most industrialized member country of the OECD. South Korean brands such as LG Electronics and Samsung are internationally famous and garnered South Korea’s reputation for its quality electronics and other manufactured goods.

South Korea was one of the few developed countries that were able to avoid a recession during the global financial crisis

Despite the South Korean economy’s high growth potential and apparent structural stability, the country suffers damage to its credit rating in the stock market because of the belligerence of North Korea in times of deep military crises, which has an adverse effect on South Korean financial markets. The International Monetary Fund compliments the resilience of the South Korean economy against various economic crises, citing low state debt and high fiscal reserves that can quickly be mobilized to address financial emergencies. Although it was severely harmed by the Asian economic crisis of the late 1990s, the South Korean economy managed a rapid recovery and subsequently tripled its GDP.

South Korea GDP
South Korea GDP

South Korea Economic Indicators

South Korea GDP Growth Rate

South Korea has an export oriented economy and is the world’s leading producer of displays and memory semiconductors and the second largest producer of ships. Services account for the highest percentage of GDP (around 57 percent of GDP). Within services the most important ones are public administration (6 percent ); education (5.3 percent); information and communication (5 percent); and business activities (4.6 percent of GDP). A strong manufacturing industry which has turned South Korea into a major exporter accounts for 32 percent of GDP.

South Korea GDP Growth Rate
Source: The Bank of Korea
South Korea Interest Rate

In South Korea the interest rates decisions are taken by the Bank of Korea’s (BOK) Monetary Policy Committee. The official interest rate is the Bank of Korea Base Rate which was changed from overnight call rate on March 2008.

South Korea Interest Rate
Source: The Bank of Korea
South Korea Inflation Rate

In South Korea, the most important categories in the consumer price index are Housing, water, electricity, gas and other fuels (17 percent of total weight) and Food and non-alcoholic beverages (13.6 percent of total weight). Others include Restaurants and hotels (12 percent); Education (11.4 percent); Transportation (10.9 percent); Health (7.3 percent); and Clothing and footwear (6.2 percent). The components with the least weight are Communication at 5.8 percent; Miscellaneous goods and services at 5.4 percent; Recreation and culture at 5.3 percent; Furnishings, household equipment and routine maintenance at 3.8 percent; and Alcoholic beverages and tobacco at 1.24 percent.

South Korea Inflation Rate
Source: Statistics Korea
South Korea Unemployment Rate

In South Korea, the seasonally adjusted unemployment rate measures the number of people actively looking for a job as a percentage of the labour force.

South Korea Unemployment Rate
Source: Statistics Korea
South Korea Government Debt to GDP

South Korea recorded a government debt equivalent to 36.60 percent of the country’s Gross Domestic Product in 2018. Generally, Government debt as a percent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields.

South Korea Government Debt to GDP
Source: Ministry of Strategy and Finance, South Korea
South Korea Balance of Trade

South Korea remained as a net exporter for the 11th consecutive year in 2019 with a trade surplus of USD 39.2 billion, despite a downturn in semiconductors, petrochemicals, and petroleum products industry and challenges such as the US-China trade dispute, Japan’s restrictions on exports, Brexit, and Hong Kong protests.

South Korea Balance of Trade
Source: Ministry of Trade, Industry & Energy (MOTIE)
South Korea Currency Won

The USDKRW spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the KRW.

South Korea Currency Won

South Korea Stock Market

The Korea Stock Exchange Composite KOSPI is a major stock market index which tracks the performance of all common shares listed on the Korean Stock Exchange. It is a capitalization-weighted index. The KOSPI Index has a base value of 100 as of January 4, 1980. The KOSPI is a major stock market index which tracks the performance of large companies based in South Korea. The prices displayed in Trading Economics are based on over-the-counter (OTC) and contract for difference (CFD) financial instruments. Please visit https://global.krx.co.kr/ for official data and contact https://english.koscom.co.kr if you need to have a market data license.

South Korea Stock Market

South Korea Ease of Doing Business

South Korea is ranked 5 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of South Korea remained unchanged at 5 in 2019 from 5 in 2018. The Ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operationstronger protections of property rights. Economies with a high rank (1 to 20) have simpler and more friendly regulations for businesses.

Ease of Doing Business in South Korea
Source: World Bank
South Korea Business Confidence

The Business Survey Index (BSI) on business conditions in the manufacturing sector in South Korea rose to 68 in August 2020 from 66 in July. It was the highest reading since January as the economy continues to recover from the coronavirus pandemic. In contrast, the measure of business conditions at non-manufacturing companies fell to 62 from 66 in June, while the outlook for the following month fell by 7 points to 62.

In South Korea, the Business Survey Index (BSI) in the manufacturing sector measures the level of optimism that business leaders have about the performance of the economy in the current month and their outlook for the following month. The Index is based on the survey of around 2800 companies in fifteen areas including sales, inventories, production facilities, prices, labor force and profitability. For each of the indicators measured, the net difference between the number of positive responses and the number of negative responses is computed. The BSI above 100 indicates an improving outlook and below 100 a deteriorating outlook.

South Korea Business Confidence
Source: The Bank of Korea
South Korea Consumer Confidence

The Composite Consumer Sentiment Index (CCSI) in South Korea increased to 91.6 points in October 2020 from 79.4 in the previous month. It was the highest reading since February, as coronavirus cases declined and the economic recovery continued. All six sub-indexes improved, nudged mainly by current domestic economic conditions (+16 points to 58) and prospective domestic economic conditions (+17 points to 83). Meanwhile, future household spending (+8 points to 100), future household income (+6 points to 94), and current living standards (+5 points to 86), and future living standards (+6 points to 91) also increased.

In South Korea, the Composite Consumer Sentiment Index (CCSI) measures the level of optimism that consumers have about the performance of the economy. The index is based on a survey of around 2200 households. The CCSI is computed as a sum of six variables, including current living standards, prospective household income and prospective spending. A CCSI above 100 indicates an improving outlook and below 100 a deteriorating outlook.

South Korea Consumer Confidence
Source: The Bank of Korea
South Korea Bank Lending Rate

Bank Lending Rate in South Korea increased to 2.66 percent in September from 2.63 percent in August of 2020.

In South Korea, the bank lending rate is the average rate of interest charged on loans by commercial banks to private individuals and companies.

South Korea Bank Average Lending Rate
Source: The Bank of Korea
South Korea Corruption Rank

South Korea is the 39 least corrupt nation out of 180 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International. The Corruption Perceptions Index ranks countries and territories based on how corrupt their public sector is perceived to be. A country or territory’s rank indicates its position relative to the other countries and territories in the index.

South Korea Corruption Rank
Source: Transparency International
South Korea Credit Rating

Standard & Poor’s credit rating for South Korea stands at AA with stable outlook. Moody’s credit rating for South Korea was last set at Aa2 with stable outlook. Fitch’s credit rating for South Korea was last reported at AA- with stable outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of South Korea thus having a big impact on the country’s borrowing costs. This page includes the government debt credit rating for South Korea as reported by major credit rating agencies.

Korea Exchange
Korea Exchange

Taxation in South Korea

Corpo-
rate tax
Perso-
nal income tax
VAT or
sales tax
Social Security Rate for Companies Social Security Rate for Employees
25% 42% 10% 9,96% 8,98%

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