Doing business in South KoreaAsia- Pacific Doing business
Did you know that South Korea has become one of the top 10 business-friendly economies in the world?
It’s no surprise really since there has been an innovative governmental reorganization leading to efficient laws, a transparent marketplace and clear investment incentives. The country also suffered much less of a decline in GDP than other countries amid the pandemic – GDP decreased from $1.65 trillion in 2019 to $1.63 trillion in 2020 – thus lifting South Korea to 10th place for the world’s biggest economy.
As you can see already, doing business in South Korea is a smart move, but here’s why.
Note: This summary is taken from the full TGS Doing Business Webinar co-hosted with the French Korean Chamber of Commerce and Industry (FKCCI). This webinar covered the economic potential of the South Korean market in its entirety.
Should businesses invest in South Korea in 2021?
You already know that the answer to this question is a resounding YES, and the reasons are as follows:
- South Korea is a geographic favorite: nestled between two great powers, Japan and China, South Korea is often overlooked, but it shouldn’t be! It is perfectly located as a gateway to these markets and its 1.7 million consumers.
- South Korea has the world’s 10th largest economy: as we said above, GDP didn’t decline as much as other countries during the pandemic (in Q2 of 2020, GDP growth only fell 3.2% compared to 14% in France) and it is already showing signs of recovery in certain industries (e.g manufacturing and services). This shows that the economy is resilient and stable!
- South Korea has a good economic forecast for the near future: the industry production index and the IMF predicts that South Korea will only keep getting stronger thanks to recovery trends seen in exports, investment and consumption. A record low interest rate (0.5%) will also help with this. Predictions for the future include a GDP of US$1.81 trillion in 2021, US$2.05 trillion in 2024, and US$2.22 trillion in 2026.
- South Korea is a key global player in exports: currently ranking in 7th place for major exporting countries, South Korea is a world leader in electronics manufacturing, including semiconductor chips, computers, mobiles and batteries. In fact, there was a massive increase in demand for these (+57%) in 2020, so this has been a key driver for the country’s recovery. Today Korea’s FTA (free trade agreement) covers 84% of global GDP.
- South Korea has a highly skilled and resilient workforce: South Koreans are known for being extremely disciplined, hard-working, loyal, motivated, well-educated and eager to excel. That’s probably why the employment rate is higher than a lot of other countries (66% of the population) and has remained stable.
What makes South Korea a sound investment for the future?
The South Korean government is incredibly enthusiastic to welcome international investors who wish to do business here, so as a result, they provide quite a few incentives. Here are the main reasons that investors are attracted:
1. Innovation and Infrastructure
South Korea is the most innovative country (according to Bloomberg’s Innovative Index) with one of the world’s best digital infrastructures. It is also well-connected with respect to docks, airports, roads and rails.
2. Korean New Deal
The recovery plan that was launched last year has had 140 billion dollars dedicated to it. It is split between the green deal (where there is a large focus on renewable energy and electric cars etc) and the digital deal (which focuses on AI, smart healthcare, and the establishment of a big DNA project).
3. Consumption Trends
South Koreans are tech-savvy consumers and have greatly contributed to the country’s domestic market in the last decade. This didn’t stop throughout the pandemic either. 2020 saw a 5.5% increase in consumption due to more online sales (+17%). The trend was labelled ‘revenge shopping’ as automobile and luxury goods sales soared. Since February 2021, a further 10% increase has been observed from offline sales (+14%).
4. Foreign Direct Investment (FDI) incentives
In 2020, 21 billion dollars was invested in South Korea, especially in I.C.T areas such as AI and cloud computing. The first quarter of 2021 shows the same trend as investment increased by a further 45%. Why? Because there are many investment incentives such as:
- Cash grants
- Lower startup costs
- Low rents on land
- Tax rebates
- Free trade zones
- And many more…
TGS can help you benefit from investing in South Korea
South Korea is a leading choice for investors because it places a very high priority on business continuity, among other things. Now you know why it is good to do business in South Korea, you may want to know how.
FKCCI can help you with this. They can support you from prospecting and networking to marketing, human resources, and legal support. In short, FKCCI can help you maximize the opportunities that South Korea offers for your business.
TGS is an entrepreneurial and innovative network with a focus on sustainable business development. We help you collaborate, recreate and innovate in the South Korea and around the world.