Why invest in South Korea? The East Asian nation is one of the world’s fastest-growing economies. Since 1961, the country’s gross domestic product (GDP) has grown an average of 7.1% every year. As of March 2023, foreign direct investments (FDI) increased by $2.6 billion.
If you’re considering investing in South Korea, here are three things you should know before diving in.
South Korea is a leading global destination for industrial sectors
As the world’s 10th-largest economy, the South Korean market is robust and dynamic, mostly driven by the technology, automotive, and manufacturing industries. As of 2021, South Korea’s manufacturing sector accounted for 28% of the country’s GDP. The average contribution of manufacturing in 157 countries is 12.32%.
Aside from being the world's largest producer of semiconductors, South Korea’s main industries include textile, steel, car manufacturing, shipbuilding and electronics.
Korean business culture is steeped in Confucianism
Developing strong relationships and understanding the local business culture is critical when investing in South Korea. Korean business culture emphasizes hierarchy, respect for authority, and personal connections.
Being punctual and engaging in “small talk” before getting to business is generally expected. And while most business decision-makers prefer to shake hands when meeting for the first time, others still bow. If this happens, you are expected to do the same, starting with the most senior executive in the room and bowing as deeply as he does.
Establishing trust and long-term relationships with local partners or potential clients can greatly enhance your chances of success. Moreover, having a reliable local contact who understands the Korean market can help overcome language barriers and cultural differences, which will facilitate smoother transactions.
South Korea has friendly regulations and legal solutions for foreign investors
In the 2023 Index of Economic Freedom released by World Heritage, South Korea ranked 15th out of 176 countries. The index grades a country’s respect for property rights, financial soundness, and judicial efficiency. To attract more business from overseas, the country passed in 1998 the Foreign Investment Promotion Act (FIPA), which was followed up by other laws that further protected foreign investments.
Additionally, various state-mandated incentives and support including professional and legal advice are available for qualified potential investors.
Investing in South Korea offers lucrative opportunities for international investors. However, success in the Korean market requires careful consideration of the economic landscape, a clear understanding of the business culture, and a firm grasp of the regulatory environment.
Visit https://www.investkorea.org/ for more information.
