Doing Business in South Korea

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Doing Business in South Korea
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South Korea
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Background

• Known as the Hermit Kingdom
• 35 year period of Japanese rule
• June 1950 The North Korean army invaded and the
  Korean War began
  
• Ended in the DMZ at the 38th parallel

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Economy

• Today, GDP per capita is 7 times that of India
  and 13 times that of North Korea
  
• Moved to a market-oriented model after the
  financial crisis of 1997-1999
  
• Exchange rate (as of 10/29/03)
  
  
• 1179.00 KRW 1 US

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Economy

• Export Partners
• US 21.8
• Japan 11.9
• China 10.7
• Hong Kong 6.2
• Taiwan 4.7

• Import Partners
• Japan 19.8
• US 18.2
• China 8
• Saudi Arabia 6
• Australia 3.7

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Economy

• Major Industries
• Electronics, automobile production, chemicals,
  shipbuilding, steel, textiles, clothing,
  footwear, food processing
  
• Labor force by occupation
• 69 Services and other
• 21.5 Mining and Manufacturing
• 9.5 Agriculture, Fishing, and Forestry
• Unemployment
• 3.9, as of 2001

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General Information

• Population 48.324 million people (2002)
• Religion 49 Christianity
• 47 Buddhism
• 3 Confucianists
• 1 Shamanism and Chongdogyo
• Internet Users 22.23 million (2001)

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General Information

• Capital Seoul
• Climate Cold, dry winters (average of 21 F)
  Hot, humid summers (average of 77 F)
  
• Terrain 70 of the country is mountainous, with
  cultivated plains along the coast.
  
• Airports with paved runways 68
• Airports with unpaved runways 34

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Economic Environment

• Slowdown in 2003

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Economic Environment

• Real GDP - .4 in Q1 2003
• Private consumption - 2.1 Q1 2003
• Consumer confidence index lowest since 1998 when
  initiated
  
• BOKs Business Survey Index lowest in 27 months

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Economic Environment

• Manufacturing shrank 2.2 in May
• Wage growth is slowing but still high 8.2 April
  2003
  
• For many foreign companies wages are biggest
  negative KITA survey.
  
• Drop in FDI to 9.1 billion lowest since crisis.

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Economic Environment

• Unemployment is low and steady at 3.3 in Q2
  2003.
  
• Exports strong up 23 in Sept.
• Interest rates low 3.75 in July
• Inflation is low 3.5
• Government stimulus package

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Economic Forecast

• GDP
• 2.4 for 2003
• 4.4 for 2004
• Growth in Exports
• Slow to 9.3 in 2003 from 15 in 2002

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Economic Forecast

• Inflation
• 3.5 in 2003
• 2.2 in 2004
• Source EIU Country Reports

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Leading sectors for U.S. Exports

• Franchising
• Defense Equipment
• Electrical Power Systems
• Software
• Architectural Engineering Services
• Cosmetics
• Medical Equipment
• Pharmaceuticals
• Pollution Control Equipment
• Source U.S. Commercial Service

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For More Info

• EIU Country Reports
• Korea Country Commercial Guide 2004 U.S.
  Commercial Service
  
• Ministry of Commerce, Industry and Energy
  Website
  

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Political Environment

• President Roh Moo-hyun
• Until Sept., of the Millennium Democratic Party
  (MDP) founded by predecessor Kim Dae-jung
  
• Serves 2003 2008
• Pledged to continue reforms after crisis

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Political Environment

• President Roh seen as inept
• Close associate and head of party involved in
  embezzlement scandal
  
• Money for Peace
• 10 approval rating

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Political Environment

• Parliament is controlled by the Grand National
  Party (GNP)
  
• Traditionally aligned with chaebols
• Parliamentary election April 2004

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Political Environment

• Roh forming a new party
• GNP may maintain control
• More political turmoil than usual
• Lack of consensus
• Slowdown in reforms

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Political Environment

• Reforms include
• Chaebols
• Privatizing Banks
• Bankruptcy laws OECD estimates 25 of Korean
  companies cannot pay their debt interest.
  

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ExternalPolitical Environment

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ExternalPolitical Environment
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ExternalPolitical Environment

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ExternalPolitical Environment

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For More Info

• EIU Country Reports
• EIU Country Monitor
• Korea Country Commercial Guide 2004

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Legal Issues

• Korea Chamber of Commerce Industry Database
• Corporate
• Trade
• FDI
• Finance
• Intellectual Property
• Tax
• Labor

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Legal Issues

• Intellectual Property Law Korea Intellectual
  Property Office (KIPO)
  
• Antitrust Law Korea Fair Trade Commission
• Tax Law National Tax Service
• Import/Export Korea Customs Service
• Background Country Commercial Guide U.S.
  Commercial Service
  

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Cultural Differences

• Gestures
• Remove shoes when entering a Koreans home or a
  temple
  
• Women should cover their mouths when they laugh,
  men do not
  
• Eating in the street is rude
• Blowing your nose in public is rude
• Dont put your hands in your pockets when talking

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Cultural Difference

• Gestures cont.
• Money
• Counting money
• Counting on your fingers
• Slurp soup and smack lips while enjoying a meal

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Cultural Opposites

• Emergency phone number is 119
• Meals are served all at once to the group, not in
  courses to an individual
  
• Traditional footwear has left and right socks,
  with shoes that can fit either foot
  
• Addressing envelopes

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Cultural Concepts

• Group harmony
• Saving face
• Relationships
• Oriental zodiac
• Language

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Living in Korea

• Pyong equals 6 square feet
• Chonsay rent system
• Hotels
• Deluxe
• Tourist
• Yogwans

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Transportation

• Weaving is a way of life
• Beeping is not a sign of anger
• Taxis
• Standard
• Deluxe
• Picking up additional passengers

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Business Etiquette

• Third party introduction is needed to get an
  appointment with a new business
  
• Always carry business cards and give them out
  immediately upon being introduced
  
• Use titles rather than first names
• Business-related entertainment is very important

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Business Etiquette

• Punctuality
• Be on time
• Do not take it personally if someone shows up
  late
  
• Remember he got here as fast as he could
• Koreans do not rush

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Business Etiquette

• Leadership and status
• Age
• Gender
• Titles
• Education

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Business Etiquette

• Meetings
• Address a mixed group as Gentlemen and Ladies
• Presentations
• Socializing
• Nodding the head yes

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Business Etiquette

• Negotiating
• No concept of fair play or of not taking
  advantage of a weaker adversary
  
• Conflicts must be resolved so that neither side
  appears to have been forced to make a
  concession
  
• Its up to you to ask the right questions and
  read between the lines
  
• Like to haggle
• Patient

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Business Etiquette

• Contracts
• Koreans like for them to be flexible
• May sign with a tojang instead of a signature

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Business Organizations

• Chaebol
• Business conglomerates
• AMCHAM
• American Chamber of Commerce in Korea
• KCCI
• Korean Chamber of Commerce and Idustry
• KABI
• Korean-American Business Institute
• KOEX
• Korea Exhibition Center

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Useful Sayings

• Good morning
• Ahn nyong, ha ship nee ka (ah-nee-yong
  hah-sim-NEE-kah)
  
• My name is
• Nah eui, eeh room eun, ____ eep nee da
  (NAH-oo-wee-eerum-oon ____ eem-NEE-da
  
• Thank you
• Kahm sah hap nee da (kumh-sah ham-NEE-dah)
• Yes Neh (nay)
• No Ah nym nee da (ah-nyim-NEE-dah)

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Hangul Alphabet
Saccone 1994
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Questions?
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Sources for Cultural Information

• Kenna, Peggy, and Sondra Lacy. Business Korea A
  practical guide to understanding South Korean
  business culture. Lincolnwood, Il Passport
  Books, 1995.
• Saccone, Richard. The Business of Korean
  Culture. Elizabeth, NJ Hollym, 1994.
  
• Asia Pulse. South Korea. 3 November 2003http//www2.gol.com/users/coynerhm/south_korea_eti
  quette.htm .