SOUTH KOREA 2016

IN THIS REPORT

SOUTH KOREA 2

BACKGROUND

LOCATION

EAST ASIA

CAPITAL

SEOUL

CURRENCY

SOUTH KOREAN WON (SKW)

South Korea, an East Asian nation on the southern

half of the Korean Peninsula, shares one of the world’s

most heavily militarized borders with North Korea. It’s

equally known for its green, hilly countryside dotted

with cherry trees and centuries-old Buddhist temples,

plus its coastal fishing villages, tropical islands and

high-tech cities such as Seoul, the capital. South

Korea has a market economy that ranks 13th in the

world by nominal GDP and 13th by purchasing power

parity (PPP). It is a developed country, with a

developed and a high-income economy.

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GEOGRAPHY

LOCATION

Eastern Asia, southern half of the

Korean Peninsula bordering the

Sea of Japan and the Yellow Sea

CLIMATE

Temperate, with rainfall heavier in summer than winter; cold winters

99,720 sq.km

AREA

REGIONS

9 provinces (do, singular and plural), 6 metropolitan cities (gwangyeoksi, singular and plural), 1 special city (teugbyeolsi), and 1 special self-governing city (teukbyeoljachisi)

MAJOR CITIES

• Busan (Pusan), Daegu (Taegu), Daejeon (Taejon), Gwangju (Kwangju), Incheon (Inch'on), Ulsan

NATURAL RESOURCES

• Coal, Tungsten, Graphite, Molybdenum, Lead, Hydropower Potential

THREATS FROM NATURAL HAZARDS

• Occasional typhoons bring high winds and floods; low-level seismic activity common in southwest

SOUTH KOREA 4

PEOPLE AND SOCIETY

HEALTH SPENDING

( % OF GDP )

POPULATION POPULATION

GROWTH RATE

EDUCATION SPENDING (% OF GDP)

4.6%

of GDP (2012)

50.63 million (2015)

7.4% of GDP (2014)

GENDER RATIO

LIFE EXPECTANCY

82 YEARS

(2015)

1 MALE

1 FEMALE

• 0-14 years : 13.69%

• 15-24 years: 13.52%

• 25-54 years: 46.63%

• 55-64 years: 13.14%

• 65 years and over: 13.02% (2015)

AGE STRUCTURE

ETHNIC GROUPS

• Homogeneous (except for about 20,000 Chinese)

RELIGION

• Christian 31.6% (Protestant 24%, Roman Catholic 7.6%), Buddhist 24.2%, other or unknown 0.9%, none 43.3% (2010 survey)

LANGUAGES • Korean, English

SOUTH KOREA 5

GOVERNMENT AND POLITICS

OFFICIAL NAME

REPUBLIC OF KOREA

NATIONAL ASSEMBLY PARK GEUN-HYE

TRANSNATIONAL ISSUES

PRESIDENTIAL REPUBLIC

FORM OF

STATE

LEGAL SYSTEM

Elections in South

Korea are held on

national level to select

the President and the

National Assembly. The

president is directly

elected for a single five-

year term by plurality

vote.

Justice Party [SIM Sang-jeong]

Minjoo Party of Korea or MPK

People's Party

New Frontier Party (NFP) or

Saenuri

NATIONAL LEGISLATURE

NATIONAL ELECTIONS ELECTIONS

Mixed legal system

combining European civil

law Anglo-American law

and Chinese classical

thought.

HEAD OF STATE

POLITICAL PARTIES

Military Demarcation Line within the

4-km-wide Demilitarized Zone has

separated North from South Korea

since 1953; periodic incidents with

North Korea in the Yellow Sea over the

Northern Limit Line, which South

Korea claims as a maritime boundary;

South Korea and Japan claim

Liancourt Rocks (Tok-do/Take-shima),

occupied by South Korea since 1954

SOUTH KOREA 6

ECONOMY

GDP (CURRENT US $) GDP GROWTH RATE

RAPHY

$1.410 trillion

(2014)3.3 %

(2014)

Electronics, Telecommunications,

Automobile Production, Chemicals,

Shipbuilding, Steel

SECTOR BREAKDOWN

AGRICULTURE

2.3%

INDUSTRY

38%

SERVICE

59.7%

EXCHANGE RATE RATERATE

2.5%

(2014)

1,170.10/USD (16/06/2016)

FDI (INBOUND & OUTBOUND)

INBOUND

$191.3 billion

(31 Dec, 2015) EST.)

OUTBOUND

$293.2 billion

(31 Dec, 2015)

4Th

(AMONG 189 COUNTRIES)

INFLATION

MAJOR INDUSTRIES

1.3% (2014)

INTEREST RATE RATERATE

EODB RANKING 2016 2016201620120120162016

2016

SOUTH KOREA 7

MAJOR EXPORTS

Semiconductors, Petrochemicals,

Automobile/Auto Parts, Ships, Wireless

Communication Equipment, Flat Display Displays, Steel,

Electronics, Plastics, Computers

17.1

10.28.7

7

4.94.1

CHINA JAPAN US SAUDI ARABIA

QATAR GERMANY

MAJOR IMPORT PARTNERS( In % )

17.1

12.3

5.64.8 4.2

CHINA US JAPAN HONGKONG SINGAPORE

MAJOR EXPORT PARTNERS

( In % )

AS ON 2014

MAJOR IMPORTS

Crude Oil/Petroleum Products, Semiconductors, Natural Gas, Coal, Steel,

Computers, Wireless Communication Equipment, Automobiles, Fine Chemical,

Textiles

AS ON 2014

SOUTH KOREA 8

TECHNOLOGY

RESEARCH AND DEVELOPMENT SPENDING (% OF GDP)

4.15 % (AS ON 2013)

NO OF MOBILE USERS INNOVATION INDEX

PER 100 PEOPLE

115.54 2014

RANKED 13TH IN INNOVATION

INDEX

SCORE: 56.3 (2015)

NO OF INTERNET USERS PER 100 PEOPLE

38.78 2014

SOUTH KOREA 9

INVESTMENT CLIMATE

FISCAL POLICY – 2016

FISCAL POLICY

• Increase bugdet frontloading by 8 trillion won in the first quarter to 125 trillion won.

• Increase public institutions' investment in private sector projects by 6 trillionwon

• Promote private sector investment in SOC projects by introducing a new PPP.MONETARY POLICY

• Maintain accomodative monetary policy and step up efforts to break out of lowinflation.

FOREIGN EXCHANGE POLICY

• Maintain foreign exchange market stability to ensure financial stability fromextreme shocks.

Adopt expansionary macroeconomic policies to support recovery momentum.

SOUTH KOREA 10

Work on Risk Management

HOUSEHOLD DEBT

• Gradually increase the ratio of mortgages with fixed interest rates andamortization schedules, while tightening DTI ratio requirements

CORPORATE DEBT

• Strongly promote corporate restructuring, in particular of those in industriesfacing oversupply issues - Enact the Special Act on corporate Revitalization toencourage business restructuring by providing tax incentives for stock swapsand asset sale.

• Strengthen the monitoring of the corporate bond market situation and itsimpact on the financial market; Korea Development Bank to provide up to 5billion won per small enterprise and 7 billion won per medium sized enterprisein order to relieve their temporary liquidity crunch

EXTERNAL RISKS

• Maintaining external stability by conducting thorough review of the currentforeign exchange soundness management system , revise the 3 macro -prudential measures to be more flexible and review external soundnessregulations for financial institutions, including the foreign exchange.

• Promoting overseas investment by introducing tax favoured foreign equityinvestment funds and help correct inefficient foreign exchange risk hedgingpractices.

Boost Domestic Consumption and Exports

BOOST CONSUMPTION

• To boost consumption organize large scale shopping events, attract touristsand Enhancing consumers' convenience

PROMOTE INVESTMENT

• To boost private sector investment in large - scale rental housing contruction,Review special - purpose zones, Attracting investment in new industries, Havethe national pension fund and other public funds and attarcting FDI

STRENGTHEN COMPETITIVENESS

• Promoting export, Developing promising export items, Promoting Koreancompanies direct investment in China, and Promoting Korean companiesdoing business in China

SOUTH KOREA 11

MONETARY POLICY 2016

MONETARY POLICY AND OBJECTIVES OF SOUTH KOREA

South Korea have adopted contractionary monetary policy with following objectives

Article 1, Clause 1 of the Bank of Korea Act stipulates that the purpose of this Act is “to

contribute to the sound development of the national economy by pursuing price

stability through the formulation and implementation of efficient monetary policy”.

Accordingly, the Bank of Korea takes price stability as the most important objective of its

monetary policy.

In order for the national economy to achieve stable growth, it should be supported by not

only price stability but also financial stability. Regarding this, Article 1, Clause 2 of the

Bank of Korea Act stipulates that “The Bank of Korea needs to pay attention to financial

stability in the implementation of monetary policy”. Thus, the Bank of Korea is also

making policy efforts to maintain financial stability while pursuing price stability through

implementing its monetary policy.

SOUTH KOREA 12

MONETARY POLICY DIRECTION 2016

1. Operation of Inflation Targeting

The Monetary Policy Board of the Bank of Korea has set the inflation target for 2016

onward* at 2.0%, as measured by the year-on- year change in the Consumer Price

Index (CPI). The inflation target has been adjusted to 2.0%, from the previous

2.5~3.5% range.

2. Under this policy stance the Bank of Korea, after having cut the Base Rate by 0.25

percentage point in both March and June of 2015, had through March of this year

operated it at a continuing rate of 1.50 % per annum.

3. The Bank will enhance the efficiency and transparency of its open

market operations, by establishing and publishing core standards for the selection

of institutions eligible to participate in open market operations.

4. The trend of improvement in the domestic economy was showing signs of slowing,

with the trend of decline in exports expanding and the domestic demand recovery

weakening. Accordingly, the Bank decided to respond through supporting exports,

facilities investment and high-tech and other start-up SMEs by a 9 trillion won

expansion (including 4 trillion won in the unused portion under the existing ceiling)

of its Bank Intermediated Lending Support Facility.

SOUTH KOREA 13

24.2 %

38 %

10 %

The Korea–India Comprehensive Economic Partnership Agreement (CEPA)

went into effect on January 01, 2010.

India is a large market, holding one-seventh of the world’s population and has the 10th highest nominal GDP in the world (as of 2010, IMF). Signing the CEPA* with India is

expected to lay a groundwork for vitalizing trade, investment and human resource exchanges with an emerging giant economy. *Comprehensive Economic

Partnership Agreement (CEPA) is a term used to emphasize the agreement encompasses various economic

sectors across the board including goods and services trade, investment and economic cooperation. In practice, it

has the same nature with FTA.

CORPORATE TAX RATE

TAXES PERSONAL INCOME TAX RATE

SALES TAX RATE

FTA’S BETWEEN INDIA & SOUTH KOREA

SOUTH KOREA 14

FDI IN SOUTH KOREA

Total FDI

FDI Procedure In South Korea

Foreign investment procedures consist of the following:

Foreign investment notification, remittance of investment funds,

registration of incorporation & business, and registration of foreign-

invested company.

$ 20.9 BILLION

(AS ON 2015)

TOTAL FDI

SOUTH KOREA 15

How foreigners advance into South Korea ?

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FDI incentives in South Korea

SOUTH KOREA 17

FINANCING POLICY

Financing policy of South Korea directs at following two objectives.

ONE POINT CONTACT FOR ESTABLISHING BUSINESS IN SOUTH KOREA

Financial reform

Financing for innovative start-ups and

SMEs.

More autonomy, more responsibility for

financial companies.

Financial industry as Korea’s new

economic growth driver

More innovative and convenient fi-

nancial services.

Support for household wealth growth

Financial Stability

Soft landing of household debt

Preemptive corporate restructuring

Financial market stability and

soundness

Expansion of microfinance support

Financial consumer protection

Invest Korea Korea Trade – Investment Promotion Agency

SOUTH KOREA 18

PROCEDURE FOR STARTING BUSINESS IN SOUTH KOREA

* Takes place simultaneously with another procedure.

COUNTRY FORECAST

South Korea | Economic Forecasts | 2016-2020 Outlook

Overview Actual Q2/16 Q3/16 Q4/16 Q1/17 2020

GDP Growth Rate 0.50 0.9 0.5 0.8 1.1 1.2 percent

Unemployment Rate 3.70 3.9 3.8 3.7 3.9 3.7 percent

Inflation Rate 0.80 1.1 1.2 1.4 1.7 2.8 percent

Interest Rate 1.25 1.25 1.25 1.25 1.25 3 percent

Balance of Trade 7100.00 8653 10668 7719 7786 17269 USD Million

Government Debt to GDP 35.12 35.36 35.64 35.93 37 38.26 percent

No. Procedure Time to Complete Associated Costs

1 Make company seal 1 day KRW 30,000

2 Register the company with Start-

Biz; pay the corporate registration

tax bill and incorporation fee

3 days KRW 2,000 fee of e-

registration+ 1.2% capital registration tax + education

tax (20% of the registration tax) + KRW 10,000 (e-registration form)

* 3 Pay the fees for the Public Health

Insurance Program, the National

Pension Fund, Employment

Insurance, and Industrial

Accident Compensation Insurance

Less than one day (online procedure,

simultaneous with previous procedure)

no charge

SOUTH KOREA 19

SOURCES

CIA WORLD FACTBOOK

WORLD BANK DOING BUSINESS REPORT

http://www.tradingeconomics.com/south-korea/forecast

http://www.investkorea.org/

http://www.bok.or.kr/

http://data.worldbank.org/

http://www.theglobaleconomy.com/

SOUTH KOREA 20

CONTACT DETAILS

CENTRE FOR GLOBAL BUSINESS STUDIES

Indo – East Asian Study Centre

Gujarat Technological University

Nr. Vishwakarma Government Engineering College

Nr. Visat Three Roads, Visat - Gandhinagar Highway

Chandkheda, Ahmedabad - 382424, India

Compiled & Designed by

Dhvani Vyas

Global Study News Network – E Newsletter

http://international.gtu.ac.in/

Contact no: 07923267525 / 590

ra2_cgbs@gtu.edu.in , cgbs@gtu.edu.in

CGBS GTU

Centre for Global Business Studies