Country Risk Analysis-South Korea

COUNTRY RISK ANALYSIS: SOUTH KOREA 1

Submitted By: Himanshu Raj (4494) Kulein Chauhan(4662) Parth Tuli (4950) BBS 3FB

OBJECTIVE OF STUDY 2

The main objective behind the preparation of this project is to get a deep understanding of the investment scenario in South Korea and to assess the attractiveness of South Korea as an Investment destination.

Contents

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1.

Country Profile: South Korea…………………………………………5

2.

Economy Of South Korea………………………………………………6

3.

Political Risk in South Korea……………………………………………8

4.

How to Start a Business in South Korea………………………………9

5.

Latest Developments in India-South Korea Trade Relations………………………………………………………………… 11

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SOUTH KOREA: COUNTRY PROFILE IN A NUTSHELL

CAPITAL CITY

SEOUL

OFFICIAL LANGUAGE

KOREAN

GOVERNMENT TYPE

PRESIDENTIAL REPUBLIC

POPULATION

48,875,000 (2010 Estimate)

POPULATION DENSITY (per sq. km.)

491/km2

AREA (Total)

100,210 km2

GDP (PPP) TOTAL

$1.457 trillion (2010 estimate)

PER CAPITA

$29,790 (2010 estimate)

GDP (NOMINAL) TOTAL

$986.256 billion (2010 estimate)

PER CAPITA

$20,165 (2010 estimate)

CURRENCY

SOUTH KOREAN WON

MAJOR INDUSTRIES

Shipbuilding, Automobile, Construction, Electronics and Armaments etc.

MAJOR CORPORATIONS OF SOUTH KOREA

Daewoo Group, Hyundai Group, Kia Motors, LG Group, Lotte Group, POSCO and Samsung Group.

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ECONOMY OF SOUTH KOREA

South Korea has a market economy which ranks 15th in the world by nominal GDP and 12th by purchasing power parity (PPP), identifying it as one of the G-20 major economies. It is a high-income developed country, with an emerging economy, and is a member of OECD. South Korea is one of the Asian Tigers, and is the only developed country so far to have been included in the group of Next Eleven countries. South Korea had one of the world's fastest growing economies from the early 1960s to the late 1990s, and South Korea is still one of the fastest growing developed countries in the 2000s, along with Hong Kong, Singapore, and Taiwan, the other three members of Asian Tigers. South Koreans refer to this growth as the Miracle on the Han River.[7] Having almost no natural resources and always suffering from overpopulation in its small territory, which deterred continued population growth and the formation of a large internal consumer market, South Korea adapted an export-oriented economic strategy to fuel its economy, and in 2009, South Korea was the eighth largest exporter and tenth largest importer in the world. Despite the South Korean economy's high growth potential and apparent structural stability, South Korea suffers perpetual damage to its credit rating in the stock market due to the belligerence of North Korea in times of deep military crises, which has an adverse effect on the financial markets of the South Korean economy. However, renowned financial organizations, such as the International Monetary Fund, also compliment 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 any expected financial emergencies. South Korea was one of the few developed countries that were able to avoid a recession during the global financial crisis, and its economic growth rate will reach 6.1% in 2010, a sharp recovery from economic growth rates of 2.3% in 2008 and 0.2% in 2009 when the global financial crisis hit.

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South Korea was a historical recipient of official development assistance (ODA) from OECD. throughout the 1980s until the mid 1990s, South Korea's economic prosperity as measured in GDP by PPP per capita was still only a fraction of industrialized nations. In 1980, the South Korean GDP per capita was $2,300, about one-third of nearby developed Asian economies such as Singapore, Hong Kong, and Japan. Since then, South Korea has advanced into a developed economy to eventually attain a GDP per capita of $30,000 in 2010, almost thirteen times the figure thirty years ago. The whole country's GDP increased from $88 billion to $1,460 billion in the same time frame. In 2009, South Korea officially became the first major recipient of ODA to have ascended to the status of a major donor of ODA. Between 2008 and 2009, South Korea donated economic aid of $1.7 billion to countries other than North Korea. South Korea's separate annual economic aid to North Korea has historically been more than twice its ODA. The domestic economy appears to have stabilized since mid-2009. Moreover, despite the increased volatility witnessed since tensions started to rise between the two Koreas in May 2010, the won has been broadly appreciating against both the US dollar and the Japanese yen since April 2009. Recent dovish statements from the Ministry of Strategy and Finance (MOSF) and the Bank of Korea (BOK, the central bank) have, however, provided a reminder that the economy is still far from healthy. Particular concerns include the fact that, while the economy avoided a technical recession, South Korea is suffering from a jobless recovery. A failure to bring down the unemployment rate would result in social unrest. The GNP is, however, unlikely to lose its position in power.

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POLITICAL RISK IN SOUTH KOREA Political Risk: Low • South Korea has a stable government with sustainable democracy and a healthy infrastructure. There is still some need for deregulation to improve efficiency. • The labor market is somewhat inflexible which can be burdensome for private companies. • The relationship between North Korea and South Korea is strained and is a source of political and social controversy.

HOW TO START A BUSINESS IN SOUTH KOREA

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Introduction It is still a mystery to a number of people in the west especially when it comes to starting a business in South Korea. As the eleventh biggest economy in the world South Korea offers numerous business opportunities. This article will cover various procedure and paperwork that is required to start a business in South Korea.

Checking out Trade Name Any entrepreneur willing to start business in South Korea first has to take a trade name certificate. This certificate process only takes a day and availability can be checked with the Supreme Court website. There is absolutely no charge for checking the availability of the company name, only condition is that no other organization is running the same business in same city or South Korean term 'Kun'.

Making the Seals The next in line is getting the seals and other paperwork done for the company. In case of an entrepreneur they can use their personal seal. It is similar to sole proprietary firm in United Kingdom and United States.

Incorporation of the company Next step in starting a business is to incorporate the company by registering it with the registrar of the company department. The notarization process often takes a day and company has to show the total capital more than 10 million Korean wan.

Next is Opening the Bank Account The promoters starting a business in South Korea next need to open the bank account and deposit complete subscription amount in lieu of the share they are subscribing in the company.

Paying the Corporate Registration Tax

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The corporate registration tax varies in different areas of South Korea. The basic components of corporate registration tax are - capital registration tax, education tax, railroad bond tax and registration tax of Supreme Court Stamp.

Registration with District Tax Office To start the business operation an entrepreneur has to register their business with local tax office and get a commencement of business certificate. This process often takes 20 days and each business will be issued a tax identification number and VAT number.

Filing Public Health Insurance Program Companies with more than one employee need to register themselves with National Insurance Program. Finally the company has to submit the rules of employment to the office of Ministry of Labor in South Korea. This process only takes a day and company has to submit the proof of accident insurance in case they are hiring more than 10 employees.

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LATEST DEVELOPMENTS IN INDIA-SOUTH KOREA TRADE RELATIONS

 Bilateral trade between India and South Korea grew to US$ 15.6 billion

in 2009 from

US $ 2.6 billion in 2002.

 South Korea and India signed an ambitious free trade agreement called

Comprehensive Economic Partnership Agreement that slashes tariffs, encourages investment and promotes exchange of skills in a bid to double fast growing commerce over the next decade between two of Asia’s biggest economies.  India and South Korea are also working towards a civil nuclear deal. India is in talks with South Korea for the supply of nuclear fuel as South Korea is a member of 45-nations Nuclear Suppliers Group.

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