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
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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How foreigners advance into South Korea ?
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FDI incentives in South Korea
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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
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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
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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
[email protected] , [email protected]
CGBS GTU
Centre for Global Business Studies