From hermit economy to major global hub. Business is booming in South Korea.
South Korea has not always been such a rich dynamic economy. After all, the place was torn apart in the 1950s and desperately poor and isolated. But it has pulled itself up by the boot straps to now reach OECD levels of economic prosperity in just a few decades.
It’s gone from poverty to prosperity through sheer hard work and ambition – that is, with perspiration and aspiration – and as a result has been an inspiration to the rest of the world.
You now see Korean companies as household names worldwide with Samsung, Kia, LG, Hyundai all very familiar not to mention K-pop and Gangnam style!
South Korea is also a leading test bed for technology and its story can also be told as having gone from a hermit economy to a major global hub.
South Korea is a modern OECD economy and is the 11th largest in the world. South Korea’s per capita GDP ranking is expected to rise to eighth in 2025, which would put it just behind countries like the US, Canada and the UK.
South Korea is a major player in the global economy and leader in technology. This is demonstrated by its vast ICT-related production and exports, world-class technology and the wide use of internet and mobile communication devices in the country. ICT industry-related products, such as computer chips and mobile phones, account for over 33 per cent of Korea’s total exports.
Seoul is remarkably well connected. Broadband within the Greater Seoul capital area covers 24 million people – almost half the country’s population. South Koreans are well educated – often topping the world school’s tables – especially in maths and it has world class universities.
South Korea is a major player in the global economy and leader in technology
South Korea has a number of free trade agreements – including KAFTA with Australia. 25 per cent of Korea’s exports go to China, 12 per cent to the USA and over 5 per cent to Japan.
South Korea’s GDP over the decade has grown at 2-3 per cent a year, inflation is low and unemployment hovers at over 3 per cent.
However, this modern gleaming Seoul, the capital of Asia’s hub economy wasn’t always the case. In the 1950s Korea was torn apart by war and Seoul was one of the poorest urban dwellings in the world. South Korea was a recipient of aid then and poorer than many African nations.
But South Korea’s government allowed large enterprises, the chaebols, to build their structures across industries, particularly in ship building, motor vehicles and other forms of mass manufacturing. And we saw South Korea rise as an industrial power. In 1960, 33% of the nation’s GDP came from primary industry – agriculture and fishing – while manufacturing accounted for just 16%. By 2010 manufacturing was responsible for over 50% of national GDP, with primary industry only 5 per cent.
The rise of industrial South Korea was done under iron grip of President Park (father of the current President) with a watchful eye over the border to the north. But after successful hosting of the Seoul Olympics in 1988, Korea started to loosen up and build democratic structures to match its economic success.
Now South Korea is a major player in world economic events. South Koreans play major roles in multilateral institutions such as the OECD and the outgoing President of the United Nations Ban Ki-Moon is of course a South Korean.
South Korea and Australia also founded APEC to show leadership in Asian Pacific regional affairs and at Australia’s suggestion Seoul hosted the first major G20 summit at the height of the global financial crisis. Together with the Korean Australia Free Trade Agreement (KAFTA) you could say that South Korea and Australia were “Seoul Mates.”
From being a hermit economy South Korea is now more open to business than ever before.
Through agreements like the Korean Australian Free Trade Agreement (KAFTA) tariffs have been eliminated on 84 per cent of Korea’s imports from Australia and on full implementation 99.8 per cent of Australian exports will enter Korea duty free. Korea has similar FTAs with Canada, USA, the EU and plan for one with the UK post Brexit.
Korea also has some labelling and health requirements in agriculture (to avoid BSE) but otherwise it’s a pretty open economy. There are great export opportunities in food and beverage, wine, aged care, education and financial services. Korea imports almost 95 per cent of its food and energy so it’s very dependent on food imports and resource imports like LNG to fuel its massive industrial infrastructure.
Despite K-Pop and Gangnam style videos, Korea is still traditional, with the majority following their strong Confucianist cultural heritage. So, absorb the strong culture in Korea, and when doing business be formal and traditional and take note of hierarchy and seniority. Business is still based on personal relationships, so getting in the right networks matters especially in an economy where the large chaebols and their families behind them played such a dominant role. But after the IMF crisis (Asian crisis of 1997) and the global financial crisis of 2008, Korea has become very open and interested in foreign ideas so it is a welcoming country business wise.
So, in conclusion we can say that South Korea is a remarkable story. It has gone from being the ‘hermit’ kingdom to a hub economy in a couple of decades.
It’s an amazing story of economic transformation. Whilst Korean society is pretty homogenous there is keen interest in the outside world and it’s a nation with international aspirations.
Tim’s tips for doing business in South Korea?
Be Formal. There is still hierarchy in Korean organisations so you need a formal introduction at the right level.
Don’t be overly legalistic. Koreans prefer flexible “memorandums of understanding (MOUs)”.
Be patient. Koreans like firm but not pushy negotiators. There is a “bally bally” or “hurry hurry” aspect to Korean life but not when doing a business deal with a foreign partner.
Be aware of the need to not “lose face” and important aspect of culture in East Asia – including in Korea.
Have kimchi will travel. Koreans love their food and drink. You’ll see kimchi everywhere and a drinking session is part of Korean business culture.
Give a gift. Corporate gifts are often exchanged in Korean business meetings (make it classy – no cheap stuffed koalas from Circular Quay).
If you follow those tips and immerse yourself in the amazing Korean culture, you’ll be: “switched on in Seoul in no time!”
The Airport Economist airs on Sky News Business, Friday at 630pm and Sundays at 7pm. If you miss the show you can catch up on The Airport Economist China second-tier cities episode on the show’s website: www.theairporteconomist.com