Doing Business in Korea
Political and legal impacts on doing business in Korea
Korea is known as a country that showed miraculous economic growth, and considered one of the four tiger economies of Asia. Since the 1950s, South Korea has built a modern, internationally oriented industrial economy largely from scratch. This economy, the fourth-largest economies (after China, Japan and India) in Asia (World Bank 2014) is based on low –cost, high quality export production. Between the late 1980 and 1990s, the country has seen a massive influx of FDI projects to the South Korea, and recorded an increase quadruple the foreign investment projects during the previous 35 years (Kim & Lee 2007). This outcomes is generally attributed to the country’s transition to a more open and democratic political system after years of authoritarian rule, with a pro-business government. However, these changes have also posed a number of latent tremendous challenges to the international business operating in South Korea, which include overregulation, rising labour cost, and corruption
1. Overregulation:
The overabundance of regulations and bureaucracy has been considered the main reasons that investors are packing up or moving to other Southeast Asian countries or staying away from South Korea. A survey of Kim and Lee (2007) reveals that there is an inaccurate interpretation and improper implementation of investment regulations among the various government agencies at all levels. The poor governance at the local governments, as a result of the intense decentralisation policies in the late 1990s, has created unnecessary bureaucracy and lack of consistency in laws and regulations enforcement at different cities/provinces across the countries.
2. Rising labour cost and labour union:
Since martial law ended and trade union activity became legal in 1987, workers’ compensation has double on average and the cost of benefits has risen dramatically. Korean factory wages are now the third highest in Asia, after
Korea is known as a country that showed miraculous economic growth, and considered one of the four tiger economies of Asia. Since the 1950s, South Korea has built a modern, internationally oriented industrial economy largely from scratch. This economy, the fourth-largest economies (after China, Japan and India) in Asia (World Bank 2014) is based on low –cost, high quality export production. Between the late 1980 and 1990s, the country has seen a massive influx of FDI projects to the South Korea, and recorded an increase quadruple the foreign investment projects during the previous 35 years (Kim & Lee 2007). This outcomes is generally attributed to the country’s transition to a more open and democratic political system after years of authoritarian rule, with a pro-business government. However, these changes have also posed a number of latent tremendous challenges to the international business operating in South Korea, which include overregulation, rising labour cost, and corruption
1. Overregulation:
The overabundance of regulations and bureaucracy has been considered the main reasons that investors are packing up or moving to other Southeast Asian countries or staying away from South Korea. A survey of Kim and Lee (2007) reveals that there is an inaccurate interpretation and improper implementation of investment regulations among the various government agencies at all levels. The poor governance at the local governments, as a result of the intense decentralisation policies in the late 1990s, has created unnecessary bureaucracy and lack of consistency in laws and regulations enforcement at different cities/provinces across the countries.
2. Rising labour cost and labour union:
Since martial law ended and trade union activity became legal in 1987, workers’ compensation has double on average and the cost of benefits has risen dramatically. Korean factory wages are now the third highest in Asia, after