Invest in South Korea

With a history as one of the fastest growing economies in the world, South Korea is pursuing to be the top Asian economic bloc during the 21st century.

S. Korea developed rapidly after the Korean War, fueled by high savings and investment rates, and a very strong emphasis on science and business education. The nation became the 29th member country of the Organization for Economic Cooperation and Development (OECD) in 1996.

Investment Climate

S. Korea has been criticized for imposing a series of regulations on foreign firms and having investment procedures that lack transparency due to dramatic growth without a solid economic policy. South Korea's dependence on untransparent chaebols came to a head in the Asian financial crisis of 1998, when South Korea suffered severe economic dislocations. The government of South Korea moved quickly to crush the largest chaebols, increase transparency, and move the economy closer to a classically open Western model.

Foreign direct investment flows

Foreign investment in South Korea was tallied at $654.2 billion as of the end of last year, up 21.3 percent from a year earlier, the Bank of Korea (BOK) said. Also, securities investment, which accounts for most foreign investment in South Korea, rose 14.6 percent to $357.3 billion, while direct investment grew 12.5 percent year-on-year to $118 billion. Stock investment by foreigners reached $276.4 billion as of the end of 2006, up 10.8 percent from a year earlier, while bond investment rose by 29.8 percent to $80.8 billion.

On the other hand, foreign investors accounted for nearly half of the main local bourse in 2004 and 2005, but their ownership of South Korean stocks continued to fall since 2006 on concerns over a global economic slowdown. According to the country's stock market operator, foreign investors held a combined 37.2 percent of all stocks listed on the main bourse at the end of 2006, down from 39.7 percent in 2005 and 42 percent in 2004. 

General Political Atmosphere

President of S. Korea Roh Moo-hyun has generally hewed to free-market economic policies. He said that his administration will speed up its free trade agreement (FTA) talks with the U.S. and conclude them ahead of Washington's possible similar deals with Tokyo (Japan) and Beijing (China) in January, 2007; however, the Korean FTA remains hostage to political interest groups, notably farmers, on both sides of the Pacific, and its outcome is unclear. President Roh has also captured nationalist support with his push for full Korean control of its military situation, something a cash- and troop-strapped Washington would be glad to offload to the now-wealthy South Korea.

Living standards

The population of South Korea is about 49 million, more than double the population of North Korea. This is a reversal of the pre-1945 situation in which the North had a higher percentage of the population. South Korea was also originally the poorer of the two Koreas, but North Korea's uniquely oppressive form of communism has rendered it a relative pygmy compared to present-day South Korea. Now, South Korea is a largely urban country with a number of large cities, including Seoul, the capital, Busan, Daegu, and others. President Roh presented comprehensive national strategies to lift Korea's per capita annual income to $30,000 in the coming years. To help the nation reach the $30,000 income goal, the president stressed the importance of democracy, a market economy, innovation, freer trade, balanced regional development, social investment -- and peace with North Korea.