South Korea has a $2 trillion GDP, making it one of the world’s most developed and industrialised countries. That’s why it has been regarded as a perfect location for international trade and commerce. Investing in South Korea is appealing because of the country’s excellent infrastructure, growing technological capabilities, and free trading relationships with global powerhouses like the United States, European Union and China.
The South Korean economy is projected to contribute the tenth most to global growth during the next five years. That’s more than France or Italy and on par with the United Kingdom.
To make your business dealings with South Koreans less fraught, we’ve listed some basic facts about the country and certain cultural norms you should keep in mind. You will thoroughly understand the fundamentals of conducting business in Korea and gain valuable insights to aid you in succeeding in this region.
Korean Culture and Its Influence on Business Practices
Confucianism, the underlying philosophical framework of Korean culture, strongly emphasises obedience to superiors, loyalty, and social hierarchy.
Having reliable business connections in Korea is crucial to your company’s success. Trying to get to know your counterparts and build trust is crucial. This usually entails going out and having fun with other people at parties, potlucks, and other social activities.
The concept of hierarchy plays a significant role in Korean workplace culture. It is essential to address your coworkers with their proper titles and to show respect to your managers and bosses.
The legal system of South Korea is known as civil law. South Korea is divided into nine provinces and has upwards of 230 lower-level governments in metropolitan areas.
When doing business in Korea, it’s essential to know the legal framework governing tax and labour laws.
Foreign businesses operating in Korea may need to navigate specific regulations and requirements, such as obtaining the necessary permits and licenses, registering with the relevant authorities, and ensuring compliance with tax and labour laws.
The Foreign Exchange Transactions Act (FETA) of South Korea governs foreign exchange control and mandates the disclosure of all foreign currency transactions between residents and non-residents.
In this regard, foreign investors must obtain prior approval for their investment in business entities via their designated foreign exchange bank in compliance with the FETA or Foreign Investment Promotion Act. Conducting commerce with North Korea through third nations is illegal without obtaining permission from the Minister of Unification.
Financial institutions are required to register to comply with anti-money laundering rules. They need to cooperate with the Korea Financial Intelligence Unit’s requirements, which include verifying customer information and reporting suspected transactions involving unlawful assets, money laundering, or funding terrorism. Recent changes to the legislation have expanded the definition of a financial institution to include suppliers of virtual asset services.
When doing business in South Korea, it is crucial to seek the advice of legal specialists and accountants in Korea who are well-versed in the local legal system.
Networking is an essential aspect of doing business in Korea. In addition to understanding Korean business culture, it’s essential to be aware of proper business etiquette, including dress code and communication style.
Some of the key considerations foreigners should bear in mind are below:
Adapting your method of communication based on who you’re talking to is essential. Many people in South Korea are fluent in English, although some may have more difficulty. If you want to be understood, use simple, straightforward English.
Planning and arriving on time for appointments are highly valued in South Korea. Be on time, no matter how late your host is. Always aim for a balance between formality and friendliness.
A short bow followed by a handshake is customary in South Korea. And it’s best to let more senior people shake hands first. Resting your left hand on your right forearm is customary when shaking hands.
Dressing professionally in South Korea is important. Dress in black, blue, or brown. Avoid short skirts, shorts, sleeveless shirts, and low-cut tops.
5. Giving each other business cards
In Korea, business cards serve as a vital networking tool. Make sure to use both hands while presenting or receiving a card and to read its contents before filing it away.
In Korean business culture, it is customary to give and receive gifts. Be aware of cultural taboos, such as not giving anything in sets of four, which is considered unfortunate.
To do business in Korea, you must know about the culture, laws, and etiquette. To succeed in the Korean market, building relationships, respecting hierarchy, and understanding the legal landscape is crucial.
Remember, Calibre BA is ready to help with financial aid and business advising services targeted to your requirements. Contact our business advisors at (02) 9261 2177 to learn how to do business in Korea.