2023: Doing Business In South Korea
Doing Business in South Korea
1. What is the current business climate in your jurisdiction including major political, economic and/or legal activities on the horizon in your country that could have a big impact on businesses?
President Yoon Suk Yeol was elected in 2022, on a platform of economic development through deregulation and pro-business policies. He has been introducing and implementing such policies one year into his five-year term, which includes (i) tax and other incentives for foreign direct investment in high-tech industries (e.g. semiconductors, batteries, and biotech), (ii) lower individual and corporate tax burdens, (iii) deregulation for newly emerging industries, and (iv) other business-friendly policies, in general, such as in area of labor-management relationships. We also note that a general election for the National Assembly is scheduled for April 2024, which may affect the course of the general government policy depending on its results.
With respect to operating foreign invested enterprises in South Korea, the SAPA has become a crucial factor. Under the SAPA, businesses and individual executive officers can be subject to heavy criminal liabilities for serious industrial accidents occurring in the workplace. Criminal liabilities did not extend to top management in the past, but, under the SAPA, a CEO may be held criminally liable for industrial accidents. BKL has been active in assisting foreign invested companies to prepare for and respond to the SAPA compliance issues.
2. From what countries do you see the most inbound investment? What about outbound?
As of 2022, the United States and the European Union countries were the largest sources of foreign direct investment into Korea, each with the investment size of USD 8.6 billion and USD 8 billion, respectively. Japan (USD 1.5 billion) and PRC (USD 1.4 billion) were also significant sources of foreign direct investment.
As for outbound investments, the largest amount went to the United States with USD 30.2 billion invested in 2022. Investments in European Union (USD 15.4 billion) and in other Asian countries (USD 18.1 billion) were also significant.
3. In what industries/sectors are you seeing the most opportunity for foreign investment?
As South Korea is an export-driven economy, global economic trends affect foreign investments into South Korea. The battery industry has been a target of extensive foreign investment due to the global demand for electrification. Furthermore, the semiconductor industry, while showing somewhat less activity after the COVID-driven highs of recent years, is still subject to intense investment activities. Finally, the media and entertainment industry, affected by the K-culture boom worldwide, is being seen as a magnet for foreign investments.
4. What advantages and pitfalls should others know about doing business in your country?
Advantages: South Korea is the tenth largest economy with the fifth largest manufacturing sector in the world, notably with leading semiconductor, automobile, and shipbuilding industries, with accompanying developed domestic supply chains. South Korea is also noted for a highly educated and trained workforce, with 69% of graduates completing a college degree Korea also boasts its leading digital infrastructure, with 99.96% of households having broadband internet access. Moreover, South Korea has stable financial, legal, and monetary systems.
Pitfalls: One of the difficulties often flagged by foreign investors in South Korea is the relatively high barrier to terminating employees. South Korea is a for-cause termination jurisdiction, and legal barriers to terminating employees are quite high. Labor union movement is active in certain industries, and may act as impediments to management decisions.
5. What is one cultural fact or custom about your country that others should know when doing business there?
Confucian ethics has historically been a major component of the Korean culture. While modern day Korean society has become significantly more open and less hierarchical, Confucian values still live on in Korean organizations, where values such as loyalty, diligence, and humility are appreciated. This characteristic is more express in the "traditional” industries and larger companies with vertical hierarchies. We are seeing more open and horizontal culture in newer industries, such as tech and media.
Our Firm
1. What distinguishes your firm from others in your market?
Bae, Kim & Lee LLC ("BKL”) was founded in 1980 and is one of the premier law firms in South Korea. Headquartered in Seoul, BKL is a full-service firm providing market-leading legal services in every practice area it covers, including corporate/M&A, capital markets, finance, dispute resolution, antitrust, tax, IP, employment, real estate, TMT, maritime, and insurance.
With over 750 attorneys and other professionals, the BKL team is a diverse group of Korean attorneys, foreign attorneys, tax advisers, industry experts, former public sector professionals, and other specialists in various practice areas.
BKL advises a broad range of clients from Korean conglomerates and government organizations to major international financial institutions and multinational corporations.
2. What are three words that describe the culture of your firm?
People, Values, Progress.
3. How does your firm participate in Corporate Social Responsibility (CSR) and/or Environmental, Social and Governance (ESG) initiatives?
BKL is involved in various public interest initiatives through its internal Pro Bono Committee (with participation from both professionals and staff members) and Dongcheon Foundation.
As of 2022, the members of the BKL Pro Bono Committee spent 21,601 hours on public interest activities including pro bono advocacy. The Committee has been engaged in socially meaningful cases, including a judgement from the Supreme Court of Korea acknowledging the bus companies’ obligation to equip intercity and express buses with wheelchair lifts.
Established in 2009 as the first public interest foundation to have been founded by a law firm in South Korea, Dongcheon Foundation is actively engaged in supporting underserved communities in South Korea, including refugees, immigrants, and North Korean defectors.
4. Are there any new and exciting initiatives, practice areas or industry focuses in your firm?
In light of the increased needs for risk management (including the new Serious Accidents Punishment Act, "SAPA”) in Korea, BKL has set up the "BKL Risk Advisory Center” with top experts in relevant fields of practice including criminal, corporate, occupational safety and health, environment and ESG, competition, labor, intellectual property, and tax law. Our center provides comprehensive compliance consulting to handle legal risks that our clients may face.Furthermore, BKL is responsive to the changing legal landscape and the corresponding need for a new packaging of its legal services, setting up task forces for issues relating to competition-related criminal law, securities law investigations, regulatory solutions, and asset succession.
Authors
Ri Bong Han, Seongsoo Kim, and Alan PJ Lee