Business with Seoul

South Korea remains an attractive destination for many European firms, but the country is not always an easy place to do business. To gain fresh insights into European perceptions of the South Korean business climate, we teamed up with national chambers of commerce and business councils to offer a comprehensive survey. Some 139 companies spanning nine industries and worth a combined 60 million euros in revenues contributed to this exclusive annual report.

For many European companies, the Korean market is of growing importance. Two thirds of respondents have had a presence in the country for more than a decade. Yet more than half (52%) of the firms surveyed indicated that doing business in South Korea had become more difficult over the past year. Sentiment varied among industries, but the automotive and the machinery sectors were most content with their Korean operations while financial service companies voiced more pessimism.

Overall, the European business community continues to believe in the prospects for South Korea and many companies plan to expand their operations there this year. In line with the country’s shift away from manufacturing and exports in favor of an economy driven more by service and domestic demand, additional investment is likely to flow into sales and service efforts rather than factories. South Korea will remain an important business hub for production and exports, but the trend towards offshore manufacturing will continue.

Like last year, companies reported that domestic and international economic headwinds presented the biggest challenge. Locally, the rule of law and transparent implementation of policymaking are of paramount concern, followed by fair competition and productivity growth. Finally, the discretionary enforcement of regulations remains a key obstacle for foreign companies operating in the country.

Survey participants supported the government’s deregulation initiatives, but said that they would like to see bolder progress in reviewing rules leading to more operational freedom, as well as less complexity, when doing business in South Korea. We hope this publication offers a constructive contribution towards tackling the challenges facing both Korean policymakers and businesses alike.