South Korea

South Korea is an interesting market for Basque companies due to its sophisticated economy, its high level of technology and its strategic position in Asia. This country is a leader in sectors such as electronics, automotive industry, shipbuilding and renewable energy, areas where Basque companies are in an excellent international position. Furthermore, the Free Trade Treaty between the European Union and South Korea facilitates access to this market, by lowering customs tariffs and encouraging exports and investments. Its strong business infrastructure and culture based on quality and efficiency make South Korea a key partner to expand the global presence of Basque industry.

The Basque Country, gateway to Europe

South Korea is in a prominent position in the global economy thanks to its fast development, high competitiveness and innovation capacity. It is the world’s tenth largest economy by nominal GDP and a world leader in sectors including technology, electronics, automotive industry and shipbuilding. South Korean companies such as Samsung, Hyundai and LG are international benchmarks, which reflects their ability to compete on global markets. Furthermore, South Korea is known for the importance it gives to education, research and development, which drives sustainable economic growth over time and its capacity for resilience. Its geopolitical influence is also significant, as it acts as a bridge between the economies of Asia and the rest of the world, thanks to its strategic partnerships with key players such as the United States and the European Union.

South Korea’s economy is one of the most dynamic and diversified of the world; it is noted for its transformation from an agricultural economy in the 1960s to a global technological and industrial powerhouse. This country stands out for its approach in key sectors including electronics, the automotive industry, shipbuilding, the petrochemical industry and telecommunications, led by global conglomerates of the ilk of Samsung, LG, Hyundai and SK Group. At the same time, it has diversified its economy towards creative industries and those with high added value, such as biotechnology, artificial intelligence, renewable energy and entertainment, such as the ‘K-culture’ global phenomenon. Its commitment to innovation, investment in research and development, and a favourable climate for international trade bolster its position as a strategic player on the global economic stage.

Growth of 2.7% GDP is expected in 2024, mainly due to greater external demand of electronic components for western markets. Furthermore, better labour conditions will stimulate consumer spending at the end of the year. Such growth will remain stable between 2025 and 2028, as external demand is forecast to increase helped by state policies. The main products exported by South Korea will continue to be electric cars, consumer electronics and microchips. The main threat to this growth is China, which could offer more competitive prices.

South Korea’s external sector is one of the cornerstones of its economy and it is the world’s seventh largest exporter and the nineth largest importer. Its economic model is highly focused on international trade, with diversified exports including electronic products, vehicles, semiconductors, petrochemicals and machinery. The ports of Busan and Incheon and its advanced logistic infrastructure are fundamental for it to remain competitive in global trade, consolidating the country as a key player in international supply chains.

Exports will continue to grow in 2024, due to the increasing demand for electronic products, particularly microchips and communication devices, where South Korea is in a prominent global position. Furthermore, the Korean government’s efforts to ensure the supply chain and reshoring component production in key industries such as semiconductors, vehicles and electronics will lead to a drop in imports of components for these industries in the medium term. Apart from electronics, the tourism and entertainment industries will continue to grow, with the ensuing increase in the GDP.

The South Korean market is highly attractive and competitive, noted for high purchasing power, demanding consumers and strong uptake of new technologies. South Korea, with a population of over 50 million inhabitants, is the tenth largest in the world, and its domestic market is noted for rapid urban development and a steadily growing middle class. Sectors such as technology, entertainment, fashion, beauty, consumer products and renewable energy are particularly dynamic, driven by digital and young consumers. Furthermore, the country has a favourable regulatory environments and trade agreements that facilitate the entry of foreign companies. Its focus on quality, innovation and global trends make the South Korean market a strategic opportunity for businesses seeking to expand in Asia.

South Korea’s investment and trade landscape is fuelled by market driven policies, broad free trade agreements and key manufacturing centres, which makes it even more attractive. The country has efficient business procedures and a strong protection of intellectual property, shored up by recent legislative reforms that have increased the punitive damages for infringements. However, entry into the market is hampered by the fiscal framework, with corporation tax rates of up to 24%, and the presence of large corporations that completely dominate certain sectors. Despite those challenges, a skilled workforce, financial incentives and governmental support initiatives, such as relaxing capital controls, make South Korea a dynamic and accessible partner for world trade and investment. South Korea is in sixth place among the 18 markets of South-East and Far-East Asia, and 27th among the 202 global markets in terms of investment and trade risk.

South Korea’s financial system is very accessible and attractive to foreign investors, with robust banking services and a dynamic stock exchange. Governmental initiatives, such as relaxing capital controls and the revaluation programmes, have made the market more attractive. However, the complex tax environment – with corporation tax rates of up to 24.0% and the introduction of a minimum overall tax rate of 15.0% – may deter some investors compares to other hubs with pull factors such as Singapore and Hong Kong (China). However, the prudent economic policies and a robust financial structure mitigate the risks, making South Korea an attractive and stable landscape for business operations.

South Korea is a benchmark in commercial openness and stands out for its economic model based on international trade and its integration in the global value chains. The country has signed multiple free-trade agreements with strategic partners such as the European Union, United States, China and other South-East Asian countries, which allows it to access the main global markets with tariff advantages. Its export economy is based on high added value products, such as semiconductors, vehicles and electronic equipment, which account for a large part of its trade balance. Furthermore, the South Corean government fosters policies to encourage foreign direct investment, by backing innovation and technology transfer. This openness has been key in positioning South Korea as one of the world’s most connected and dynamic economies.

Despite the country’s progress towards economic deregulation and liberalisation, import tariffs average 8% of the industrial products, which makes South Korean one of the countries with the highest tariffs of South-East and Far-East Asia. Furthermore, there are technical obstacles to trade and strict emission standards. Electronics face technical certification standards, while pharmaceutical products are subject to long approval processes and strict labelling requirements. Consumer goods, such as cosmetics and alcoholic beverages, face labelling requirements and tariffs of up to 15%. Export restrictions include licences for semiconductors and defence equipment, quotas for rare earth metals and taxes on importing vehicle parts.

South Korea’s regulatory framework has efficient business procedures, better than its regional counterparts and despite the higher operating costs. The legal system shores up the anti-corruption legislation, creating a favourable business climate. Key sectors such as IT, the automotive industry and semiconductors benefit from robust protection of intellectual property, in keeping with international standards. South Korea’s digitised and advanced bureaucracy and its transparent legal system guarantee equal treatment of all companies, which underlines its commitment to a safe and dynamic business landscape.