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South Korean Sky with Flag

How to Do Business in South Korea

South Korea occupies the southern part of the Korean peninsula. Korea was an independent kingdom before Japan occupied it in the beginning of the twentieth century. After World War II, the peninsula was divided into two countries: North Korea (Democratic People’s Republic of Korea) and South Korea (Republic of Korea). The border between the two countries along the 38th parallel was set by the armistice ending the Korean war in 1953.

 

South Korea had been a developing country until the 1960s. Due to far-reaching economic reforms (referred to as the Miracle of the Hangang River), the country’s economy entered a period of rapid growth (about an annual 10% for over 30 years). Today, South Korea‘s GDP is about $2 trillion, and it’s one of the most developed and industrialized countries in the world.

 

South Korea places great importance on education, innovation and investment into research and development. The country has a highly skilled workforce earning a high median household income. Services provide the majority of the country’s GDP (59%), while industry is at 38% and agriculture at 2%.

 

Today, South Korea‘s GDP is about $2 trillion, and it’s one of the most developed and industrialized countries in the world

 

The country’s leading industries are electronics, vehicle production, telecommunications, shipbuilding, steel, and chemicals. The top agricultural products are rice, vegetables, fruits, cattle, poultry, fish, and root crops.

 

The economy of South Korea is largely export-oriented. Total exports amounted to about $512 billion in 2016. Semiconductors, petrochemicals, auto parts, ships, electronics, steel, and plastic were the most exported goods that year. The US is South Korea’s second biggest export partner after China, receiving 13.5% of the total South Korean export (that amounts to $69.9 billion). US companies mainly seek South Korean vehicles, machinery, pharmaceuticals and mineral fuels.

 

Total imports amounted to around $391 in 2016. South Korea mostly imports crude oil, natural gas, electronics, semiconductors, steel, textiles, and fine chemicals. The US is South Korea’s third largest import partner, accounting for 10% of total imports, with China and Japan taking the top spots. US companies mostly sell machinery, aircrafts, optical and medical instruments, and vehicles in South Korea.
Regarding the internet, South Korea is the most connected nation on the planet: more than 92% of the population use the internet on a regular basis. Broadband and wireless connections are common all over the country, and South Korea also boasts the fastest average internet connection in the world.

 

Korea has a rich history and culture. Due to the north – south divide, the two parts of the ancient kingdom have taken very different routes from the second half of the twentieth century. The relationship to North Korea, a heavily militarized communist country, is one of the defining factors of South Korea’s international diplomacy.

 
 

Major Cities

 

South Korea is a presidential republic. The country consists of eight provinces (in Korean: do), a special self-governing province called Jeju, a special city (the capital, Seoul), six metropolitan cities (in Korean: gwangyeoksi), and one metropolitan autonomous city (Sejong). The provinces and special cities are led by governors and mayors respectively, and have authority over several local policies.

 
South-korea-major-cities
 

South Korea has ca. 51 million inhabitants, with about 82% of them living in urban areas. The country has a population density of 1,310/sq mi (compared to 90.6/sq mi of the US). The majority, about 57% of the population, doesn’t belong to any religion. Nearly 20% of South Koreans are Protestants, 15.5% Buddhists, and 7.9% Catholics.

 

Seoul

Seoul is the capital of South Korea. It has about 9.7 million inhabitants (with 25 million people living in the greater Seoul Capital Area). Strategically located on the River Han, Seoul is the largest trade, finance, and business hub of South Korea. Major IT and electronics companies have their headquarters in Seoul, including LG, Samsung, and the Hyundai Group.

 

Busan

With 3.2 million inhabitants, Busan is the second largest city of South Korea. Located on the south-eastern coast of the peninsula, Busan has the biggest commercial port in the country and it serves as the educational, cultural, and business center of the south-east. The city is famous for its shipbuilding, machinery and marine industries, as well as its trade and fashion.

 

Incheon

Located on the west coast, the city belongs to the Seoul Capital Area. In itself, it has 2.6 million inhabitants. Incheon is known for its commerce and trade, as well as its emerging biotech industry.

 

Daegu

Formerly known as Taegu, the city has 2.4 million inhabitants. Daegu is best known for its electronics and textiles industries, as well as its production of apples.

 

Daejeon

Located in the center of the peninsula, Daejeon has 1.5 million inhabitants. The city serves as South Korea’s major transport and education hub. It’s home to 18 universities and several major research facilities. Because of its numerous tech companies and major education institutions, the city was nicknamed ‘Asia’s Silicon Valley’.

 
 

Currency

 

The currency of the country is the South Korean won (KRW, not to be confused with the North Korean won). The value of the won is usually well below the dollar: over the past year, 1 USD was worth between 1,050-1,200 KRW.

 

Inflation is currently at 1%.

 
 

Language

 

The official and national language of South Korea (and North Korea as well) is Korean. The language has two alphabets: Hangul (which is the official script), and Hanja (which utilizes Chinese characters, albeit with Korean pronunciation).

 

English is taught country-wide in junior high and high-school education. Most South Koreans understand English; however, make sure to inquire whether you need to bring an interpreter to your business negotiations.

 

English is taught country-wide in junior high and high-school education. Most South Koreans understand English; however, make sure to inquire whether you need to bring an interpreter to your business negotiations.

 
 

Holidays in South Korea

 

South Korea has five National Celebration Days (Independence Movement Day, Constitution Day, Liberation Day, National Foundation Day and Hangul Day) that commemorate key events in Korean history and culture. With the exception of Constitution Day, the National Celebration Days are public holidays. However, there are several additional public holidays; here’s a list of these.

 

HolidayDateObservance
New Year’s Day (Sinjeong)January 1Nationwide
Korean New Year (Seollal)First day of the first lunar monthNationwide
Independence Movement Day(Samiljeol)March 1Nationwide
Children’s day (Eorininal)May 5Nationwide
Buddha’s birthday (Bucheonnim Osinnal)8th day of the 4th lunar monthNationwide
Memorial Day (Hyeonchung-il)June 6Nationwide
Liberation Day (Gwangbokjeol)August 15Nationwide
Chuseok (harvest festival)15th day of 8th lunar monthNationwide
National Foundation Day (Gaecheonjeol)October 3Nationwide
Hangul day (Hangeulnal)October 9Nationwide
Christmas (Gidoktansinil)December 25Nationwide

 

Communication from the US

 

Email

When communicating via email, South Koreans like to exchange a few pleasantries about the weather, and express their hope for their partner’s good health.

 

Since English is taught in most South Korean schools, you can expect your partner to understand your emails. However, bear in mind that English is not their first language. Avoid using complicated sentences and try to be as clear as possible without being rude.

 

Making calls from the US

The international country code for South Korea is +82.

 

  1. Dial 011 to exit the US
  2. Dial 82 for South Korea
  3. Dial the 1-2 digit area code for the city
  4. Dial the 6-8 digit phone number
  5. Example: 011-82-51-xxx-xxx

 

If you want to dial a South Korean number from the US, follow these instructions.

 
 

Traveling to South Korea

 

South Korea uses Korean Standard Time (KST), which is UTC +9 hours. Seoul is 14 hours ahead of Washington, DC. Cars drive on the right side of the road. Officially, South Korea uses the metric system, but informally, many people still rely on the traditional Korean units of measurement (cheokgwan-beop).

 

Visas

US citizens need a valid passport to enter South Korea. If you want to stay for less than 90 days for business or touristic purposes, you don’t need a visa to enter the country. If your stay exceeds 90 days, you can apply for your South Korean visa here.

 

Using a Cell Phone in South Korea

The majority (over 80%) of South Korean population uses cell phones. For foreigners, buying a cell phone in South Korea is very expensive and complicated. Luckily, you’ll most likely be able to use your own phone (provided you have a modern phone that supports 2.1Ghz 3G WCDMA networks). However, since roaming costs are very high, it’s advisable to buy a South Korean prepaid SIM card, or even rent one.

 

Buying a prepaid SIM card is easy: just visit one of South Korea’s major carriers (Olleh, SK Telecom, or LG U+) and pay for your minutes in advance.

 

Buying a prepaid SIM card is easy: just visit one of South Korea’s major carriers (Olleh, SK Telecom, or LG U+) and pay for your minutes in advance. The other option is renting a SIM card (or even a phone) from a company for the duration of your stay. You may pre-order this service online and pick up your rental card or phone at the airport upon arrival.

 
 

Major Trade Shows

 

Trade shows provide an excellent opportunity to showcase your business, as well as meet potential customers and partners. Here’s a list of the major trade shows held in South Korea.

 

WhatWhere
WhenWhat about
IMAC - International Material and Components Industry ShowSeoulFallMaterials and Components
Eco-Expo KoreaSeoulFallGreen economy and sustainable development
BISFE - Seafood and FisheriesBusanFallSeafood and fisheries
ROBEX - Robot IndustryDaeguFallRobot industry
KOSIGN - Sign and designSeoulFallDesign, Architecture
Intercharm Beauty expo KoreaSeoulFallSignage, display and printing
Gwangju International Food FairGwangjuFallFood
Semicon KoreaSeoulWinterSemiconductor equipment and services
KORTEXDaeguSpringTextile machinery
KIMES - Medical and Hospital EquipmentSeoul Spring Every Two YearsMedical and hospital equipment
WISSeoul SpringIT
NEPCONSeoul SpringElectronics components and manufacturing
KOREA PHARMSeoul SpringPharmaceuticals

 

Business Culture

 

South Korean culture is deeply rooted in Confucian ethics (Confucius was a Chinese philosopher. His teachings of ethics focus on justice, character, and respect). Virtues like benevolence, loyalty, righteousness, integrity, modesty, knowledge, and respectfulness are key to understanding the mentality of South Korean people, including your business partners. Respect for hierarchy, authority, and seniority are at the core of every South Korean business.

 

The line between professional and personal lives is blurred. A business manager is often viewed as a senior family member by their employees. Loyalty to the company and its leaders is important for and expected of South Koreans. Similarly, South Koreans are loyal to their former schools, sports teams and hometown.

 

The line between professional and personal lives is blurred. A business manager is often viewed as a senior family member by their employees.

 

The concept of ‘face’ (called gibun in Korean) is equally important. This could be roughly translated as integrity, or avoiding embarrassment. Koreans will go to great lengths to avoid embarrassing themselves in front of others, and also to acknowledge others embarrassing themselves. When a Korean person perceives something as embarrassing (either for themselves or for others), they will most likely react with an awkward smile, or not react at all. This also means that being critical of a person or institution in public is generally considered rude; if you want to raise a delicate issue, do it as privately as possible. Similarly, contradicting someone in public is not advised. Try to formulate your opposing views as smoothly as possible to avoid a direct contradiction.

 

The South Korean idea of politeness doesn’t always match what we’re used to in the US. For example, thanking a person who holds the door open, or apologizing when bumping into someone is not common. In a restaurant, people might talk and laugh loudly to express their appreciation for food and company. Similarly, slurping when eating soup or noodles is a sign of enjoying the food. However, South Korean businesspeople are usually familiar with Western habits and customs. You don’t have to slurp or laugh loudly, but don’t be surprised if your partners do.

 

A few general rules

  • Modesty and humility are highly appreciated. Don’t exaggerate your accomplishments as it might be considered bragging. When receiving a compliment, Koreans tend to downplay it and say they don’t deserve it. That doesn’t mean you shouldn’t keep paying compliments, but if you receive one, consider following your partner’s lead and act modestly. Interestingly, this might also result in your partner understating their achievements.
  • In general, South Koreans tend to use use fewer facial expressions and hand motions than Americans.
  • Blowing your nose in public is considered very rude.
  • If you’re sitting or standing, try not to show the soles of your shoes, and don’t point your feet at other people, as feet are considered unclean.
  • Touching is not very common among Koreans, unless they’re family or good friends. Even a pat on the back is not advisable.
  • Koreans don’t like saying a direct ‘no’ (ani or anniyo in Korean). If you need to respond negatively, try to formulate your answer without directly saying no. Similarly, read between the lines: when your partner seems to be evading a direct answer, they might be trying to say no respectfully.
  • If you want to tip your waiter in a restaurant, make sure to fold the notes inside the bill.
  • Beckoning someone with a finger is very rude. Similarly, avoid pointing at people.

 

 

Hierarchy in South Korean Businesses

 

A strict hierarchy is one of the core features of a South Korean business. Age and ranking is very important; external business relationships are developed according to rank, which means that you’ll mainly be in contact with a person who holds a similar rank in their organization that you do in yours.

 

The decision-making process in a South Korean company is longer than in the US. It’s a collective process where everyone is expected to participate according to their rank and knowledge. The final decision is made at the top level based on all the input from subordinates.

 

When establishing your business relationship, you can expect questions about your family, education, and rank in your company. Though these questions may seem too personal for a US businessperson at first glance, they generally serve to find out your status according to their idea of hierarchy.

 
 

Business Communication

 

The First Meeting

First impressions are very important to South Korean businesspeople. Building a deep personal relationship precedes business; therefore you can expect your first meeting to be largely about getting to know each other.

 

First impressions are very important to South Korean businesspeople. Building a deep personal relationship precedes business; therefore you can expect your first meeting to be largely about getting to know each other.

 

Our tips on all practical issues of a meeting will help you navigate your way in South Korean business culture.

 

Attire

South Koreans prefer formal attire for a business meeting. Suits, ties, and light-colored shirts are always acceptable. Women usually wear knee-length skirts. Make sure to wear conservative colors, like black, gray, or navy-blue.

 

Timing

When scheduling a meeting, plan well ahead of time. Most South Korean business meetings take place mid-morning (10-12 am) or mid-afternoon (2-4 pm).

 
Business Man looking at watch
 

South Koreans appreciate punctuality. Don’t be more than a few minutes early and definitely don’t be late, as these both disrupt the schedule of your partner and may indicate disrespect on your part. If you know you’ll be late, let your partner know as soon as possible and apologize, even if it’s not your fault.

 

If something unexpected comes up in your partner’s schedule, they might cancel the meeting at any time. If this keeps happening, that might mean that they’re not really committed to working with you, or there’s an issue that needs to be addressed before your negotiations can proceed.

 

Introductions

Introductions are usually made by a third person, therefore it’s best to wait to be introduced to your partner. Similarly, when first establishing contact, it’s best to use an intermediary party known to both of you, as cold calls are rarely responded to in South Korea.

 

An introduction is usually followed by a handshake, or a traditional Korean bow (bending from the waist to a maximum of 45 degrees). Follow your partner’s lead to see what form of greeting they’re most comfortable with.

 

In a hierarchical situation, bows are generally initiated by the junior person. The senior person reciprocates with a slightly smaller bow. Koreans prefer the two-handed handshake to a single handed-one: this means that while the right hand is extended, the left hand supports the right elbow. This shows respect for the other person.

 

Eye-contact between equals is common; however, a lower ranking person might avoid lengthy eye-contact with their seniors to show respect.
 

Traditionally, Korean women don’t shake hands with Western men, though this custom is changing. Also, a Korean man will most likely not initiate a handshake with a Western woman; it’s up to her to decide if she wants to extend her hand or not.

 

Eye-contact between equals is common; however, a lower ranking person might avoid lengthy eye-contact with their seniors to show respect.

 

South Koreans are more formal than Americans. When addressing your partner, it’s best to use their title and surname. If they don’t have a title, stick to Mr. and Mrs. As your relationship progresses, you might eventually be invited to call them by their first name. Some Koreans adopted a Western first name to be used in Western relations. Even if that’s the case, make sure you know the proper Korean name of your partner (especially since their co-workers wouldn’t necessarily know their Western name).

 

Business Cards

At the first meeting, business cards are always exchanged. Business cards are viewed as a part of the person, and should be treated with utmost respect. Receive your partner’s business card with both hands, and offer yours in a similar manner. Take a moment to read the card carefully, and place it in front of you on the table. If you place the cards in front of you according to the seating arrangements, it will be easier to keep track of who’s speaking. Never scribble on a business card.

 

Small Talk

Since your partner wants to get to know you and is most likely interested in building a long-term relationship, you can expect some amount of small talk at the start a business meeting, as well as socializing with your partner outside of business hours. Safe topics for conversation are your positive impressions of Korean culture and arts, sports (especially golf), family, and hobbies. Avoid topics like the divide between North and South Korea, Communism, the Korean War, and Korea’s history and relations with Japan.

 

Gifts

Gifts are often exchanged as a sign of appreciation, especially at the first meeting to build trust and goodwill. Always receive a gift with both hands and offer yours with both hands as well. Inquire ahead about the value and quantity of the gifts to be exchanged, because your gift should be of equal value to that of your partner. For a first meeting, items with your company logo or traditional items of your hometown/country are perfect. If you bring more than one gift, always give the most valuable to the most senior person.

 

Gift-giving is also common before holidays, like Christmas or Chuseok.

 
 

Business Negotiations

 

South Koreans place great value on establishing and nurturing business relationships. They are willing to spend a lot of time and money on getting to know their partners, which means that you can expect a considerable amount of socializing as a part of business negotiations. Your willingness to participate indicates how much you value them and whether you plan to establish a long-term relationship. Long-term commitment is greatly preferred to short-term deals.

 

South Koreans place great value on establishing and nurturing business relationships.

 

A business contract is not seen as the culmination of a relationship, but rather as the beginning. South Koreans like to keep their contracts as flexible as possible and amend it if needed. They value the interpersonal relationship between your companies above the written legal document, and might not want to adhere to the contract as strictly as US businesspeople are used to. Make sure you’re on the same page about the role of the contract in your relationship.

 

Refreshments are usually offered at the start of a meeting. Make sure to accept your partner’s hospitality in a respectful manner.

 
 

Making a Payment

 

Paying your South Korean supplier is easiest through Veem. Sending international payments through Veem is fast, secure, and low-cost. It’s as easy as sending an email, and because Veem cuts out the middlemen, it’s a lot faster and cheaper than ordering an international transfer at your bank.

 
 

Regulations and Permits

 

If you want to get your supplies from South Korea, you need to be aware of US import regulations. Since the US and South Korea have a Free Trade Agreement in place, 95% of Korean consumer and industrial goods can enter the US free of duties and merchandise processing fee (MPF). However, certain goods are regulated by quotas, and bear in mind that you need to provide a certificate of origin to prove that your imported supplies indeed come from South Korea.

 

Useful links

 

Travel State Gov International Travel: South Korea

The Embassy of the Republic of Korea in the Us: Visa Information

US Customs: Korea Free Trade Agreement

US Customs: Quota Status Reports

 

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