Guidance

Overseas Business Risk: South Korea

Updated 3 March 2022

Information on key security and political risks which UK businesses may face when operating in South Korea.

1. Political and Economic

1.1 Politics

President Moon Jae-in was elected President of the Republic of Korea (South Korea) on 9 May 2017 and was inaugurated on 10 May 2017. The President of South Korea is elected for a single term of five years. Moon Jae-in represents the progressive Minjoo Party. Moon succeeded the conservative Park Geun-hye, whose impeachment was upheld by the Constitutional Court of South Korea in March 2017 following a vote to impeach her by the National Assembly in December 2016. Park Geun-hye was removed from office and was subsequently charged with a number of criminal offences. She has since received a Presidential pardon. The President of South Korea appoints a Prime Minister, who in turn appoints the Cabinet. Cabinet-level Ministers are required to appear before the National Assembly before they can be appointed. Unlike in the UK, Cabinet Ministers are not required to be Members of Parliament. The 300 seat single-chamber National Assembly forms the legislative branch of the government of South Korea and its members serve four-year terms. The next Presidential election will be in March 2022.

1.2 Economy

South Korea is the world’s 10th largest economy (by GDP, 2021), the 4th largest in Asia, and the 6th largest trading country in terms of trade volume of goods. The economy grew by 4% in 2021, the highest growth rate since 2010. It is home to iconic and world-beating brands such as Samsung, LG, Hyundai and KIA. It boasts a wealthy, tech-savvy population. GDP at Purchasing Power Parity per person is over USD $39,000. Trade between the UK and South Korea totalled £13.3 billion in the year to September 2021 – up 11% on 2020. UK exports to South Korea have also seen strong growth, increasing by 12% in the same year. The UK-Korea Continuity Free Trade Agreement came into force in January 2021. UK companies exporting goods to South Korea worth over 6,000 Euros can benefit from the FTA tariff reductions by registering with HMRC as an ‘approved exporter’. The application form is accessible from HMRC’s pages on Gov.UK. The DIT exporting to Korea guide provides further detailed information on Korea’s economy and opportunities.

In 2017 (latest OECD data) South Korea’s Gross Expenditure on R&D stood at 4.5% of GDP with a total spend of $84bn. Of this total, approximately 75% of R&D is financed by industry and in particular by large Korean conglomerates such as Samsung and LG. The remainder is funded by the government and performed by universities and national laboratories. The UK and South Korea continue to enjoy wide and deep cooperation in science and innovation. Agreed themes for collaboration include: digital (artificial intelligence, Internet of Things, 5G communications), healthcare (AMR, precision medicine, big data healthcare applications), clean energy (energy storage and smart grid technologies) and future manufacturing (advanced material and manufacturing processes). President Moon’s stated economic priorities are focused on job creation and improving working conditions. This includes tackling long working hours, raising the minimum wage, improving workplace safety, and reducing the proportion of workers on temporary contracts.

1.3 Regional Issues

For the South Korean government, maintaining good relations with regional partners remains a delicate balancing act. South Korea’s relationship with the US remains a key part of its political and security strategy. Stronger links are being developed with ASEAN and a growing number of partners around the world.

A Trilateral Cooperation Secretariat was established in Seoul in September 2011 to build relations between South Korea, China and Japan. However, trilateral cooperation with China and Japan in some areas remains difficult due to ongoing regional tensions. South Korea’s relationship with Japan is often characterised by historical and territorial disputes. At the time of writing, South Korea and Japan have removed each other from their preferred trading “Whitelists”. In August 2019, South Korea also announced its intention not to renew the General Security of Military Information Agreement (GSOMIA) with Japan.

1.4 Inter-Korean Relations

Since the end of the Korean War in 1953, the Korean peninsula has been divided by a demilitarised zone (DMZ) separating the Democratic People’s Republic of Korea (DPRK) and South Korea. Peace has been maintained under an armistice agreement rather than a formal peace treaty.

The level of tension on the Korean peninsula grew considerably in 2017 due to a series of North Korean nuclear and missile tests. On 21 April 2018, North Korea announced a halt to nuclear and intercontinental ballistic missile testing.

Since the start of 2018, there has been renewed direct contact between the North and South Korean governments, and between North Korea and the United States. The Panmunjom Declaration, signed at an inter-Korean summit on 27 April 2018, included a number of commitments to build inter-Korean ties and reduce military tensions.

The level of tension and the security situation can change with little notice. For example, tensions increased after the sinking of the South Korean Navy Ship Cheonan and an artillery attack against Yeonpyeong Island in 2010, and also following artillery fire in the DMZ in August 2015. Tensions can rise around the time of the regular South Korean-US military exercises.

2. Human Rights

In general, there is a high level of respect for human rights in South Korea. In the Human Rights Watch World report 2020, South Korea is listed as a democracy with appropriate protections in place for most political, civil, and socio-economic rights. However, the organisation describes discrimination against at-risk groups including women, LGBTQ+ and racial and ethnic minorities as sometimes “severe”. There is no general anti-discrimination law, meaning that companies lack legal obligations to respect most human rights. South Korea retains the death penalty, but there has been a de facto moratorium for over 20 years.

South Korea has been a member state of the International Labour Organisation (ILO) since 1991 and signed 27 of its critical conventions as of 2022. Since 1992, the ILO’s Committee of Freedom of Association (CFA) has received 12 complaints from labour groups in South Korea. Former Foreign Minister Kang Kyung-wha has been nominated by Korea as a candidate for the Director-General of the ILO.

Trade unions are legal in South Korea but only 11% of the workforce belongs to one. It is notable that the government has refused to recognise any trade union set up by non-Korean migrant workers. Strikes are classed as illegal if striking workers resort to violence, unlawful occupation of premises or inflict damage to facilities. The suppression of illegal strikes has been known to result in a heated confrontation between demonstrators and the police.

3. Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In March 2015 South Korea approved a new anti-corruption law to tackle corruption amongst government officials, school teachers/professors and journalists. The law came into effect in September 2016.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case, it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

In 2021 South Korea was ranked 32nd on Transparency International’s corruption perception index (CPI) which covers the public sector.

Although the total number of cases of corruption in the public arena has decreased significantly, methods have been developed in more secret and sophisticated ways, in part linked to the complex nature of ownership and subsidiaries in South Korea. New legislation came into effect in September 2016 to help tackle bribery of public sector officials – the Improper Solicitation and Graft Act. It covers bribery of a public official both directly and indirectly (e.g. through family members). More information can be found on the Act (Korean) and its 2021 amendment.

Currently, ACRC (Anti-corruption & Civil Rights Commission) is a central institution that deals with fighting corruption in the public sector and protecting civil rights from unfair administrative practices.

Visit the Business Anti-Corruption portal page providing advice and guidance about corruption in South Korea and some basic effective procedures you can establish to protect your company from them.

Read the information provided on our Bribery and corruption page.

4. Terrorism Threat

Although there is no recent history of terrorism in South Korea, attacks can’t be ruled out. You should be aware of the global risk of indiscriminate terrorist attacks, which could be in public areas, including those visited by foreigners.

There’s a heightened threat of terrorist attack globally against UK interests and British nationals, from groups or individuals motivated by the conflict in Iraq and Syria. You should be vigilant at this time.

Find out more about the global threat from terrorism, how to minimise your risk and what to do in the event of a terrorist attack.

Read the latest Travel Advice for South Korea from the Foreign, Commonwealth & Development Office.

5. Protective Security Advice

As one of the world’s most “wired” countries, IT crimes (such as worm infection, hacking, phishing, identity theft, credit card fraud, pornography, illegal music/movie downloads, etc.) are often reported in Korea. In 2003, the government set up a National Cyber Security Centre (NCSC), to track rising cyber exploitation, operating a monitoring room year-round, 24/7. The NCSC is the central point of government for identifying, preventing and responding to cyber-attacks and threats in South Korea.

Since the use of internet banking is increasing, the incidence of hacking and information theft also keeps on rising. The government enacted the Electronic Financial Transactions Act in 2006, and the Financial Supervisory Service and other government authorities have published guidance on the operation of electronic financial services in Korea.

In May 2017, the WannaCry global ransomware attack affected a small number of organisations and individuals, but the impact in South Korea was not as extensive as reported in other countries. Read the information provided on our Protective security advice page.

6. Intellectual Property

Regarding Intellectual Property Rights, it is highly recommended that companies register their patents and trademarks with the Korean Industrial Property Office (KIPO) prior to making any major business decisions in dealing with Korean companies. In principle, the patent and trademark registration system used here is based on a “first-to-file” (or, more accurately, the first to successfully register) with KIPO. Therefore, the sooner you register, the better. Companies will be disadvantaged in any future disputes over IPR if they have not registered in Korea. Below are contact details for KIPO:

International Co-operation Division
Korean Intellectual Property Office
Address: Government Complex Daejeon Building 4, 189, Cheongsa-ro, Seo-gu, Daejeon, 35208, Republic of Korea
Tel: 82 42 481 5008/5936

If UK companies need professional legal advice for any business issues, DIT Seoul can provide a list of local lawyers upon request.

Read the information provided on our Intellectual Property page.

7. Organised Crime

The crime rate in South Korea is low. Civilians are strictly prohibited from arming themselves. However, some criminal organisations operate businesses that can make large amounts of money quickly: gambling, drug trafficking, prostitution, private loan, real estate dealings, construction contracts, etc. Those organisations can accumulate property through such operations and then launder the proceeds by investing in legal businesses.

Read the information provided on our Organised crime page.

8. Contact

Contact the Department for Business and Trade (DBT) team in South Korea for more information and advice on opportunities for doing business in the country.