Doing business in South Korea

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An independent kingdom for much of its long history, Korea was occupied by Japan from 1905, following the Russo-Japanese War. In 1910, Tokyo formally annexed the entire Peninsula. Korea regained its independence following Japan’s surrender to the United States in 1945. After World War II, a democratic-based government (Republic of Korea, ROK) was set up in the southern half of the Korean Peninsula while a communist-style government was installed in the north (Democratic People’s Republic of Korea, DPRK). During the Korean War (1950-1953), US troops and UN forces fought alongside ROK soldiers to defend South Korea from a DPRK invasion supported by China and the Soviet Union. A 1953 armistice split the peninsula along a demilitarised zone.

Since the 1960s, the Republic of Korea has set world records in economic growth and development, with a focus on heavy industry and manufactured exports. Today, South Korea is the fourth largest economy in Asia and the tenth largest in the world. It is the leading global supplier of LCD screens, memory chips and mobile phones. The country’s population is highly educated and technologically advanced, with one of the world’s highest levels of broadband penetration.

South Korea’s economy is dominated by its conglomerates, the ‘chaebol’.  Their role in society has been an enduring point of contention due to their economic and political influence.  Successive attempts by the government to rein in the country’s economic titans have been inadequate and the chaebol have grown more powerful since the inception of the Covid-19 pandemic.  There are currently around 40 chaebols and the four of the largest are Samsung, LG, Hyundai and SK.

Business culture in South Korea

Han is a difficult Korean concept which requires an understanding of the context in which it is used as there is no English equivalent. It explains much of ‘Korean-ness’ and is an anthropological concept that operates on many levels ― from the highest historical-national level to the innermost- feelings of a person. It is the idea that some injustice has been done to oneself. The injustice could be on the Korean people by a foreign power, on employees by their employer, or on a daughter-in-law by her mother-in-law. It manifests itself as a deep-seated sense of grief and grievance that they have been wronged by powerful agents of injustice.

Facts, logic and conclusions are often not nearly as important in Korean culture as how one is looked upon by others. Friendships are tight-knit and valuable. It is an insult to refuse a friend’s request. It is even less forgivable to fail a superior. These friendships are possible because everyone does his or her best to preserve and foster harmony and good feelings. The bearer of bad news may smile to soften the blow. They may avoid giving the news, even if they are merely the messenger and in no way responsible for it.

It is very hard for Koreans to admit failure and it is devastating to lose face in Korean culture. The directness of Westerners is thoroughly uncomfortable to many Koreans (especially older and/or more traditional people). In Korea, it is of unparalleled importance to maintain kibun – a word that has no literal translation in English. However, as a concept that permeates every facet of Korean life, kibun can be described in terms of pride, face, mood, or state of mind.

In order to maintain kibun, particularly in a business context, one must show the proper respect and avoid causing loss of face. In a culture where social harmony is essential, the ability to identify another’s state of mind, often referred to as nunchi, is crucial to successful business ventures. The literal translation of nunchi is ‘eye-measure’. With nunchi, Koreans are using non-verbal cues to convey emotion and meaning through various indirect signs, including voice pitch and volume as well as intonation, so that you are aware of subtleties in exchanges and gauge a true sense of what is being communicated.

Although it is not seen as a religion in this increasingly Christian society, and it is no longer part of the ‘public’ school curriculum, Confucianism still plays an important role in Korean society. Confucian ideals such as chung (loyalty), hyo (filial piety), in (benevolence) and sin (trust) are still part of the cultural fabric and thought that still exists in day-to-day administrative and organisational hierarchies.

In Korea, personal relations frequently take precedence over business. In order to be successful, it is vital to establish good, personal relationships based on mutual trust and benefit. One of the modern ways of developing mutual trust and cementing a relationship is the practice of getting closer through alcohol. However, there is growing recognition in Korean society that getting drunk for business reasons may not really be good for business and younger, health-conscious workers are opting for alternative ways of bonding when they can. A traditional practice of 'gift-giving' is also being addressed in many sectors as anti-corruption practices and policies are increasingly being implemented.

Finally, the Korean business world is still male-centered and male-dominated. However, women are beginning to gain some inroads and Korean women’s enrolment rate in higher education has increased remarkably.

This achievement is believed to be the one of the most important foundations for achieving gender equality in the future Korean society. Although the age group of 55 or older shows a significant gender gap, no significant gap is seen in the high-school graduation rate of the younger generation, indicating a bright future in Korea’s endeavour to narrow the gender gap.

This achievement in the education sector has not been sufficiently transferred to the economy however, including the labour market. What is concerning is the wage gap in Korea. Despite a modest improvement over the past decades, Korea has the highest wage gap among OECD members, and Korean women are paid a third less on average than their male counterparts. This reality does present some special challenges to foreign women who go there to work.