Korea
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Business practicalities in <strong>Korea</strong><br />
Foreign businesses that invest under the terms of the<br />
Foreign Investment Promotion Act (FIPA) are permitted<br />
to remit a significant portion of their profits, as long<br />
as they submit an audited financial statement and<br />
supporting documents to a forex bank. Businesses that<br />
do not invest and register under the FIPA may not remit<br />
retained earnings via a forex bank. Although the <strong>Korea</strong>n<br />
Government reserves the right to limit the remitting of<br />
funds out of the country, it has never done so, not even<br />
during the 1997-98 financial crisis.<br />
<strong>Korea</strong>n financial system and how to get paid<br />
<strong>Korea</strong>’s financial system is at times hard-pressed to<br />
fulfil requests for capital and financing for cross-border<br />
commercial transactions. This is because banks are<br />
required to maintain high capital adequacy ratios for their<br />
lending to SMEs. As a result, foreign companies in JVs<br />
with <strong>Korea</strong>n partners usually provide the financing, while<br />
the <strong>Korea</strong>n party makes in-kind investments such as land<br />
and facilities. Foreign businesses and JVs regularly use<br />
branches of foreign banks in <strong>Korea</strong> to raise financing in<br />
<strong>Korea</strong>n Won. Branches of foreign banks, however, only<br />
control a small portion of the local currency available.<br />
Financing in <strong>Korea</strong>n Won is available from <strong>Korea</strong>n<br />
commercial, regional and specialised banks. ANZ,<br />
Citibank, and Standard Charted are foreign banks with<br />
branches in <strong>Korea</strong> that may be able to assist with business<br />
banking and raising finance in <strong>Korea</strong>n Won.<br />
If your business involves exporting, there are numerous<br />
ways you can get paid for the goods or services that<br />
you export. Many of these also apply for other types of<br />
businesses operating in <strong>Korea</strong>. You should contact your<br />
bank for comprehensive advice about payment options<br />
and the relative advantages of each option for your<br />
particular situation.<br />
Getting paid is a critical part of any transaction – and<br />
one that you have to get right. There are a number of<br />
payment methods used in international exporting. The<br />
best option for you at any particular time will depend on a<br />
number of factors:<br />
• How much can you trust your buyer?<br />
• How well do you know the company?<br />
• Have you established a relationship of trust, or is this<br />
the first transaction?<br />
• How much risk are you prepared to take?<br />
• How much risk is your buyer prepared to take?<br />
• How big is the transaction?<br />
• Can you bargain for more favourable terms with this<br />
buyer?