Korea

80
Country starter pack
Business practicalities in Korea
Foreign businesses that invest under the terms of the
Foreign Investment Promotion Act (FIPA) are permitted
to remit a significant portion of their profits, as long
as they submit an audited financial statement and
supporting documents to a forex bank. Businesses that
do not invest and register under the FIPA may not remit
retained earnings via a forex bank. Although the Korean
Government reserves the right to limit the remitting of
funds out of the country, it has never done so, not even
during the 1997-98 financial crisis.
Korean financial system and how to get paid
Korea’s financial system is at times hard-pressed to
fulfil requests for capital and financing for cross-border
commercial transactions. This is because banks are
required to maintain high capital adequacy ratios for their
lending to SMEs. As a result, foreign companies in JVs
with Korean partners usually provide the financing, while
the Korean party makes in-kind investments such as land
and facilities. Foreign businesses and JVs regularly use
branches of foreign banks in Korea to raise financing in
Korean Won. Branches of foreign banks, however, only
control a small portion of the local currency available.
Financing in Korean Won is available from Korean
commercial, regional and specialised banks. ANZ,
Citibank, and Standard Charted are foreign banks with
branches in Korea that may be able to assist with business
banking and raising finance in Korean Won.
If your business involves exporting, there are numerous
ways you can get paid for the goods or services that
you export. Many of these also apply for other types of
businesses operating in Korea. You should contact your
bank for comprehensive advice about payment options
and the relative advantages of each option for your
particular situation.
Getting paid is a critical part of any transaction – and
one that you have to get right. There are a number of
payment methods used in international exporting. The
best option for you at any particular time will depend on a
number of factors:
• How much can you trust your buyer?
• How well do you know the company?
• Have you established a relationship of trust, or is this
the first transaction?
• How much risk are you prepared to take?
• How much risk is your buyer prepared to take?
• How big is the transaction?
• Can you bargain for more favourable terms with this
buyer?