CM December 2023

COUNTRY FOCUS
A
As Lloyd’s List wrote in September
2021, ‘South Korea aims to dominate
shipbuilding within a decade…The
Government has set a target for the
country's shipbuilders to take 75 percent
and 55 percent of market share in ecofriendly
vessels and autonomous ships,
respectively, by 2030.’
Car manufacturing
Data from the International Organization
of Motor Vehicle Manufacturers shows
that in 2022, South Korea was the world’s
fifth largest producer of cars having made
nearly 3.8m vehicles. In comparison,
India made 5.5m cars, Japan 7.8m, the US
10m and China 27m.
What once started as an assemblybased
sector has transformed into one
using advanced production techniques.
Key producers are Hyundai, Kia, General
Motors Korea, KG Mobility, Renault Korea
Motors, Tata Daewoo, Edison Motors, Asia
Motors and Proto Motors. But it’s not all
sun and roses: Nikkei Asia wrote in May
2022 that ‘automobile production in South
Korea has retreated to the lowest in nearly
two decades, on the struggles of smaller
carmakers and the offshoring of capacity
by the dominant Hyundai Motor group.’ It
added, though, that ‘hopes for reversing
this decline are blooming.’ Part of the
problem was a function of COVID-related
semiconductor shortages.
But beyond car manufacturing, Invest
r
AUTHOR – Adam Bernstein
Korea points to 10 Korean car parts
companies being listed on the world's top
100 automotive parts producers in 2021
(by sales). These firms achieved sales of
$65.1bn and accounted for 8.2 percent of
the sales of top 100 parts producers.
Textiles
Textile manufacturing is another large
part of the South Korean economy which,
says fibre2fashion.com, was worth, in
terms of exports, $13.30bn in 2016 and
$13.70bn in 2018. Statista reported, at
the start of 2023, that in 2020, the textile
production amounted to about KRW
37.83tn. It’s relevant that production value
was highest in 2012 at more than KRW
45tn but has been falling continuously
since then.
Globaldata considers that the overall
apparel market in South Korea will reach
KRW 111.4tn by 2027.
Tourism
Tourism is a sector that appears to be
growing in South Korea and it’s one that
the World Travel & Tourism Council
(WTTC) reckoned, in July 2022, will create
nearly half a million jobs over the next
decade. It said that the forecast from
WTTC’s latest Economic Impact Report,
which shows an average of nearly 49,000
new jobs every year, to reach nearly
1.8m by 2032, also reveals the sector will
outpace the overall economy for the next
10 years. According to the report, travel
and tourism’s contribution to GDP is
forecasted to grow at an average rate of
4.8 percent annually between 2022-2032,
significantly outstripping the 1.8 percent
growth rate of the national overall
economy. And this could be worth KRW
116.9tn – about 4.6 percent of the total
economy.
It should be noted, though, that in terms
of the numbers of tourists and value in
revenue, COVID has a serious impact on
the sector. Invest Korea wrote that in 2018
there were 15.3m arrivals and 17.5m the
year after. But with COVID that number
fell to 2.5m in 2020, 967,000 in 2021, but
rose to 3.2m in 2022. There’s still quite a
way to get back to pre-COVID levels.
And as to origination of the traveller,
where once 6m Chinese and 3.2m
Japanese visited South Korea (in
2019), over the first eight months of
2022, 281,000 Americans made up
the largest contingent followed
by just 123,000 Chinese visitors.
Personal income tax
South Korea considers as an
individual resident taxpayer
any individual having a
domicile in Korea or having a residence
within Korea for 183 days or more.
There are eight bands that range from
six percent on income up to KRW 14m,
to 15.0 percent (KRW 14m to KRW 50m),
24.0 percent (KRW 50m to KRW 88m), 35.0
percent (KRW 88m to KRW 150m), 38.0
percent (KRW 150m to KRW 300m), 40.0
percent (KRW 300m to KRW 500m), 42.0
percent (KRW 500m to KRW 1bn) and 45.0
percent on income of over KRW 1bn.
Beyond that is a local income tax
surcharge that uses the same bandings
but at rates of 0.6 percent, 1.5 percent,
2.4 percent, 3.5 percent, 3.8 percent, 4
percent, 4.2 percent and 4.5 percent.
And there is a minimum income tax
of the greater of 45.0 percent of income
tax liability (with 35.0 percent applied to
income tax liabilities of up to KRW 30m)
before exemptions or the actual tax after
exemptions.
Summary
It’s abundantly clear that in sixty plus
years that South Korea has moved on
from its agrarian background to one
that is firmly in bed with technology and
manufacturing.
However, there are challenges to
overcome such as unique industry
standards, less than transparent
regulations, resistance to foreign business
models, and competition and price
pressures from domestic manufacturers.
And beyond that is the latent problem of
South Korea’s proximity to sabre rattling
nations – namely North Korea and China.
But we need to live for the moment and
to any valiant globetrotter, South Korea
is a destination worthy of any corporate
agenda.
Adam Bernstein is a freelance
finance writer for CM magazine.
Brave | Curious | Resilient / www.cicm.com / December 2023 / PAGE 37