Business indicators for South Korea
Just found this report on business in South Korea, really interesting:
South Korea's economy is 68.6 percent free, according to our 2007 assessment, which makes it the world's 36th freest economy. Its overall score is 0.6 percentage point higher than last year, partially reflecting new methodological detail. South Korea is ranked 7th out of 30 countries in the Asia–Pacific region, and its overall score is higher than the regional average.
South Korea has high levels of business freedom, fiscal freedom, freedom from government, investment freedom, monetary freedom, and property rights. The corporate tax rate is low. Both total government expenditures relative to GDP and inflation are fairly low as well, but South Korea's monetary score is hurt by government subsidies of several sectors. Investment in South Korea is easy, as the government has made several efforts over the past decade to open the economy to foreign capital. The rule of law is strong, and property rights are protected in a transparent manner.
South Korea's trade freedom, financial freedom, and labor freedom are weak. Non-tariff barriers are common. The financial system is advanced, but it remains partially dominated by the government. The labor market remains rigid despite the government's efforts to enhance market flexibility in recent years.
South Korea is one of Asia's most vibrant democracies. After several decades of rapid industrialization and modernization, a 1997 economic financial crisis revealed structural deficiencies that have been largely corrected. Although the government did much to liberalize the financial and economic sectors in the aftermath of the crisis, the economy continues to be dominated by the chaebols (large conglomerates). South Korea's greatest challenge, both economically and politically, is managing its increasing interaction with North Korea in light of ongoing tensions resulting from the North's nuclear programs and deteriorating relations with major powers in the region.
Business Freedom - 83.1%
Starting a business takes an average of 22 days, compared to the world average of 48 days. Obtaining a business license is simple, and closing a business is easy. The regulatory process has improved over the years, but bureaucracy and lack of transparency can still hinder entrepreneurial activities. The overall freedom to start, operate, and close a business is protected by the national regulatory environment.
Trade Freedom - 64.2%
South Korea's weighted average tariff rate was 7.9 percent in 2005. Prohibitive tariffs, non-transparent and restrictive regulations and standards, import restrictions, import taxes, weak enforcement of intellectual property rights, export subsidies, and services market access barriers add to the cost of trade. Consequently, an additional 20 percent is deducted from South Korea's trade freedom score to account for these non-tariff barriers.
Fiscal Freedom - 81.0%
South Korea has a high income tax rate but a moderate corporate tax rate. The top income tax rate is 38.5 percent (a 35 percent income tax rate plus a 10 percent resident surcharge), and the top corporate tax rate is 27.5 percent (a 25 percent income tax rate plus a 10 percent resident surcharge). Other taxes include a value-added tax (VAT), a special excise tax, and a property tax. In the most recent year, overall tax revenue as a percentage of GDP was 24.6 percent.
Freedom from Government - 81.5%
Total government expenditures in South Korea, including consumption and transfer payments, are modest. In the most recent year, government spending equaled 28.1 percent of GDP, and the government received 0.19 percent of its total revenues from state-owned enterprises and government ownership of property. There were 32 state-owned enterprises as of January 2006.
Monetary Freedom - 79.0%
Inflation in South Korea is moderate, averaging 3 percent between 2003 and 2005. Relatively unstable prices explain most of the monetary freedom score. The government regulates or controls prices in certain sectors, including agriculture, telecommunications, and other utilities; pharmaceuticals and medical services; and some energy products. Consequently, an additional 10 percent is deducted from South Korea's monetary freedom score to account for these policies.
Investment Freedom - 70.0%
The Foreign Investment Promotion Act of November 1998 and other reforms substantially opened South Korea's economy to foreign investment, but media, electric power, and certain agricultural sectors remain partially closed. The government has removed restrictions on foreign investors that acquire companies through mergers and acquisitions. In August 2005, the government eased regulations and expanded tax incentives. Both residents and non-residents may hold foreign exchange accounts. Payments, transactions, transfers, or repatriation of profits are subject to reporting requirements or restrictions on amounts permitted for specified periods.
Financial Freedom - 50.0%
South Korea has one of the most advanced and sophisticated financial systems among the world's fast-growing economies. Foreign banks own majority stakes in four of the eight major commercial banks and account for roughly one-third of banking assets. The government has been selling its shares in private banks but retains some ownership positions, including a majority of the second largest domestic bank. The post office network offers some banking services and personal insurance products and is a major participant in both sectors. The government still owns the Korea Development Bank, Export–Import Bank of Korea, Industrial Bank of Korea, Industrial Bank of Korea, National Agricultural Co-operative Federation, and National Federation of Fisheries Co-operatives. Supervision and transparency remain insufficient. There are numerous restrictions on ownership of financial institutions. The insurance sector is large and well developed, and foreign insurers are prominent. Capital markets are deep and sophisticated.
Property Rights - 70.0%
Private property is secure, and expropriation is highly unlikely. However, the justice system can be inefficient and slow. Contracts are often considered as a matter of consensus that allows for flexibility. Strict adherence to contract terms is difficult.
Freedom from Corruption - 50.0%
Corruption is perceived as present. South Korea ranks 40th out of 158 countries in Transparency International's Corruption Perceptions Index for 2005.
Labor Freedom - 57.7%
The labor market operates under restrictive employment regulations that hinder employment and productivity growth. The non-salary cost of employing a worker is high, and dismissing a redundant employee is relatively costly. Regulations related to increasing or contracting the number of work hours are not flexible.
19 May 2007, 05:33 Sebastian
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