South Korea

Country risk

Country risk in South Korea is low, suggesting a low likelihood that it will be unable and/or unwilling to meet its external debt obligations. The three private ratings agencies have high investment grade credit ratings for South Korea. That said, individual debtors and sub-sovereign entities can and do default.

South Korea’s business climate ranked fifth out of 190 economies on the World Bank’s ease of doing business gauge. South Korea outperforms most other advanced economies across all areas of doing business, especially resolving insolvency, enforcing contracts and accessing ample electricity.

That said, South Korea’s business landscape is dominated by “chaebols”—large corporate conglomerates run by powerful families. Chaebols dominate the economy and account for up to 90% of Korea’s GNP; they are often scrutinised for their influence in Korean politics.

The risk of expropriation is low. According to the US investment climate statements, South Korea follows generally accepted principles of international law with respect to expropriation. South Korean law protects foreign-invested enterprise property from expropriation or requisition. Private property can be expropriated for a public purpose–like developing new cities, building new industrial complexes, or constructing roads. Property owners are entitled to prompt compensation at fair market value. 

Political risk is also low and is mainly driven by long-standing tensions with North Korea. Periodic strains in South Korea's bilateral tensions with its larger neighbours, including China and Japan, have led to occasional disruptions to the economy. The domestic political environment remains relatively stable.

Fiscal, monetary and regulatory institutions are very strong, as reflected in a long-track record of robust economic management. But governance indicators are slightly lower than most other advanced economies. In particular, corruption remains a significant constraint on the institutional environment and doing business. This reflects in part perceptions of the disproportionate influence of the country's chaebol on the economy and government. South Korean President Moon Jae-In aims to reduce corruption, including the establishment of an anti-corruption agency. This could improve governance standards over the medium to long term.