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SOUTH KOREA.   Term Paper ID:23639 Click to get this paper

Essay Subject: Economic, sociocultural, legal & political conditions affecting international business & investment. Growth, debt, taxes, banking, currency.... More...

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Paper Abstract: Economic, sociocultural, legal & political conditions affecting international business & investment. Growth, debt, taxes, banking, currency. Paper Introduction: REPUBLIC OF KOREA: A COUNTRY STUDY Executive Summary This research reviewed the cultural, social, political, legal, and economic environments in the South Korea. The focus of this review was the effects of the characteristics of these societal environments in Korea on international business operations. The conclusion was that generally Korea is a good place to do business. Domestic and international political tensions may be expected to continue; however, these factors do not appear to compromise the stability of either the government or the economy. A middle-class has emerged in Korea as the country has developed rapidly since the end of the Korean War. The professional and managerial classes in Korea are relevant in the contemporary p Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. A middle-class has emerged in Korea as the country has developedrapidly since the end of the Korean War. Increased prosperity for workers has also led toa greater demand for domestic consumption, which has, in turn, caused somemanufacturers to devote increased emphasis to the domestic Korean market. Murphy. The Pacific Economic Cooperation Council (PECC)was founded as an informal body in Canberra in 198 by 11 participatingcountries.[24] From the beginning, the tripartite PECC was a serious,though unofficial, effort to define and pursue the elusive goal oforganizing the Pacific for greater economic cooperation. U. [14]Nakarmi, 46. World Development Report. "Human Capital, Fertility, and Economic Growth." Journal of Political Economy 98, Pt. The conclusion was that generally Koreais a good place to do business. Exportemphasis, however, is an integral component of the country's industrialpolicy. [27]S. [2 ]World Bank, 231. K. Sincethe end of the Korean War, however, the country has been racked with onegovernmental scandal after another. As a consequence, theUnited States maintains armed forces in Korea, and Korea maintains a large,well-trained, well-equipped, and expensive armed force. When the Pacific Economic Cooperation Council (PECC) was formed inCanberra in 198 , the concept of an "open region" was more hope thanreality. By 1992, the PECCincluded 2 Pacific economies (Australia, Brunei, Canada, Chile, China,Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Peru,the Philippines, Russia, Singapore, Taipei, Thailand, the United States,and the Pacific Island Nations). Cultural Environment A middle class has emerged in Korea as the country has developedrapidly since the end of the Korean War.[1] The professional andmanagerial classes in Korea are relevant in the contemporary period, as arebusiness owners. The situation of a relatively stable won-dollar exchange ratecontinues to prevail. H. International business organizations should view Korea as a favorablelocation for investment. A. Korea's external debt places heavy pressure on the country's economicmanagers to retain the emphasis on exports. Domestic and international politicaltensions may be expected to continue; however, these factors do not appearto compromise the stability of either the government or the economy. R. The diffusion model, on which Korea's economic planning relied in thedecade of the 198 s, holds that progress is a function of the spread ofmodernism to backward, archaic, and traditional economies and that theprincipal factors leading to development are advanced technology and aninfusion of foreign capital. On the other hand, however, the won losesonly .22 percent of its value against the dollar for each 1 percent thedollar gains in value against the yen. F. On the one hand, as the dollar gains value againstother major currencies, the won loses value against the dollar. [18]Ibid. Theaverage annual rate of growth of Korean exports in the 198 s was 17.2percent.[18] While this growth rate was two-thirds of the level attainedin the 197 s and one-half of that attained in the 196 s, the export volumeon which growth rates were based were enormously higher in the 198 s thanin the two earlier decades. Increasing centralgovernment deficits, together with the external debt problem, indicate thatthe country will continue to rely heavily on high taxation in the 1996-1999period and that any faltering in the level of exports will likely prove tobe devastating. No special capital gains treatment is applied, with the exception ofgains derived from the sale of real property.[7] In such instances, gainsare subject to both ordinary income taxes and a graduated surtax. Lim, and H-C.Moon, "Influence of Role Stress on Industrial Salespeople's Work Outcomes,"Journal of International Business Studies 23 (January 1992): 77-99. The PECC provided a facilitating forum, which, through its taskforces, emphasized process, exploring approaches to economic cooperationand anticipating policy issues.[25] The PECC's success in promoting anoutward-looking region facilitated the formation in 1989 of APEC.[26] APECwas the first region-wide government forum in the Pacific, and Korea is amember nation. Cheit, "A Declaration on Open Regionalism in the Pacific,"California Management Review 35 (Fall 1992): 116. M. Higher levels of job satisfaction lead to higher levels oforganizational commitment among Korean workers. Rapid growth in exports was a salient feature of the Korean economy inboth the 196 s and the 197 s, and this trend continued in the 198 s. "The Society and Its Environment." In South Korea: A Country Study, ed. [24]E. A. M. [12]M. As the United States (through a combination ofwage increases which exceeded productivity gains, high real interest ratesemployed by the Nixon and Reagan Administrations to attract foreign fundsto finance American deficits, and a misguided belief that the country couldrely on the services sector to maintain its status as an economicsuperpower) priced itself out of one industry after another, American jobsmoved to foreign countries. Cincinnati, OH: South-Western, 1992."Korea." International Financial Statistics (March 1995): 24 -244.Kim, Y. [25]Ibid., 118. S., and K. Chanda, "Uncommon Bonds," Far Eastern EconomicReview 156 (18 November 1993): 16-17. Repatriated profits are taxed an additional 25 percent if they areremitted to non-tax treaty countries, and in a range from 1 -to-15 percent,if remitted to tax treaty countries, depending on the provisions of thespecific treaty. A. Kim, "Republic of Korea," in International Tax Summaries: AGuide For Planning and Decisions, ed. The financial sector of the Korean economy expandedsubstantially during the decade of the 198 s.[21] This expansion broughtalong a diversification of products and services in the financial sector,as well as structural changes. In great part, however, Korea's rapid economic development over thepast decade has depended on many of the same ingredients employed by theJapanese a decade earlier. During the decade of the 198 s, South Korea emerged as a middle-industrial power. In the decade of the 198 s, Korea's industrial policy reliedheavily on the diffusion model, whereas in the past it had relied on thehuman capital model. Under the source principle, only that incomederived from activities conducted within a taxing jurisdiction is subjectto taxation by that taxing authority. Lim, and H-C. The focus ofthis review is the effects of the characteristics of these societalenvironments in Korea on international business operations. The industrial growth was essential to supportthe country's industrial policy emphasizing the export of manufacturedproducts. Berger, K13-K34. M. Although the Korean government cooperates with industry in efforts tokeep labor unions as ineffective as possible, wage levels and employeebenefits increased significantly in the 198 s. "Asia's Next Giant?" Technology Review (1989): 46-53.Awanohara, S., and N. Internationally, the situationinvolving North Korea has remained tense since 195 . Dubinsky, R. K. K. The ranks of industrial workers also have grown rapidly.One aspect of the cultural environment in Korea that affects the conduct ofbusiness is the reaction of Korean workers to job-related stress. E. [23]J. [26]Ibid., 117. Koo and P. Total grossexternal liabilities for Korea at the end of 1988 were US$43 billion. [6]Ibid. The conclusion was that generally Koreais a good place to do business. In this approach, the concept of human capital is substitutedfor a raw population variable.[3] In this model, human capital is definedas embodied knowledge and skills. None of thesefactors appear to be leading toward any substantial change. For Korea, this percentage is 1496.9percent. New York: Greenwood Press, 199 .Nakarmi, L. government. [15]Amsden, 46-53. "Uncommon Bonds." Far Eastern Economic Review 156 (18 November 1993): 16-17.Becker, G. This state of affairs is not generally acceptableto the U.S. This shiftwas reflected in changes in the commodity-product structure of Koreanexports in the 198 s, wherein the major shift also was to machinery andtransport products. In the structure employed by the World Bank, Korea isgrouped in the upper middle income sub-classification of the middle-incomeeconomies classification, along with such countries as Argentina, Brazil,Greece, Hong Kong, Mexico, Singapore, South Africa, and 16 others (theRepublic of China [Taiwan] would be included in this sub-classification,were it not excluded for political reasons).[16] Real per capita grossnational product (GNP) in Korea grew at an average annual rate of 9.8percent during the 198 s.[17] Although this rate of growth was higher thanthat recorded in the 197 s, it is of even greater significance because itproceeded from a much higher base point. Thus, Korea has, largelythrough the support of its export trade, built a major heavy industrialbase. The country's economic planners and managers thus have hadto walk a tight-rope during the period since 1986, when the U.S. The ranks of industrial workers also have grown rapidly. The refusal of the South Koreans to permit the won to fluctuateaccording to market conditions against the dollar in international currencyexchange has distorted all of the economic relationships involving therelative values of the two currencies. Tae-ho, "Government Policies: Recent Trends inForeign Investment," Korea's Economy 11 (April 1995): 3-5. K. [9]A. This industrial policy must be continually refined, as some of themajor industrial countries targeted for Korea's exports adjust, at least tosome extent, to a so-called post-industrial environment. Savada and W. Shaw (Washington: United StatesArmy, 199 ), 96. percent ofthe GDP. Domestic and international politicaltensions may be expected to continue; however, these factors do not appearto compromise the stability of either the government or the economy. [11]M. Financial deregulation in Korea easedinterest ceilings and accelerated product diversification. Social Environment Korea has relied heavily on the development of human capital througheducation. [1 ]L. Korean monetary management created a situationwhere the won appreciated only 7 percent against the dollar, at a time whenthe yen was appreciating 7 percent against the dollar. M. In thepost-World War II period, Japan's rise to economic super-power statusrelied heavily on the development of external markets. Higher levels of role ambiguity lead to lower levels of jobsatisfaction among Korean workers. The roleof stress and performance on job satisfaction in Korea was examined.[2]This study tested two models of the interrelationships among roleambiguity, role conflict, job performance, and organizational commitment,on the one hand, and job satisfaction, on the other. More often, however, the result has been adrive for higher productivity through a move away from labor-intensivemanufacturing practices. M. [7]Ibid. Murphy, "Human Capital, Fertility, andEconomic Growth," Journal of Political Economy 98, Pt. Branchoperations of foreign-based corporations are taxed at domestic corporationrates. billion. S. Therelevant concept of income involves the distinction between the "source"and the "unitary" principles. The underlying assumption of this modelis that, as economic development depends on advances in technological andscientific knowledge, development presumably depends on the accumulation ofhuman capital. External debt may be expressed as a percentage of netexports (exports minus imports). REPUBLIC OF KOREA: A COUNTRY STUDY Introduction This research reviews the cultural, social, political, legal, andeconomic environments in the Republic of Korea (South Korea). [8]Ibid. Risk and Insurance, 7th ed. Korea has a highliteracy rate. Kraar, "Asia's Hot New Growth Triangle," Fortune 5 October1992, 136-136, 191. [2]A. Within the structure of manufacturing (value added products), thesignificant shift (as a proportion of total manufacturing) was away fromfood and agriculture, and to machinery and transport equipment. Korea, in its economicadvance, has depended heavily on Japanese technology.[15] As aconsequence, Korean firms have not, as a general practice, spent heavily onresearch and development. This situation has caused economichardship for the United States, while creating significant economicbenefits for South Korea, as the trade deficit of the United States withSouth Korea attests. The assumption of a relationship between human capital and economicgrowth is based on observations that indicate that growth in investment inschooling grow much more rapidly than gross investment in physical capitaland that growth in years of schooling explains 25 percent of growth in percapita income in Korea.[4] The theoretical justification for the assumedrelationship between earnings and educational attainment is based on theconcept of differential pricing for educational attainment. The study found thefollowing: 1. A cut-off of technology by the Japanese (as aconsequence of Korean manipulation of currency exchange rates, or for anyother reason) could place Korean economic progress on shaky ground at leastfor the short term, until the country develops a sound approach of its ownto research and development. The South Koreans have achieved most of their economic success byprocessing imports from Japan and then selling the finished product to theUnited States. The focus of this review was theeffects of the characteristics of these societal environments in Korea oninternational business operations. Greene, Risk and Insurance, 7th ed. Washington: United States Army, 199 .Tharp, M. Shaw, 67-131. Korea's industrial policy provides several incentives for exportmanufacture. 3. 4. GNP growth in 1987 was 12.5 percent, andannual forecasted growth for the 1988-1991 period is 7.3 percent. From 1965 through 1986, Korea's per capita GNP increased by an average6.7 percent per year. As dramatic as this growth rate is, it tends tounderstate that which has occurred more recently. The focus of this review was theeffects of the characteristics of these societal environments in Korea oninternational business operations. In order to assess the implications of the external debt of developingcountries, relating the external debt of a country to other macroeconomicmeasures is necessary. Korea is a members of both the Pacific Economic Cooperation Counciland the Asia-Pacific Economic Council. "Influence of Role Stress on Industrial Salespeople's Work Outcomes." Journal of International Business Studies 23 (January 1992): 77-99.Greene, M. Korea's external debt is the equivalent of 52.9 percent ofthe country's GNP. (Cincinnati, OH: South-Western, 1992), 4 . [21]Amsden, 46. "Government Policies: Recent Trends in Foreign Investment." Korea's Economy 11 (April 1995): 3-5.Kraar, L. By the mid-198 s, banks were involved in repurchase agreementscovering government and other public bonds, and finance and investmentcorporations were dealing in large-denomination commercial paper.[22]Additionally, non-bank financial intermediaries began to assume a greaterrole in the Korean financial sector.[23] The commercial paper andcorporate debenture also markets increased rapidly. The industrialsector recorded the greatest growth in terms of both GDP and labor forceuse. Kotabe, C. Michaels, M. Tharp, "Can South Korea Bat in the Big Leagues?" Business Week27 February 1989, 35-38. Under the unitary principle,however, income derived from sources outside a taxing jurisdiction may besubject to taxation by that authority. All of the gain in the manufactured products classification hasbeen in the machinery and transportation equipment sub-classification, asthe textiles and clothing, and other manufactured products sub-classifications remained relatively stable. [5]Y. During the 1 -yearperiod 1978-1987, per capita GNP increased from US$116 to US$345 -a 197.4percent increase in 1 years. J. 2. Thisrelationship is theoretically sound, and it is one desired by Americaneconomic planners and managers. The well-educated Korean population is an important assetfor the conduct of business in the country. F. As an example, Korean export volume in 1979was US$15.1 billion, while that in 1989 was US$7 . Korean Economic Development. J., R. M. This growth wasfunded by a gross domestic investment which accounted for 29. percent of the GDP.[2 ] Thus, without the strong exportactivity, Korea could not have achieved the great industrial andmanufacturing growth levels recorded in the 198 s. Korea has effected a dramatic shift in exports away from primarycommodities and to manufactured products. Berger (New York: John Wiley andSons, 1994), K13-K34. These other macroeconomic measures are grossnational product (GNP), gross domestic product (GDP), total exports, andnet exports. In the 198 s, the 27 percent of the labor force used in industry wasresponsible for 42 percent of the GDP. "Korea Throws Open Its Doors." Business Week 29 July 1991, 46.Seekins, D. New York: Oxford University Press, 1995.----------------------- [1]D. This relationship is not consistentwith a freely operating flexible exchange system and is indicative ofeffective monetary management on the part of the South Korean economicplanners and managers. 2 (199 ): S12-S37.Cheit, E. Ofthat amount, 57.2 percent represented public debt. APEC represents an attempt to extend freer trade throughouta wider area-the Pacific Basin-than either the EEC or NAFTA does. The Korean government is receptive to suchinvestment, and the opportunities for foreign investors are substantial. In the face of rising domesticexpectations, this task becomes more difficult politically. U. Japan was the first major beneficiary of thisphenomenon. Michaels, M. "Can South Korea Bat in the Big Leagues?" Business Week 27 February 1989, 35-38.World Bank. Amsden, "Asia's Next Giant?" Technology Review (1989): 46-53. Foreign and domestic investment in designated industriesmay qualify for exemption of up to 1 percent of taxes for five years, andadditional incentives are provided for dividends and royalties.[8] The South Korean government actively supports and encourages foreigninvestment in the country.[9] The government desires most investment inKorean companies, as opposed to the establishment of foreign subsidiaries.Evidence indicates, however, that Korea is beginning to at least thinkabout reducing some of the barriers to foreign participation in thecountry's domestic economy.[1 ] Automobile insurance laws are relevant toforeign business operations that will employ expatriate workers in Korea.The Republic of Korea has a compulsory automobile liability insurancelaw.[11] The law was adopted there in the early 197 s. Legal Environment Taxation for foreign investors in Korea is a significant concern. BibliographyAmsden, A. Nakarmi, "Korea Throws Open Its Doors," Business Week 29 July1991, 46. Theinternational situation, however, has not impeded the country'sdevelopment. [22]B-b. [3]G. REPUBLIC OF KOREA: A COUNTRY STUDY Executive Summary This research reviewed the cultural, social, political, legal, andeconomic environments in the South Korea. The contemporary financial sector in the South Korean economy iscomplex. Awanohara and N. Korea applies the unitary principalto Korean residents and to corporations headquartered in the country.Nonresident foreigners domiciled in Korea and branches of foreign-basedcorporations are taxed according to the source principle.[5] Korea permits both corporations and individuals to deduct foreigntaxes as credits against Korean tax liabilities, subject to a limitationthat such tax credits may not exceed the Korean taxes applicable to suchforeign source income.[6] Depreciation is deductible, net operating lossesmay be carried forward three years; loss carry backs are not permitted, baddebts are deductible up to three-percent of net sales, and individuals arepermitted a basic deduction plus deductions dependents and for wages andsalaries below W94 , -1 percent-and from W94 , 1 through W3, , -2 percent. [16]World Bank, World Development Report (New York: Oxford UniversityPress, 1995), 231. APEC represents an attempt to extend freer trade throughouta wider area-the Pacific Basin-than either the EEC or NAFTA did.[27] Summary and Conclusion This research reviewed the cultural, social, political, legal, andeconomic environments in the South Korea. [4]Ibid., S13. The professional and managerialclasses in Korea are relevant in the contemporary period, as are businessowners. E. "A Declaration on Open Regionalism in the Pacific." California Management Review 35 (Fall 1992): 116-13 .Dubinsky, A. Savada and W. Political Environment Korea is a republic with a democratically elected government. In its surge intoand almost through the new industrializing country (NIC) status, Korea hasfollowed the path of the Japanese more closely than that of theAmericans.[12] Unlike the Japanese, however, Korea's major industrialfirms have tended to exploit the country's workers, as opposed to providingthem with the long-term security and acceptance found in the Japanesemodel.[13] One consequence of this approach has been the development inKorea of acrimonious relations between labor and management.[14] Thegrowing labor strife in Korea is a threat to its continued economicprogress. Included in the financial sector is a diversified commercialbanking system, a securities market, and a wide range of secondaryfinancial institutions. R. Becker and K. "Republic of Korea." In International Tax Summaries: A Guide For Planning and Decisions, ed. Kotabe, C. [13]L. Over the past decade, however, Korea has been acquiring manyof these jobs from the Japanese, as Japan begins to price itself out ofsome industries. percent, and growth in manufacturing, which is a component of theindustrial sector, was nearly as high at 14.8 percent. The only hope that Korea has of reducing external debt levels byany significant amount is through the application of severe austeritymeasures to economies already reeling, default, or forgiveness by debtors. Moon. Higher levels of performance lead to higher levels of jobsatisfaction among Korean workers. Higher levelsof formal educational attainment are held to increase the value of thehuman capital possessed and offered by the individual. APEC wasthe first region-wide government forum in the Pacific, and Korea is amember nation. The largestshift is away from agriculture, in terms of both GDP and labor force.Labor remains disproportionately heavy in agriculture, with 36 percent ofthe labor force accounting for only 13 percent of the GDP. This shift has been of thegreatest value to the country in its emergence as a middle-industrialpower. Among these incentives are tax reductions, ready access tocredit, subsidized interest rates, foreign loan guarantees, and directsubsidies. Chanda. A. [17]"Korea," International Financial Statistics (March 1995): 24 -244. The export of goods and non-factor services during the 198 saccounted for 41. Kwon, Korean Economic Development (New York: GreenwoodPress, 199 ), 54. Higher levels of role conflict lead to lower levels of jobsatisfaction among Korean workers. [19]Ibid. New York: John Wiley and Sons, 1994.Koo, B-b., and P. The services sector recorded moremoderate growth, and, in the 198 s, 37 percent of the labor force accountedfor 45 percent of the GDP. These political scandals, however,have not impeded the country's development. Seekins, "The Society and Its Environment," in South Korea: ACountry Study, ed. Industrial growth in the 198 s occurred at an annual average 15. Economic Environment When it was developing into an industrial and economic power, theUnited States relied primarily on an expanding domestic market. The diffusionmodel views development as a gradual process. For thedecade of the 198 s, the average annual growth rate was 9.8 percent.[19] A major area of concern for Korea is external debt. 2 (199 ): S13. The PECC's success in promoting anoutward-looking region facilitated the formation in 1989 of APEC. This development has causedsome Korean manufacturers to consider a shift of production from Korea tolower labor-cost countries. dollar haslost so much of its value. Enforcement is aprimary characteristic of compulsory automobile liability insurance laws.The law in Korea requires proof of the existence of such insurance, beforeregistration certificates will be issued to motor vehicle owners or drivinglicenses will be issued to drivers. In this model, development is equated withindustrialization and increased economic diversification. H. Industrialization is developing at a rapid pace in Korea. The Koreans also face a threat from Japan. "Asia's Hot New Growth Triangle." Fortune 5 October 1992, 135- 136, 191.Kwon, J. Tae-ho. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.