A Case Study on South Korean
The essay on case study analysis of South Korea demonstrates on systems of Political, Economic and Legal and also discusses it’s either the attractiveness or foreign direct investment. Initially, the process will include analysis and discussion on the three systems which are political, economic and legal of the country then their inter relationship and evaluation of the need of foreign investment caused by South Korea’s market and the investment.
Basically, Political systems are the formal and informal political processes by which decisions are made concerning the use, production and distribution of resources in any given society (GSDRC 2014.). Still more broadly defined, the political system is seen as a set of “processes of interaction” or as a subsystem of the social system interacting with other nonpolitical subsystems, such as the economic system (Britannica). Economic system is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area (Wikipedia). Market, Mixed and Common are the three types of economy. The political economy is defined as the study of the way in which a government influences or organizes a nation’s wealth (Collins Dictionary). The Legal system refers to a procedure or process for interpreting and enforcing the law .It elaborates the rights and responsibilities in a variety of ways. Three major legal systems of the world consist of civil law, common law and religious law (Uslegal).Foreign Direct Investment (FDI) refers to the investment made by a firm or individual in one country into business interests located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company. Foreign direct investments are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies (Investopedia).
In context of South Korea, it has long history of a kingdom then was occupied by Empire of Japan in 1910 A.D. and released on 15th August 1945 from Japan. After the World War II, a democratic based government (Republic of Korea) was set up in the southern half of Korean Peninsula (CIA World Factbook) under the U.S zones. South Korean government is currently Presidential Republic and is the combination of three branches which are The Executive, The Legislature and The Judiciary. With effective administrative division of Nine Provinces, Six metropolitan cities, One Special city as Seoul and One special self-governing city in South Korea and the political leaders during the three decades has brought drastic change in political stability and the economic condition. However, political stability can also be determined by its level of corruption. Though South Korea’s government is democratic, it still experiences a share of corruption. A study published in 2009 reports that 76.8 percent of middle and high schools see Korean society as corrupt (The Korea Times, 2009). Corrupt government can display adversely affect towards foreign investors as a country with political risk can be a problematic for the investors. South Koreans are very collectivistic which shows that they put more importance on whole rather than on the individual’s wellbeing.
According to the CIA World Factbook, during the fifteen years of military leadership of Park Chung-hee, the country’s economic regarding Per Capita Income rose up by 17 times in comparison to the North Korea (CIA World Factbook). This was possible because of the export- oriented industrialization strategy that lead to huge growth in economy. After the economic crisis of 1997, Korea experienced the extraordinary growth and its mixed economy led the one of the poorest agricultural nation to the 11th nominal and 13th purchasing power parity GDP (around $ 2 trillion) in the world, making it as one of the G-20 major economies. When South Korea ended up in the agreement to the Organization for Economic Cooperation and Development (OECD) on December 12, 1996, this aid in establishment of legal framework for the stepping into Foreign Direct Investment after adoption of regulation. Korea’s rapid development was driven by very high rates of savings and investment and a strong emphasis on education, which boosted the number of young people enrolled in universities to among the highest levels in the world. South Korea has international popular brands referring as Conglomerates (Chebol) such as LG electronics, Samsung and Hyundai and along with the development of advanced technology, the economy has been heavily impacted. Not only has these, Korean Entertainment also made remarkable contribution in escalating the economy. Their economy is heavily dependent on international trade, which makes them 5th largest exporter and 7th largest importer in the world. Moreover, United States and European Union have contributed as good trading partners for the South Korea, and it has ultimately aided in the export increment with upsurge in the GDP. Foreign direct investment in South Korea improved sharply after the financial crisis of 1997-98. The government not only reformed its foregoing procedure by enabling limitations and looked for foreign direct investment but also motivated mergers and acquisitions as a means of providing liberation to major companies which were burdened with excessive debt loads or cash flow difficulties. The Korean government also passed the Foreign Investment Promotion Act and provided better-quality services, such as one-stop services for foreign investors. Furthermore, many procedures and measurer were adopted that helped to achieve significant results in few years. Foreign direct investment generally engaged in the manufacturing sector, with an emphasis on the IT, electronics, chemical, and machinery industries. Foreign direct investment in the service sector also has seen substantial gains with the financial and insurance industries in particular showing 10 to 20 percent annual increases. Foreign investors and entrepreneurship has contributed more in the economy. In the year 2012, Foreign Direct Investment brought major change in South Korea, topping 16.2 billion US dollars (Jun, 2013). Foreign Direct investment in the country provides the huge opportunities for the new jobs, increment in the GDP and escalates the living standard.
South Korean legal system is found to be the mixed one comprising of European civil law, Anglo- American law and Chinese classical thought. They have extensive regulatory and legal practices. The Constitution stipulates the separation of powers among the three branches: legislative, executive, and judicial. The president and the government are in charge of the administration, the National Assembly is responsible for the legislation, and the Court enforces and interprets laws by making decisions over legal disputes.
To conclude that though, South Korea have seen remarkable growth due to FDI,the government must put efforts to bring about the liberalization of trade and investment and more welcoming to the foreigner investors. Nevertheless, Korea is still lacking in terms of trade and investment related strategies. Hence, there is a need of country’s attractiveness of FDI, for this the government must priorities the improvement in investment atmosphere comparable to its competitor’s nation. IN addition to this, it is better if the government let know of the availability of attractiveness for investment.
Scott, Z. and Mcloughlin, C., (2014). Political Systems: Topic Guide, Birmingham: GSDRC, University of Birmingham, UK
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