The Republic of Korea (South Korea) remained a market of many opportunities for experienced American companies of all sizes in 2003. South Korea was America's seventh largest export market in general, sixth largest trading partner, fifth largest export market for agricultural products, and fifth largest market for high technology goods. South Korean imports of U.S. products and services exceed those of France, Taiwan, the Netherlands and Australia.

South Korea continues to be an economic leader in Asia and is the third largest economy in East Asia. Situated between China and Japan, South Korea is well integrated into both markets. In 2002, China became South Korea's largest export market. Although GDP growth slowed to an estimated 3.1 percent in 2003, the economy is expected to turn around with projected real GDP growth of between 4.8 and 5.5 percent in 2004. The growth in the economy will be driven by exports, especially with South Korean companies continuing to move their production lines to China. Export growth will also be stronger due to the improving economic situation in the global economy. Slowly recovering domestic demand in 2004 will provide some balance to strong South Korean exports. This projected growth in exports and in domestic demand provides good opportunities for American companies to sell to the South Korean market.

Some other stats on Korea

• Country Profile: population, religions, geography
• Economic Trends and Outlook: economic growth, balance of payments

RECOVERING FROM CRISIS

Although economic growth will hover around five percent in 2004, South Korea still suffers from structural impediments that could constrain long-term growth. The South Korean government has been taking action to improve the economy over a number of years. Financial reform, improved corporate governance and labor market flexibility are the main areas that need to be addressed in order to strengthen domestic demand and to create a more open economy.

The government is also undertaking specific measures to improve the economy by supporting small and medium-sized enterprises and the development of technology, especially through start-ups. To promote the long-term development of an international business environment, South Korea is taking steps to improve intellectual property rights. However, IPR is an area where U.S. companies need to remain vigilant and ensure that their technology is protected through registration and monitoring of the use of technology by clients and partners in South Korea. On January 8, 2004 South Korea was placed on the Priority Watch List by the Office of the U.S. Trade Representative (USTR) as a result of the lax protection of film and music. Protection of software is improving but there is still some distance to go. The government is addressing corruption more aggressively, but it is still a factor in South Korea.

Traditionally, the South Korean Government has pursued conservative macroeconomic policies. It has worked to keep the GDP share of government spending and taxes at a comparatively low level by international standards, averaging about 21-22 percent in the past few years. Prior to the 1997-98 Asian financial crisis, during which South Korea went into recession, the budget was virtually in balance. The quality of public expenditure is high with an emphasis on education and public works rather than transfer payments. As a result of the 1998 agreement with the International Monetary Fund to deal with the financial crisis, South Korea largely opened its financial and corporate sectors to foreign investment and removed controls on overseas capital transactions. Such actions have placed South Korea's economy on a more market-driven commercial footing.

A YOUNG BUT SUCCESSFUL DEMOCRACY

Politically, South Korea has been a democracy since 1987, when the first elections for President were held. Since that time there have been four other elections that have been free, open and fair. The President is directly elected and serves for a five-year nonrenewable term. There is a unicameral National Assembly selected every four years through direct elections.

A continuously pressing political issue is the relationship between the Republic of Korea and the Democratic People's Republic of Korea (North Korea), in particular, North Korea's program to develop and manufacture nuclear weapons and the large army it still maintains. Recent six party talks among the United States, South Korea, China, Japan, Russia and North Korea have provided a forum to work on these issues, as well as serving as one to expose North Korea to a wider international environment both politically and economically. Economic initiatives, such as the re-linking of the main rail line between South and North, establishing a Special Economic Zone at Kaesong in North Korea and opening a land route for southern tourists to the scenic tourist zone of Mt. Kumgang, have progressed, albeit slowly. Currently, there are limited official contacts between the Governments of South and North Korea, and government-sanctioned private exchanges continue. Restrictions on U.S. companies doing business in North Korea were lifted in 2000 and some American businesses have started to explore that new market.

South Korea and the United States have been strong friends, partners and allies since World War II. The two countries continue to work together, both in the region and the rest of the world, to combat international terror and to advance democratization and human rights.