SOUTH KOREA

by Max Wan

South Korea's Flag

6.2 % economy grow in year 2010

Reasons for strong economy

·         Strong in domestic and export demand

·         Focus on developing next generation technologies, industries

·         Improvement in global business environment

KEY CHALLENGES

·         Unique standard

·         Less than transparent regulations

·         Pressures to reduce price

·         Ratify free trade agreements with countries except United States

KEY OPPORTUNITIES

Gyeongbokgung Palace

Excellent niche market sectors

·         Automotive Parts and Accessories

·         Broadcasting Programming and Equipment

·         Computer Software

·         Construction Machinery

·         Cosmetics

·         Defence Industry Equipment

·         Drugs and Pharmaceuticals

·         Education and Training Services

·         Healthcare Technology and Medical Devices

·         Pollution Control Equipment

·         Renewable Energy

·         Smart Grid Technology and Services

·         Specialty Chemicals

·         Travel and Tourism

·         Wireless Broadband Equipment and Services

Korea Aims

·         Highly advanced technology-oriented economy

·         Establish as an international business centre for North East Asia

·         Major financial and logistics hub

                                  

USING AN AGENT / DISTRIBUTOR

·        Appointing a registered commissioned agent (offer agent) on an exclusive or non-exclusive basis

·         Naming a registered trading company as the manufacturer’s representative or agent

             i.    Can manage import documentation and imports for their own account

·         Establishing a branch sales office managed by home office personnel with Korean staff.

ESTABLISHING AN OFFICE

·         Take advantage of serviced offered by “Invest Korea”

             i.    Is an investment promotion agency for Korea

             ii.    An arm of the Korea Trade-Investment Promotion Agency (KOTRA)

             iii.    A government-sponsored non-profit organization with offices throughout the world

             iv.    Staffed by KOTRA personnel and complicated by officials from relevant government ministries and specialists from private sectors

·         Invest Korea assistance

            i.    Identifying necessary administrative procedures

            ii.    Consulting on forms of investment, including M&A, joint ventures and real estate acquisition

            iii.    Providing legal and taxation advice

            iv.    Investment planning

            v.    On-going and follow-up support

            vi.    Maintains an Ombudsman to address foreign investors’ grievances

DISTRIBUTION AND SALES CHANNELS

·         Through large discount chains is one of the best ways to market foreign products to Korean consumers

·         Use parallel imports to marginally reduce the value of an exclusive distribution agreement

SELLING TECHNIQUES

·         Adapting products and procedures to Korean tastes and conditions

·         Regular communication with Korean business partners and customers

·         Consistently exhibiting a firm commitment to the Korean market over the long run

·         Selling to manufacturers

            i.    Good personnel contact on building long relationships to obtaining first-hand acquaintances with new processes and equipment

·         Suppliers should

             i.    Making visits to Korea to augment the efforts of the local representative

             ii.    Bring representatives back to the home office periodically to ensure they are fully informed, motivated and up-to-date on the supplier and its offerings

             iii.    Allowing the distributor or agent to appropriately select from your company’s full product line items for sale in the market

             iv.    Holding demonstrations, seminars and exhibitions of product in Korea

             v.    Increasing the distribution of technical data and description brochures

             vi.    Improving follow-up of sales leads

TRADE PROMOTION AND ADVERTISING

·         Korea International Trade Association (KITA)

            i.    Largest trade association in Korea

            ii.    Member of World Trade Centre Association (WTCA)

            iii.    Explores new trade opportunities by organizing trade missions and market survey teams to a number of foreign countries on a regular basis

            iv.    KITA’s Trade Service Centre (TSC) assists potential foreign buyers or sellers

            v.    TSC offers on-the-spot consultation and personalize advisory service regarding trade rules and regulations, export and import producers, business management, market research, technology development and, taxation

·         Convention and Exhibition Centre (COEX)

            i.    Covering 36027 square meters of exhibitions space

            ii.    Largest trade show venue in Korea

            iii.    Full-service trade organization

            iv.    Offer multi-lingual simultaneous translation

            v.    Equipped with world-class audio-visual equipment, state-of-the-art lighting and sound systems

            vi.    Provide up-to-the-minute information services

·         Other exhibitions centre

            i.    Seoul Trade Exhibition Centre (SETEC)

            ii.    Busan Exhibition & Convention Centre (BEXCO)

PRICING

·         Buying Resources

            i.    Buy lowest priced raw materials and equipment, even at the expense of quality

            ii.    Prefer Japanese goods than US goods

            iii.    Offset labour wages with lost-cost inputs

·         Marketing

            i.    Adapting their products to Korea by marketing basic units

            ii.    Taking into account in price quotations the likelihood of repeat business for spare parts and auxiliary equipment

            iii.    Emphasizing and marketing the idea that the superior quality of manufactured input products ultimately results in lower production cost

·         Commission

            i.    5-7% : Product categories - general machinery, including packaging, construction, and material handling equipment

            ii.    15-18% : Sophisticated products – medical, laboratory, and scientific analytical instruments

·         Tax

            i.    10% sales tax

            ii.    10% VAT on services provided in Korea

Business Customs

·         Korean not expecting foreigner to follow their tradition, however, it is much appreciate and admire if you show familiarity with their customs

·         Have great respect for age and hierarchy

·         Hierarchy is deeply entrenched in Korean psyche

·         Prefer to discuss business with persons of the same rank

·         Preferably bilingual business card

·         Common if being asked about age, marital status, and other personal information to help them determine how they should address you.

·         Mix business with social life

·         Appreciate individuals with clear in regard to their morals

·         After work activity “no-rae-bang” (Korean karaoke)

·         Should sensitive to Korea’s long history when doing business

·         Don’t compare Korea to other Asian countries except Singapore

·         A strong grasp of the English language is not common

·         Relationship are very important, Korean prefer to work with someone they knew

·         Negotiating style is important

·         Most Korean has three name, surname followed by two given names

·         Address using surname of formal titles if possible

Seoul

Fact Facts

Official Name	Republic of Korea
Population	48755000
Capital	Seoul
Area	99720 sq km
Ethnic Groups	Korean 100%
Religions	Christian 26.3% Buddhist 23.2% Other 1.3% None 49.3%
Major Language	Korean
Monetary Unit	Korean Won (US$1 = KRW1100)
Major Industries	Electronics, telecommunications, automobile production, chemicals, shipbuilding, steel
Major Export	Semiconductors, wireless telecommunications equipment, motor vehicles, computers, steel, ships, petrochemicals
Major Imports	Machinery, electric and electronics equipment, oil, steel, transport equipment, organic chemicals, plastics
GDP	US$ 1.459 trillion
GDP per capita	US$ 30000

Source: SME Magazine, November 2011, Malaysia Edition, Market Focus

BRUNEI

by Max Wan

Brunei's Flag

·         Smallest country in ASEAN

·         One of the major economic and political power in ASEAN

·         Affluent population

·         Supportive government

·         Generally open market

BACKGROUND

Omar Ali Saifuddin Mosque

·         An oil-rich sultanate on the northern coast of Borneo
·         Well-educated and largely English-speaking population
·         Government intent to bringing foreign investment and projects to Brunei

·         Economy dependent ton the income derived from sales of oil and gas (96% total exports, 60% gross domestic product (2009))
·         Second income revenue from overseas investment
·         Citizen pay no taxes, receive free education through to the university level, free medical care, and subsidized housing
·         Investor attraction

o   Central regional location

o   Excellent telecommunications and airline connections

o   No personal income tax, sales or export taxes

o   Stable political situation

o   Foreign businesses exporting goods and services enjoy a renewable ten-year corporate tax holiday

·         Long-term residence attraction

o   Low crime rate

o   Good schools, housing and sport facilities

o   Low utility costs

·         No debt in domestic or foreign
·         Not been the recipient of economic aid
·         Large oil exports keep balance positive for importing of consumer goods and food
·         Brunei dollar pegged to the Singapore Dollar at one-to-one ratio, Singapore currency is legal tender
·         One of the lowest GDP growth rates in ASEAN
·         One of the highest rates of macroeconomic stability in the world and highest in Asia
·         Fourth-largest oil producer in Southeast Asia
·         Ninth largest exporter of liquefied natural gas in the world
·         Non-petroleum industries includes

o   Agriculture

o   Forestry

o   Fishing

o   Aquaculture

o   Banking

·         Work permits for foreigners are issued only for short period of time and must continually renewed
·         Brunei’s substantial foreign reserves

o   Managed by the Brunei Investment Agency (BIA)

o   An arm of the Ministry of Finance

o   Guiding principle is to increase the real value of Brunei’s foreign reserves while pursuing a diverse investment strategy

·         Encourage foreign investment in Brunei

o   New enterprises can receive pioneer status, exempting profits from the income tax for up to 5 years if meet certain criteria

o   No personal income tax or capital gains tax

o   30% normal corporate income tax rate

o   Foreign direct investment (FDI) outside the oil and gas industry remains limited

·         Encourage local participation but not a necessity

o   Helps when tendering for contracts with the government or Brunei Shell Petroleum

·         Companies must either

o   Incorporated locally

o   Registered as a branch of a foreign company

o   Must be registered with the Registrar of Companies

o   Public companies must have a minimum of seven shareholders

o   Private companies must have a between two to 50 shareholders

o   Half of the directors in the company must be residents of Brunei

·         Owns a cattle farm in Australia where the country’s beef supplies are processed
·         Philippines and China involved with the largest join projects with the Government of Brunei to increase agriculture and fisheries production
·         Aims to develop Brunei into

o   International offshore financial centre

o   Centre for Islamic banking

·         Promoted ecotourism to take advantage of the over 70% of Brunei’s territory (tropical rainforest)

MAIN CHALLENGES

·         Local market is relatively small
·         Foreign investors need to find a local partner to enter the market
·         SMEs and investors should expect delays when dealing with the local government

MAJOR OPPORTUNITIES

·         Brunei Economic Development Board (BEDB)

o   Promotes Brunei as an investment destination

o   Responsible for shaping government policies for foreign investment, marketing, incentives and promotion

o   Key initiatives

§  Sungai Liang Industrial Park (SPARK)

§  Pulau Muara Besar deepwater port and industrial zone (PMB)

§  iCenter (ICT)

o   Identified industries as potential investments

§  Aviation

§  Green energy

§  Halal food / pharmaceutical processing

o   Launch National Housing supply and infrastructure projects

o   Announced significant incentives and loans to encourage other investment and projects from abroad

·         Brunei Industrial Development Authority (BINA)

o   Developed several industrial parks

o   Facilitate and nurture small and medium sized enterprises

DOING BUSINESS IN BRUNEI

·         Build personal relationships with local representatives and customers

o   Regular visits

o   Establishing resident representation

USING AN AGENT OR DISTRIBUTOR

·         Should be familiar with local business customs and higher-ranking government officials

·         Local agent / distributor is worthwhile

ESTABLISHING AN OFFICE

·         Business may be established in Brunei as

o   Sole proprietorships

o   Partnerships

o   Branches of a foreign company

§  Registered as a branch of a foreign company

§  Incorporate as a Brunei limited company

·         At least two the directors in the company must be citizens or permanent residents of Brunei

·         Ministry of Industry and Primary Resources (MIPR) and Economic Planning and Development Department helps in finding

o   Agent

o   Distributor

o   Partner

JOINT VENTURES / LICENSING

·         Corporate joint venture

o   Owners have limited liability

·         Partnership joint venture

o   Partners have unlimited liability

·         Corporations partnership joint venture

o   Liability is limited to that of the participating corporations

·         Companies need a license to do business even without physical presence in Brunei
·         Except products marketed door to door by local sales person
·         Does not need Brunei citizen representative to do business

o   Commercially

o   Selling directly to the government

SELLING TO THE GOVERNMENT

·         Royal Brunei Technical Services Sdn Bhd (RBTS)

o   Only authorized agent of the Royal Brunei Armed Forces and national security to procure military equipment and ammunition

o   Wholly owned company of His Majesty’s Government

·         Non-security related product can deal directly with individual government department or ministries
·         Government tender require participation of local companies
·         Foreign companies are encourage to collaborate with local companies

DISTRIBUTION AND SALES CHANNELS

·         Currently does not have any specific legislation pertaining to distribution agreements

·         Contracts made between entities will be governed by the laws

o   Contracts Act

o   Unfair Contract Terms Act

o   Sales of Goods Act

ELECTRONIC COMMERCE

·         Aims to establish as the cyber hub of the region
·         Enhancing telecommunications infrastructure
·         Enhance human and institutional capacity building
·         Usage of ICT will be widened to

o   Create an electronic system for the government

o   Transform a paper-based procedural system into an electronic system

o   Enable provision of services and governance processing using an online system for the creation of civil services that are more efficient, effective and responsive

OPENNESS TO FOREGIN INVESTMENT

·         Offers generous tax incentives to foreign investors
·         The Investment Incentives Order 2011 provides

o   guidelines for granting pioneer status

o   tax relief

o   extending tax relief period

·         Regulations relating to foreign participation in equity are flexible
·         Foreign firms need a local partner to purchase land or apply for a long term lease
·         Strata Title Act allows non-citizens

o   Own property in accordance with the terms of a 99 year lease

o   Applies to properties more than two stories high and townhouse

RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT

·         Business must be registered with

o   Registrar of Companies

o   Attorney General’s Chambers

·         The Brunei Companies Act allows foreign investors to be majority shareholders of

o   locally incorporated limited companies

o   foreign company branches

o   representative offices

·         Sole proprietors are open to local residents only

BUSINESS CUSTOMS

·         Relationship building precedes business negotiations and brokering deals can sometimes require several visits
·         Handshakes are common among male businessmen
·         Muslim women prefer not to shake hands with men
·         Do not offend a dinner host by offer paying for the dinner
·         Shoes should be removed before entering private home
·         Avoid passing in front of a seated person
·         Avoid pointing with the index finger (point with thumbs with hands clenched)
·         Yellow is royal-designated colour and should not be worn in the presence of royalty
·         Tipping is not customary in Brunei
·         Large hotels and restaurants add 10% service charge to the bill
·         Alcohol is not available for purchase
·         Muslims generally will not offer or accept alcoholic beverages

LOCAL TIME, BUSINESS HOURS, AND HOLIDAYS

·         Business Hours

o   Government offices : 7.45am to 12.00pm, 1.30pm to 4.30pm, Monday to Thursday and Saturday, closed on Friday and Sunday

o   Shopping centres : 10am to 10pm, everyday

o   Private offices : 8am to 5pm on weekdays, 8am to 12pm on Saturday

o   Banks : 9am to 3pm on weekdays, 9am to 11am on Saturday

·         Most ATM’s can exchange foreign currency

Bandar Seri Begawan

Fact Facts

Population	401890
Capital	Bandar Seri Begawan
Area	5765 sq km
Ethnic Groups	Malay 66.3% Chinese 11.2% Indigenous 3.4%, Other 19.1%
Religions	Muslim (official) 67% Buddhist 13% Christian 10% Other (includes indigenous beliefs) 10%
Major Language	Malay (official), English (widely spoken), Chinese
Monetary Unit	Brunei Dollar (1BND = 1SGD)
Major Industries	Petroleum, petroleum refining, liquefied natural gas, construction, some agriculture
Major Export	Crude oil, natural gas, garments
Major Imports	Machinery and transport equipment, manufactured goods, food, chemicals
GDP	US$ 20.38 billion
GDP per capita	US$ 51600

Source: SME Magazine, October 2011, Malaysia Edition, Market Focus