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 in a systemic sense. Though, needless to say, individual debtors and sub-sovereign entities can and do default.
South Korea’s business climate is ranked 4 out of 190 economies on the World Bank’s ease of doing business gauge which attempts to measure regulation and current barriers associated with small to medium firms. South Korea outperforms most other advanced economies across the board, especially when it comes to resolving insolvency, enforcing contracts and accessing ample electricity. But South Korea’s business landscape is dominated by “chaebol’s”—large conglomerates run by powerful families. Chaebol’s dominate the economy and account for up to 90% of Korea’s GNP—though they are often criticised for their heavy influence on Korean politics.
The risk of expropriation and political risk in South Korea is low. But South Korea’s political risk has risen slightly over the last year, due to the elevated threat of war with North Korea in which no formal peace treaty has been signed since the Korean war in the 1950s.
Economic and political uncertainties associated with the impeachment of President Park Geun-hye on charges of corruption in March 2010 was short lived. Korea’s new President Moon Jae-In has vowed to stamp down on widespread systemic corruption. This could improve governance standards over the medium to long term—all of South Korea’s governance indicators are currently below most advanced economies, however they are significantly higher than most of their Asian neighbours.