Why South Korea
One of Asia’s most developed and influential countries, the Republic of Korea – known as South Korea – has emerged as a hub of innovation and economic vitality. Renowned for its advanced manufacturing and technological capabilities, South Korea is home to some of the world’s best-known brands. The country boasts a vibrant private sector and highly-skilled workforce which have attracted foreign businesses and portfolio investments. South Korea’s close partnership with Australia, robust infrastructure and promising technological partnerships make it an attractive destination for companies looking to expand into one of Asia’s premium markets.
Economy overview
South Korea’s remarkable economic development since the 1960s has catapulted it to upper income status. Today, South Korea is the world’s 13th largest economy and a high-tech innovation powerhouse. Its economy is highly export-dependent, driven by sales of semiconductors, electronics and automobiles to markets such as China and the US. The country also wields significant influence globally thanks to cultural exports such as K-pop and Korean films. South Korea is highly urbanised with over 92 per cent of its 51.8 million people residing in cities, particularly its capital, Seoul.
Technology titans such as Samsung, LG Electronics and Hyundai are among several “chaebols,” family-controlled business empires that dominate South Korea’s economy. A uniquely Korean phenomenon, chaebols emerged from South Korea’s rapid post-war recovery and contribute significantly to its economy. The five biggest chaebols contributed 61 per cent of the country’s GDP in 2022.
An advocate of free trade, South Korea is a member of the World Trade Organisation, Asia Pacific Economic Cooperation, Organisation for Economic Cooperation and Development and the Regional Comprehensive Economic Partnership. In recent years, South Korea has strengthened ties with India and ASEAN economies.
South Korea and Australia have a well-established economic relationship, with two-way trade topping AUD 71 billion in 2023. South Korea is Australia’s 4th largest trading partner and 3rd largest export market. In 2014, both countries signed the Korea-Australia Free Trade Agreement (KAFTA) which grants preferential treatment to exporters with enhanced market access and tariff liberalisation. More information is available in Section 5.1 and from the Department of Foreign Affairs and Trade’s Republic of Korea country brief.
South Korea’s relative stability, educated workforce, world-class infrastructure and technological prowess present opportunities for Australian companies. However, it also faces challenges, such as one of the world’s lowest birth rates and a rapidly ageing population. Its export-dependent economy has suffered from global inflation shocks, but growth is recovering thanks to revived demand for semiconductors and surging technology investments. South Korea’s growth trajectory is forecast to normalise and strengthen from 1.4 per cent in 2023 to 2.2 per cent in 2026. As South Korea enters the next era of technological transformation it will remain an important partner for Australian businesses to tap into global markets.
Comparing key indicators: South Korea and Australia
Figure 1: Real GDP Growth – South Korea and world average (2016-2026f), %
Sectoral snapshots
South Korea’s economy is a global innovation hotspot. Its highly skilled workforce, technological capabilities and robust logistics infrastructure present opportunities for trade and investment, particularly in priority growth sectors. This section provides a brief overview of key sectors for Australian businesses.
Food and agribusiness
South Korea is highly dependent on food imports. The country imported AUD 73.4 billion in agricultural and food products in 2022. Australia is its fifth largest supplier of agricultural and food products, exporting AUD 1.1 billion in 2022. The implementation of KAFTA in 2014 helped spur food imports from Australia, with beef the biggest agricultural export. Korean consumers are sophisticated, trend-conscious and increasingly looking for healthier, more convenient premium foods. Australian produce is perceived as safe and highquality and suppliers of organic products are set to benefit from surging Korean interest. Austrade has identified key opportunities in corn, horticulture, meat and livestock, oranges, packaged foods, seafood and aquaculture, wheat and wine.
Health and medical
South Korea’s rapidly ageing population is creating demand for health and medical services. The country’s healthcare spending already outpaces its OECD counterparts and is projected to hit 23.3 per cent of GDP by 2060. By 2070, nearly half the population will be aged 65-years or older, driving demand for age-related medical devices such as hearing aids, prostheses and diagnostic tools. As a high-tech nation, South Korea is a prime market for the adoption of digital health solutions. South Korea is also a health-conscious society and home to the world’s largest health and wellness market, posing an AUD 168.1 billion opportunity for Australian dietary supplements and wellness services. Austrade has identified key opportunities in biotech, digital health, medical devices and diagnostics.
Financial services
South Korea’s highly developed financial services sector has become Asia’s third-largest insurance and banking market. The sector’s stability is supported by robust fundamentals and active regulatory oversight. By the end of 2024, assets under management reached AUD 1.81 trillion (KRW 1,612.2 trillion), reflecting an 11.7 per cent increase from 2023. To further enhance the sector, the Financial Services Commission ushered in a suite of open banking policies to expedite personal and business transactions with more accessible data. These developments present significant opportunities for Australian businesses to enter this growing market and introduce innovative financial products and services in South Korea.
Green economy
Opportunities are emerging for Australian businesses as South Korea transitions towards a low-carbon economy. Demand for renewables is growing to meet the needs of energy-intensive artificial intelligence and semiconductor development, among other industries. The Korean Green New Deal was put in place to transform the economy through investments in green infrastructure, the digital economy and the social safety net. With AUD 80 billion earmarked for renewables, green infrastructure and green industry, there is ample opportunity for Australian exporters of clean energy sources like green hydrogen and ammonia. South Korea’s plan to drive adoption of hydrogen fuel cell transportation provides opportunities for Australian suppliers of green hydrogen. In addition, the Australian and Korean governments are collaborating to increase trade in low emissions steel and iron ore as well as carbon capture and storage.
Technology
The South Korean government is committed to maintaining the country’s reputation as a technology powerhouse and has invested AUD 64 billion to accelerate the digital economy through its Digital New Deal strategy. Another AUD 10 billion has also been allocated to AI research and development to retain its lead in the semiconductor market and to meet growing demand for connectivity, autonomous vehicles, Internet of Things and cloud computing. The government is also investing to position South Korea as a global centre for quantum computing and technology. These investments create opportunities for Australian businesses in software solutions, cloud computing, network security and smart infrastructure.
Education
South Koreans spend more on education and have higher tertiary attainment rates than their OECD counterparts. Achieving a higher education and English language capabilities are considered key to social advancement among many Korean families. Intense competition for places at top-tier Korean universities has driven many students abroad. South Korea is Australia’s twelfth largest source of international students, with over 13,000 students enrolled in 2023, largely in vocational education and training (VET) programs. In 2023, Australia was a top market for Korean English-language students, with 6,358 students enrolled. Korean and Australian universities have over 300 formal partnerships creating a wide range of opportunities for research collaboration. Continued demand for vocational and English language programs presents opportunities for Australian education and training service providers.
Mining and critical minerals
South Korea is highly dependent on imports of critical minerals, primarily from China, for the manufacture of semiconductors and electric vehicle batteries. The Korean Government’s efforts to secure reliable supply of critical minerals present collaboration opportunities for Australian mining firms. Korean companies are major investors in Australian mining companies, which provide 40 per cent of South Korea’s demand for rare earth elements. Australian businesses are also major suppliers of coal, natural gas, iron ore and concentrates, crude petroleum and aluminium. In September 2024, South Korea and Western Australia signed an agreement to strengthen critical minerals supply chains, opening opportunities for Australian companies to tap into a burgeoning area.
Defence
South Korea remains committed to strengthening its defence capabilities in cooperation with regional partners including Australia. The Ministry of National Defence launched the Defence Innovation 4.0 plan in 2022 to bolster defence capabilities by leveraging innovation and technologies such as unmanned systems and advanced equipment. Australian companies have opportunities to collaborate with South Korean counterparts on equipment manufacturing, defence-related science and technology research projects and innovation in defence capabilities.