k

CSEB 3102

INTERNATIONAL BUSINESS MANAGEMENT

ASSIGNMENT 2

REPORT ON THE TRANSFORMATION OF AN EAST ASIANECONOMY IN THE POSTWAR/MODERN PERIOD.

THE NURTURE OF INBOUND FOREIGN DIRECTINVESTMENT ON SOUTH KOREA.

GROUP 4

PREPARED BY: EASHWAR A/L SHANMUGAM CEB130012

PREPARED FOR: MR. MOHAMAD SAID BIN OTHMAN

1

Contents

1.0 Introduction. ……………………………………………………………………..……....3

2.0 Foreign Direct Investment (FDI) overview of South

Korea. .…..……………………..3

3.0 Foreign Direct Investment attraction in South Korea.

………………………………..6

4.0 South Korea primary inbound FDI mode. ……………...………..

…………………….8

5.0 Overcoming the inbound FDI barriers. ………………………….

…………………….9

6.0 Foreign Direct Investment transformation on South Korea.

……….....…………….10

7.0 Foreign Direct Investment rules and regulation of South

Korea. ……..…..………..13

8.0 Inbound Foreign Direct Investment of South Korea –

Improvements. ……...……..14

9.0 Conclusion. ……………………………..…………………………………………….…14

10.0 References. ………………………………………………………………….………15

11.0 Appendices.

11.1 Chart 1- Inbound FDI and its types in South Korea from 2009 until 2013. ………………………………………………………………………………..17

11.2 Chart 2- Top five nations investing in South Korea and foreign companies’ perception about South Korea’s business environment in 2013. …………………………………………………………………………18

2

11.3 Table 3- FDI inflow into South Korea by nations and

industry in

2012. ………………………………………………………………………...18

11.4 Chart 1- Numbers and Value M&A in South Korea from

1994 until 2013.

…………………………………………….………………………………….20

1.0 IntroductionSouth Korea was not more than a ruined peninsular during

post Korean War which divided the peninsular into northern and

southern part has devastated the Koreans in all aspects from

all walks of life. The nation was crippled especially in

economy just as the Japanese during World War II.

South Korea realized that economy revival is vital for the

nation’s survival for the posterity. Among the key of economy

revival tool is foreign direct investment which an element

attracting other nations globally to pay their attention into

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South Korea and invest their asset there.

This assignment is to decode one of the South Korea’s key

in economy success; the inbound FDI and its significance to

South Korea in such a way allowing her attain success; the

most industrialized Organisation for Economic Co-Operation and

Development OECD nation, becoming developed nation, Asian

Tiger title and ‘the miracle of Han River’ designation.

2.0 Foreign Direct Investment (FDI) overview of South

KoreaBeginning in 1960s, South Korea focused in export as non-

equity global entrance mode hence, export oriented and import

substitution industries received significant attention from

its government. Simultaneously, she focused on international

borrowing from International Monetary Fund (IMF). South Korea

welcomed Multinational corporations (MNCs) via Free Trade Zone

created on January 1970. FDI rules were liberalized by

revising the Foreign Capital Inducement Act; embarking her FDI

journey through Greenfield investments, Mergers & Acquisitions

(M&A), partnerships and joint ventures.

The FDI inflow astonishingly increased post 1997 Asian

Financial Crisis due to committed initiatives in economy

policy reformation; granting permission of merger and

acquisition exercise and somewhat a blessing in disguise;

Korean Won depreciation. FDI inflows from European nations

persisted even during European fiscal crisis; displaying their

confidence on South Korea’s economy to heal European economic

performance.

According to Korea Trade Promotion Corp. (KOTRA), FDI in

4

South Korea could be in these following forms;

Tools of

Foreign Direct

Investment

Anything a foreign investor invests to

own stocks, etc. under the Foreign

Investment Promotion Act, and those falls

under any of these items:

-Foreign payment method as approved by

the Foreign

Exchange Transaction Act or domestic

payment means by

exchange of the foreign means of

payment;

- Capital goods;

- Proceeds(dividends) from stocks,

etc. acquired by the

Foreign Investment Promotion Act;

- Industrial property, intellectual

property rights other

technologies corresponding and

rights to use of such rights

or technologies;

- Where a foreigner closes his/her own

branch company or

office in Korea, the residual

property allotted to the said

foreigner upon the liquidation of

the said branch company,

office, or corporation;

- The amount of redemption of loans

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with maturity of not

less than five years which is

supplied to a foreign-invested

company or other loans from foreign

countries;

- Stocks of foreign corporations

listed or registered on the

foreign securities markets;

- Stocks owned by foreigners under the

Foreign Investment

Promotion Act or the Foreign

Exchange Transactions Act;

- Domestic real estate owned by a

foreigner; or,

- Proceeds from sales of stocks, etc.

and real estate of a

Korean corporation or a company run

by a national of the

Republic of Korea, held by a

foreigner.

Table 1 The inbound FDI forms as stated by Korea Trade Promotion Corp. (KOTRA).

Meanwhile, China's direct investment in Korea grew, as

the Chinese government encourages its companies to penetrate

global markets, and establishing economic cooperation between

Korea and China by forming a Korea-China free trade agreement.

Chinese companies invested in a number of assets of South

Korea; resort on Jeju Island, mobile game developers, health

supplements manufacturers and in baby clothing manufacturers.

6

Japanese companies invested primarily in manufacturing

industries of carbon fibers, OLED touch sensors and automobile

component makers.

From the Western Europe, European companies put in good

money into electronic components makers, a petrochemical plant

and a theme park. The United States’ companies targeted

investing in social commerce firm and storage operators.

The inbound FDI policy took almost 4 decades to be

revised and keep ongoing. In post Korea War era, South Korea

emphasized on manufacturing goods to for domestic consumption;

resulting GDP of minute USD $79 in 1960. Only after nearly a

quarter century later, the Asian Tiger adopted strategy

regarding FDI. The Asian financial crisis in 1997 turned the

whole nation’s perspective towards FDI and begin to be

attentive to it since then gradually. Until 2013, the net FDI

inflow to GDP ratio is merely 0.73%. The table below displays

the time line of South Korea inbound FDI policy formation.

(1960 – 1980) - Industrial base and pursued an export-led growth development

strategy.

Import substitution drive of the 1950s made

South Korea shifted her development strategy to outward-

oriented system emphasizing on export promotion. The new

export-led growth strategy was for introducing FDI. In 1960,

the Korean government enacted the Foreign Capital Inducement

Act (FCIA) and decrees related to the act. In 1962, KOTRA

establishment boosts the export level of South Korea.

The government intended to use FDI to ease

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balance-of-payments difficulties and as required technology

and expertise supply. FDI was exercised in light manufacturing

export sector, especially in the Free Export Zones in Masan

and Iri. Nevertheless, foreign investment continued to be

discouraged as those sectors were shielded by import

substitution actions due to fear of Korean government that its

economy would be dominated by foreign firms. In fact, the

Korean government wanted to channel the scarce capital

resources to industries vital to long-term economic growth.

For this, the Korean government begin in foreign borrowing,

making foreign resources under its control.(1984 – 1997) – Beginning of FDI.

A key change in early 1980s; the South Korean

economy gone through ordeal due to the negative effects of the

Heavy and Chemical Industry Promotion Plan of the 1970s.

Replacing it, new industrial strategy was approved to elevate

South Korea’s industrial structure into highly technology- and

skill-intensive sectors economy. The government noticed that

liberty of FDI was the sole way.

To administer the idea; in 1984, the South

Korean government replaced the positive list system with

negative list system; allowing many industries for FDI

approval. In December 1989, various performance requirements

imposed on foreign-invested enterprises, such as export, local

content, and technology transfer requirements, were abolished.

Starting in 1994, the Korean government liberalized restricted

business categories according to the Five-Year Foreign

Investment Liberalization Plan, which has been updated

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subsequently annually. Multilateral trade negotiations such as

GATT and the government’s aim to induce fiercer competition

among domestic ‘Chaebols’ leading to opening of tertiary

economy sector; service.

In December 1996, South Korea joined the OECD

and further liberalise FDI by amending the FCIA establishing

Act on Foreign Direct Investment and Foreign Capital

Inducement to make Korea’s FDI system in line with

international norms and standards. For example, the concept of

FDI was expanded to encompass long-term (five year or more)

loans. Also, beginning from February 1997, foreign investors

are allowed to purchase outstanding shares of Korean companies

through friendly mergers and acquisitions (M&As) which

required the approval of the board of directors from the

targeted company.

Although Korean government intensifies its

initiatives to liberalize FDI, its overall stance toward FDI

was passive. The government allowed FDI into liberalized

business categories and activities solely without removing

countless barriers and promoting FDI.

9

(1998) – Aggressive FDI exercise.

Latterly in 1997, Korea was strangled by Asian

currency crisis when the won depreciated over 100 percent

against the U.S. dollar. Foreign reserves diminished and the

foreign lenders refuse to roll over loans, lead South Korea to

default edge in late December 1997. To overcome this rapidly

and trouble-free method possible, the Korean government

promote FDI vigorously. In November 1998, the Korean

government enacted the Foreign Investment Promotion Act,

creating investor oriented policy environment by rationalising

foreign investment procedures, expanding investment

incentives, and inaugurating institutional framework for

investors, including one-stop service besides working out

complete liberalization of hostile international M&As and land

ownership abroad.Table 2 The summary of South Korea’s inbound FDI policy development.

3.0 Foreign Direct Investment attraction in South

Korea.Situated between an Asian Tiger and Sleeping Giant; Japan

and mainland of China, South Korea is positioned naturally at

the center of East Asia regional market. Particularly

attributing to the Asian Tigers; possessing massive customer

base with 2 billion from them with additional half billion

from Association of South East Asian Nations (ASEAN) nations.

The figure exceeded the theoretical ideal market size which is

50 million people meaning ample market opportunity is

available for prospective South Korea goods and services

consumption.

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Apart from this, South Korea partnered with her

neighbour; North Korea to restore the “Seoul-Uiju” railway. It

will connect Korean peninsula to Europe thus, opening the

gateway between Asia Pacific and Eurasian region to elevate

international trade for better performing trade. In 2013,

Europe inward FDI share in South Korea was 34.5% representing

USD $ 39.5 billion which seems potential to be increased in

future by South Korea.

Advantage in science and technology especially in

information technology rooted solely in research and

development investments and patents registered. Boasting with

2863 R&D related public institutes together with 2345

corporate owned, South Korea become a research hub; conducting

R&D in paramount scale at those institutes in the information

technology industry.

Moreover, tax and credit incentives by the government

benefited South Korea’s firms considerably. Tax relief granted

based on investments made. For instance, fifteen percent tax

deduction applied on human capital development expenses and

ten percent deduction on research facilities outlay. Upon

that, 90 percent yearly depreciation pay is available on

research amenities built by domestic firms. Those overall

incentives collectively pushes down operational costs which

permits firms to put their capital into lucrative and

beneficial investments for instance; R&D to manufacture new

products.

In perspective of human capital, high productivity,

educated and skilled labor force owned by South Korea.

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Government set flexible working hour structure with regular

working hour system, permitting employers to offer work in 2-

week or 1-month periods, save labour costs and nurturing

competition between firms. In terms of labour quality, South

Korea targeted education as the element proved by its 74

percent workforce owning tertiary education degree and

literacy of almost 100% among Koreans aged 15 and above

depicting the intellectual level which contributed to new

strategies endorsed by industries like technology; producing

global addicting technology gadgets to say, Samsung Galaxy S4

smartphone.

Besides that, South Korea gave birth to amazing physical

infrastructure via lowest telecommunication and electricity

charge in Asia as stated by Bloomberg on 14 May 2014. Airports

meanwhile experience intense flight schedule with average of

802 flights weekly from capital to major all continents. In

the field of sea trade, South Korea emphasizes its ports’

facilities as South Korea transforms its coasts into shipment

base. The ports are precious to South Korea as it is close to

China, Russia and Japan ports; becoming the magnet of North

Asian region trade.

The three infrastructures; utilities, airports and

harbours are undeniably crucial components for a nations’

trade especially in international scale for aspects of

transportations for goods deliveries, communication for

effective supply chain among firms and business errands like

meetings and conventions while lowest utility charges saves

firms’ operating costs.

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4.0 South Korea main inbound FDI modes.A number of inbound FDI modes available and greenfield

investments is one of them; a form of equity FDI entry mode

(form of foreign direct investment where a parent company

starts a new venture abroad by constructing new operational

facilities; ground up) especially Limited Company status

business entities as it has the ability to incorporate sales

facilities along with manufacturing establishments including

shares in stock market to provide substantial capital for

greenfield investment. Such investment compensates the parent

company in form of profit.

An example of prominent Greenfield investment

in South Korea is executed by an American MNC

consumer goods company, Procter & Gamble. The

company established a subsidiary; Hankook P&G

in Seoul and built two factories (as

manufacturing facilities) in Cheonan and Osan which

manufactures self-care goods like soaps, toiletries and

diapers. The subsidiary; Hankook P&G gradually expanded its

product breadth by manufacturing food and cosmetics.

Other preferred FDI inbound method is Merger

and Acquisition (M&A). This equity type

entry (a merger is a combination of two

companies to form a new company, while an

acquisition is the purchase of one company

by another in which no new company is formed) guarantees

compensation for the risk taken in this case, decision to

merge or acquire a firm in form of profit made.

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For South Korea, General Motors (GM) acquired Daewoo

Motors for USD 251 million in 2002 allowing the United States

corporate to compete with other South Korean domestic car

manufacturers’ low priced cars. The newly gained competitive

advantage boost GM the power needed to penetrate South Korea

automotive market and at the same time, reviving Daewoo Motors

from bankruptcy.

In 2013, foreign investors’ M&A total investment in South

Korea exceeded greenfield investments’ manifested employment

rate fall as foreign firms and investors exercised intensely

the acquisition on domestic firms, rather than building

manufacturing plants and hiring Koreans as their employees.

South Korea received partnership

type inbound investment also. Contract

or agreement would be signed and the

compensation would be according to

agreement clauses.

In perspective of South Korea, Korean Air and Hyatt

Regency Incheon hotel teamed up in 2013 to grant Korean Air’s

international First and Business Class passengers access to

saunas at Hyatt Regency Incheon hotel. This access is free of

charge to qualifying passengers in First or Business Class

arriving on international flights other than from South

Korea’s neighbouring nations like China, Taiwan or Japan. The

promotion anticipates international passengers and business

travelers as the targeted customer segments.

14

Joint ventures are essential for FDI in which fractions

of shares or dividends are the

compensation made by establishing a new

subsidiary operation.

Amoco Chemicals Corporation from

the United States and Samsung; a South

Korean technology firm agreed for a joint venture in 1986 to

manufacture polyester fibers which benefited both initially.

As their factory began making fibers, supply surplus hit the

market, inventories begin to pile up and profits seemed a

remote possibility. Amoco Chemicals eventually decided to

allocate the profit procured as dividends to shareholders

after turbulent times in the joint venture.

5.0 Overcoming the inbound FDI barriers.FDI implementation in South Korea faces a number of

barriers or difficulties in some ways. Socially, South Koreans

are generally xenophobic thus, possess negative impression or

repel on foreign capital which originated from historical

ordeals with Japan and China, from wars; manifesting extreme

nationalism entailed among Koreans. Such nationalism is also

considered as racism which repel foreign interest to invest in

South Korea. In August 2014, a pub; JR Pub in Seoul pup up a

sign that read "We apologize But, Due to Ebola Virus we are not accepting

Africans at the moment. –JR Pub."

The owner said he was unaware about Ebola yet desired to

address concerns of customers, who were worried visiting

Itaewon; a province in South Korea over fear towards Ebola.

Such attitude in business smears negative reputation on South

15

Korea.

Regarding labours, militant labor movements is somewhat

intense and ruthless in South Korea. This adding to already

comparatively high wage levels amongst Asian countries with

monthly average wage of South Koreans at USD$2903 relative to

Japan at USD$2522 and China at USD$656; in 2012 according to

International Labor Organization (ILO) (an organization

administered by the United Nations) keeping foreign MNCs away

from South Korea. The Ministry of Labor enforced law that

benefits employees and fragile protection for management thus

making the labour market of the nation less attractive in the

eyes of foreign MNCs. In such position, making South Korea

business a friendly environment seems a long way to go.

Opposing to global trade attraction is the execution of

trade restrictions imposed on MNCs abroad. The Ministry of

Knowledge Economy still restricted a number of industries from

exercising their outbound FDI into South Korea for instance,

nuclear, telecommunication and partial restriction on

agriculture and et cetera. Initiated to protect the domestic

industries, this however would backfire the Asian Tiger which

diminishes productivity of the firms due to moral hazard

leading to trade deficits. This scenario vividly display room

for improvement for South Korea in its FDI policy

inauguration.

The worst barrier in effect in South Korea is cronyism.

There, networks and acquaintances circles are prioritized.

These networks inculcates school friends going back to many

years, mutual region an individual originate from, mutual

16

universities and also, military friends.

Cronyism simply works like this; filing for registration

procedure usually takes 2 or 3 years for it requires heaps of

documents. But if an employee of a particular company and the

bureaucrats are acquaintances, they inform the filing company

regarding required materials for the procedure before the

review process is complete. Thus, this enable the company in

all required materials prep well ahead of other companies and

saving substantial amount of workload, cost and time which

impossible for foreign MNCs.

6.0 Foreign Direct Investment transformation on

South Korea.Inflow FDI become a tool in transforming South Korea into

a developed nation through technology and knowledge

introduction in pharmaceuticals and electronics to South

Korea. The foreign companies spinning out skilled workers and

managers including technical guidance to subcontractors. The

entrance of multinational pharmaceutical companies in the

interim aid domestic firms in productivity by improving their

facilities initiated by the Ministry of Health and Welfare in

2011.

Amass of 286 domestic firms were assisted by

international pharma giants like Novartis, Merck & Co., Pfizer

and a few others in pharmaceutical researches. Hence, South

Korea firms managed to own the technologies and knowledge from

the foreign firms thanks to inbound FDI. The effort

contributed to increase in inbound FDI up to 3.28% in the

particular year compared to 2010.

17

Productivity increment occur from the foreign entrant

which places competitive pressure on local firms to use their

existing technology more efficiently, yielding productivity

gains. Greater competition leading to a reduction in so-called

X-inefficiency is frequently identified as one of the major

sources of gain. Competition also may increase the speed of

adoption of new technology or the clock speed of an industry

making South Korea persists in improving her manufacturing

base due to intense FDI into manufacturing industry

representing 42 percent from total FDI in 2012 according to

the Bank of Korea.

When foreign companies invest in Korean businesses, they

not only create jobs, they create relatively high-paying jobs.

Encouraging more foreign direct investments in Korea could

lead to more economic growth and create even more of these

high-paying jobs. The figures speak for themselves.

Foreign direct investment into Korea has been an important

factor in the Korean economy for a number of years, totaling

$109.2 billion over the last ten years.A report by the Korea Chamber of Commerce and Industry shows

that foreign firms are more productive in creating jobs than

are domestic companies.Nine new jobs were created per foreign direct investment of 1

billion won.Foreign-invested companies provide better job security, as the

rate of involuntary dismissal is smaller than at domestic

companies.

18

To put simply, foreign-invested firms craft quality jobs.

Also, new capital and managerial skills fusion could hedge a

failing company, forming salvation of jobs in the process.

There has been a visible positive impact on job creation in

the sectors attracting FDI inflow and in their supportive

domestic industries cutting off the unemployment rate from 3.7

percent in 2010 to 3.1 percent in three years.

When FDI flows into a host country, there is a potential

for FDI to act as medium which new ideas, technologies, and

finest working ethics shifted to domestic South Korean firms.

The technology of local firms may improve as foreign firms

demonstrate new technologies, provide necessary assistance to

their domestic suppliers, customers and train employees whom

local firms may later employ. This is the same case when the

pharma corporates entered South Korea market and improved

domestic firms’ productivity in R&D and also when GM formed

M&A with Daewoo Motors.

An increase in foreign direct investments boosts growth,

accumulate capital and bring in technology to globalize South

Korean economy. A good example is Solvay, a chemical group MNC

based in Belgium, which built a cross-border research and

development center at Ewha Woman’s University in Seoul. Solvay

employ more than 100 chemical specialists and work on

improving rechargeable batteries performance; which would be a

breakthrough into new technology.

Solvay arranges accessories required and exporting

knowledge for the university. By itself, foreign direct

investments contribute to creative economy development as

19

being followed by President Park Geunhye’s administration.

Creative economy; apart from being inflow FDI attraction,

Solvay-like FDI would contribute to the South Korean social

welfare as a whole and general life quality as new

technologies introduced from the nurture of creative economy.

FDI contributes to growth through several channels. It

directly affects growth through being a source of capital

formation. Capital formation refers to net additions to

capital stock of an economy, including the creation of

factories, new machinery and improved transportation. Those

capitals existed from the inbound FDI into South Korea in

which interrelates to improve the nations’ well-being and

economic performance herself for instance, GDP increment of

30.8 percent in 2014 compared to 2013.

In terms of inbound FDI, South Korea will be more and

more attractive reflected by the capital owned given ceteris

paribus. Simultaneously, this provides the power needed in

capital context to enable domestic firms to spread their wing

abroad; exercising outbound FDI.

On top of all, FDI stimulates further globalization of

South Korean firms through indirect methods. That includes

exports which hiked 2.8 percent to USD$ 573.1 billion in 2014

compared to 2013, licensing, management contracts and other

economy inducing activities. The capital sucked into South

Korea such as technologies improves productivities as

mentioned earlier and catalysts production at manufacturing

base increasing exports.

The knowledge and skills in certain fields allow license

20

provided to foreign firms with intention of producing products

like Samsung’s license to China to manufacture smartphones.

Such modes if done persistently would attract foreign firms to

exercise FDI into South Korea guaranteeing consistent FDI

inflows.

7.0 Foreign Direct Investment rules and

regulations of South Korea.A number of regulations and policies were regulated and

exercised in South Korea. The Ministry of Knowledge Economy

(MKE) published Consolidated Public Notice in 2011 which

performs restrictions for inbound FDI via economy sectors.

This resulted in total restriction in nuclear energy

generation and media broadcasting FDI into South Korea.

Asian financial crisis in 1997 became the turn point of

South Korea economy path; changing its policies primarily to

accept lending from International Monetary Fund (IMF). This

resulted in outstanding shares of companies to be purchased by

foreign companies via friendly merger and acquisition; making

South Korea enact Foreign Investment Promotion Act 1998. This

act focused on creating investor oriented environment and

establishing institutional framework for investors and

grievance handling for them. This process changed that

traditional foreign debt based development to FDI based

development strategy. GDP growth rate increased 16.4% in 1999

relative to 1998.

A number institution was established to facilitate one-

stop services to attract FDI. Korea Trade Investment and

Promotion Agency (KOTRA) established Invest Korea and Foreign

21

Investment Ombudsman (established in 1999)which address and

resolve the difficulties faced by foreign invested companies

in Korea regarding tax and tariffs, labor management, customs

and trade, investment incentives etc. Foreign Investment

Ombudsman especially provides the services to the foreign

invested companies’ investment after care services.

The enactment of Foreign Investment Promotion Act (FIPA)

in 1998; accelerated the liberalization process and further

promotion of FDI in South Korea. Under the present FDI

promotion policies, South Korea provides various incentives to

the foreign investors. South Korea has developed six

sophisticated free economic zones to facilitate the

establishment of foreign companies. Especially high-tech

industries established in foreign investment zone companies

are given tax holidays, financial support for employment and

training and cash grants. South Korea is the second largest

producer of semi-conductor products in 2007; Samsung

electronics (evertiq.com). South Korea is promoting Gyeonggi

province as the Asia investment base camp, is number one in

semi-conductor, mechatronics, bio pharmaceuticals and chemical

industry.

8.0 Room for improvement.South Korea could prepare the fundamental structure for

human capital; upgrading the education system by expanding

accreditation of international schools. Emphasis on English

should be exercised intensely so that it will develop into

South Korea’s business language. For foreign investors and

22

their families, 54 foreign schools in Korea; the Global

University in the Incheon FEZ now hosts branches of the State

University of New York and George Mason University; a branch

of the University of Utah is expected to open in September

2014.

Apart from that, South Korea should work on the FDI

related law and system transparency; making clearer clauses

regarding future tax liability system. FDI in South Korea is

still at times subject to insufficient regulatory

transparency, fresh policies only stated in Korean language

including inconsistent and sudden changes in interpretation of

regulations.

Global standards on FDI incentive system made as basis to

domestic central and government’s one. In its initiative,

Republic of Korea adhered to World Trade Organisation (WTO)

Trade-Related Investment Measures (TRIMs Agreement) and ceased

cumbersome investment requirements on both domestic and

foreign investors in 1992. Plus, The Fair Trade Act (FTA) of

Korea prohibits great grandchild subsidiaries of Korean

companies from making joint venture investments with foreign

companies, creating a major obstacle to FDI.

Aftercare services on existing MNCs have to be improved.

The Investment Aftercare Team; established under Foreign

Investment Ombudsman in 1999. The team supports investment

wingspan by foreign companies and organizes talks, conferences

and et cetera that address management and daily life issues of

foreign investors. The team employ experts in finance, trade,

law, taxation, customs, labour management and construction.

23

The experts, sometimes also referred as “home doctors”, act as

liaisons to solve grievances filed by foreign companies.

9.0 Conclusion.

Bringing out the miracle after Korean civil war is not an

easy task yet aced by South Korea. The republic struggled its

path from a heavy debtor and now becoming developed nation.

Among the ingredients for its positive breakthrough from

devastation is inbound foreign direct investment.

A report on Korea’s FDI by the Economist Intelligence

Unit reflects the views of others on ostensible de facto

negative attitudes toward foreign involvement by pen pushers,

even denial on it still being made. According Economist

Intelligent Unit, “The government’s attitude towards foreign

trade emphasizes exports and slow liberalization of imports.

This attitude remains deeply ingrained in the outlook of the

government and the country despite continuing globalization

and liberalization.”

FDI in the future will evolve in techniques, industries,

involve a changed cast of government agencies, and implement

different financing methods. Koreans must adapt to those

evolution. Nevertheless, the vast transformations over the

past half century, Koreans have shown the endurance to cope,

validated by their economy which approaching rich nations’

level. There is little doubt to believe that those skills have

died out.

10.0 References.

24

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DIRECT

INVESTMENT POLICY IN THE MULTI-TRACK FTA ERA:

INDUCEMENT AND

AFTERCARE SERVICES. Paper presented at Global Forum

on International

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http://www.oecd.org/investment/globalforum/40400795.p

df

Ahn, H. (2011, October 3). More FDI needed for young job

seekers. THE KOREA TIMES.

Retrieved from

http://www.koreatimes.co.kr/www/news/biz/2015/04/340_95912.htm

l

Alexander, A. J. (2008). Foreign Direct Investment In Korea:

Trends, Implications,

Obstacles. Retrieved from US.KOREA INSTITUTE AT SAIS

website:

http://uskoreainstitute.org/wp-content/uploads/2014/0

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m

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25

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SOUTH KOREA AS

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11.0 Appendices.11.1 Chart 1- Inbound FDI and its types in South

Korea from 2009 until 2013.

Chart 1 The recorded inbound FDI of South Korea from 2009 until 2013 showing thefluctuation year on year basis and Inbound FDI performance based on types of FDI;M&A and Greenfield.

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11.2 Chart 2- Top five nations investing in SouthKorea and foreign companies’ perception about SouthKorea’s business environment in 2013.

Chart 2 Top five nations lion share in South Korea FDI in billion USD on the left and the general foreign companies’ perception regarding South Korea’s business environment in 2013.

11.3 Table 3- FDI inflow into South Korea by nations andindustry in 2012.

FDI Inflows By Countries and Industry

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Main InvestingCountries

2012, in %

Japan 26.8

USA 19.1

Netherlands 11.8

UK 9.7

Germany 4.3

France 3.9

Singapore 3.6

Hungary 2.3

Malta 2.1

Hong Kong 2.1

Main InvestedSectors

2012, in %

Manufacturing 42.1

Trade and maintenance

20.7

Real estate, renting and business activities

20.0

Financial Intermediation

8.2

Source: Export-Import Bank of Korea - Last Available Data.

Table 3 The inflow FDI of South Korea by nations and industry in 2012.

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11.4 Chart 1- Numbers and Value M&A in South Korea from 1994

until 2013.

Chart 1 Numbers and value of M&A exercise in South Korea from 1994 until 2013.

31