Over the past few years, Korea has enjoyed strong foreign investment despite external difficulties, thanks to its free trade agreements with the U.S. and the EU, raised sovereign credit ratings and stable currency.

FDI was unaffected by the recent threats from North Korea. In the first quarter of 2013, foreign investment inflow recorded $3.4 billion, up 44.7 percent from the same period a year ago.

Many experts have concluded that the country’s investment environment is capable of absorbing these geopolitical risks. Foreign investment is closely linked to a host nation’s competitiveness in policy environment, industries and technology.

FDI policy under new government

The Park Geun-hye administration has considered foreign investment promotion one of its major agenda, and is planning to work closely with foreign-invested companies as to stimulate creativity and create jobs.

The core of the creative economy is convergence and communication between different sectors of the economy. In this sense, competition with global rivals would raise the competitiveness of domestic industries across the board.

By enabling foreign companies to partner with competitive local suppliers and global Korean companies, we can go one step closer to the creative economy.

In the current global environment, the investment by domestic companies alone is not enough to achieve sustainable growth. An increasing number of Korean companies are going abroad, and foreign investment is one of the most reliable sources of jobs and innovation.

In the process of making and implementing FDI policies, the government will seek to eliminate discrimination against foreign companies that contribute to the national economy. To this end, various communication channels will be provided so that the government can address their grievances more effectively.

New FDI attraction programs

Many global enterprises are doing business in Korea. However, there are still not enough regional headquarters of global companies here. The Ministry of Trade, Industry and Energy is planning a package program that encompasses tax incentives, cash grants and assistance for land acquisition and immigration services.

This program is aimed at attracting more regional innovation and manufacturing centers of global corporations. It will be the first step to realize Korea’s large potential as an investment destination, at a time when it needs to realign its investment environment to beat its rivals ― Singapore, Hong Kong and Shanghai.

Also, the MOTIE recently introduced “mini” foreign investment zones, which refer to complex-type foreign investment zones for small and medium-sized enterprises. Until now, large FIZs have helped the country to preemptively respond to foreign companies’ demand for sites. Now, the “mini” zones are expected to induce more foreign parts and materials companies that partner with large Korean businesses.

In addition, support measures will be focused on employment and innovation so that foreign-invested companies can contribute to the Korean economy, while raising their corporate values. Tax benefits and land acquisition support will be linked to each corporation’s jobs creation, while more support will be provided for small but strong parts and materials companies that are critical to competitiveness of domestic players.

Foreign companies are making their own efforts to grow with their Korean counterparts. For example, they help Korean SMEs tap into their global network to expand exports, while engaging in joint R&D activities.

The government will also facilitate cooperation between domestic SMEs and foreign companies through the Global Find, an expanded version of the current Global Alliance Project Series. It will lure global venture capital firms, including those in Silicon Valley, to assist the growth of Korean SMEs on the global stage.

Business opportunities generated by domestic industries will increase foreign investment. Korea has been fostering green industries and smart industries, and is becoming a global driving force of those sectors.

The new government will accelerate policy efforts to combine convergence technologies and high value-added creative sectors including contents, software and design. It will also work hard to provide a level playing field for foreign-invested companies, so that they can be a part of creative growth and convergence in Korea.

Korea’s foreign investment policies will encourage the establishment of a creative ecosystem for domestic and foreign companies alike. This effort in turn will help establish such a creative ecosystem across Asia.

By Kim Chang-kyu 

The writer is the director-general for investment at the Ministry of Trade, Industry and Energy. The opinions reflected in the article are his own. ― Ed.