10.3
Development of Investment Promotion Area for the Inducement of Foreign Direct Investment in Korea
외국인투자 촉진을 위한 투자자유지역 조성방안 연구(WP98-9) Dong-Ju Kim․1998. 12․90 pages․Korean
The Korean government has implemented various liberalization measures for foreign direct investment(FDI), one of the main sources for fostering economic development. FDI has been recognized as a catalyst to facilitate industrial restructuring of the Korean economy and to enhance Korea's competitiveness in the international market. Therefore, liberalization of FDI in Korea has been paralleled by the government's efforts to improve the domestic investment environment.
FDI inflow into Korea has undergone a dramatic increase, especially since the mid-1980s. FDI inflow to the national economy, however, was relatively lower than that of most Asian countries, such as Hong Kong, Singapore, China, Malaysia, Taiwan, and Thailand. In the mean time, the currency crisis in Korea in 1997 has changed the FDI policy substantially. FDI inflow has become a vital resource to overcome the IMF crisis and to sustain the economic growth in the 21st century. Therefore, the Korean government has improved the environment for FDI by enacting the new Foreign Direct Investment Law with improving the relevant rules, regulations, and procedures to conform with international standards. According to the new law, the foreign investment area can be established to expediate the FDI inflows.
Investment Promotion Area is a barrier-free environment where regulatory obstacles in doing businesses are eliminated and various economic incentives are provided, compared with other regions in the country. To this end, with the exception of the sector related to the social security, some remained restrictions on the investment sectors which currently exist in Korea need to be eliminated in the Area. Tax and financial burden, such as income tax and import duties, should be reduced or at least exempted at the level of other competitive countries. To maximize the development effects of the Investment Promotion Area, the induced functions need to be diversified. It may include manufacturing
as well as other functions, such as international business and logistics, based upon the conditions of locations and infrastructures, etc.
Investment Promotion Areas are to be developed to serve as a center for new foreign investments in Korea. In this context, the areas are to be designed and constructed mainly from the foreign investors' perspectives. Government provides basic guidelines for the development and plays the role of a supporter and coordinator.
