This study seeks to examine the conditions of the low level of Foreign Direct Investments (FDI) and analyze the reasons for these lower levels, thereby discussing its significance and devising its countermeasure.
The competition of attracting FDI has recently heated up among most countries including developing countries, as various kinds of investment incentives are offered to foreign companies and different regulations alleviated. Korea likewise, has recognized the positive impacts of FDI and has gained momentum on its work of attracting more investment. The country has exerted continuous efforts in devising attractive mechanisms, including the range-setting of advanced technology projects to grant incentives such as tax exemption, or shifting the current licensing system of foreign investments to a reporting system, or streamlining administrative procedures related to FDI.
Despite these efforts, the level of FDI in Korea is still relatively low compared to other countries. As for its reasons, the high cost of production factors, difficulty in financing and acquiring land, weak social overhead capital, and regulations on foreign investments are some of the major factors hindering the entrance of FDI.
As an unconditional opening to foreign investments can backfire and lead to resources wasted and growth potential weakened, FDI must be brought in by a way that meets the Korean national economy’s demand for FDI.
Future policies on FDI will have to work to repeal or weaken discriminative regulations and selective incentives, reinforce the country’s overall competitiveness including its technological capability, develop an efficient and diverse scheme of investment incentives, and meet with international norms on investment.
In order for the country to achieve practical effects from devises including deregulation or investment incentives, relevant administrative procedures must be streamlined while the policy contents be transparently disclosed so as to prevent any government organization from making arbitrary interpretations. Investment incentives granted to FDI that are accompanied by high technology, must go through reform in order to be able to contribute in achieving the positive externality of FDI. For this, efficient and diverse investment incentives must be devised.
외국인 직접투자의 부진과 대응방안(Study of the low level of foreign direct investment and its countermeasure)
|Series Title; No||정책포럼 / 제106호(9609)|
|Subject||Economy < General|
|Holding||KDI; KDI School|