This study aims to identify the problems found in the currently implemented foreign investment policies, thereby offering suggestions for their improvement.
With the country receiving support from the International Monetary Fund for its restructuring, discussions are actively taking place to set up plans to promote foreign investment as an approach to overcoming of the economic crisis. Foreign investment boosts the productivity of local industries through the transfer of manufacturing technology and management know-how, contributing to the development of the community and the region. However, foreign investment polices as currently implemented do not make full use of the potential advantages. Given the situation, the study seeks to identify the problems of the currently implemented foreign investment policies and suggest measures to improving the policies.
The current system of foreign investment policies carries issues of discriminative and preferential treatment on foreign investment, lack of transparency, and ineffective application of investment incentives. Complexity in the process is another problem. This arises from factors such as excessive or repetitive procedures on the licensing, which also apply to domestic investments.
In accordance with the principle of equal treatment of local and foreign investors, policies henceforth must be reformed by removing obstacles that block domestic and foreign investment and implementing effective ways to encourage investment. In this context, the following are ways of improvement:
Conditions with regards to a foreigner’s acquisition of a Korean local company’s shares, requiring the approval of the company’s board of directors in case the shares exceed a certain amount must be repealed. Investment regulations for foreign-owned investment enterprises and Korean major conglomerates must be repealed as well, setting room to allow foreign investors to take part in the liberalization process of public enterprises.
On the other hand, land acquisition requirements for foreigners must be lowered to a similar level of a domestic acquirer. Foreign investment support centers should expand and reorganize its extent of assistance to providing mediation, consultation, establishment of factories and acquisition of workforce. A similar system providing one stop services should likewise be offered to local companies.
Industrial complexes and free investment areas designated for foreign-owned enterprises must be switched to ‘investment-inducing areas,’ making them accessible to both local and foreign companies. Benefits should be provided to both local and foreign companies that meet certain standards and are based in these areas.
Categories designating “high-level” industries must be repealed as well, while benefits should be provided to those that bring a major impact on employment creation and technology transfer. Decisions with regards to the provision of benefits should be made under the supervision of the minister in charge.
외국인직접투자정책의 문제점과 개선방안(Problems of foreign direct investment policies and improvement plans)
|Series Title; No||정책포럼 / 제136호(9801)|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|