Recent capital flight has raised many issues concerning its potential impact on the domestic economy of Korea. “Industrial hollowing-out” is considered to be detrimental to the Korean economy, which faces competitive pressure from both developing and advanced economies. Since Korea has lost its competitive advantage based on factor conditions, it seems that industrial upgrading and international division of labor is inevitable. The key question, therefore, is how to facilitate industrial restructuring and how to enhance competitive advantage of Korean firms through outward foreign direct investment. Addressing this question, this report first reviews theories of foreign direct investment as well as the experiences of the United States and Japan in terms of foreign direct investment and its relationship with domestic economy.
The second part of the report examines the recent trend of foreign direct investment from the domestic economy are discussed with available statistics in the third part. Given a short history of Korea’s outward foreign direct investment, it appears that there is no conclusive evidence to support industrial hollowing-out yet. However, there is some evidence for industrial hollowing-out in certain sectors and regions of the Korean economy. To prepare for this potentially detrimental impact of outward foreign direct investment, it is argues that domestic business environment should be greatly improved. Along with cost reduction measures, policies promoting technology development, stable labor-management relations, and human capital accumulation seem necessary for enhancing national competitiveness of industries. In particular, the report in the last part discusses the importance of locational asset in an increasingly globalized economy. Factors that are less mobile such as productive labor, social overhead capital, the presence of supporting and related industries, and institutional environment need to be refurbished and enhanced. These enhanced locational assets will raise the attractiveness of domestic industrial location and thereby provide an opportunity to construct an international industrial division of labor. Specifically, multi-purpose, small-scale industrial estates are proposed instead of the current large-scale, single-purpose estates. These various types of industrial estates, developed by the government and the private sector, can be either sold or leased to both domestic and foreign enterprises.
- 세계화시대의 산업입지 개발전략(Industrial location strategy in a global era)
- 김원배; 김영봉
세계화시대의 산업입지 개발전략(Industrial location strategy in a global era)
|Series Title; No||국토연 / 96-32|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Direct Investment
Territorial Development < National Land Development