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Foreign direct investment in Korea : Trends, implications, obstacles

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  • Foreign direct investment in Korea
  • Alexander, Arthur J.
  • The U.S.-Korea Institute at SAIS


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Title Foreign direct investment in Korea
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Sub Title

Trends, implications, obstacles

Material Type Reports
Author(English)

Alexander, Arthur J.

Publisher

Washington, DC:The U.S.-Korea Institute at SAIS

Date 2008-07
Series Title; No Korean Economy Series / 08-01
Pages 24
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Direct Investment
Holding The U.S.-Korea Institute at SAIS

Abstract

Korea’s economic development is now at the stage in which increasing productivity rather than investment is the key to future growth. Making the transition requires a shift in emphasis from capacity expansion to productivity enhancement, which demands not only a change in economic approach, but also a rethinking of political and psychological attitudes.
Korea already has a well-developed transportation and telecommunications infrastructure, an education system that produces large numbers of highly trained individuals, and many companies with world-class technology. The weight of the economic evidence indicates that productivity growth in an economy like Korea’s, which has achieved middle income status, requires increased competition, more deregulation, greater mobility of capital and labor, higher levels of scientific and technological competence, and greater openness to trade and foreign investment. This report focuses on the last item, foreign direct investment (FDI).
Foreign investment is not required to enlarge the nation’s stock of capital. Investment, in general, is adequate. Rather, more foreign involvement in Korean business would promote several of the attributes that lead to higher productivity: competition, technology, skills, capital and labor mobility, and trade. At the same time, improvements to these other areas would increase the rate of foreign investment. Therefore, FDI is both an indicator of how well Korea is performing in general as well as a stimulant in its own right.
Despite rapid increases in foreign investment since the early 1990s, Korea remains notable for its relatively low receptivity to foreign firms. Therefore, increasing such activities would likely have a disproportionately positive effect on the Korean economy.

User Note

This paper was prepared exclusively for the U.S.-Korea Institute’s Korean Economy Working Paper Series.