In all, Invest Korea Plaza offers a highly sophisticated platform from which foreign investors can assess the Korean market, whether it is for their initial venture, the launch of expanded facilities or the delivery of a new service. Communications offered within the plaza will be to an unmatched degree; a wireless broadband system will be available throughout the building that will provide instant and unwavering connection to the Internet.
Plaza tenants will be able to work and receive visitors in a setting that will match the finest executive suite that Seoul has to offer, and be supported by a professional secretarial staff especially selected to ensure that their businesses operate as smoothly as possible. Tenants will also be qualified to receive advice on market entry and suppliers; on who would make the most suitable partners; site location; assistance on accessing all manner of investment incentives; and introductions to key central and local government officials, all without charge.
Q: What are your strategies to compete with rival countries such as Singapore, China, and Taiwan in the investment environment field
A: Korea is Asia's third-largest economy. Yet we are more than ever pressured to improve our foreign investment conditions, as the country suffers from lackluster domestic investment and competes with regional neighbors, such as China and Singapore, which are rising in popularity as preferred destinations for FDI. At the same time, the changing trade environment resulting from Korea's increasing number of multilateral trade pacts, such as free trade agreements, also called for the need to reexamine present FDI policies.
However, from the investors' point of view, Korea is quite attractive as a gateway to Northeast Asia in terms of its proximity to huge markets like China and Japan. In addition, many investors are drawn to Korea's fast-moving information and technology (IT) sector, which is a fine test-bed for state-of-the-art technology and products.
The efforts that Korea has made to welcome and provide an accommodating home for foreign investment by way of enhancing its immigration procedures for incoming corporate personnel, supporting international schools and healthcare facilities, and providing more traffic signage in English are gradually beginning to pay off.
With respect to financial market environment, Korea is fast catching up with competitors Hong Kong and Singapore because of the expanded depth and width of its financial market development while foreign financial institutions have begun local operations in Korea. Enormous advances in the country's capability vis-a-vis Hong Kong and Singapore have been made. In particular, Korea's financial hub initiative will be phased in over three stages up to 2015.
Phase I (by 2007) . Groundwork for the hub would be laid in the first phase by building a financial infrastructure. Key to this phase is the passing of the Capital Market Consolidation Act and promoting the Korea Investment Corporation (KIC) to the position of a world-class asset management institution.
Phase II (by 2010) . Establishing Korea as a specialized financial hub by attracting 50 of the world's top asset management institutions and simultaneously supporting the rise of a regional champion amongst local institutions.
Phase III (by 2015) . Positioning Korea as one of the top three Asian financial hubs along with Singapore and Hong Kong by developing its specialized capacity.
In terms of institutional infrastructure, much improvement had been made in building a market-oriented financial system in a relatively short time, mostly on the back of appropriate reform measures required to establish a financial hub. The core policy measures in promoting the financial hub initiative include the Capital Market Consolidation Act (slated for passage in early 2007), financial sector deregulation and foreign exchange liberalization.
In addition, against our gigantic neighbor (greater by a factor of 25 in terms of population), China, Korea and China nearly square off against each other on the basis of the categories of labor, finance, logistics, utility costs, intellectual property protection, technological infrastructure, foreign schooling, healthcare, and communications.
One of the big differences between Korea and China is in the level and quality of communications. No country in the world can match Korea for its Internet infrastructure or for its level of Internet use and access. Connection to the Internet in Korea is swift and permits sending and receiving large-volume files. Some 77 percent of Koreans have Internet access, a stunning 17 million play on-line games (30 percent of the world market), while 80 percent of the population owns a mobile phone.
Moreover, the rise of mobile technologies such as WiBro and Digital Multimedia Broadcasting promise to make Korea a truly ubiquitous society where information technology is accessible any place, anywhere and any time. Internet access has not spread widely in China, being available only in a few large cities. China has some 160 million Internet users, second only to the United States, but they represent a penetration rate of only 10 percent. Furthermore, only half of this number has broadband Internet connection. This state of affairs has obvious ramifications for the ease with which business might be done.
Q: Please explain this year's foreign capital inducement situation and year-end target figures.
A: Foreign direct investment in South Korea dipped 2.3 percent from a year ago to US$7.52 billion in the first nine months of this year. Of the total invested, slightly more than 44 percent, or US$3.33 billion, was in the manufacturing sector, while the remainder was in service areas. FDI in manufacturing-related areas rose 60.6 percent from the same period last year. In 2005, overseas money generally moved towards mergers and acquisition deals and investment in the service sector.
By sector, foreign investment in electronics and chemicals were up sharply to US$1.55 billion and US$540 million respectively, while money pouring into the service sector was down by more than 24 percent compared to the year before. During the reported period, foreign direct investment from Japan and the European Union grew 89.7 percent and 3.0 percent, respectively, from a year ago. But FDI from the United States plunged 46.5 percent. Japan's investment in South Korea totaled US$1.78 billion, while FDI from European countries and the US came to US$3.89 billion and US$730 million.
For the third quarter alone, FDI was down 14.8 percent year-on-year to US$2.60 billion. Total FDI for the year will reach US$11.0 billion by year's end, despite the slight dip in investment growth.
Q: Please explain your strategies for FDI promotion.
A: Korea's approach to attracting foreign direct investment will call for shifting its focus from increasing the quantity to raising the quality. Korea will focus on improving the overall business environment, advancing labormanagement relations, and making investment conditions better for foreign investors. These steps would help the Korean economy become more advanced and global. The Korea-US FTA is an important stepping stone to further developing the Korean economy. The trend also signals the need for the government to provide better incentives to foreign investors amid intense competition with regional neighbors. But it also comes amid a protectionist sentiment evoked by hostile foreign takeovers of domestic firms.
We will step up efforts to improve the environment and incentives for offshore investors, a departure from its more inward approach to attracting investments. Our mid to long-term FDI vision and strategies underlined that the government's aim is to broaden its perspective, which until now has been narrowly focused on securing FDI. New efforts will entail improving economic policies to better accommodate foreign companies and help them heighten management efficiency, which would benefit the local economy.
There are substantive investment incentives, which have been expanded this year. We have increased the number of tax breaks in order to distribute incentives to as many investors as possible, and factory sites are provided at practically no cost. Companies in the high-tech, and/or parts and materials sectors are eligible for cash grants after meeting certain guidelines.
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