KOREA

oreign direct investment (FDI) is critically important to Korea, accounting for 14 percent of GDP and 8 percent of manufacturing employment in 2006. However, as the cumulative stock of FDI represents just 8 percent of national GDP compared to the global average of 24.8 percent, Korea is operating way below its potential in attracting this vital form of capital. The Lee Myung-Bak administration is thus seeking to make Korea more

business-friendly through the implementation of a three-year plan, which by its conclusion in 2010, will bring about huge improvements in the foreign investment environment.

      To be implemented by the Ministry of Knowledge Economy (MKE), the Plan involves a broad range of initiatives. The government will now offer foreign investors incentive packages tailored to their individual needs without any prohibition of “overlap” of benefits as was the case before, while cash grants will be provided to defray the cost of projects that create large numbers of jobs. The number of Foreign Investment Zones (FIZs), which offer foreign investors significant tax breaks and reduced or waived rental fees, will increase from 12 to 20 by 2010.

      Selecting an industrial site nationwide in Korea will be even easier by 2010 when a comprehensive on-line service detailing information about all such sites will become available.

      To make Korea more competitive against its East Asian rivals, the corporate income tax rate will be cut from 25 percent to 22 percent by end-2009, and to 20 percent by 2010. Moreover, foreign taxpayers will get a speedier response to their grievances once specially trained officials are deployed to the nation’s tax offices. Next year, foreign-invested enterprises will be free to adopt International Financial Reporting Standards (IFRS).

      With the cap on funds subject to integrated management increased to US$30 million, most loans and debts arising from transactions between a foreign-invested enterprise and its overseas head office will no longer have to be reported to the government. The government will enhance intellectual property rights protection through measures to quash the domestic trade in counterfeit items, and in cases where a patent registration process is ongoing, the patent in question will automatically remain in effect.

      In regard to communications, usage of the BlackBerry – the world’s leading wireless smart phone – will soon become available in Korea.

      The government will provide tailored solutions for foreign-invested enterprises experiencing labor relations difficulties, and for their general guidance, has published two manuals in English and Japanese: one on personnel management and the other on negotiating with unions. Support on the labor front is also available in the form of employment subsidies, which are now provided for employees of new research centers as well as newly established factories.

      The government will support the establishment of additional international schools in Seoul and one each in Daejeon, Daegu and Busan.

      More hospitals and clinics will be designated to provide services in foreign languages. This initiative will be complemented by a 24-hour emergency medical assistance service that will operate in several languages.

      In areas favored by foreigners, the government will continue to press for the eradication of the jeonse or “key money” system for leasing accommodation, and its replacement by the payment of monthly rent. More residential complexes will be established exclusively for foreign nationals within the nation’s Free Economic Zones (FEZs), beginning with 150 new units in New Songdo City, Incheon FEZ, by 2009.

      Any foreign investor who invests more than US$500,000 and employs more than five Korean citizens will be eligible to apply for permanent residency. Executives of foreign-headquartered companies will soon be issued travel cards that will allow prompt entry to Korea.

      English-language FM broadcasting will be made available in areas with relatively high foreign populations such as Seoul, Busan and Gwangju by end-2008. English ticketing services will be enhanced to provide non-Korean speakers with easier access to cultural performances and exhibitions.

      To make the use of public transportation more convenient, more English signs will be placed on bus routes, and more city buses will announce each stop in English.

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