Economic Environment and
Investing in Korea
2006
Korea Institute for International Economic Policy
Introduction to Korea
Introduction to Korea
Mongolia
North Korea
East Sea
Japan
Republic of
China
Korea
Pacific Ocean
India
Burma
Hongkong
Population : 48 million
Laos
Thailand
Industry Breakdown
:
Services
Philippines
Vietnam
Indonesia
57%
Manufacturing Agriculture
39%
4%
Economic Overview
GDP in 2004 : US$ 679 bn (WR: 10TH 4.6% )
Trade amount in 2004: US$ 478 bn (WR: 12TH 28% )
Foreign currency reserves in 2004: US$ 199 bn
(WR: 4TH 28% )
Export / Import Trends
Real GDP Growth (1970-2004)
800
25,000
600
20,000
400
15,000
200
10,000
1970
1980
Source: Bank of Korea
1990
2000
2001
2002
2003
2004
(Unit: KRW tn)
Jan-00
Imports
Jan-01
Jan-02
Exports
Jan-03
Jan-04
Dec-04
(Unit: US$ bn)
Economic Environment:
The Korean Advantage
Geographical Advantage
44 cities with populations of more than 1 million
are within 4 hours’ flying time1
China2*
GDP
US$ 1,569 bn
Population
1,299 mn
Trade w/Korea
US$ 57 bn
* Hong Kong included
Japan2
GDP
Population
Trade w/Korea
US$ 4,302 bn
128 mn
US$ 54 bn
ASEAN3
GDP
Population
Trade w/Korea
Source:
1. Incheon International Airport Corporation
2. IMD World Competitiveness Yearbook 2004, Korea International Trade Association
3. ASEAN, Korea International Trade Association
US$ 686 bn
542 mn
US$ 39 bn
20% of Global GDP
32% of World Population
High Quality Human Resources
Well Educated Human Resources2
International Experience1
% of population with higher education
Senior Managers’ International Experience
Country
Canada
Japan
Korea
Norway
US
%
51
50
41
40
39
Rank
1
2
3
4
5
Country
HK
Singapore
Korea
Japan
China
Productivity Improvement2
Diligent Workforce2
Avg. annual growth (1994-2003)
Working hours per year per person
Korea
4.1%
Finland
2.6%
US
2.1%
OECD
Japan
1.8%
1.4%
Source:
1 IMD World Competitiveness Yearbook 2004
2 OECD Fact Book 2005
Country
Rank
2
3
5
58
59
Hours
Korea
2,390
Japan
US
UK
Germany
1,801
1,792
1,673
1,446
Superb Infrastructure
Logistical Infrastructure
- One of the top 6 airports
- No. 3 in cargo handling volume
- No. 10 in passenger capacity
- No. 5 commercial port
- Easy connectivity w/ the U.S.
- 5th high-speed train (KTX)
- Future connection w/China,
Siberia, and Manchuria
ICT Infrastructure
“Most competitive in IT industry among OECD countries” - 2004
Broadband Subscribers
Internet Use
Country
%
Rank
Iceland
Korea
67%
60%
1
2
Sweden
US
New Zealand
57%
55%
53%
3
4
5
Source:
ITU, IMD World Competitiveness Yearbook 2004 , World Telecommunication Indicator
Country
#
(Source: OECD)
Mobile Phone Subscriber Ratio (2002)
Rank
80.00%
60.00%
Korea
218
1
HK
Canada
Taiwan
Belgium
153
112
93
84
2
3
4
5
(# of subscribers per 1,000 inhabitants)
68%
64%
64%
50%
40.00%
38%
20.00%
0.00%
Korea
Japan
Australia
U.S.A
Canada
R&D Capability
Legal Framework and Enforceable Judgement in Support of Intellectual Property Protection
R&D Capability
Patent Related Figures
Business Expenditure on R&D
Patents Granted to Residents
Country
USA
Japan
Germany
France
UK
Korea
China
Country
Japan
USA
Korea
Taiwan
Germany
US$ millions
200,525
94,264
34,426
19,491
18,246
10,152
9,518
Rank
1
2
3
4
5
6
7
Total Expenditure on R&D
Country
Israel
France
Japan
U.S.A.
Korea
Source:
IMD World Competitiveness Yearbook 2004
% of GDP
4.8
3.1
3.1
2.7
2.5
Rank
1
4
6
8
10
Number
118,535
85,528
29,363
24,700
18,318
Rank
1
2
3
4
5
Patent Productivity
Country
Taiwan
Japan
Korea
South Africa
Thailand
Number
446
195
187
95
81
Rank
1
2
3
4
5
(patents granted to residents / R&D personnel in business : in '000s)
Improving Investment Environment
Deregulation
Restructuring
Balanced
Development
International
Schools
Bilingual Public
Services
International
Hospitals
5 Year Plan to Improve Foreigners’ Living Conditions
Overview of FDI
FDI Overview
Total FDI amount of US$ 12.8 billion (98% increase from 2003)
FDI Inflow (1991- 2004)
Notification
Arrival
(Unit: US$ bn)
20
15
12.8
10
6.5
8.6
5
1.4
1.2
4.8
0
91
92
93
94
95
96
97
98
99
00
01
02
03
04
FDI Breakdown
FDI Breakdown by Country
Country
Electricity, Gas,
and Construction
US$ 5 bn
Agriculture,
Livestock and Fishery
5%
1%
US$ 0.4 bn
Amount (US$ bn)
U.S.A
32
Japan
16
Netherlands
12
Germany
6
France
3
UK
44%
50%
3
Manufacturing
Industry
Service
Industry
Canada
3
US$ 45 bn
US$ 52 bn
China
3
Others
25
Total
Source: Ministry of Commerce, Industry, and Energy
Note: Total amount accumulated between 1962 and 2004
China figures include Hong Kong
104
FDI Breakdown by Industry
Major Investors
Fortune 500 Companies in Korea
2001
Europe
2002
Asia
2003
2004
North America
Business Opportunities
Automotive and Automotive Parts
Automotive Industry
Restructuring
6th Biggest Auto-Producing Country in the World
Million vehicles, Growth rate (%)
12
United States
11
Japan
6
Germany
5
China
4
France
Korea
3
(-1.1%)
Acquired controlling share (36.3%)
Hyundai Motors (Nov. 1998)
Kia Motors
(2.2%)
Renault-Samsung
(1.1%)
(14.1%)
GM Daewoo
(2.2%)
SsangYong
Acquired (70.1%)
(Apr. 2000)
Merged
GM
(Apr. 2002)
Acquired (48.9%)
(Jan. 2005)
(9.2%)
Automotive Parts Industry
Renault
(Unit : US$ bn)
USA
Japan
Germany
China
Korea
France
Spain
Canada
Others
Total
91
78
42
33
27
25
23
19
122
459
SAIC
Semiconductor and Display
World’s No.1 DRAM Producer (45%)
Semiconductor Market Share
Company
Major DRAM Producers
Revenue (US$ bn)
%
31.1
15.1
10.3
9.4
9.0
14%
7%
5%
4%
4%
Intel
Samsung Electronics
Texas Instruments
Infineon
Renesas
Source: IC Insights, 2004
World’s No.1 PDP Producer
Samsung SDI :
28.7%
Company
Samsung Electronics
Micron
Hynix
Infineon
Elpida
Revenue (US$ bn)
%
7.6
4.2
4.2
3.7
1.6
29%
16%
16%
14%
6%
Source: iSuppli, 2004
World’s No.1 Large TFT-LCD Producer
First to develop 82” LCD Panel (Samsung SDI)
First to commercialize 5’7” LCD panel (LG Philips LCD)
OLED & CRT Market Share (2004) : 40%(Samsung SDI)
LG Electronics :
27.0%
Other Major Industries
Shipbuilding
World leader - 44% of world market
Advanced design and production capability
Hyundai Heavy Industries
- Largest shipbuilder in the world (15 % mkt share)
Steel
No. 5 in the world - 45.4 million tons of crude steel
1st and 2nd largest single production sites both located in Korea (POSCO)
Petrochemicals
World’s 3rd largest producer
Leading know-how and advanced technology
Information Communication Technology
World leader in mobile phone manufacturing
World Mobile Phone Makers
(Unit: %)
2003
Company
Rank
Market Share
Nokia
Motorola
1
2
34.8
14.5
Samsung Electronics
3
10.8
Siemens
4
8.4
LG Electronics
5
5.3
Sony Ericsson
6
5.3
Source: StrategyAnalytics, February 2004
World leader in VDSL use
Internet & telecom infrastructure – one of world’s most advanced
Satellite DMB services to be commercialized in July 2005
“Most Competitive in IT Industry among OECD Countries” - 2004
(Source: OECD)
SOC Logistics & Real Estates
SOC
Private sector participation – encouraged through strong incentives,
e.g., guarantees, risk-minimization schemes, etc.
BP has set-up a power plant JV with SK
- Korea’s first privately owned generation facility
Logistics
Geographic advantage – gateway to Asian markets
Strong public sector support & incentives for foreign investors
FedEx and DHL are expanding facilities in Korea
Real
Estate
Total deregulation of real estate market in May 1998
Foreigners' real estate purchasing shifting from short-term office building purchases
to long-term development type projects
Finance
Banking
Fully deregulated industry :
Foreign ownership: Kookmin (78%), KEB (73%)
Recent “mega-deals” :
Standard Chartered
Citibank
Korea First Bank (Jan. 2005)
: USD 3.3 bil
Koram (Feb. 2004): USD 2.8 bn for 91%
Increasing presence of major foreign
banks in the consumer banking sector
Sector wide restructuring and
consolidation
High -net-worth individual asset
management : next wave of profitability
Life Insurance
One of the largest markets in Asia :
US$ 6.34 b profit from insurance operation 23 insurers (Feb.2005)
Continuous deregulation in the market
Level playing field
Investment Trust
Gov’t’s restructuring effort in final stage
Recent enactment of “Indirect Investment
Asset Management Business Act”
expected to increase business
opportunities
Bio-Technology
Strong Gov’t Support
Closing gap with
world leaders
: AIDS vaccine,
herbicide-resistant crops
Industrial clusters designated
for bio-technology companies
Various incentives such as site
support and tax exemptions
Synergies with IT
Next goal
: Establishing dog’s embryonic
stem cells through nuclear
transfer
First ever cloning and
extracting of embryonic stem
cells by Prof. Hwang’s team
. Seoul National University Feb. 2004
First cloned canine,
Snuppy the puppy Aug. 2005
Incentives and Support
Extensive Incentives
Corporate Income Tax
Local Tax : Acquisition,
registration, property &
aggregate land tax
Tax Holidays
Exemption or reduction of
leasing costs for national or
local government properties almost free of charge
Leasing
Employment and/or training
National R&D Projects
Development for Basic Facilities
Other Financial
Support
Various incentives provided depending on business area and investment size
Site Support
Foreign Investment Zones
- Local governments authorized to designate a
particular area where foreign investors wish to invest
- Provide plant sites at inexpensive prices
- Also attracts FDI from SMEs
Gangwon
Province
Gyeonggi
Province
Seoul
Incheon
Free Economic Zones
North Chungcheong
Province
South Chungcheong
Province
Daejeon
North Gyeongsang
Province
North Jeolla
Province
Gwangju
South Jeolla
Province
- Provides special legal status to foreign investors
- Details : deregulation, labor market flexibility,
convenient living conditions
Free Trade Zones
Business activities can be pursued without the legal
requirements demanded under Foreign Trade Act and
the Customs Tax Act
Daegu
South Gyeongsang
Province
Busan
Promotes investments into high-technology and
leisure industries
Gwangyang
Jeju Island
Foreign Investment Zones
Free Trade Zones
Int’l Airport
Jeju Free International City
Free Economic Zones (FEZ)
Jeju Free International City
Commercial Port
Invest KOREA
Organization
Investment Promotion Regime
Foreign Investment Committee
Ministry of Commerce, Industry and Energy
Local
Governments
Invest
KOREA
Central
Government
Headquarter
Overseas
Identifying
Ombudsman
Promotion
※ Invest KOREA is the investment promotion arm of KOTRA
Support
Aftercare
Services
Project Manager (PM) System
PM provides full support to potential foreign investors
Provide necessary information on Korean markets and industries
Help on selecting appropriate plant sites
Assist in seeking and meeting potential business partners
Consult on FDI incentives available for investors’ projects and procedures to obtain them
Arrange meetings with investment related government entity
Provide administrative support - visa extension, registration documents, etc
Aftercare
Appointed by President
OIO
Office of the Investment Ombudsman
- Resolve difficulties experienced by foreign-invested
companies
- Create a more favorable overall investment environment
Grievance Resolution
Foreign Investor
Report
complaint
Provide
Solution
Ombudsman
+
Aftercare Team
Cooperation
Government/
Gov’t agency
Recommendation
Foreign Investment
Committee
Thank You
www.kiep.go.kr
300-4, Yomgok-dong, Seocho-gu, Seoul, Korea
Tel:(82-2) 3460-1001 Fax:(82-2) 3460-1122
This presentation is reproduced with a support from Invest KOREA.