Foreign Direct Investment In KOREA

Essay by rhiesoUniversity, Master's June 2004

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1. Change from "Control and Regulation" to "Promotion and Support"

Promotional efforts by the Korean government obtained the first inflows of foreign capital in 1962. Following its initial success, the government was somewhat passive about inducing further inflows for quite a while, being afraid that multinational enterprises would dominate most lucrative sectors of the domestic economy. At the same time, foreign capital gained by loan inducement seemed much easier to control than direct foreign investment. This growth policy of preferring foreign debts to investment continued until the early '80s.

After Korea joined the OECD in December 1996, the government exerted itself to continue liberalization up to the level of advanced countries. The Foreign Capital Inducement Act was amended to become the Foreign Direct Investment and Foreign Capital Inducement Act in February 1997, which spelled out policies on FDI, M&A, and long-term loans.

The new administration inaugurated on February 2, 1998, is highly aware of the fact that encouraging FDI must be given the utmost priority to overcome the economic crisis and difficulties which may lie ahead, as well as to effectively achive globalization.

Accordingly, the government enacted epochal changes in the Foreign Investment Promotion Law, switching its emphasis from "control and regulation" to "promotion and support" as of September 2, 1998.

All laws related to foreign investment, including the Foreign Investment and Foreign Capital Inducement Act, was streamlined and incorporated into a single legal framework, which will institutionally support the provision of a one-stop service and national treatment of foreign investors.

The result of the government's efforts set up a new foreign investment law, the Foreign Investment Promotion Act, which is expected to play a key role in making Korea's foreign investment environment more internationally competitive and attractive to foreign investors by providing simplified procedures, one-stop foreign direct investment service,