According to the Ministry of Commerce, Industry and Energy, foreign direct investment (FDI) in Korea recorded $11.2 billion in 2006. The ministry report said FDI in the electronics and chemical sectors rose 70.7 percent and 171.5 percent in 2006, respectively, from the year before. Foreign investment in manufacturing shot up 37.1 percent year-on-year to $4.2 billion, while FDI in the service sector plummeted 20.4 percent to $6.6 billion.

In 2005, FDI in Korea was $ 11.5 billion. The volume of Korea¡¯s foreign trade is comparable to 70% of the national GDP in the same year, while revenue from foreign invested companies takes up almost 14% of total manufacturing sales. As such, Korea is working hard to support foreign invested companies. A recent example is the opening of the world's largest LCD complex in Paju, just kilometers from the Demilitarized Zone.

The government built roads and infrastructure needed to support an industrial complex of the scale envisioned for Paju. It worked to relax or eliminate regulations that had been in place for decades regarding the development of border areas. These and other measures were pushed through with utmost speed - a sign of the government's willingness and commitment to helping foreign businesses take root in Korea.

There are many other success stories: The British retailer Tesco has done remarkably well in Korea. Tesco's Korean operations make up a third of the retailer's overseas sales. Another example is the outstanding performance by GM Daewoo. The company, in the first quarter of 2006, became Korea's number two automaker once again. It has made great strides in the span of just four years. GM Daewoo is doing so well, in fact, that it is said to be helping to boost GM's overall presence in Asia.

Korea attracted $ 11.2 billion in foreign investment in 2006, a level similar to 2005. In addition to the usual sectors like finance and insurance, there is growing interest by investors in R&D; facilities, logistics centers and regional headquarters of multinational corporations. There is also much interest in Korea's highly developed electronics sector by parts and materials companies.

The interest expressed by investors in these fields is natural when you consider the huge R&D; investments made by Korea annually, helping it to rank in the top 10 every year. Such dedication has paid off in many fields. In 2005, Korea was ranked sixth in terms of international patent applications filed with the World Intellectual Property Organization (WIPO).

Another of Korea's strong points is its great human resources. There are more than 100,000 science and engineering students graduating every year. An increasing number of these students are working for advanced master's and doctorate degrees. For investors, this is the optimal environment for creating new goods and services. Another point to consider is that Korea is the perfect place to base logistics centers or regional headquarters in Asia. There are 44 cities with populations of one million or more within a four-hour flight from Seoul.


Besides Korea's potential as a hub of Asia, Korea has another advantage in that companies can easily expand to overseas markets after using Korea as a test bed platform. Already more than half of the Fortune 500 companies have a presence in Korea.

Underscoring the importance of investment to the nation's future, Korea is determined to do all it can to accommodate investor needs. For this, Korea is implementing measures to help improve the business environment. The new Invest Korea Plaza in southern Seoul is expected to help foreign-backed businesses meld seamlessly with the Korean economy. The facility will offer many programs geared toward potential investors, the most important of which will be the hands-on consultations and incubating assistance for businesses about to start operations in Korea.

The Plaza aims to be a one-stop service destination for investors: on-site Project Managers will help with everything from finding the best location for factory sites, to dealing with administrative details, to applying for all relevant government assistance programs and benefits. The government is working to increase incentives so that businesses interested in high-tech R&D; or those wishing to relocate their regional headquarters to Korea will have greater access to cash grants.

Ultimately, Korea is concentrating efforts on two objectives: first, supporting market conditions which allow entrepreneurs to fully realize their business potential in Korea; and secondly, following through on its commitment to help businesses perform well in Korea.

To make the economy more conducive to foreign investment, the government replaced the old Foreign Exchange Management Act with the Foreign Exchange Transaction Act in 1998. The relevant measures were phased in two stages over two years with the primary goals being capital account liberalization and advancement of the domestic foreign exchange market.

Major items of the First Stage Liberalization in-cluded the introduction of a ¡°Negative List System,¡± which is more flexible than the former positive list system. It also liberalized capital account transactions related to business activities with financial institutions, including short-term borrowing from abroad. Authorization of foreign exchange transactions to allow financial institutions to meet certain requirements was another market liberalization effort by the government.

Major items of the Second Stage Liberalization included capital account transactions that remained restricted in the first stage, except for those related to national security and prevention of criminal activities. It allows non-residents to invest in won-denominated domestic deposits with maturities of less than one year as well as allow resident individuals to invest in foreign-currency denominated overseas deposits and securities.

These liberalization measures, however, are not without risks. Therefore, along with their implementation, the government is strengthening oversight regulations and market monitoring, as well as building an early warning system.

The Government mapped out mid- and long-term foreign exchange market development plans in April 2002 in order to make Korea a business-friendly country and reshape Korea's foreign exchange market into an East Asian financial hub. The plans will be phased in by 2011 in three stages. Accordingly, many restrictions imposed in the first and second round of FX liberalization will be lifted by 2011.

In 2002, the Bank of Korea's certification procedure was abolished, and the burdensome paperwork accompanying individual and corporate financial transactions was simplified. At the same time, capital movement has become much more liberalized.

In order to revitalize overseas investment, the Government has been actively working on liberalization since 2005. Examples include easing of regulations on direct foreign investment and on the purchase of overseas residential properties by Korean nationals. In 2006, all capital transactions were changed from a license system to a simple reporting system, spurring liberalization of inbound investment.