Potential investors or foreign- invested companies currently operating in the Republic of Korea have a friend and ally in Chung Tong-soo, Head of Invest KOREA. The government agency, which is a part of the Korea Trade-Investment Promotion Agency (KOTRA), is directly concerned with both attracting new foreign direct investment (FDI) into the country and helping investors in Korea with whatever problems they may have.

In an interview with the Korea IT Times, Chung Tong-soo spoke first about the current state of FDI in Korea. He said that depending on the way the current numbers were interpreted, one could get a good or a bad picture of the country's current FDI stance. In some analyses, FDI numbers have been dropping over the last few years. If one were to count net FDI, "...that is inbound FDI minus outflow of that FDI, meaning repatriation or when the companies decide to terminate their investment," explained Mr. Chung, "on the net figure, we've seen a decline over the last few years since 2004 primarily because there has been greater repatriation, not because of a drop in new investment that is coming in." But the repatriation of funds from successful investments in the country is a good sign for future investors, as it proves Korea to be a steady investment option that, as many FDI companies now know, gives a solid return.

Some of the first investments that came into Korea since the 1998 financial crisis began to mature in 2004 and 2005. This puts more pressure on Invest KOREA to find newer investors to increase the flow of capital into the country in order to offset the repatriation of investment funds from the first wave of investment. "So that's the challenge for us to provide new investment opportunities. Lone Star is an example in that they started out with Lone Star fund 1, then they set up fund 2, fund 3 - and Carlyle and other private equity funds are similar in that they set up one fund, they invest in it, they terminate it, and if investors are happy, when Carlyle partners form another fund, some of the previous investors come in again in the subsequent fund," Mr. Chung explained.

Where the investment opportunities are

Korea's strong industries represent excellent opportunities for parts manufacturers to find clients. Globally competitive parts and components manufacturers regularly find a market in Korea due to the large and well-known companies in electronics, automotive, and shipbuilding. Since these client relationships are so lucrative in Korea, many of these parts manufacturers establish new plants in the country to supply their products more rapidly and efficiently. Particularly in the case of LCD panels, it is almost a necessity to set up manufacturing plants locally because shipping the large, delicate components required for LCD panels quickly becomes infeasible. Shipping 3-meter square panels of glass even from Japan to Korea, well, as Mr. Chung put it: "It's a mess." That's why there are now well-known glassmakers setting up plants in Korea.

There are also small and mediumsized auto parts or electronics companies from such places the EU or the US that do a majority of their business supplying the large Korean conglomerates and foreign-owned automobile manufacturers, as well. Since such a great part of their income stems from Korea, says Chung, they are locating or plan to relocate here to the peninsula.

When asked what kinds of trends he sees in Korean FDI, Mr. Chung mused that: "This year we have seen a significant increase in FDI compared to last year in the services sector, especially in financial services. We believe that is in anticipation of the new act, what we call the Financial Services, or Capital Markets Consolidation Act." Under this new act, financial services companies will be able to get licenses to offer every type of financial service rather than just one. Mr. Chung expects mergers and consolidation to be the order of the day in the financial sector for the next few years, and companies are already adjusting their Korean operations in order to be able to compete.

Why Korea

One of the points often brought up by Korean FDI promotion agencies is Korea's geographical location in between China and Japan, and in close proximity to the rest of Southeast Asia. A few investors might then ask, why not just go to China itself, or Japan Why commit oneself to Korea when larger markets are so close One of the most compelling reasons Mr. Chung mentioned was intellectual property protection: "Some of the companies with very sensitive technology or intellectual property that they want to protect - some are afraid of going to China because they are afraid their technology will be stolen, in just a matter of a few years. Those companies that care a great deal about their sensitive IP, they come to Korea as a base for Northeast Asia." He said that the Korean judicial system is much further ahead of China in providing intellectual property protections to companies both domestic and foreign. Another strong point that he brought up was Korea's labor force, which is educated, highly motivated, multilingual, and often already has experience.

However, there are a few complaints that Invest KOREA deals with from FDI companies. One such area of grievance is regulations. Many companies feel that their particular sector or operations, whatever it may be, is too highly regulated. However, Mr. Chung suspects that this would be the case no matter where the company does business, since companies always enjoy having fewer regulations to tie them down. The second major complaint is labor-related. Korean labor unions are notorious for being well-organized and militant, although only about 10% of Korea's workforce is unionized. The third complaint, says Mr. Chung, is that costs have been increasing. From property costs to the average wage, it is becoming more costly to do business on the peninsula. However, Invest KOREA supports each company in working with the government to find solutions to common problems, and works together with one of Korea's largest labor unions to moderate their demands and remind them of the mutual benefits of FDI, namely the creation of new jobs. Also to this end is the current government's probusiness stance, having pledged to reduce the corporate income tax from 25% to 20% by the year 2013.

So, all things considered, Invest KOREA is definitely working to upgrade Korea's environment for FDI, efforts which are all the more important in this time of global economic crisis. Invest KOREA definitely stands ready to assist companies who are interested in investing in Korea by providing them with comprehensive investment-related services.