Invest Korea Attracts Japan’s Surplus Capital

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Ki-won Han, Commissioner of Invest Korea at KOTRA, Says “Korea is the hub of Asia-bound Investment.”
Monday, June 18th, 2012

“South Korea, the center of global investment pipelines, is one of the most attractive destinations for investment in the world. Korea, which has successfully hosted a series of international events, such as the 2010 G20 Seoul Summit, the 2012 Nuclear Security Summit and Expo 2012 Yeosu Korea and entered into the KORUS (Korea and the U.S.) FTA, is growing into the hub of Asia-bound investment. In particular, Korea is the optimum investment destination for those who are looking to make investments in Asia. Security risks often associated with Korea and negative views on Korea’s transparency evaporated the moment Korea signed the KORUS FTA,” said Ki-won Han, Commissioner of Invest Korea (IK) at KOTRA.

Invest Korea Plaza

Commissioner Han, who was appointed to his position in early April, held investor relations (IR) events in New York, Japan, Texas, China, the Middle East and other locations for a total of 10 countries immediately after assuming his post. Commissioner Han is a financial expert who has built his career as an investment banker (IB) in other nations (e.g. the UK and Japan) over the past 25 years. After a long period of stints abroad, Commissioner Han finally returned to Korea to give free play to his IR capabilities. His presentations do not trigger yawns: he is an IR expert who could make a 100-page presentation in 20 minutes without making it boring.

Commissioner Han mentioned, “Right after being inaugurated as the Commissioner of Invest Korea, I made my rounds to get a worm’s eye view of Invest Korea/KOTRA. The organization was previously somewhat passive about IR seminars: it used to host IR seminars by simply taking advantage of the network of 115 overseas KOTRA branches, called Korea Business Centers. Now, Invest Korea/KOTRA are different: just like IBs, we proactively search for prospective investors. We develop items and ideas to draw up proposals and we have already made an investment bible that contains detailed information on Korea’s attractive investment sectors and incentive systems. Thanks to vigorous approaches, IR events were held in more than 10 nations within a month of my assuming this position.”

Above all, the seven IR seminars held in New York were a resounding success, and the Korean delegation attracted an investment of USD 480 million. Commissioner Han attributed this to FTAs with the U.S. and the EU. Since the U.S. government and the EU Commission pushed ahead with FTAs with Korea, foreign investors now understand that no nation is more reliable than Korea.

Commissioner Han said, “FTA naysayers often broach the issue of Investor State Dispute Settlement (ISDS) provisions. However, to nullify a hard-earned FTA on the grounds of Investor State Dispute Settlement (ISDS) provisions is to give up big gains out of concerns about incurring small losses. In light of long-term benefits that would be brought about by FTAs, Korea’s political circles should unite in supporting FTAs and the Korean government has to swiftly go for FTAs with neighboring nations such as Japan, China and Russia. By doing so, Korea can assure foreign investors that Korea is an investment-worthy nation.”

Ki-won Han, Commissioner of Invest Korea at KOTRA

Ki-won Han, Commissioner of Invest Korea at KOTRA

Korea Is Determined to Attract Japan’s Surplus Capital of 55 Trillion Yen.

Commissioner Han added, “Attracting companies that have had their manufacturing bases established in the U.S. is, unfortunately, very difficult. U.S. manufacturers have already firmly built their production lines and value chains in the U.S., so they have no reason to relocate to Korea. But Japan is different from the U.S.”

Asked about ways to draw Japan’s surplus capital of 55 trillion yen, Commissioner Han answered, “As for Japan, the surplus capital held by about 2,000 Japanese companies is estimated to reach 55 trillion yen, of which a total of 10 trillion yen was invested overseas and 6 trillion of the 10 trillion yen investment flowed into Asia. Most of the 6 trillion yen Asia-bound investment flowed into China. And Korea and Malaysia were jointly ranked 7th in Japan’s Asia-bound investment. But we should rank higher because we are a nation propped up by state-of-the-art industries such as parts and materials, facilities, equipment and chemicals.”

Commissioner Han went on to say, “No other nation in Asia is more attractive to Japanese companies than Korea when it comes to investment in cutting-edge industries. Once Japanese companies establish production lines in Korea, they can secure value chains in which they can supply products to large Korean companies like Samsung and Hyundai. Here, we need to pay keen attention to the effects of the KORUS FTA and the KOREA-EU FTA. Thanks to the FTAs with the U.S. and the EU, tariffs on about 80% of Korean items exported to the U.S. and the EU will be immediately lifted and the percentage is scheduled to increase to 95% within five years after the deals take effect. In other words, if Japanese companies export products manufactured in Korea, they will benefit the most from the elimination of tariff barriers. What better investment destination could there be than Korea? Furthermore, if they build production lines in free economic zones, regions friendly to foreign investors and parts and materials production complexes in Korea, they do not need to pay corporate taxes. Japanese companies cannot help being intrigued by such benefits.”

Commissioner Han explained that once Japanese companies set up production lines in Korea, the red carpet will be rolled out for them: they can supply products to Samsung and Hyundai, pay no tariffs on their exports and be exempt from corporate income taxes. However, no one had ever attempted to inform Japanese companies of such advantages until Commissioner Han came into the picture. Therefore, Commissioner Han is busy playing a crucial role.

Commissioner Han said, “However, attracting Japanese companies to Korea should be preceded by efforts to touch their minds. In particular, Japan’s right-wing organizations are so influential that Japanese companies will find it difficult to build their production lines in Korea. Thus, we need to take advantage of Japanese companies’ tendency to act in groups. Since Japanese people do not easily take action on their own but tend to take collective action with ease, we are recruiting IBs working at Japanese banks to commission the job of explaining the benefits of doing business in Korea to Japanese companies. In other words, we let them visualize a picture in which Japanese banks and Japanese companies are headed for Korea in the same boat and making a lot of money.”

Creation of Japan Center that Focuses on Doing Business with Japan

Commissioner Han also touched upon ways to attract foreign investment into the tourism and consumption industries. “As you know, consumption in Korea is high compared to GDP and inflation. Still, hotels, the restaurant industry and fashion brands have yet to come up with customized strategies. Japanese tourists visit Korea in droves thanks to the strong yen. The most important travel decision is about selecting a place to stay. Unfortunately, Korea does not have enough hotels to accommodate a myriad of Japanese tourists. Thus, Japanese M&A hunters have acquired Korean hotels and listed their stocks, but not many Koreans are aware of that,” said Commissioner Han.

Commissioner Han continued, “Creation of a larger leisure town in the Seoul Metropolitan area is possible. The construction of a huge hotel complex is also feasible. To realize such plans, I pushed for the establishment of the Japan Center. We opened the Japan Center after I was appointed Commissioner of Invest Korea to carry out customized investment promotion activities by region and industry and conduct studies on desirable strategies. Japan does not do business with those who have little knowledge of Japanese culture and do not speak Japanese. As Sun Tzu wrote in the “Art of War” -- if you know your enemies and know yourself, you will not be imperiled in a hundred battles -- we can win Japanese companies over when we know much about Japan.”

Leveraging ample IR experiences and knowhow, Commissioner Han, the former chief of the Daiwa Securities Group branches in London and Seoul, has hammered out a plan to attract 3 trillion yen from Japan this year. At the end of the interview, he outlined his aspirations to serve as an investment specialist for Korea’s advancement.

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