SEOUL, KOREA - When Invest Korea Commissioner Han Kiwon first assumed his post a year ago, he was determined to increase inbound foreign direct investment (FDI) from Japan.
As the former chief of the Japan-based Daiwa Securities Group’s London and Seoul branches, he had stressed that Japanese companies were interested in overseas investment and mergers and acquisitions (M&A). He believed Korea had not properly opened its doors to them.
Today, Japan is Korea’s largest foreign investor, with FDI from Japan in 2012 reaching an all-time high of USD 4.5 billion, or a 98 percent increase from 2011. Invest Korea, the national investment promotion agency of Korea, has played a significant role in this increase.
“We have been focusing on strategic investments by customizing our services to the needs of Japanese investors,” said Han. “Our approach is to zoom in on what investors are interested in, and where.”
Han’s staff began by identifying specialized sectors by region and categorizing them into a cluster so foreign investors could easily discern regional focus. The next step was to get a hold of matching investors and provide them with tailor-made investor relations (IR) services. Last year, Invest Korea provided 25 such IR services for countries, including five for Japan and more than 10 face-to-face meetings there based on specific investor requests. These services enabled Invest Korea’s specialists to give feedback and consultations on an individual basis to Japanese investors. As a result, Japanese companies have formed a large global value chain with global Korean players.
On the back of such efforts, Invest Korea attracted $2.52 billion from Japan last year, up 44 percent from a year earlier. What’s more, the organization generated $10.6 billion in foreign investment, accounting for more than 65 percent of Korea’s total FDI inflow. Though the outlook for FDI promotion looks tougher for this year with the strong won, Han is optimistic.
“Invest Korea’s goal is not only to match last year’s performance, but to exceed it,” he said.
Asked why Korea is an appealing investment destination, Han, who travels the world answering this very question through IR events and eye-catching presentations, says it’s all about innovation. Korea ranked second this year, following the United States, on a Bloomberg Ranking of countries’ innovation quotients that measured factors including R&D intensity, productivity, high-tech density and researcher concentration.
“Korea is no longer a low-cost country, but it offers investors an innovative climate with its high–technology, R&D, innovation and high value-added knowledge services,” said Han.
When it comes to strategies for encouraging incentives and deregulation to stimulate foreign investment, Han opts for being realistic and practical.
“I am not in favor of the ‘come to us and we will give you everything’ approach. This seems to contradict the catchphrase, ‘Why Korea Only Korea,’ which we have used in our specialized environments,” he said. “We should see what types of incentives each investor is attracted to and try to provide them with what they want.”
Han’s focus this year is on new growth engines and R&D centers, especially considering Korea’s commitment to the IT convergence, green energy, bio and nano sectors as well as R&D.
“Due to favorable conditions in this respect, I am sure we can discover companies that are willing to join us in forming a larger global chain in these areas, companies that will profit from breaking into the global market and by taking advantage of Korea’s FTA network,” the Commissioner said.
Investment in new growth engines and R&D would help advance the industrial structure of the economy, Han added. It would enable technology transfers and the production, development and absorption of high technologies in Korea in the future. This, in turn, would create jobs for the large population possessing M.A.s and PhDs in Korea.
A veteran investment banker, Han is also focused on, and enthusiastic about, M&A. Earlier this year, he became the chief of the Global M&A Center, which KOTRA launched in February to support companies wanting to expand into overseas markets through M&A.
“Korean companies are interested in M&A, and they’re looking for support,” Han said. “Our new center is here to provide the expertise, resources and connections they need.”
Last year, the number of M&A in Korea stood at 83 while Japan had 453 and China, 195. M&A has not seen a resurgence in Korea due to a lack of funds, information and commitment. Also, the CEOs of investment banks, who commonly serve relatively short terms, are not eager to make a substantial commitment to M&A, as it takes longer to yield results, according to Han.
But the interest is there. Prior to establishing the Global M&A Center, KOTRA conducted a survey on 1,366 small- and mid-sized companies and found that 165 firms have M&A needs. Among them, some 40 companies have adequate funds to seek partnerships abroad, demonstrating the potential to become global companies through M&A with foreign partners, Han said. The Global M&A Center helps companies find deals overseas and complete M&A. Experts have been recruited in London and some have been assigned to New York.
“Even after deals are closed, we can monitor transactions by taking advantage of our network of 119 KOTRA overseas offices,” Han said.
Despite having opened its doors only a month ago, the center has 10 deals in the works and expects about 30 deal executions later this year. But more than quantity, Han stresses quality.
“My focus is not on total M&A transaction amounts. Instead, my goal is to generate a symbolic M&A deal model that helps domestic companies gain a foothold in overseas markets and enhance their brand image,” said Han. “By doing so, we can help young people in Korea find work or set up their own company abroad. This is what drives me.”
