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Sat, December 14, 2019 | 22:47
Business
Foreign Direct Investment Waning
Posted : 2007-10-28 17:47
Updated : 2007-10-28 17:47
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By Ryu Jin
Staff Reporter

Korea has seen an exodus of foreign capital in recent years amid fresh questions whether the country is sufficiently dedicating itself to attracting foreign investment.

KOTRA reported an outflow of $8.3 billion in foreign direct investment between 2005 and 2006. The outflow has been accelerating yearly, especially since the Roh Moo-hyun administration took office in February 2003.

During the previous Kim Dae-jung administration from 1998 to 2002, South Korea was serious in attracting inbound investment, especially to tide over the currency crisis in 1997.

Kim himself met personally with foreign CEOs as long as they were committed to investing more than $50 million here.

But the Roh administration made no such serious efforts, a foreign banker in Seoul said. Foreign direct investment (FDI) stood at $4.95 billion last year, down 29.8 percent from 2005.

According to the United Nation Conference on Trade and Development (UNCTAD) last week, South Korea placed 48th out of 207 countries in terms of FDI this year, down from 29th in 2002.

``It is the result of anti-corporate sentiment, excessive regulations and prejudice against foreign capital that have been widespread since the launch of the Roh administration,’’ said Na Seong-rin, an economics professor at Hanyang University.

Many diplomats here said the public humiliation of Lone Star Fund created an image problem for South Korea among foreign investors.

They also added that, though South Korea is still attractive as an investment destination, the other countries are more lucrative, encouraging investors to look beyond Korea in global business opportunities.

From 2001 till last year, there were as many as 170 cases in which foreign firms withdrew more than $10 million in FDI, according to KOTRA.

Experts call for countermeasures to be taken immediately, noting that the companies seem to be bringing their investment back home for various reasons, although most of them are reluctant to give clear reasons for the withdrawal.

Surveyed companies were asked to answer why they had decided to leave South Korea in the poll. But the largest number of the respondents chose ``no particular reason’’ reflecting their reluctance to expose the reasons for their withdrawal.

About 29 percent opted to shut down Korean operations since they had received better offers than continuing business here. About 18 percent said that they decided to leave because they have already accomplished their goals here.

Others cited some economic and social reasons such as intensifying competition, labor-management relations and rising labor costs as well as the reduction of incentives and differential treatment from local companies.

``In order to stop the outflow of foreign investment, the country needs to fortify the authority of the Office of the Investment Ombudsman and improve systems to deal with complaints and proposals of the foreign investors,’’ said the KOTRA report.

It also advised the government of improving transparency and predictability of its policies, devising strategic incentive systems and reducing lingering red tapes on foreign investment.

jinryu@koreatimes.co.kr








 
 
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