KOTRA 자료 11-039
Invest KOREA
Annual Report 2010
September, 2011
 Greetings 
Since its designation as a national investment promotion agency in 1998 under the
Foreign Investment Promotion Act, KOTRA has assisted the Korean government in
formulating foreign investment promotion policies and worked with local
governments and its counterparts around the world on multiple fronts to attract
more foreign direct investment (FDI) to Korea.
FDI flows registered $1.2 trillion globally in 2010, up only 0.7 percent from the
previous year, as the world economy did not fully recover from the impacts of the
global financial crisis of 2008.
On the contrary, Korea posted $13 billion in FDI inflows on a notification basis, showing a 13.8 percent year-on-year
increase. This performance is all the more meaningful in that foreign investors showed confidence in Korea's strong
economic fundamentals and growth potential despite heightened tension on the Korean peninsula after North Korea
attacked and sank the Korean Navy ship, the Cheonan, in March 2010 and shelled Yeonpyeong Island seven months
later. Additionally, the fact that Korea’s FDI inflows, which had hovered at about $10-$11 billion for the past 10 years,
broke the $13 billion mark signals a major step toward achieving $20 billion of inbound FDI.
Also notable is that the share of new growth engine industries, on which the government has focused, in total inbound
FDI has increased from 19 percent in 2009 to 24 percent in 2010. Meanwhile, FDI inflows to the capital city and its
surrounding areas declined from 57.6 percent of the total inbound FDI to 33.3 percent, alleviating heavy concentration
of foreign investments in these areas. FDI sources have also been diversified from developed countries to emerging
economies, including China, India and Middle Eastern countries.
In 2011, we need better strategies to attract investments, considering we have both favorable conditions (an FTA with
the European Union, a pending FTA with the United States, major industries such as automobiles growing strongly,
Japanese firms diversifying their production base after the earthquake and tsunami in March of 2011, and U.S. and
European firms looking outside Japan for new investment opportunities) and unfavorable economic conditions (U.S.
fiscal deficits, the sovereign debt crisis in Europe, China's tightening fiscal policies, and strong Korean won).
Invest KOREA, as the national investment promotion agency, will continue its efforts to improve the competitiveness
of Korea's manufacturing sector and provide jobs by promoting FDI. I hope this report will help you understand these
efforts. Thank you.
September, 2011
Suk Woo Hong
President and CEO
Korea Trade-Investment Promotion Agency
Invest KOREA Annual Report 2010 ▶ 1
 Introduction 
Although the world witnessed a slowdown in FDI due to the global financial crisis
in 2010, Invest KOREA employed an aggressive approach to attracting foreign
investment, designating 2010 as the first year in our efforts to achieve $20 billion
in inbound FDI.
In this regard, we stepped up our efforts to nurture new growth engine industries,
including the parts and materials sector, and attract research and development
(R&D) centers, aiming eventually to improve national competitiveness and
develop state-of-the-art technologies. We also attracted businesses in high valueadded industries such as logistics/retail, tourism/leisure, education, medical
services and finance, which provided the Korean economy with many new jobs. Meanwhile, we facilitated balanced
economic growth between metropolitan and local areas by attracting development projects in local cities. In response to
slower FDI flows from advanced economies prompted by weaker domestic demand in those countries, Invest KOREA
diversified Korea's FDI sources into the Middle East, China and sovereign wealth funds.
Additionally, we integrated the two separate service centers -- one for administrative services and the other for
settlement consulting -- into the Investment Consulting Center to provide customer-friendly one-stop services. After the
change, customer satisfaction rose by 3.4 points year-on-year to 98.1.
Invest KOREA has published annual reports since 2004 to look back on its accomplishments during the previous year
and to renew its commitments for the coming year. I hope this report will help you learn about the current developments
in Korea's inbound FDI and better understand our activities to attract FDI.
I thank all of our employees at Invest KOREA’s headquarters and the Korea Business Centers worldwide, as well as the
officials at local governments and related organizations, for their hard work and cooperation, despite difficulties, to
promote investments in Korea.
September, 2011
Hank Ahn
Commissioner of Invest KOREA
Invest KOREA Annual Report 2010 ▶ 2
Contents
I. FDI Trends in 2010
1. World FDI Inflows
8
2. FDI Inflows to Korea
10
II. Trends in FDI Inflows by Industry
1. Parts and Materials
14
2. Aerospace and Defense
16
3. Auto Parts
18
4. New Renewable Energy
20
5. Biotechnology
23
6. Broadcasting and Telecommunications
26
7. Tourism/Leisure and Regional Development
29
8. Logistics
31
9. Finance and M&A
34
III. Contribution of FDI to Korean Economic Growth
1. Economic Effects of FDI
37
2. Business Performance of Foreign-Invested Companies
42
3. Major Characteristics of Foreign-Invested Companies' Business Activity
43
Ⅳ. FDI Induced by Invest KOREA
1. FDI Inflows
52
2. Investment Projects Identified
53
3. Investment Attraction Activity by Sector
54
4. Administrative Services for Investors
59
5. Incubating Services for Foreign-Invested Companies
60
6. Settlement Assistance for Investors
61
7. Foreign-Invested Companies' Resolved Grievances
61
Invest KOREA Annual Report 2010 ▶ 3
◈ Summary ◈
FDI Trends in 2010
World FDI Inflows: $1.22 trillion (up 0.7 percent year-on- year) (UNCTAD, Jan 17, 2011)
- FDI flows to developing countries in South America and Asia grew consistently, while flows to developed
countries such as Japan and Europe, with the exception of the United States, declined or grew only slightly.
- The reinvestment of retained earnings increased as global economic conditions improved, but equity
investment and overseas investment loans continued falling.
- Greenfield investment, made mainly in manufacturing, dropped but trans-border mergers and acquisitions
surged by 37 percent.
FDI Inflows to Korea: $13 billion (up 13.8 percent year-on-year) (on a notification basis)
- While the world saw weaker growth in FDI flows, Korea received more than $13 billion in investment, the
highest in the last ten years.
- Tensions on the Korean peninsula heightened in 2010 as North Korea launched strikes against the South’s
Navy ship, the Cheonan, in March and Yeonpyeong Island in November. Nevertheless, Korea registered
record-high inbound FDI since the Asian financial crisis, showing the strong confidence of foreign investors
in the Korean economy.
FDI Inflows to Korea by Year
(USD million, number of cases)
Category
2006
2007
2008
2009
2010
FDI notified
3,107
3,560
3,744
3,131
3,108
Amount notified
11,248
10,515
11,711
11,484
13,071
Actual amount
9,124
7,853
8,373
6,725
5,417
Source: INSC
Trends in FDI Inflows by Industry
Parts and Materials: This sector’s inbound FDI growth, which started in 2008, continued in 2010,
registering an increase of more than 75 percent from the last year, accounting for 40 percent of the total FDI
inflows in Korea. The sector is expected to maintain growth momentum thanks to investments from such
large Korean companies as Samsung and LG and the government’s support for new growth engine industries.
Aerospace and Defense: The Defense Acquisition Promotion Act and the Enforcement Decree thereof were
amended in 2009 to include FDI in defense offset programs, laying the groundwork for promoting FDI in the
sector. However, performance in inbound FDI was not satisfactory as Korea’s defense industry lagged
behind its competitors.
Auto Parts: As Korea’s auto industry grew rapidly, investments both from new and existing foreign auto
parts manufacturers in the country increased.
Renewable Energy: FDI inflows in solar energy were on a consistent rise. While investments from
European firms declined, those from Asia and America went up.
Biotechnology: FDI involving large-scale M&As and equity investment surged in medicine and healthcare
equipment manufacturing, for example investments from GSK, Temasek Holdings, and Inverness Medical
Innovation. Investments for medical/pharmaceutical research and development also had risen since 2008.
Invest KOREA Annual Report 2010 ▶ 4
Broadcasting and Telecommunications: FDI in the sector, which faltered in the wake of the global
financial crisis, recovered to $200 million in 2010. Given the recent emergence of cloud computing and
Korea’s excellent IT infrastructure and growth potential, FDI inflows in broadcasting and
telecommunications are expected to continue rising.
Tourism/Leisure and Regional Development: The sector made up more than 40 percent of the service
industry's FDI inflows, doubling its inbound FDI growth rate of the last year. The investments were made
mainly in Jeju Island and coastal and marine tourism projects.
Logistics: Due to a decline in global freight traffic prompted by the global financial crisis, inbound FDI in
logistics fell by 25 percent year-on-year to $197 million in 2010. Investments in port terminal operation and
logistics complexes were on a consistent rise.
Finance and M&A: While the share of FDI involving M&As in global total inbound FDI increased, it had
decreased in Korea after peaking at 45.5 percent in 2005 because Korea’s financial sector was not as
competitive as the manufacturing sector. However, the share is expected to recover due to Korea’s growing
capital market, introduction of the Financial Investment Services and Capital Markets Act, and the
government policy banning conglomerates from owning banks.
Contributions of FDI to the Korean Economic Growth (as of 2009)
Revenues and Employment: The revenues of foreign-invested firms reported 226 trillion won, 10.1 percent
of the revenues of all industries combined, and foreign firms employed 345,000 workers (excluding the
financial sector), or 5.1 percent of the total employed population in Korea.
- Manufacturing made up 12.0 percent of the foreign firms’ total revenues; and services, 11.5 percent. The
former sector hired 6.9 percent of all workers employed by international firms; the latter, 6.1 percent, a slight
decline from the previous year.
Added Value and Exports/Imports: The aggregate amount of value added by foreign-invested companies
was an estimated 37.8 trillion won (excluding the financial sector), 8.1 percent of Korea’s total value added.
Exports in manufacturing (excluding petroleum refining) posted $42.8 billion, 12.7 percent of Korea’s
national total; and imports in the same sector stood at $34.2 billion, or 16.1 percent.
- The poor performance of foreign-invested firms in exports reflected a downturn in major sectors such as
petroleum refining, transportation equipment, and electrical/electronics affected by the financial crisis.
Profitability and Dividend Payout Ratio: Foreign-invested firms’ operating-profit-to-net-sales ratio was
5.55 percent, slightly higher than Korea’s national average of 5.04 percent. Their dividend payout ratio (25.2
percent) was much higher than Korean companies’ average (15.3 percent).
- The return on equity of foreign-invested companies (10.08 percent) was also much higher than that of
domestic firms (8.34 percent). The more shares a foreign investor had in a foreign-invested company, the
higher dividend payout ratio the company registered.
Main Markets and Export Destinations: The main market of most foreign firms was Korea. Only 20
percent of international enterprises in manufacturing and 10 percent in services had main markets in
countries other than Korea. In manufacturing, the export destination of foreign firms was China (25 percent),
Japan (19 percent), and other countries neighboring Korea.
Motives for Investment: The Korean market as a base for the Northeast Asian market and the country's
excellent workforce were the main drivers for FDI in Korea.
- In the manufacturing industry, 55 percent of foreign firms started business in Korea to enter the Korean
market, 10 percent to build a production base, and another 10 percent to invest in valuable assets. In the
services sector, international firms cited entering the Korean market, securing valuable assets, and
establishing a base for the Northeast Asian market as main reasons for investment.
Invest KOREA Annual Report 2010 ▶ 5
FDI Induced by Invest KOREA
Amount: $7.89 billion (up 6.7 percent year-on-year, on a notification basis)
Share: 60.4 percent (down 4.0 percent year-on-year)
Invest KOREA-Induced FDI
(USD million, %)
Category
2006
2007
2008
2009
2010
Inbound FDI in Korea (notified amount)
11,248
10,515
11,711
11,484
13,070
IK-induced FDI (notified amount)
4,192
4,741
4,929
7,393
7,892
IK's share in total inbound FDI
43.3
48.0
54.3
64.4
60.4
Note: Investments involving M&As in the financial/insurance sector were excluded, when calculating percentages for 2006-2008.
Source: INSC, Invest KOREA
Number of projects identified by Invest KOREA: 863 (up 6.5 percent year-on-year)
Projects Identified by Invest KOREA
Category
2006
2007
2008
2009
2010
Number of projects managed
564
644
810
863
1094
Source: Invest KOREA
Investment Attraction Activities by Sector
- Parts and Materials: A task force for attracting Japanese enterprises to parts and materials industrial
complexes (March), investor relations for Japanese investors (June), investor relations for German investors
(July), investor relations at Korean Parts and Components Fair in Tokyo (Oct.), a task force for attracting
European firms to parts and materials industrial complexes (Nov.), etc.
- Auto Parts: Tsubakimoto Chain's engine component production plant (June), Gestamp's visit to Korea to
establish an auto parts factory (June), investor relations on Korea Auto Day in Detroit (Dec.), Huchinson's
visit to Korea to build production facilities (Dec.), etc.
- Aerospace and Defense: Participation in the GOCA Conference and a task force for the conference to attract
investment (March), Boeing's visit to Korea to discuss R&D projects and investment (May), an investment
road show at the UK Farnborough Air Show (July), an investment task force for North American aerospace
and defense firms (Dec.), etc.
- Biotechnology: A task force for attracting biotechnology/pharmaceutical firms (May), an investment seminar
at the Global Biotech Forum (June), investor relations on advanced medical complexes (North America in
October, Japan in November), etc.
- Renewable Energy: A joint task force for investment in renewable energy (Jan.), Korea-Europe Wind Power
Plaza (June), Korean local governments' joint investor relations in North America (Sept.), an investment
promotion booth at the Solar Power International 2010 in LA (Nov.), Green Investment Plaza 2010 (Dec.),
etc.
- Display and Find Chemicals: An investment task force for the LED sector (July), an investment task force
for display panels/LED (Dec.), etc.
- R&D Center: Investment attraction activities for joint international R&D in telecommunications and IT
convergence (April), investment promotion activities for international joint R&D in the United States (Oct.),
investment promotion activities for R&D infrastructure in Europe (Dec.), etc
Invest KOREA Annual Report 2010 ▶ 6
- Global Alliance Program Series (GAPS): Qualcomm Partners' Day (Feb.), Novartis (March), GE (May),
Johnson & Johnson (May), Solvay (June), Merck (Sept.)
- Logistics and Distribution: Pyeongtaek Port's logistics investment road show (March), Singapore
port/logistics task force (June), task forces to identify large retail companies in Europe (June and Dec.), the
Ministry of Land, Transport and Maritime Affairs' investor relations in North America (Sept.), etc.
- Tourism/Leisure and Regional Development: Investor relations for regional development projects (April),
investor relations during Regional Development Week (Sept.), investor relations in North America (Sept.), a
task force for attracting investment in the Saemangeum Development Project (Oct.), etc.
- Finance and M&A: Investor relations in North America (Feb.), a road show for global financial investors
(May), Singapore Investment Forum (Sept.), Asia-America Venture Investor Conference (Sept.), investor
relations at the CIO Summit (Oct.), Korea Private Fund-Venture Forum (Nov.), etc.
- New Emerging Market: Shanghai investor relations at the opening ceremony of China Desk (May), investor
relations in Shanghai (Sept.), investor relations at The China International Fair for Investment and Trade in
Xiamen (Sept.), investor relations at the CCPIT-KOTRA regular meeting (Nov.), Singapore Investment
Forum (Sept.), Korea-Abu Dhabi Investment Forum (Oct.), research to create international funds for new
growth engine industries, etc.
Administrative Services for Investors
- Direct handling of claims: 3,945 cases (down 5.4 percent year-on-year)
· Immigration (nine categories), 3,941 cases; corporate registration, 10 cases; confirmation of investment in
kind, 4 cases, etc.
- FDI notified: 3,108 cases (down 0.1 percent year-on-year)
·Among them, 362 cases ($8.72 billion) were registered at IK.
- Registered foreign-invested firms: 13,780 companies (up 6.5 percent year-on-year)
· Among them, 9,662 firms were legal persons. The minimum investment amount for a business to be
registered as a foreign-invested company was adjusted upward to ￦100 million in October, 2010.
Incubating Services for Foreign-Invested Companies
- New beneficiaries: 16 firms, graduates: 22 firms
· By 2010, a total of 96 businesses received business incubating services, among which 76 completed the
incubating program.
- Investment amount notified by firms using the incubating center: $495 million
·The accumulated amount of FDI notified by 2010 was $2.67 billion.
Settlement Assistance for Investors
- Counseling services on business issues and living environment: 3,193 cases (down 18.2 percent year-on-year)
- Secretarial services for foreign investors: 52 cases (up 136 percent year-on-year)
Foreign-Invested Companies’ Resolved Grievances
- Resolved grievances: 385 cases (up 5.4 percent year-on-year)
·Tax, 50 cases; labor, 24; investment procedure, 37; customs and trade, 27; investment incentive, 50, etc.
Invest KOREA Annual Report 2010 ▶ 7
I
FDI Trends in 2010
1. World FDI Inflows
Global Trends
According to statistics released by UNCTAD, world FDI inflows in 2010 registered $1.12 trillion, up only by 0.7
percent from the previous year's $1.11 trillion. This shows global FDI inflows did not fully recover from the impact of
the global financial crisis in 2008, although the world economy showed a small upturn in 2010.
As to FDI inflows in major economies, developed countries posted $527 billion, down by 7 percent from the past
year. However, the United States and the United Kingdom reported increases of 48.3 percent and 1.2 percent
respectively, due to hikes in the reinvestment of retained earnings and investments involving mergers and acquisitions
(M&A). On the contrary, Japan and France reported decreases of 83.4 percent and 3.7 percent respectively, as foreign
investors exited in growing numbers and greenfield investments fell. Meanwhile, FDI inflows in developing countries
reached $525 billion, up 10 percent from 2009, as investment involving M&As doubled year-on-year. Malaysia (409.7
percent), Singapore (122.7 percent) and Hong Kong (29.2 percent) also recorded surges in inbound FDI.
<Table 1-1> FDI Inflows by Region and Major Economy
(USD billion, %)
Region/Economy
World
2007
2008
2009
2010*
Growth rate
09/10
1,978.8
1,697.4
1,114.1
1,122.0
0.7
1,358.6
962.3
565.9
526.6
-6.9
Europe
899.6
518.3
378.4
295.4
-21.9
United States
379.6
316.1
129.9
186.1
43.3
22.5
24.4
11.9
2.0
-83.4
529.3
620.7
478.3
524.8
9.7
69.2
87.6
58.6
50.1
-14.4
South America
127.5
144.4
116.6
141.1
21.1
Asia and Oceania
332.7
388.7
303.2
333.6
10.0
90.9
114.4
69.9
70.5
0.8
Developed economies
Japan
Developing economies
Africa
Eastern Europe and the CIS
Note: 2010 estimates (as of Jan. 17, 2011)
Source: UNCTAD, World Investment Report 2010, Global Investment Trends Monitor No.5 2011
Invest KOREA Annual Report 2010 ▶ 8
FDI Inflows by Type
Investments involving cross-border M&As increased to $341.4 billion in 2010, up by 37 percent, while greenfield
investments declined. Among developed economies, Italy registered an increase of 590.2 percent in M&As and France
recorded a surge of 500.3 percent. Developing economies also posted remarkable growth of 117.6 percent to $85.2
billion in M&As. In particular, Mexico and Argentina recorded increases of 7,616.1 percent and 3,001.5 percent,
respectively.
<Table 1-2> Cross-Border M&As by Region and Major Economy
(USD billion, %)
Region/Economy
2008
2009
1,637.1
706.5
249.7
341.4
36.7
1,454.1
581.4
203.5
252.1
23.9
Europe
825.0
273.3
133.9
125.0
-6.6
United States
379.4
227.4
40.1
79.6
98.6
21.4
9.3
-5.8
7.1
..
152.9
104.8
39.1
85.1
117.6
Africa
10.2
21.2
5.1
7.7
49.3
South America
30.7
15.5
-4.4
32
..
112.0
68.2
38.3
45.3
18.4
30.1
20.3
7.1
4.3
-39.8
World
Developed economies
Japan
Developing economies
Asia and Oceania
Eastern Europe and the CIS
2010*
Growth rate
09/10
2007
Note: 2010 estimates (as of Jan. 17, 2011)
Source: UNCTAD, World Economic Situation and Prospects 2008-2009, Global Investment Trends Monitor No.5 2011
<Table 1-3> World FDI Inflows and Cross-Border M&As
(USD billion, %)
Category
2007
2008
2009
2010*
FDI inflows
1,978.8
1,697.4
1,114.1
1,122.0
Cross-border M&As
1,637.1
706.5
249.7
341.4
Note: 2010 estimates (as of Jan. 17, 2011)
Source: UNCTAD, World Economic Situation and Prospects 2007-2009, Global Investment Trends Monitor No.5 2011
FDI Forecast for 2011
UNCTAD estimated that world inward FDI stock for 2011 will be between $1.3 trillion and $1.5 trillion. The
recovery of global inbound FDI will depend largely on whether the economies of developed countries and their FDI
inflows will grow. Elements such as rising income and stock prices powered by improved macro-economic conditions,
abundant cash holdings of transnational corporations, more M&As, and favorable government policies will have
positive impacts on global FDI inflows. On the contrary, factors such as declining global GDP, foreign exchange
volatility, rising sovereign debt, and the spread of investment protectionism will have negative influences.
Invest KOREA Annual Report 2010 ▶ 9
2. FDI Inflows to Korea
Overview
Korea's inbound FDI, which had hovered at about $10-$11 billion for the past six years, surpassed $13 billion in
2010 on a notification basis, up 13.8 percent from $11.4 billion in 2009, while world FDI inflows had plummeted since
the global financial crisis in 2008. This means foreign investors had strong confidence in Korea's solid economic
fundamentals.
The figure was also the highest in the ten years since the Asian financial crisis. This was all the more meaningful in
that such a record was achieved while tensions were particularly high on the Korean peninsula in 2010 due to North
Korea's strikes against South Korea's navy ship, the Cheonan, in March and Yeonpyeong Island in November.
In particular, the share of inbound FDI in new growth engine industries -- for example, biotechnology & medicine,
renewable energy such as solar and wind power, and digital contents & software -- reached 23.6 percent, up 4.8 percent
from the previous year. FDI sources were diversified into emerging economies such as China and India while the share
of developed countries in total inbound FDI declined by 21 percent year-on-year to 54.9 percent. Additionally, the share
of FDI inflows to Seoul and the surrounding metropolitan area -- Gyeonggi and Incheon -- dropped by 24.3 percent to
33.3 percent, narrowing the gap with other cities and provinces significantly.
- Real GDP growth rate: 0.3% (2009) → 6.2% (2010)
- Won-dollar annual average currency exchange rate: ￦1,276.35 (2009) → ￦1,156.00 (2010)
Korea's inbound FDI patterns for 2010
1.
Growing investments in new growth engine industries
2.
More FDI in high value-added services sector
3.
Significant increase in greenfield investments and decline in investments involving M&As
4.
More inflows from new emerging economies
5.
Less imbalance between metropolitan and other areas
<Table 1-4> FDI Inflows in Korea
(USD million)
Category
2006
2007
2008
2009
2010
3,107
3,560
3,744
3,131
3,108
Amount of investments notified
11,248
10,515
11,711
11,484
13,071
Actual amount of investments
9,124
7,853
8,373
6,725
5,417
No. of investments notified
Source: INSC
Invest KOREA Annual Report 2010 ▶ 10
FDI Inflows by Region
Korea received $1.97 billion in investments from the United States, up 32.8 percent year-on-year; and $2.08 billion
from Japan, up 7.7 percent. On the contrary, FDI from the European Union declined by 8.8 percent to $4.83 billion.
<Table 1-5> FDI Inflows to Korea by Region
(USD million, %)
Category
2007
Amount
2008
Share
Amount
2009
Share
2010
Amount
Share
Amount
Growth rate
09/10
Share
United States
Japan
European Union
Others
2,341
990
4,332
2,852
22.3
9.4
41.2
27.1
1,328
1,423
6,339
2,621
11.3
12.2
54.1
22.4
1,486
1,934
5,297
2,767
12.9
16.8
46.1
24.1
1,974
2,083
4,831
4,183
15.1
15.9
37.0
32.0
32.8
7.7
-8.8
51.1
Total
10,514
100
11,711
100
11,484
100
13,071
100
13.8
Source: INSC (on a notification basis)
FDI Inflows by Industry
Korea's inward FDI trends for 2010 can be summed up as a surge in manufacturing and a drop in services. More
specifically, FDI inflows in the manufacturing sector rose by 78.7 percent year-on-year, exceeding $6.6 billion for the
first time, largely thanks to excellent performance in parts and materials. The share of manufacturing in total inbound
FDI has been on a consistent rise since 2007, registering 50.9 percent in 2010.
In the meantime, FDI inflows to the service sector fell again from 2009 and recorded $6.3 billion, down by 16.7
percent. Other sectors decreased by 43.6 percent collectively.
<Table 1-6> FDI Inflows to Korea by Industry
(USD million, %)
2007
Category
2008
Amount Share
2009
2010
Amount
Share
Amount
Share
Amount
Share
Growth rate
09/10
Primary industries
3
-
1
-
16
0.1
4
-
-
Manufacturing
(transportation equipment)
(electrical/electronics)
(chemicals)
(others)
2,692
(565)
(938)
(509)
(680)
25.6
(5.4)
(8.9)
(4.8)
(6.5)
3,007
(346)
(1,058)
(572)
(1,031)
25.7
(3.0)
(9.0)
(4.9)
(8.8)
3,725
(625)
(1,798)
(204)
(1,098)
32.4
(5.4)
(15.6)
(1.8)
(9.6)
6,658
(2,483)
(1,561)
(927)
(1,687)
50.9
(19.0)
(11.9)
(7.1)
(12.9)
78.7
(297.3)
(-13.2)
(354.4)
(53.6)
Services
7,612
72.4
8,387
71.6
7,594
66.1
6,302
48.3
-17.0
Others
207
2
316
2.7
149
1.3
107
0.8
-28.2
Total
10,514
100
11,711
100
11,484
100
13,071
100
13.8
Note: Primary industries are agricultural, livestock, maritime and mining sectors. Others mean electrical power, natural gas and water
supplies, and construction.
Source: INSC (on a notification basis)
Invest KOREA Annual Report 2010 ▶ 11
FDI Inflows by Type
Investments involving M&As declined by 40.2 percent to $2 billion, while greenfield investments increased 36
percent to $11.1 billion.
<Table 1-7> FDI Inflows to Korea by Type
(USD million, %)
2007
2008
2009
2010
Amount
Share
Amount
Share
Amount
Share
Amount
Share
Growth rate
2009-2010
M&A
2,483
23.6
4,432
37.8
3,375
29.4
2,017
15.4
-40.2
Greenfield
8,031
76.4
7,280
62.2
8,109
70.6
11,055
84.6
36.3
(plants)
(1,017)
(9.7)
(1,153)
(9.9)
(5,421)
(47.2)
(5,948)
(45.5)
(9.7)
(other business facilities)
(7,014)
(66.7)
(6,127)
(52.3)
(2,688)
(23.4)
(5,064)
(38.7)
(88.3)
Total
10,514
100
11,712
100
11,484
100
13,072
100
13.8
Category
Note: The amount of greenfield investments in the manufacturing sector are not the same as that of investments made for establishing
plants, because greenfield investments also include investments for building other business facilities.
Source: INSC (on a notification basis)
FDI Inflows by Investment Volume
Large-scale investments worth more than $100 million grew by 7 percent to surpass $7.4 billion in 2010. Investments
of less than $100 million, which decreased in 2009, also increased by 24.2 percent to $5.6 billion.
The share of large-scale investments in total FDI inflows registered 57.0 percent, showing an increase for four
consecutive years. The share of medium-scale investments worth $10 million to $100 million was 31.7 percent.
<Table 1-8> FDI Inflows to Korea by Investment Volume
(USD million, %)
Category
2007
2008
Amount Share
2009
2010
Amount
Share
Amount
Share
Amount
Share
Growth rate
09/10
$100 million or more
4,222
40.2
5,239
44.7
6,958
60.6
7,450
57.0
7.0
Less than $100 million
6,293
59.8
6,472
55.3
4,526
39.4
5,621
43.0
24.2
(41.3)
(4,580)
(39.1)
(3,023)
(26.3)
(4,140)
(31.7)
37.0
($10 million~$100 million) (4,343)
($1 million~$10 million)
(1,543)
(14.7)
(1,497)
(12.8)
(1,189)
(10.4)
(1,138)
(8.7)
-4.3
(less than $1 million)
(407)
(3.9)
(395)
(3.4)
(315)
(2.7)
(343)
(2.6)
8.9
Total
10,514
100
11,711
100
11,484
100
13,071
100
13.8
Source: INSC (on a notification basis)
Invest KOREA Annual Report 2010 ▶ 12
FDI Inflows by Quarter
In 2010, first-time investments jumped by 37.4 percent from the previous year to reach $5.52 billion, and subsequent
investments also rose slightly by 2.7 percent to $6.76 billion.
Long-term loans registered $780 million, down 10.4 percent year-on-year.
<Table 1-9> FDI Inflows to Korea by Quarter
(USD million, %)
2009
Category
1Q
2Q
3Q
2010
4Q
Annual
1Q
2Q
3Q
4Q
Annual
Annual
growth rate
Initial investment
496 1,222
427 1,873
(29.6) (41.2) (12.7) (54.1)
4,018
(35.0)
370
(24.0)
1,710
(61.2)
856
(29.2)
2,586
(44.6)
5,522
(42.2)
37.4
Additional
investment
937 1,325 2,921 1,408
(55.9) (44.7) (86.6) (40.6)
6,590
(57.4)
1,026
(66.6)
802
(28.7)
1,974
(67.3)
2,963
(51.0)
6,765
(51.8)
2.7
876
(7.6)
145
(9.4)
281
(10.1)
102
(3.5)
257
(4.4)
785
(6.0)
-10.4
3,465 11,484
1,541
2,792
2,932
5,806
13,070
13.8
long-term loan
Total
245
421
(14.6) (14.2)
1,677
2,967
27
(0.8)
3,374
184
(5.3)
Note: Figures in parenthesis are percentages.
Source: INSC (on a notification basis)
Invest KOREA Annual Report 2010 ▶ 13
II
Trends in FDI Inflows by Industry
1. Parts and Materials
The Parts and Materials Industry of Korea
The parts and materials sector is one of Korea’s major industries and makes up about 10 percent of the national GDP.
In 2010, the industry reported ￦540 trillion in production, up 18.8 percent from 2009, and employed 1,250,000 people,
51 percent of total employed people. The importance of the industry is pronounced when considering the import and
export volumes of Korea. Last year, the parts and materials sector posted $229 billion in exports, 49% of the total and
$151.2 billion in imports, thus generating $77.8 billion of surplus.
In the meantime, the intra-regional division of labor was becoming more apparent in the sector. Korea imported high
value-added core parts and materials from Japan and, on the other hand, exported general-purpose items to China. Thus,
the parts and materials industry of Korea saw a $24.2 billion deficit in Korea-Japan trade, but $45.8 billion of surplus in
Korea-China trade in 2010.
The Korean government has been promoting investments in parts and materials to address deficits against Japan and
turn the sector into a high value-added industry.
Investment Environment and Policy for Korea's Parts and Materials Industry
After a sudden plummet in 2007, FDI inflows in parts and materials started rising again and have been on the rise
ever since. In 2010, inward FDI in the sector grew by 75 percent from the previous year. Receiving more than 40
percent of the total inflows in Korea, the parts and materials industry became a major FDI recipient.
<Table 2-1> FDI Inflows in Parts and Materials for the Past 5 Years
(USD million, %)
Year
2006
2007
2008
2009
2010
Amount
3,190
2,353
2,548
3,008
5,283
Growth rate
50.2
-26.4
7.9
18.1
75.6
Share in total inbound FDI
28.2
22.3
21.8
26.2
40.4
Source: INSC (on a notification basis)
Recently, Korea's large corporations have expanded their investments, as a result, generating more opportunities for
foreign enterprises to do business in Korea. Among many segments of the sector, there is a growing need for resource
inflows particularly in materials and equipment used for TFT-LCDs, PDPs, DRAM chips, and NAND flash memory
chips, where Korean companies retain nearly 50% of the global market share. Moreover, as the Korean government has
Invest KOREA Annual Report 2010 ▶ 14
been nurturing new economic drivers such as display panels, robotics, electric motor vehicles, and next generation
semi-conductors, related segments are also likely to see increases in FDI inflows.
To encourage investments in the parts and materials sector, the government has created industrial complexes
exclusively for international manufacturers. After President Lee Myung-Bak suggested building the complexes while
visiting Japan in April 2008, four Free Economic Zones -- Gyeongbuk-Pohang, Gumi, Cheonbuk-Iksan, and BusanJinhae -- were designated for the locations by July 2009. Foreign-invested companies in the complexes are entitled to
tax benefits, lease price reduction and cash grants. Tsubakimoto Chain, Johnson Controls and Ishizaki Press started
establishing manufacturing facilities in the complexes.
Foreign-Invested Companies in Korea's Parts and Materials Industry
Most foreign firms in this sector are manufacturers of parts and materials used for LCDs and semiconductors, the key
products of large Korean corporations. These suppliers include the world's leading companies, such as S-LCD
Corporation, a joint venture of Sony (Japan) and Samsung (Korea) that produces LCD displays; Avanstrate Korea, a
maker of glass panels for LCDs; and MagnaChip Semiconductor. Investments for making electric cars have also grown
in recent years. For example, Bosch (Germany) and Samsung SDI (Korea) have created SB LiMotive to make
secondary batteries for electric cars. In 2010, Japan's Cosmo Oil and Korea's Hyundai Oilbank established HC
Petrochem to manufacture BTX, and a catalyst producer, Albermarle Korea, also started business in Korea. Asahi Glass,
which manufactures LCD glass, made another large investment.
Major Investments
HC Petrochem, a joint venture between Japan's Cosmo Oil and Korea's Hyundai Oilbank, is building a
BTX -- benzene, toluene and para-xylene -- complex in Daesan, Chungcheongnam-do Province by
investing $250 million. The new facility is scheduled for completion in June, 2012 and will add 1 million
tons to HC Petrochem's annual production capacity, tripling it. Para-xylene produced by the new plant
is planned to be exported to China, Southeast Asia, and other markets to meet growing demand.
Invest KOREA Annual Report 2010 ▶ 15
2. Aerospace and Defense
The Aerospace and Defense Industry of Korea
The size of the global defense industry is estimated at $1.5 trillion, $450 billion of which comes from aerospace, and
is growing every year. In terms of defense expenditure, Korea was the 12th largest market in the world in 2010,
following the United States, China, France, and the United Kingdom. 1 The country was also the third biggest importer
of armaments, based on the average between 2006 and 2010. As for exports, Korea broke the $1 billion mark in 2008
and posted $1.17 billion in 2009 and $1.19 billion in 2010, steadily reducing trade imbalance, but remained at 18th
place in the world defense export ranking.
Although the total revenues of all 93 defense firms (as of 2010) in Korea exceeded ￦6 trillion in 2010, 85 percent of
them were from the domestic market. Korea's poor performance in defense exports was attributed to the small size of
defense firms, their lack of experience in export business, and weak negotiating power caused by the lack of a single
unified communication channel between the defense firms. So, KOTRA opened the Center for Defense Trade
Promotion in October 2009, in collaboration with the Ministry of Knowledge Economy, the Ministry of Defense, and
the Defense Acquisition Program Administration, to boost industrial cooperation, offsets, government-to-government
sale, and package deals.
Investment Environment and Policy for Korea's Aerospace and Defense Industry
FDI inflows in Korea's aerospace and defense have been weak, as Korea has not been a strong competitor in this field.
Moreover, most FDI commitments made were related to aircraft maintenance and training, rather than manufacturing.
<Table 2-2> FDI Inflows in Aerospace for the Past 5 Years
(USD million, %)
Year
2006
2007
2008
2009
2010
Amount
1.6
0.69
32
0.5
10
Growth rate
-99%
-40%
4524%
-98%
2009%
Note 1: Investments in aerospace-manufacturing (KSIC 313)
Note 2: The 2010 figure includes aerospace-related investments notified under other categories.
Source: INSC (on a notification basis)
Having worked on the issue from 2006, the government revised the Defense Acquisition Program Act and the
Enforcement Decree thereof in 2009 so that offsets include FDI in the aerospace and defense sector.
During the last year, Invest KOREA organized investor relations meetings, provided prospective investors with
consulting services, and sent delegations to different countries to explain the new legal institution and get feedback.
1) Note: Stockholm International Peace Research Institute (SIPRI) Yearbook 2009
Invest KOREA Annual Report 2010 ▶ 16
Invest KOREA will continue to improve the new system and thereby boost inbound FDI in the aerospace and defense
sector, working with the Ministry of Knowledge Economy, the Defense Acquisition Program Administration, and other
relevant organizations.
Foreign-Invested Companies in Korea's Aerospace and Defense Industry
As of 2010, ten international aerospace and defense firms, including the global corporation EADS, France's Thales,
and the United States' Boeing and United Technologies, were doing business in Korea. Samsung Thales, established as a
50:50 joint venture between Samsung Electronics and Thales in February 2000, doubled its revenues for the last four
years, powered by synergy between the world's leading IT and defense companies. Huneed Technologies, 16% of whose
shares were acquired by Boeing in 2006, successfully made its way to the Korean market, introducing Boeing's
advanced defense systems in Korea. In 2010, the United States' United Technologies and Korea's Korean Air Lines set
up a joint venture to establish a center for aircraft engine maintenance, repair, and overhaul (MRO).
Major Investments
United Technologies is an American aerospace and defense conglomerate and was ranked 130th on the
Fortune Global 500 in 2010. The trans-national corporation has seven subsidiaries, including helicopter
manufacturer Sikorsky Aircraft and aero engine maker Pratt & Whitney, offering MRO expertise. In 2010,
Pratt & Whitney reported to the Korean government that it would invest $10 million in total to build an MRO
center in Yeongjong Island, Incheon through a joint venture with Korean Air Lines. The center will have
facilities to dismantle, assemble, repair, and test aero engines. The center is expected to provide services
to 200 units of aircraft annually, worth about ￦1 trillion in aggregate value by 2020. The center is also
expected to transfer aviation maintenance technology, nurture MRO business in Korea, and enable
Korean firms to develop their own.
Invest KOREA Annual Report 2010 ▶ 17
3. Auto Parts
The Automobile Industry of Korea
After breaking the 4 million unit mark in 2007, Korea's automobile production seemed to be entering a recession,
registering negative growth both in 2008 and 2009, affected by the global financial crisis. However, in 2010, production
rebounded to 4.27 million units of vehicles from the previous year's 3.51 million, growing a remarkable 21.6 percent in
a year. The performance had been powered by Hyundai/Kia introducing new models, GM Daewoo Auto and
Technology replacing its GM Daewoo brand with Chevrolet, Ssangyong Motors being sold to Mahindra, and strong
exports. Those events were the key milestones in the history of Korea's automobile industry.
In 2010, Hyundai Motor's production increased 8.5 annually and Ssangyong Motors, 130 percent, recovering back to
the 2008 level. Among Korean car manufacturers, Daewoo Bus alone reported negative growth.
In particular, after launching the K5 and K7, Kia's production jumped to 1.41 million units with Kia's bid to improve
design bearing fruits. Renault Samsung manufactured 270,000 units of vehicles in 2010, more than its previous
production capacity, due to strong sales in overseas markets.
<Table 2-3> Domestic Production by Manufacturer in 2010
(number of vehicles)
Category
2008
2009
2010
Hyundai Motor
1,673,580
1,606,879
1,743,375
8.5%
Kia Motors
1,055,152
1,137,176
1,416,681
24.6%
GM Daewoo Motors
813,023
532,191
744,096
39.8%
Renault Samsung Motors
187,947
189,831
275,269
45.0%
Ssangyong Motors
81,445
34,703
80,067
130.7%
Daewoo Bus
4,866
4,037
3,214
-20.4%
Tata Daewoo
10,669
8,131
9,039
11.2%
3,826,682
3,512,948
4,271,741
21.6%
Total
Growth rate
Source: Korean Automobile Manufacturers Association
‘
Investment Environment and Policy for Korea's Auto Parts Industry
The Hyundai Kia Automotive Group, which emerged as the fifth largest automaker in the world in 2009, aimed to
become one of the Big 3 in 2010. Coinciding with this, first-time investments as well as reinvestments from
international auto parts manufacturers in Korea increased. Many large manufacturers have been operating in Korea, and
smaller firms are also turning to the Korean market. However, the total number of auto parts manufacturers in Korea
remained at a similar level because of the M&As between them, which were a way to improve efficiency.
Invest KOREA Annual Report 2010 ▶ 18
<Table 2-4> FDI Inflows in Auto Parts for the Last 5 Years
(USD million)
Year
2005
2006
2007
2008
2009
2010*
Amount
350
180
333
288
88
2,079
Growth rate
25%
-49%
85%
-13%
-69%
2,363%
Note: Investments in transportation equipment/automobiles manufacturing (KSIC 30)
Source: INSC (on a notification basis)
The government implemented policies encouraging the development and distribution of green cars. The Hyundai Kia
Automotive Group launched a line-up of hybrid models: the mini car Pride, a slightly bigger Avante Blue, and mid-size
Sonata and K5 to compete with Japan's Toyota and Honda. The company has also been developing electric cars and
their core components, such as batteries and motors. The headquarters of Renault Samsung Motors and General Motors
have been focusing on research and development for electric cars as well.
Foreign-Invested Companies in Korea's Auto Parts Industry
Most of the world's leading auto parts manufacturers have been doing business in Korea. Only nine out of the global
top 100 firms (Automotive News, as of 2009) did not have operations in Korea: Japan's Aisin Seiki, Toyota Boshoku,
Toyoda Gosei, and Keihin; Italy's Magneti Marelli; Germany's Peguform and Kautex Textron; the United States' FlexN-Gate; and Mexico's Nemak. However, some of those firms have been showing interest in the Korean market and
considering setting up a branch in the country. Benteler entered the Korean market indirectly via an M&A with France’s
Hydro Aluminum in 2010.
Major Investments
Spain's Gestamp acquired 60 percent of the stocks in Kartek, a Korean car component manufacturer
based in Gimhae, Gyeongsangnam-do, in 2007 to supply products to Renault Samsung. It changed the
Korean firm's name to Gestamp Kartek Corporation in 2008 and gained full ownership by buying the rest
of the stocks in 2009. Gestamp later launched an R&D business in Korea. When officials from Gestamp's
R&D division visited the Global TransporTech held in Changwon in June 2009 to find a business partner,
Invest KOREA publicized Korea's good investment environment and kept them informed on great
investment opportunities. As a result, Gestamp established a 60:40 joint venture, GS Hotstamping, with
Sungwoo Hitech, and called Invest KOREA for help to find the best location for its new plant in April, 2010.
The hot-stamping facilities were constructed on a free lease in Daegu, one of three options Invest KOREA
provided along with Asan and Iksan. GS Hotstamping currently employs more than 120 people and has
invested more than ￦20 billion in building the facilities, contributing to Daegu's economy and the
development of hot-stamping technology in Korea.
Invest KOREA Annual Report 2010 ▶ 19
4. Renewable Energy
The Renewable Energy Industry of Korea
Revenues in Korea's renewable energy industry grew 29 times in five years from ￦139.4 billion in 2004 to ￦4.02
trillion in 2009, growing 102 percent on average annually. Wind power generation accounted for more than 50 percent
of the industry's monthly revenues until 2007, but the solar energy sector became the main source of revenue for the
industry in 2008.
During the five years, the renewable energy industry (in terms of manufacturing business) grew 3.6 times in number
of firms, 13.3 times in number of employees, 29 times in revenues, and 31.4 times in exports. The amount of
investments from the private sector also jumped 3.1 times for the last two years. The growth of the solar and wind
power sectors was particularly noticeable.
<Table 2-5> Solar and Wind Power Market Growth
Growth Sector
Employees (2004→2009)
Revenues (2004→2009)
Exports (2004→2009)
Solar Energy
170 → 6,698 persons
￦33.2b→￦2.37t
$6m→$1.3b
Wind Power
281 → 2,301 persons
￦101b→￦1.03t
$58m→$724m
Source: The Ministry of Knowledge Economy 2010
The number of renewable energy manufacturers increased by 3.6 times from 41 firms in 2004 to 146 firms in 2009, at
an annual rate of 29 percent on average. As of 2009, solar energy manufacturers were 61 firms, 42 percent of the total
number; biotechnology were 32 firms, 22 percent; and wind power were 24 firms, 16 percent. This was because many
manufacturers in the semiconductor, display panel, and shipbuilding sectors, recently in a global recession, transferred
to solar and wind power business by 2009.
* Solar energy manufacturers: 13 (2004) → 61 firms (2009) [4.7 times]
* Solar equipment manufacturers: 2 (2004) → 12 firms (2009) [6 times]
* Solar parts/materials manufacturers: 3 (2004) → 11 firms (2009) [3.7 times]
* Wind energy manufacturers: 12 (2004) → 24 firms (2009) [doubled]
In the Development Strategy for the Green Energy Industry report released in September 2008, the Ministry of
Knowledge Economy designated nine areas -- solar, wind, LED, IT for power generation, hydrogen fuel cells,
integrated gasification combined cycle, coal to liquids and gas to liquids, energy storage, and carbon dioxide capture
and storage -- to improve the new renewable energy industry's competitiveness. Under the plan, the government,
partnering with the private sector, will invest ￦3 trillion in total for five years (2008-2013). The Ministry will also
replace the current feed-in tariff -- a policy mechanism designed to accelerate investment in renewable energy
Invest KOREA Annual Report 2010 ▶ 20
technologies -- with the Renewable Portfolio Standards, a regulation that requires the increased production of energy
from renewable energy sources, by 2012 to promote the adoption of new renewable energy.
Investment Environment and Policy for Korea's Renewable Energy Industry
FDI in renewable energy rose for three consecutive years. Total inbound FDI in the industry, most of which was made
in wind power generation, amounted to about $140 million in 2008. In 2009, it grew to $670 million, approximately six
times the previous year's amount, and most of the investments were made in solar energy. In 2010, inward FDI in the
industry remained at the similar level, registering $690 million, with many investors turning to Asia, America, and other
new markets as the European markets matured.
<Table 2-6> FDI Inflows in Renewable Energy for the Past 3 Years
(USD million)
Year
2008
2009
2010
Amount
103.7
676.7
689.3
Source: INSC (on a notification basis)
The government has also provided feed-in tariffs (FITs), cost-based compensation, to electricity producers using
green technology. However, as the government spending on this program skyrocketed, especially for solar and fuel cell
power generation, the government announced the Plan for Technology Development and Proliferation of New
Renewable Energy in 2009. In the plan, the government said it would put a cap on the total amount of feed-in tariffs
provided for solar power generation, which showed relatively low energy efficiency. So, the government will purchase
the aggregate amount of 500MW until 2011; 50MW in 2009, 70MW in 2010, and 80MW in 2011.
In 2012, the current FITs will be replaced with Renewable Portfolio Standards (RPS), which places an obligation on
electricity supply companies to produce a specified fraction of their electricity from renewable energy sources. So,
discussions are underway to determine the details, such as who will be subject to the obligation and the scope of quota.
Although FITs will be abolished in 2012, already pledged amounts will be provided after that.
Foreign-Invested Companies in Korea's New Renewable Energy Industry
Foreign enterprises operating in Korea include Acciona (Spain), Vestas (Denmark), Korwind (Germany) and NTN
Corporation (Japan) in wind power; Sonix Janan, Orix Corporation, Green Tec (all three from Japan), Solarworld
(Germany), and Telio Solar Technologies (the United States) and Saint-Gabain (France) in solar energy; and
Scandinavian Biogas Fuels AB, Swedish Biogas International AB (both from Sweden), and Envio Boigas (Germany) in
biogas.
Invest KOREA Annual Report 2010 ▶ 21
Major Investments
Some well-known international investors doing business in Korea include Germany's Solarworld and
Hyundai-Avancis, a joint venture between France's Saint-Gabain and Korea's Hyundai Heavy Industries in
the solar photovoltaic energy sector; and Spain's Acciona in wind power generation. Hyundai-Avancis is
building thin-film CIGS solar cell manufacturing facilities of 500MW capacity, as a leader in the sector in
Korea. Solarworld, which has emerged as the world's third largest photovoltaic product manufacturer
through the company's vertical integration, established photovoltaic modules assembly lines of 80MW in
Jeonju, Jeollabuk-do in 2008 and has embarked on a project to increase the capacity to 150MW.
Solarworld plans to increase its total production capacity to 1GW by investing $210 million in total.
Acciona, a renewable energy developer headquartered in Spain, has constructed a 61.5MW wind farm
complex, the second largest in Korea, in Yeongyang Gyeongsangbuk-do, by investing $230 million since
2007. The company is now building another wind farm named Yeongyang Ⅱ of 34.5MW, scheduled for
completion in 2012, and plans to create a new wind farm complex of 400MW by 2013 by investing $800
million.
Invest KOREA Annual Report 2010 ▶ 22
5. Biotechnology
The Biotechnology Industry of Korea
Korea's healthcare market -- medicine, medical equipment, medical services, etc. based on biotechnology -- was 2.3
times the size of the information technology market in 2010 and recently emerged as a new economic driver due to an
aging population and increasing chronic diseases.
Korea experienced the steepest increase in per-capita medical costs among OECD member countries; the OECD's
average growth rate was 6.7 percent and Korea’s, 11.6 percent. As of 2009, the production of Korea's bioindustry was
￦5.63
trillion, up 24.9 percent year-on-year. The biopharmaceutical and biofood sectors accounted for 76.9 percent of
total production; bioassay, bioinformatics, and R&D services, 6.1 percent; and biochemical, 5.9 percent. Korea's
domestic pharmaceutical market (production + imports - exports) amounted to ￦19.1 trillion in 2010, up 5.1 percent
year-on-year, making up 1.9 percent of the global market. In particular, the production of vaccines, cholesterol-lowering
medications and high blood pressure drugs grew significantly.
The size of the medical equipment market was ￦3.9 trillion in 2010, up 7.10 percent year-on-year. In particular,
exports of digital X-ray imaging systems, ultrasound scanners, and dental implants surged. However, imports of highend medical equipment as well as cancer chemo therapy drugs and vaccines were also on the rise.
Meanwhile, the number of clinical trials that took place in Korea for developing new drugs jumped 10 percent from
404 cases in 2009 to 439 in 2010, and 48 percent of them were multinational projects. This reflects Korea's improved
reputation for excellent clinical research workforce, publication of research papers and patents, and clinical research
infrastructure.
As of 2010, Korea's bio industry employed 22,817 people, up 11.1 percent from 2009, and 36.7 percent of them had
doctoral or master's degrees. The number of Korean scientists' biotechnology papers published in “Nature,” “Science”
and “Cell,” the top three science journals in the world, jumped from 21 in 2009 to 28 in 2010. In addition, Korea ranked
5th in patent application -- 9,689 filings -- according to the World Intellectual Property Organization's 2010 patent
statistics. The number of Korea's patent applications published in the United States was 520 in total between 2006 and
2010, and Korea ranked 14th in an international technology index, scoring 166 points.
The Ministries of Health and Welfare; Knowledge Economy; and Education, Science and Technology have been
working on Korea's global pharmaceutical project, in which the public and private sectors will have invested ￦600
billion each from 2011 to 2019. With strong support from the government, the bio industry saw active R&D,
particularly in biomedicine (biosimilars), herbal medicine, convergence between biotechnology and information
technology, personalized medicine, and regenerative medicine.
Invest KOREA Annual Report 2010 ▶ 23
Investment Environment and Policy for Korea's Biotechnology Industry
In 2010, 83 investment projects, worth $809 million in total, were notified in biotechnology -- medicine, medical
supplies and equipment, and cosmetics sectors, but excluding biofoods. This accounted for 6.2 percent of the total
amount of inbound FDI ($13.1 billion), a 60 percent increase in number of projects and 528 percent in amount year-onyear. This was also an annual increase of 43 percent, based on the compound annual growth rate in 2006-2010. Such
performance was driven by large-scale mergers and acquisitions and equity investments of GlaxoSmithKline, Temasek
Holdings, and Inverness Medical Innovation in medicine and medical equipment manufacturing. R&D investments in
medical and pharmaceutical sectors increased steadily.
<Table 2-7> FDI Inflows in the Medicine & Medical Equipment Industry for the Past 5 Years
(USD million)
Category
2006
2007
2008
2009
2010
Wholesale & retail (medicine, medical
supplies/equipment, cosmetics)
6.7
64.8
27.7
88.1
49.4
Medicine & medical supplies manufacturing
55.9
39.6
40.3
0.3
708.3
Medical equipment manufacturing
5.3
5.6
-
1.9
36.4
Research & development
in medical science & medicine
Total notified amount in biotechnology
(No. of cases)
7.8
3.7
23.7
38.6
14.7
75.6
(48)
143.8
(69)
91.7
(32)
128.8
(52)
808.8
(83)
Share in all industries
0.7%
1.4%
0.8%
1.1%
6.2%
Source: INSC
<Diagram 2-1> Medicine/Medical Equipment Sectors' Compound Average Growth Rate for the Past 5 Years
FDI reported amount (million dollars)
Source: INSC and KOTRA analysis
Invest KOREA Annual Report 2010 ▶ 24
The government has strived to promote FDI in biomedicine (e.g., antibodies and vaccines), genetic cures, medical
equipment for senior citizens, herbal medicine, and contract research organizations (CRO) and contract manufacturing
organizations (CMO). The government also has created bio-clusters -- the High-tech Medical Complex (Daegu and
Osong), Biomedical Complex (Songdo Incheon and Gyeonggi), Medical Industry Techno Valley (Wonju), and
Daedeok Research Complex -- in which universities, biotech ventures, pharmaceutical companies, and clinical trial
centers are able to collaborate.
Foreign-Invested Companies in Korea's Biotechnology Industry
Most global pharmaceutical companies or large medical equipment manufacturers were operating wholesale/retail or
manufacturing businesses in Korea, but no particular investment for building large production facilities or R&D
projects were identified. However, GlaxoSmithKline, a global pharmaceutical corporation, acquired the shares of
Korea's Dong-A Pharmaceuticals in June 2010 ($129 million, the United Kingdom) to forge a strategic alliance.
Dentsply, a German dental equipment maker, bought the stocks of DIO, a Korean dental implants manufacturer.
Additionally, Inverness Medical Innovations (Alere), an American medical diagnostic products producer, acquired
Korea's diagnostic instruments maker SD for $324 million. Korea's Celltrion received a $190 million financial
investment from a subsidiary of Temasek holdings, an investment company owned by the government of Singapore. As
such, inbound FDI involving equity investment in and mergers/acquisitions of Korean firms jumped significantly in
2010, which means that Korean firms have become competitive enough to be an attractive investment target.
Meanwhile, a vaccine maker, Crucell (Berna Biothech), expanded its manufacturing plant in Korea by investing $20
million in December 2010, even after its takeover by Johnson & Johnson. These FDI inflows are expected to help
strengthen the competitiveness of Korea's biotech industry.
Major Investments
GlaxoSmithKline (GSK), a UK-based pharmaceutical company announced in May 2010 that it would
enter into a strategic alliance with Dong-A Pharmaceuticals, Korea's largest pharmaceutical firm by
revenues, to extend its presence in Asia and diversify its businesses. As part of the transaction, GSK
bought a 9.9 percent stake in Dong-A for ￦142.9 billion ($129 million). The alliance will co-promote
selected GSK and Dong-A primary-care products. GSK signed the agreement after considering the
Korean market potential and Korea's R&D capabilities and expertise in clinical trials. The British company
also showed a great interest in the development of Dong-A's R&D pipeline in overseas markets. The
unprecedented alliance between Korea's No. 1 pharmaceutical company and a leading global
pharmaceutical firm is expected to generate synergy, strengthening both companies’ commercial
positions in the Korean and global markets.
Invest KOREA Annual Report 2010 ▶ 25
6. Broadcasting and Telecommunications
The Broadcasting and Telecommunications Industry of Korea
Korea's broadcasting and telecommunications industry grew substantially in the late 1990s and early 2000s, emerging
as a new economic driver. Although the growth rate slowed in recent years, including 2009, when the global financial
crisis hit the world economy, the industry registered ￦145.3 trillion in production (12.4 percent of GDP) in 2010, a 3.9
percent increase from the previous year thanks to the world economic recovery.
The industry's service sector grew significantly in 2010 due to the smart phone boom (mobile telecommunications
services), vibrant TV/radio advertising market (broadcasting services), IPTV and mobile/fixed-line contents
(broadcasting and telecommunications convergence). The industry's manufacturing segment also posted positive growth
thanks to rising demand for digital TV and set-top boxes driven by the Winter Olympic Games and the FIFA World
Cup, even though Korean cell phone makers expanded their overseas production.
<Table 2-8> Korea's Broadcasting and Telecommunications Industry for the Past 3 Years
(KRW trillion, %)
Category
Services
2008
2009
2010
Total sales
57.3
59.8 (4.4)
62.9 (5.1)
Telecommunications
42.7
43.6 (2.2)
44.3 (1.7)
Broadcasting
8.6
8.9 (2.8)
9.7 (9.5)
Convergence
6
7.4 (21.8)
8.8 (20.2)
Production
Export
(USD billion)
82.7
80.6 (-2.6)
82.4 (2.2)
45.02
39.01 (-13.4)
38.25 (-1.9)
140.1
140.4 (0.2)
145.3 (3.5)
Equipment
Grand total
Source: KISDI
The biggest trend in the broadcasting and telecommunications industry for 2010 was a "smart boom" from smart
phones and smart working to smart grid and smart TV, every sector in which information technology (IT) is applied.
So, the Korean government plans to develop a network, draw up medium and long-term plans for the development of
smart TV and IPTV, identify new growth engines such as cloud computing, and attract FDI in these sectors to improve
the industry's competitiveness and make Korea a global IT hub.
Investment Environment and Policy for Korea's Broadcasting and Telecommunications Industry
FDI inflows in the broadcasting and telecommunications sector, which had exceeded $200 million since 2006,
plummeted to $120 million in 2009 because of the global financial crisis and recovered to the $200 million level (59
investment projects) in 2010.
Invest KOREA Annual Report 2010 ▶ 26
Broadcasting and telecommunications accounted for 1.5 percent of Korea's total inbound FDI amount, $13 billion, in
2010. Mobile and fixed-line telecommunication made up 26 percent ($52 million) of the FDI inflows in the sector,
showing investors' growing interest in Korea's telecommunications market.
<Table 2-9> FDI Inflows in the Broadcasting and Telecommunications Industry for the Past 5 Years
(USD million)
Category
2006
2007
2008
2009
2010
Broadcasting/telecommunications
(No. of cases)
Mobile & landline telecommunications
(%)
Total inbound FDI
(No. of cases)
Share of broadcasting/
telecommunications in total inbound FDI
271
(80)
60
(22)
11,247
(3,108)
354
(92)
68
(19)
10,515
(3,560)
295
(63)
104
(35)
11,711
(3,744)
122
(54)
8
(7)
11,483
(3,131)
199
(59)
52
(26)
13,071
(3,107)
2.4%
3.4%
2.5%
1.1%
1.5%
Source: INSC
Korea's broadcasting and telecommunications industry has strong growth potential because of its world-class IT
infrastructure. However, the regulatory separation of broadcasting and telecommunications has hindered the
development of new services and growth of the media industry. In addition, high value-added segments such as media
contents and equipment still lack competitiveness. To address these issues, the government needs to facilitate fair
competition in the market and attract the world's leading companies to boost industry development through strategic
plans and support programs.
In 2010, the government incorporated broadcasting/telecommunications convergence and software into the list of 17
new growth engine industries it announced in 2009. In April 2011, it designated 4G mobile broadband services and
software companies to provide ￦6.5 trillion worth of loans and loan guarantees. The government is also considering
having Korea's ￦4.6 trillion New Growth Engine Fund invest in enterprises with commercialized related technologies.
More specifically, the Korea Communications Commission announced in 2009 that it would nurture the cloud
computing industry, which has emerged as the next big thing, into a ￦2.5 trillion market within five years. In June
2011, it was reported that Korea would build the Global Cloud Data Center in Busan, part of its efforts to become a data
hub in Southeast Asia. The port city is ideal for housing such facilities, as it has advanced networks, solid ground, a
geographical advantage, and government support. So, in addition to Japan's Softbank and the United States' eBay,
which plan to set up a data center in the city, many global companies are expected to establish such facilities in Korea.
Foreign-Invested Companies in Korea's Broadcasting and Telecommunications Industry
For the past five years, the Canadian telecommunications equipment manufacturer Nortel, Finland-based
telecommunications equipment and solution company Nokia Siemens Networks, American semiconductor maker Intel,
and Amphenol Infocom Europe, a major producer of electrical, electronic, and fiber optic connectors headquartered in
the Netherlands, launched business in Korea. In 2010, Intel invested $20 million to produce a chipset with a built-in
Invest KOREA Annual Report 2010 ▶ 27
wireless broadband (WiBro) module for Korea Telecom. Nokia Siemens Networks established a Smart Lab to explore
the potential of WiBro technologies by investing $18 million. Dimension Data, a South African company specializing
in information technology services, invested $3 million in the Internet Data Center in Songdo International Business
District, Incheon.
As Korean mobile carriers launch 4G mobile broadband services in 2011, Long Term Evolution (LTE) and WiBro
equipment manufacturers from around the world will come to Korea to explore new business opportunities. The
government should provide them with proper assistance to promote investment.
Major Investments
Cisco Systems, the world's No. 1 network equipment maker and headquartered in San Jose, California,
announced in 2010 that Korea would be a test bed for its Smart+Connected Communities project,
coinciding with the development of Korea's "U-city" adopting ubiquitous technology. Cisco and Incheon
Metropolitan City will collaborate to turn Incheon into a smart connected city. Cisco Chairman and CEO
John Chambers met with President Lee Myung-bak at Cheongwadae, or the Blue House, in 2009 to
outline such a huge investment plan in Korea. Cisco signed an MOU with Incheon Metropolitan City to
develop the Cisco Global Center for Smart+Connected Communities in Songdo International Business
District in 2010 and will spend ￦50 billion for the Smart+Connected Communities project in 2011. Cisco
will also establish a research center by 2012 to develop relevant technologies and plans to export
business models developed in the Korean market to other countries around the world in the long run.
Currently, using KOTRA's Global Alliance Project Series (GAPS), the company seeks to partner with
Korean online service firms in joint ventures, mergers or acquisitions, and joint research.
Invest KOREA Annual Report 2010 ▶ 28
7. Tourism & Leisure and Regional Development
The Tourism/Leisure Industry and Regional Development of Korea
The tourism industry reported negative growth globally in 2008 because of the global financial crisis. However,
according to the World Tourism Organization's (UNWTO) report published in October 2010, the industry's growth rate
returned to the pre-crisis level after it turned around in 2009. Additionally, the World Travel & Tourism Council (2009)
estimated that the tourism industry attracted capital investment of $1.2 trillion in 2009, down 5.3 percent year-on-year,
but that the capital investment was expected to increase 4.7 percent annually for the next ten years (2010-2019) to reach
$2.5 trillion. In particular, the Asia-Pacific region is likely to attract more investment for the next ten years. The largest
FDI receivers are expected to be Asia and the Pacific, Europe, and America by 2019, in that order.
<Table 2-10> Major Indicators for the Tourism/Leisure Industry and Regional Development
Category (2009)
Korea
Japan
U.K.
United States
France
Tourism-to-GDP ratio (%)
7.6
9.2
10
9.4
9.9
Actual growth rate (%)
4.8
-5.9
-1.2
-8.9
-3.5
Tourism-to-employment ratio (%)
8.4
10
10.5
10
11.6
Inbound tourists (million persons)
8
7
30
54
177
Source: Statistics Korea
The World Economic Forum's (WEF) Travel and Tourism Competitiveness Report 2011 revealed that Korea ranked
31st among the 139 countries surveyed -- 6th among 25 Asia-Pacific nations -- in the Tourism and Travel
Competitiveness Index. Korea was high on the list in cultural resources (5th) and ICT infrastructure (8th), but low in
affinity for travel & tourism (120th) and price competitiveness in the travel & tourism industry (96th).
<Table 2-11> Investment Climate Analysis of the Tourism/Leisure Industry and Regional Development
Competitive edge
Competitive disadvantage
Cultural resources, 5th
Affinity for travel & tourism, 120th
ICT infrastructure, 8th
Price competitiveness in travel & tourism industry, 96th
Ground transport infrastructure, 18th
Tourism infrastructure, 94th
Source: World Economic Forum's Travel and Tourism Competitiveness Report 2011
Investment Environment and Policy for Korea's Tourism/Leisure Industry and Regional Development
Investment projects notified in the fields of tourism/leisure and regional development are divided into three
categories for statistical purposes: culinary & accommodation, real estate & rental, and culture & recreation businesses.
FDI inflows in the sector accounted for about 20 percent of the service industry's total inbound FDI for the past five
years. In particular, the share of investments for real estate development was on the rise.
Invest KOREA Annual Report 2010 ▶ 29
<Table 2-12> FDI Inflows by Segment in Tourism and Real Estate Business
(USD million, %)
Category
2006
Amount
2007
Share
Amount
2008
Share
Share
11,711
Amount
2010
Share
11,484
Amount
Share
Inbound FDI in Korea
11,247
Services
6,627
58.9
7,612
72.4
8,387
71.6
7,594
66.1
6,302
48.21
Culinary & Accom.
1,114
16.8
422
5.5
37
0.4
176
2.3
58
0.9
Real estate & rental
325
4.9
977
12.8
689
8.2
1,420
18.7
2,687
42.6
Culture & recreation
308
4.6
366
4.8
151
1.8
55
0.7
110
1.7
1,747
26.3
1,765
23.1
877
10.4
1,651
21.7
168
45.2
Total
10,515
Amount
2009
13,071
Source: INSC (on a notification basis)
To boost FDI in tourism/leisure and regional development, the Korean government revised relevant regulations.
Under the amendment of the Enforcement Decree of the Foreign Investment Promotion Act in July 2009, authorities
may designate an individual foreign investment zone (FIZ) for building recreational condominiums and juvenile
training centers. Previously, the FIZ had been designated only for hotels, resorts, and amusement parks.
In addition, service businesses that have greatly contributed to national economic health are entitled to buy or take
out a lease on land by paying an amount equivalent to construction costs under Article 47 of the Enforcement Decree of
the Urban Development Act. Now authorities also may sell or lease public/state land developed under the Urban
Development Act to foreign investors, as the Foreign Investment Promotion Act was revised in December, 2009.
Foreign-Invested Companies in Korea's Tourism/Leisure Industry and Regional Development
The United States' Gale and KOZAR LLC, China's Guangsha Group, and the United Kingdom's AMEC have
participated in development projects in Korea. Mandarin Oriental Hotel will be established in Yongsan, Seoul. Jeju
Island has attracted many Chinese investors. China's Pramac Group has participated in the development of Iho Land
Resort. Malaysia's Berjaya also has invested in Yerye resort town. More recently, such marina developers as the United
States' Florida Marina Development, Singapore's SUTL, and Australia's Superior Jetties have entered the Korean
market as well.
Major Investments
Singapore's SUTL has signed an MOU with the Busan Port Authority to develop marina facilities with
KOTRA’s assistance. The SUTL Group is a global marina developer and operator established in 1965 and
also engages in developing property and trading travel/leisure products. The company's value is about
$600 million. SUTL plans to invest $200 million in the Busan North Port Redevelopment project and invest
in another three projects to establish marina facilities in urban areas.
Invest KOREA Annual Report 2010 ▶ 30
8. Logistics
The Logistics Industry of Korea
The total revenues of Korea's logistics industry were ￦111.9 trillion as of 2009, up 25 percent from 2006. A total of
340,000 firms were operating, and average revenues per business were ￦328 million.
<Table 2-13> Statistics on Logistics Industry
Category
2006
2007
2008
2009
Revenues (KRW million)
90,160,022
102,438,350
127,745,306
111,981,875
Operating cost (KRW million)
81,315,502
91,940,062
117,017,948
105,417,240
Logistics companies(No. of firms)
332,611
341,789
339,992
340,529
Average revenues (KRW million)
271
299
375
328
Source: Statistics Korea (2011)
The number of Korean logistics providers employing more than 500 people was 51, making up about 52 percent of
the industry’s total revenues. Among the top 10 companies by revenues, seven were maritime shipping companies,
reflecting that the key part of the industry was international shipping businesses (e.g., maritime and air transportation)
rather than comprehensive logistics service firms.
Investment Environment and Policy of Korea's Logistics and Distribution Industry
FDI inflows in the logistics industry (warehouse) were $197 million in 2010 on a notification basis, registering a
slight decrease from the previous year. However, as FDI in this sector often involves investment for wholesale and
retail business, it is necessary to look at inbound FDI in the wholesale and retail sector as well. In 2010, FDI inflows in
the logistics and wholesale/retail sectors combined were $1.16 billion, 8.8 percent of Korea's total inbound FDI.
<Table 2-14> FDI Inflows in Logistics and Retail Sectors for the Past 5 Years
(USD million)
Year
2005
2006
2007
2008
2009
2010
Total inbound FDI
11,247
11,242
10,514
11,705
11,483
13,072
Warehouse (logistics)
364
568
564
704
265
197
Share of A (%)
3.2
5.1
5.4
6.0
2.3
1.5
Wholesale & retail
807
499
1,827
938
2,203
964
Share of B (%)
7.2
4.4
17.3
8.0
19.1
7.3
Share of A+B (%)
10.4
9.5
22.7
14.0
21.4
8.8
Source: INSC (on a notification basis)
Invest KOREA Annual Report 2010 ▶ 31
The logistics cost-to-sales ratio of manufacturing and wholesale/retail businesses in Korea was higher than that of
Japanese firms, undermining the competitiveness of the industries. The Retail and Logistics Business Report of Korea,
China and Japan 2008 revealed that third-party logistics (3PL) services accounted for only 28.8 percent of Korea's
logistics sector, showing the need for more inward FDI in the segment to improve competitiveness.
<Table 2-15> Ratio of International Logistics Cost to Sales
(%)
Year
Korea
United States
Japan
1999
12.5
7.5
6.1
2001
11.1
9.1
5.5
2003
9.9
7.5
5
2005
9.7
7.5
4.8
2007
9.74
9.74
4.84
2009
8.48
8.48
4.77
Source: Korea International Trade Association's Korea International Logistics Council
Nevertheless, Korea's logistics cost-to-sales ratio had been reduced consistently and reached the level of the United
States in 2009.
Prospects for Korea's inbound FDI are very bright due to the country’s geographical proximity to the global
powerhouse that is China, Japan, one of the largest economies in the world, Far Eastern Russia, and Taiwan. Moreover,
its excellent air and sea ports (e.g., Incheon International Airport and Busan Seaport), a great network of freeways and
railroads, and inland logistics centers are also pluses.
In addition to these advantages, the Korean government has been focusing on promising segments such as
distribution centers within logistics complexes and port terminals to attract more FDI from Germany, France, and the
United States. Meanwhile, the government has also been streamlining the relevant laws and regulations that impede the
development of the logistics industry.
Foreign-Invested Companies in Korea's Logistics Industry
Foreign-invested companies were operating in Korea's international freight forwarding, port operation, international
express shipping, and logistics real estate development segments. International port operators such as Hong Kong's
Hutchinson Port Holdings, the Port of Singapore Authority, and the United Arab Emirates' Dubai Port International
have advanced to the Korean market. The Taiwanese containerized-freight shipping company Evergreen and its
subsidiary Uniglory, and Israeli cargo shipping company Zim have also started business in Korea. Additionally, four of
the world’s largest courier companies have been doing business in Korea: DHL (1977), TNT (1983), and both FedEX
and UPS (1988). A growing number of international real estate funds are investing in logistical facilities in Korea.
About 30 foreign investors, including Mapletree, AMB Property, Prologis, and Asendas Korea, have made investments.
Invest KOREA Annual Report 2010 ▶ 32
When it comes to the wholesale and retail sector, the UK-based grocery and general merchandise retailer Tesco has
opened more than 300 stores in the country. U.S. retailer Costco has expanded its investment in Korea. Both companies
have also established large-scale stores and logistics facilities in key logistics spots and surrounding areas of ports.
Major Investments
Various segments of the logistics industry have attracted FDI. Singapore's Mapletree has invested $30
million to develop logistical facilities. Canada's Schenker invested $14 million in Incheon International
Airport in May 2007, and the United States' Amway has opened the Asia Logistics Hub Center in Busan.
Many foreign investors have also engaged in projects for developing and operating seaports and
container freight stations.
Invest KOREA Annual Report 2010 ▶ 33
9. Finance and M&A
The Financial Industry and M&As of Korea
Thanks to the global economic recovery, mergers and acquisitions (M&A) also increased substantially in 2010,
compared with the previous year. In Korea, 499 M&A deals were reported, up 20.8 percent year-on-year, and the
aggregate value of the deals was ￦215.4 trillion, a 43.3 percent increase. The amount of all M&A deals combined
registered between ￦250-300 trillion in 2006-2007 powered by abundant global liquidity, but fell to around ￦150
trillion in 2008-2009 due to the global financial crisis and subsequent recession and capital crunch. In 2010, however, as
the economy started to recover, M&As increased significantly both in number and value.
In 2010, five of the ten largest deals in Korea were mergers between subsidiaries: KT and KTF; LG Telecom and LG
Dacom; LG Telecom and LG Powercom; Samsung SDS and Samsung Networks; and Hyundai Mobis and Hyundai
Autonet.
<Table 2-16> M&A Deals by Quarter, 2010
Period
Q1
Q2
Q3
Q4
Total
2009
91
97
114
111
413
2010
120
122
124
133
499
Source: The Fair Trade Commission
Manufacturing -- machinery, electronics, chemical, etc. -- accounted for 211 deals, up 37.9 percent from 153 cases in
2009, a bigger growth than in services. Five out of seven "mega deals" worth more than ￦1 trillion took place in the
manufacturing sector.
The share of M&As between subsidiaries and non-subsidiaries to expand business rose from 68.8 percent to 72.1
percent. Services (the sector of acquired/merged firms), including financial services and telecommunications, accounted
for 288 deals, 58 percent of all deals; and manufacturing, as mentioned above, accounted for 211 transactions, 42
percent.
Conglomerate integrations accounted for 49.0 percent (245 deals); horizontal ones, 34.5 percent (172 cases); and
vertical, 16.5 percent (82 cases). Although conglomerate integrations had the biggest share of the total deals in 2010,
they had been on a consistent decrease since 2008 (62.7 percent→ 53.3 percent→ 49.0 percent). The share of horizontal
integrations had not shown much difference over the years (27.0 percent→ 35.1 percent→ 34.5 percent). As many
companies focused on securing sources of raw materials or integrating a supply chain, rather than on expanding
business, the share of vertical integrations had increased (10.3 percent→ 11.6 percent→ 16.5 percent).
When it comes to integration methods, stock acquisition accounted for 37.3 percent; statutory merger, 23.1 percent;
statutory consolidation, 16.8 percent; strategic alliance, 12.4 percent; asset acquisition, 10.4 percent. Mergers between
Invest KOREA Annual Report 2010 ▶ 34
subsidiaries often took place in 2009 to improve efficiency, but as the economy began to recover in 2010, hostile
takeovers also increased again.
Investment Environment and Policy of Korea's Financial Industry and M&As
Korea's inbound FDI, which had hovered around $11 billion for the past ten years, registered $13 billion in 2010. The
share of FDI involving M&As peaked at $5.26 billion, 45.5 percent of the total inbound FDI in 2005 and fell to $2.01
billion, 15.4 percent in 2010.
One of the noticeable differences between the inbound FDI trends in Korea and other countries is the share of
investments involving M&As. While investment via M&A accounts for 60-70 percent of the total FDI inflows globally,
it had been between 20 and 30 percent in Korea for the past 5-6 years, except in 2005.
<Table 2-17> FDI Inflows by Type and Share
(USD million)
Category
2006
2007
2008
2009
2010
Inbound FDI
11,247
10,516
11,711
11,484
13,072
FDI involving M&As
4,309
2,483
4,431
3,375
2,017
Greenfield FDI
6,938
8,033
7,279
8,109
11,055
Share of
FDI involving M&As
38.3%
23.6%
37.8%
29.3%
15.4%
Source: INSC (on a notification basis)
Investment via M&A is closely related to the development of the capital market. To finance this type of investment,
large sums of money are needed where the role of the financial market comes in. In Korea, the financial sector has
lagged behind the manufacturing sector, as the government's efforts to attract FDI have been focused on the latter.
However, Korea's capital market is growing and liquidity is increasing, improving the financial market. Furthermore,
the introduction of the Financial Investment Services and Capital Markets Act relaxed a policy not allowing
conglomerates to own banks. Reforms of public financial corporations are also expected to enhance the financial market
and foster FDI involving M&A.
Foreign-Invested Companies in Korea's Financial Industry and M&As
Financial investors doing business in Korea are divided into venture capital and private equity firms, and the former
have lately been making more active investments. Intel Capital, Intel's corporate venture capital investing in start-ups
with original innovative technology, has invested in ten Korean enterprises. Qualcomm also started business in Korea
last year and now invests in two Korean firms. DFJ Athena, a Korea fund of the United States' Draper Fisher Juverson,
has been investing in both Korean and U.S. tech companies specializing in the development of software,
semiconductors, networking systems, and network-based services. DFJ Athena's basic investment strategy is to provide
its portfolio companies with technical, financial, and operational assistance to increase their value. More than ten global
Invest KOREA Annual Report 2010 ▶ 35
venture capital firms, including JAFCO and IDG, as well as private equity firms such as Goldman Sachs SAIF Partners
AIG and Carlyle have invested in Korea.
Major Investments
Solvay, a Belgian chemical company, launched the Solvay Korea Venture Fund, making a $17.5 million
commitment on July 30, 2010. Solvay had been looking for investment opportunities in Asia to grow
further. Invest KOREA had assisted the Future Business Division of Solvay since December 2008 to
establish the fund by introducing prospective Korean partners and inviting officials to Korea to facilitate
communication between the two sides. The Solvay Korea Venture Fund is the first large-scale venture
fund set up by a global corporation to invest in Korean venture firms, and is expected to encourage
similar investments from international investors.
Invest KOREA Annual Report 2010 ▶ 36
III
Contribution of FDI to Korea's Economic Growth
1. Economic Effects of FDI
(1) Revenues
The revenues of all foreign-invested companies combined, excluding the financial sector, were estimated at ￦226
trillion in 2009, 10.1 percent of the total national revenues according to the Financial Statement Analysis published by
the Bank of Korea. The manufacturing sector accounted for 12.0 percent of foreign-invested companies' aggregate
revenues, and services were 11.5 percent, showing little gap between the two, in contrast to ten years ago.
<Table 3-1> Foreign-invested Companies' Revenues and Share in National Total
(KRW billion, %)
Foreign-invested companies
Shares in national revenues
Year
Manufacturing
Services
All industries Manufacturing
Services
All industries
1999
44,892
20,797
66,591
9.7%
5.9%
6.9%
2000
61,956
29,023
92,126
11.5%
7.7%
8.9%
2001
65,446
35,952
102,940
12.1%
9.5%
9.8%
2002
68,485
39,786
109,948
11.1%
8.8%
8.9%
2003
77,810
46,549
126,478
11.8%
11.4%
10.0%
2004
94,047
52,324
148,743
12.2%
12.3%
10.6%
2005
103,842
58,208
164,749
12.3%
11.4%
10.2%
2006
119,517
58,890
180,895
13.4%
10.8%
10.6%
2007
127,737
70,638
200,578
12.9%
11.7%
10.7%
2008
154,145
80,227
237,171
13.2%
11.3%
10.8%
2009
142,287
81,211
226,165
12.0%
11.5%
10.1%
Source: Financial Statement Analysis, Bank of Korea
Note: Figures on industries other than manufacturing and services are provided in the appendix.
Foreign-invested firms' share in the national total revenues was 6.9 percent in 1999, but after reaching 10 percent in
2003, it has remained at a similar level. Manufacturing's share in foreign-invested firms' total revenues showed a
relatively steep increase by 2001, but after a sharp decline in 2002 witnessed a rather gradual growth until 2006, when it
reached 13.4 percent. It has been showing few ups and downs since. Services' share increased rapidly until 2004 to
reach 12.3 percent, but has been hovering over 11 percent since.
Invest KOREA Annual Report 2010 ▶ 37
<Diagram 3-1> Foreign-Invested Companies' Revenues and Share in National Total
(KRW billion, %)
Source: Financial Statement Analysis, Bank of Korea
Source: Financial Statement Analysis, Bank of Korea
(2) Employment
In 2009, foreign-invested firms across all industries, excluding the financial sector, employed 345,000 people, 5.1
percent of all employed people in Korea, according to the Financial Statement Analysis published by the Bank of Korea.
Manufacturing accounted for 6.9 percent of all people hired by foreign-invested firms, a slight decrease from the
previous year, and services made up 6.1 percent.
<Table 3-2> Foreign-invested Companies' Employment Level and Share in National Total
(number of people, %)
Foreign-invested companies
Shares in national employment
Year
Manufacturing
Services
All industries
Manufacturing
Services
All industries
1999
2000
152,086
173,591
82,532
97,516
237,610
274,208
2001
174,601
102,094
280,008
2002
176,969
109,767
289,696
8.6%
8.2%
6.2%
2003
191,188
116,180
310,518
9.0%
7.9%
6.3%
2004
196,956
126,860
327,195
9.3%
8.5%
6.1%
2005
198,910
133,160
335,526
8.7%
7.4%
5.4%
2006
203,129
140,816
347,238
8.5%
7.5%
5.5%
2007
205,287
148,272
356,517
8.6%
7.9%
6.3%
2008
2009
200,948
187,151
152,330
154,553
356,562
345,360
7.4%
6.9%
6.0%
6.1%
5.4%
5.1%
Source: Financial Statement Analysis, Bank of Korea.
Note: Figures on industries other than manufacturing and services are provided in the appendix. National employment has been
calculated based on the amount of per-capita value added provided in the Financial Statement Analysis (employment = value
added/ per-capita value added).
Invest KOREA Annual Report 2010 ▶ 38
The manufacturing sector once reached 9.3 percent of foreign-invested firms' total employment in 2004 and fell
gradually to about 7 percent recently. Services rose to 8.5 percent in 2004, but declined to 6 percent over the years.
<Diagram 3-2> Foreign-Invested Companies' Employment Level and Share in National Total
(number of person, %)
Source: Financial Statement Analysis, Bank of Korea
Source: Financial Statement Analysis, Bank of Korea
(3) Value Added
Total value added by foreign-invested firms across all industries, excluding the financial sector, were estimated at
￦37.8 trillion, 8.1 percent of Korea's national total value added according to the Financial Statement Analysis published
by the Bank of Korea. Manufacturing took up 9.8 percent and services 10.5 percent of the total value added by foreigninvested firms.
<Table 3-3> Foreign-Invested Companies' Value Added and Share in National Total
(KRW billion, %)
Foreign-invested companies
Share in national value added
Year
Manufacturing
Services
All industries
Manufacturing
Services
1999
10,081
5,006
15,315
2000
13,874
5,568
19,707
2001
13,067
6,364
19,817
2002
14,405
7,056
2003
16,256
2004
All industries
21,878
10.3%
10.2%
8.2%
7,971
24,721
10.7%
9.5%
8.2%
19,227
9,431
29,228
11.1%
10.8%
8.9%
2005
19,030
10,873
30,525
10.6%
11.0%
8.1%
2006
21,822
12,221
34,594
11.9%
11.7%
9.4%
2007
2008
2009
24,036
24,025
23,135
14,108
14,745
13,971
38,713
39,439
37,805
11.5%
10.5%
9.8%
12.5%
11.2%
10.5%
9.7%
8.9%
8.1%
Source: Financial Statement Analysis, Bank of Korea
Note: Figures on industries other than manufacturing and services are provided in the appendix. National value added has been
calculated based on the value added rate provided in the Financial Statement Analysis. (value added = revenues/value added rate)
Invest KOREA Annual Report 2010 ▶ 39
The manufacturing sector's share in foreign-invested firms' total value added jumped to 10.3 percent in 2002 and 11.9
percent in 2006, and has remained at about 10 percent in recent years. Services rose to 10.2 percent in 2002 and up to
12.5 percent in 2007, but has slightly dropped lately to about 10 percent.
<Diagram 3-3> Foreign-Invested Companies' Value Added and Share in National Total
(KRW billion, %)
Source: Financial Statement Analysis, Bank of Korea
(4) Exports from Manufacturing Firms
Foreign-invested manufacturing firms, excluding oil refining, registered ￦42.8 billion in exports and ￦34.2 billion
in imports in 2009, making up 12.7 percent and 16.1 percent of Korea's total exports and imports, respectively.
<Table 3-4> Foreign-Invested Companies' Imports & Exports and Their Share in National Total (manufacturing)
(USD million, %)
Year
Export
Import
Amount
Share
Amount
Share
1999
12,037
7.7%
9,485
8.8%
2000
17,258
10.8%
14,861
12.6%
2001
15,702
11.3%
13,119
12.8%
2002
16,720
10.9%
12,262
10.7%
2003
22,468
12.3%
15,231
11.3%
2004
27,294
11.4%
20,043
12.0%
2005
32,510
12.3%
22,040
11.9%
2006
45,836
15.3%
29,949
14.1%
2007
49,818
14.4%
30,145
12.6%
2008
49,917
13.1%
37,008
13.9%
2009
42,807
12.7%
34,243
16.1%
Source: Statistics between 1999 and 2006 are from OECD STAN DB, and 2007-2009 data are from KIET.
Note: The oil refining industry has been excluded, as it includes imports of crude oil.
Invest KOREA Annual Report 2010 ▶ 40
Exports grew steadily until 2006 to reach 15.3 percent, but have declined since. Imports hit 14.1 percent in 2006, but
dropped the next year. In 2009, although the amount of imports decreased, its share jumped to 16.1 percent. The amount
of exports had been larger than that of imports throughout the surveyed period between 1999 and 2009.
<Diagram 3-4> Foreign-Invested Companies' Imports & Exports and Their Share in National Total
(USD million, %)
Source: Statistics between 1999 and 2006 are from OECD STAN DB, and 2007-2009 data are from KIET
(5) R&D Expenditure of Manufacturing Firms
Foreign-invested manufacturing firms' R&D spending was estimated at ￦2.4 trillion in 2009, 10.0 percent of Korea's
national R&D expenditure. Its share in the national total grew rapidly from 7.0 percent in 1999 to 11.7 percent in 2005.
However, after a fall in the following years, it has leveled at about 10 percent.
<Diagram 3-5> Foreign-Invested Companies' R&D Spending and Share in National Total
(KRW billion, %)
Source: The Ministry of Education, Science and Technology (www.ntis.go.kr)
Invest KOREA Annual Report 2010 ▶ 41
2. Business Performance of Foreign-Invested Companies
1) Profitability
The operating profit margin of foreign-invested firms was 5.55 percent in 2009, slightly higher than Korean
companies' average of 5.04 percent. International companies underperformed in the manufacturing sector but
outperformed in services. However, in terms of return on equity, foreign firms surpassed Korean companies' average
both in manufacturing and services.
<Diagram 3-6> Operating profit margin
<Diagram 3-7>Return on equity
(%)
Source: Financial Statement Analysis, Bank of Korea
(%)
Source: Financial Statement Analysis, Bank of Korea
(2) Financial Soundness
Korean companies' debt-to-equity ratio (ratio=debt/total asset) was slightly higher than that of foreign-invested firms.
However, the gap was insignificant, as both Korean and international enterprises registered more than 50 percent,
showing strong financial stability.
<Diagram 3-8> Debt-to-Equity Ratio of Foreign-Invested and Korean Companies
(%)
Source: Financial Statement Analysis, Bank of Korea
Invest KOREA Annual Report 2010 ▶ 42
(3) Dividend Payout Ratio (dividends/net income for the same period)
The average dividend payout ratio of foreign-invested firms across all industries was 25.2 percent, higher than
Korean businesses' 15.3 percent. The ratio of majority-owned foreign affiliates was particularly high, registering 32.3
percent.
<Diagram 3-9> Dividend Payout Ratio of Foreign-Invested and Korean Companies
(%)
Source: Financial Statement Analysis, Bank of Korea
3. Major Characteristics of Foreign-Invested Companies' Business Activity
1) Investment Motives of Parent Company
(1) Foreign Investor's Industry
Individual persons accounted for about 4 percent of all foreign investors. Legal persons who were in the same
industry as their parent company were 80 percent; legal persons in industries different from their parent company were
10 percent. Financial investors such as venture capital firms were less than 10 percent.
<Diagram 3-10> Industry of Foreign Investors
Invest KOREA Annual Report 2010 ▶ 43
(2) Investment Purpose
In the manufacturing sector, 55 percent of foreign investors made investments to enter the Korean market, and 10
percent invested to set up production facilities for global markets. The rest of the surveyed investors answered that they
had planned to establish their Northeast Asian centers in Korea or use Korea's excellent workforce. When it comes to
the services sector, entering the Korean market, securing valuable assets, and setting up a Northeast Asian center were
cited as top motivations, in that order.
<Diagram 3-11> Investment Motivations
(3) Parent Company's Involvement in Management
Foreign-invested firms were divided roughly half and half between those whose parent company engaged in the
management of their local operations and those whose parent company did not. More than 60 percent of the parent
companies of manufacturing firms and wholesalers/retailers participated in their local business operation, while those of
services and other businesses gave more independence.
<Diagram 3-12> Parent Company's Involvement in Management
Invest KOREA Annual Report 2010 ▶ 44
(4) Technology Transfer
In manufacturing, wholesale/retail, and other sectors, the majority of the surveyed answered that they had transferred
technology in Korea. Investors that replied they had not transferred technology at all were only 10 percent of all
respondents.
<Diagram 3-13> Technology Transfer by Foreign Investors
2) Sales Activity
(1) Main Market
For most foreign-invested companies, Korea was their main market. About 20 percent of manufacturing firms and 10
percent of services businesses targeted overseas markets. The percentage of those going after both Korean and overseas
markets were very low.
<Diagram 3-14> Foreign-Invested Firms' Main Market
Invest KOREA Annual Report 2010 ▶ 45
(2) Customers in the Korean Market
About 90 percent of foreign-invested manufacturing firms and 70 percent of services firms answered that their clients
in the Korean market were corporate clients. Among those, 30 percent of manufacturing firms and 20 percent of
services companies replied that their corporate customers were Korean exporters. As such, the majority of foreigninvested firms were found to be part and raw material suppliers of Korean enterprises. Government policies to support
and further strengthen such partnerships are necessary.
<Diagram 3-15> Customers in the Korean Market
(3) Export Destination
In the manufacturing sector, 25 percent of foreign-invested firms exported their products to China, 19 percent to
Japan, and also to Korea's neighboring countries. Less than 20 percent of the respondents answered they did not export
their products at all.
<Diagram 3-16> Foreign-Invested Firms' Main Export Destination
Invest KOREA Annual Report 2010 ▶ 46
3) Procurement
(1) Source of Supply
There was a stark difference between industries in terms of procurement sources. Manufacturing businesses sourced
goods and services from Korean suppliers as much as they do from overseas suppliers. On the contrary, more than 60
percent of wholesalers and retailers procured them from overseas suppliers.
<Diagram 3-17> Foreign-Invested Firms' Key Procurement Sources
(2) Procurement from Overseas Suppliers
Many manufacturing firms procured materials and goods from overseas suppliers other than their parent company or
its subsidiaries, mostly from Japan, the United States, and the EU zone. The vast majority (74 percent) of wholesalers
and retailers sourced goods from their parent company.
<Diagram 3-18> Foreign-Invested Companies' Overseas Suppliers
Invest KOREA Annual Report 2010 ▶ 47
(3) Overseas Suppliers by Region
Overseas suppliers of foreign-invested manufacturing firms were mainly in Japan (37 percent), the United States and
Europe (34 percent) and China (15 percent).
<Diagram 3-19> Foreign-Invested Firms' Overseas Suppliers by Region
(4) Competitiveness of Locally Procured Goods
Almost 50 percent of foreign-invested firms said their locally procured materials and goods were competitive in
terms of price and quality. But 26 percent said the products were excellent in quality but their prices were high. This
indicates that Korean suppliers are competitive enough to attract foreign customers by providing quality products, but at
the same time, high supply costs (e.g., labor costs) may drive foreign investors away.
<Diagram 3-20> Foreign-Invested Firms' Assessment on Locally Procured Items
Invest KOREA Annual Report 2010 ▶ 48
(5) Technical Support and Training for Local Suppliers
About 30 percent of foreign-invested firms provided local suppliers with technical support or training programs.
<Diagram 3-21> Technical Support and Training for Local Suppliers
4) Research and Technology Development
(1) R&D
In the manufacturing sector, 40 percent of companies have their own research institutes and 20 percent have an R&D
division in the company. Twenty percent of manufacturers did not engage in R&D. When it comes to the services sector,
the share of companies doing R&D activities was much smaller than that of the manufacturing industry. Given that
many services firms are knowledge-based services providers, it is necessary to promote their investment in R&D
activities.
<Diagram 3-22> Foreign-Invested Firms' R&D Activity
Invest KOREA Annual Report 2010 ▶ 49
(2) Cooperation with Korean Research Institutes
In the manufacturing sector, many manufacturing firms focus on cooperating with both vendors and public research
institutes and 15 percent of them cooperate very intimately. In the services sector, the percentage of firms collaborating
with Korean research centers was very low.
<Diagram 3-23> Cooperation with Korean Research Institutes
(3) Assessment of R&D Cooperation
When asked whether collaboration with Korean research organizations had been helpful, about half of foreign
investors found it very productive, and 23 percent found it successful but with difficulties in the process of working
together.
<Diagram 3-24> Assessment of R&D Collaboration
Invest KOREA Annual Report 2010 ▶ 50
(4) Government Aid
In the manufacturing industry, the share of companies that had not received government aid for their R&D programs
(26 percent) was lower than expected. As many as 65 percent of enterprises had been granted funding to conduct R&D
projects, and 8 percent to pay labor costs. As for the services sector, 43 percent of all firms had not received financial
aid from the government. 40 percent had received funding to finance their projects, and 20 percent to pay labor costs.
<Diagram 3-25> Government Support for R&D Activities
(5) R&D Performance
Foreign-invested companies demonstrated great R&D performance. As many as 38 percent of manufacturing firms
and 50 percent of services firms had succeeded in developing a new original technology. In addition, 37 percent of
manufacturers and 21 percent of services companies had developed not new but their own technology.
<Diagram 3-26> Foreign-Invested Companies' R&D Performance
This chapter of the Contribution to Korea's Economic Growth is based on the Survey on Foreign-invested Companies
Business Performance 2010.
- Surveyed: 1,200 out of 2,678 foreign-invested firms (parameter that has made investment worth more than $500,000
- Content: Foreign-invested firms' financial/business performance and characteristics in 2009
- Organized by: the Ministry of Knowledge Economy
- Conducted by and when: KOTRA, KIET, and KDN, Sept. 2010 - Feb. 2011
Invest KOREA Annual Report 2010 ▶ 51
Ⅳ
FDI Induced by Invest KOREA
1. FDI Inflows
In 2010, Invest KOREA, as a national investment promotion agency, identified prospective investors and investment
projects and stepped up its assistance in resolving difficulties foreign investors encounter while doing business in Korea,
in order to attract new investments and promote national economic growth and competitiveness as a result. In particular,
Invest KOREA focused on emerging economies and the high value-added services sector to make up for the weak
investment of previous years due to the global financial crisis. So, FDI inflows induced by Invest KOREA increased by
6.7 percent year-on-year to $7.89 billion in 2010.
<Table 4-1> Inbound FDI Induced by Invest KOREA
(USD million, %)
Category
2006
2007
2008
2009
2010
National inbound FDI (notified amount)
11,248
10,515
11,711
11,484
13,070
IK-induced FDI (notified amount)
4,192
4,741
4,929
7,393
7,892
IK's share in national inbound FDI
43.3
48.0
54.3
64.4
60.4
Note: 2006-2008 data do not include investments involving M&As in the financial/insurance sector.
Source: INSC, Invest KOREA
Invest KOREA-induced inbound FDI in high value-added industries (e.g., financial services, regional development,
logistics, etc.) registered a 132 percent year-on-year increase to reach $2.95 billion. Key manufacturing segments such
as parts/materials and aerospace also attracted 28.2 percent more investment than in the previous year, registering $1.61
billion in total value.
Invest KOREA induced $1.55 billion in investments in the parts/materials sector, $1.39 billion in regional
development, $820 million in logistics and retail, and $770 million in M&As and global partnering.
Meanwhile, investments from China, Russia and other emerging economies rose significantly by 250 percent yearon-year, registering $1.05 billion.
Invest KOREA Annual Report 2010 ▶ 52
2. Investment Projects Identified
Invest KOREA has provided prospective investors with updates on Korea's business climate and opportunities
consistently to promote investment. It has also assisted them in materializing their investment plans, in close
cooperation with Korea Business Centers, KOTRA's local offices around the world, project managers, and Korea's
central and local governments.
Thanks to such efforts, the number of investment projects that Invest KOREA identified and helped manage grew by
26.8 percent year-on-year to 1,094 cases. This was also possible due to a focus on emerging economies and high valueadded industries to make up for weak investments prompted by the global financial crisis in 2008.
<Table 4-2> Projects Identified by Invest KOREA
Year
2006
2007
2008
2009
2010
No. of projects
564
644
810
863
1,094
Source: Invest KOREA
Europe amounted to 431 projects, 31 percent of all investments facilitated by Invest KOREA and North America, 342
projects. When it comes to investments by country, the United States topped the chart, registering 255 projects, and was
followed by Japan (122 projects), Germany (94 projects), and Canada (86 projects).
<Table 4-3> Managed Projects by Region in 2010
Region
North
America
Europe
Japan
China*
Asia
Middle East
Total
No. of projects
342
431
122
86
91
22
1,094
Note: Including Hong Kong and Macau
Source: Invest KOREA
Invest KOREA made efforts to identify promising and globally competitive firms in ten major sectors it selected,
which would drive Korea's economic growth, create high value-added jobs, generate new business opportunities, and
develop Korea's technological capabilities.
The agency, in collaboration with the Korea Institute for Advancement of Technology, identified 800 prospective
investors in manufacturing and new growth engine industries (18 sub-sectors, 21 products/technologies). Additionally,
Invest Korea selected 1,446 target companies (311 firms in financial services, 63 in tourism & leisure, 90 in emerging
economies, etc.) to promote investment by looking beyond developed countries or manufacturing industry and turning
to emerging economies with huge foreign reserves and a high value-added services sector.
By providing more attentive assistance to those new target companies and existing investors, Invest KOREA
identified and helped manage 902 investment projects in the ten major sectors, 82.4 percent of all investment projects
the agency managed, up 15.1 percent year-on-year.
Invest KOREA Annual Report 2010 ▶ 53
The parts and materials sector accounted for 242 projects; new renewable energy, 108; and financial services, 91..
<Table 4-4> Managed Projects by Industry
Industry
No. of projects
Industry
No. of projects
Parts and materials
242
Finance
91
Aerospace
29
Tourism & Leisure
23
IT convergence and related business
151
Regional development
65
Biotechnology
80
Logistics & Retail
83
New renewable energy
108
M&A and global partnering
30
Source: Invest KOREA
3. Investment Attraction Activity by Sector
As developed countries could not afford as much investment in overseas markets as they used to because of the
global financial crisis, Invest KOREA looked to emerging economies to promote FDI, and at the same time, strived to
boost investment in manufacturing and high value-added services sectors.
Manufacturing
In response to growing imports and trade imbalance in the parts and materials sector, Invest KOREA stepped up its
efforts to attract investment from German and Japanese parts and materials manufacturers. In this regard, the agency
worked to raise awareness about industrial complexes in Korea established exclusively for parts and materials
manufacturers.
In addition, Invest KOREA facilitated partnerships between global auto parts and components manufacturers and
Korean car makers. As a result, FDI inflows in the parts and materials sector rose by 23.4 percent year-on-year to $1.55
billion in 2010. The parts and materials industrial complexes attracted seven new foreign firms, which invested $111
million.
To attract aerospace investments and improve the industry's competitiveness, the agency assisted in reforming
relevant regulations such as laws on defense offset and performed FDI promotion activities at the Global Offset and
Countertrade Association's conference (GOCA) and UK Farnborough Air Show. As a result, it induced investment
commitments of $60 million.
Invest KOREA Annual Report 2010 ▶ 54
<Table 4-5> FDI Attraction Activities in Manufacturing Sector
Sub-sector
Parts &
materials
Project Title
Japan Task Force for Attracting Investors to
Parts/Materials Industrial Complexes (Mar.)
Visited 11 Japanese major companies.
Japan Investor Relations (Jun.)
Attracted 229 Japanese companies (162
investment projects, $56 M).
Attracted 170 German businessmen (96
investment projects, $8.5 M).
Attracted 89 Japanese businessmen, set up a
Korea PR booth.
Visited 7 European major companies.
Germany Investor Relations (Jul.)
Investor Relations at Korea Parts and Components
Fair in Tokyo (Oct.)
Europe Task Force for Attracting Investors to
Parts/Materials Industrial Complex (Nov.)
Auto parts
Aerospace
Activity
Tsubakimoto Chain Engine Assembly Plant (Jun.)
Assisted the plant construction in BJFEZ
complex ($25 M).
Gestamp Auto Parts Assembly Plant (Jun.)
Assisted the plant construction in Daegu
Dalsung FIZ($10 M).
Attracted 72 officials from auto parts
manufacturing firms. Visited 4 companies.
Assisted in entering into an MOU for building a
plant in Gangwon-do ($30 M).
Korea Auto Day Investor Relations in Detroit
(Dec.)
Huchinson Plant (Dec.)
GOCA Conference Investor Relations (Mar.)
Attracted 200 companies, induced 3 investment
projects.
Boeing R&D/Investment Promotion (May)
Boeing considered building an aerospace
research center in Korea.
Set up a Korea PR booth (51 companies, $50 M)
Road Show at UK Farnborough Air Show (Jul.)
North America Aerospace Investment Task Force
(Dec.)
Visited 5 North American aerospace firms ($30 M)
New Growth Engine
Invest KOREA continued its efforts to boost FDI in new growth engine industries the government has been nurturing
such as renewable energy, IT convergence, biotechnology, semiconductors, and display panels. Thanks to various FDI
promotion campaigns ranging from the renewable energy investment task force in January to Green Investment Plaza
2010 in December, Invest KOREA induced $1.66 billion in commitments in these industries in 2010.
<Table 4-6> FDI Attraction Activities in New Growth Engine Industries
Sector
New
renewable
energy
Project Title
Activity
New Renewable Energy Investment Joint Task Force
(Jan.)
Korea-Europe Wind Power Plaza (Jun.)
Set up a Korea PR booth. (8 wind power
companies visited).
Identified 9 prospective investors.
Local Governments' Joint Investor Relations in North
America (Sept.)
LA Solar Power International (Nov.)
Attracted $210 M investment.
Green Investment Plaza 2010(Dec.)
Attracted $250 M investment in biofuel plant.
Set up a Korea PR booth.
Invest KOREA Annual Report 2010 ▶ 55
LED Investment Task Force (Jul.)
Display panel/
LED
Display Panel/LED Investment Task Force (Dec.)
IT
convergence
Biotechnology
Induced 7 LED investment projects
Induced 7 display panel investment projects
Europe Task Force for IT Convergence Investment
(Nov.)
Conducted investor relations for European firms.
Biotech/Pharmaceutical Investment Task Force (May)
Induced 5 investment projects.
Investment Seminar at the Global Biotech Forum
(Jun.)
Medical Complex Investor Relations (North America
in Oct., Japan in Nov.)
Attracted 150 companies, induced 7 investment
projects.
Attracted 30 organizations, identified 14
prospective investors.
Meanwhile, the organization attracted global high-tech firms' research centers and encouraged joint investment,
research and marketing between international and Korean enterprises through the Global Alliance Project Series
(GAPS). In 2010, four new R&D centers ($34 million) were established and six foreign firms made investments of $21
million.
<Table 4-7> FDI Attraction Activities in Global R&D and Partnering
Sector
Global R&D
Project Title
Activity
IT & Communication Convergence Investment
Promotion (Apr.)
Induced 9 new R&D projects.
US Joint Research Promotion (Oct.)
Induced 7 biotech projects.
Europe R&D Investment Promotion (Dec.)
Induced 6 semiconductor and
telecommunications projects.
Qualcomm Partners' Day (Feb.)
Attracted $4 million investments and R&D
centers.
Attracted $2 million investments in 2 Korean
firms.
Attracted $10 million investment and R&D
centers.
Facilitated 2 joint research projects.
Attracted R&D centers.
Established $40 million fund.
Attracted global R&D centers.
Selected 14 Korean partner companies.
GAPS with Novartis (Mar.)
GAPS with GE (May)
GAPS
GAPS with Johnson & Johnson (May)
GAPS with Solvay (Jun.)
GAPS with Merck (Sept.)
High Value Added Services
Invest KOREA also boosted FDI in high value-added services sectors such as financial services, tourism & leisure,
and logistics & retail by reinventing itself.
First, it held investor relations meetings -- North America Financial Sector Investor Relations (Feb.), Singapore
Investment Promotion Forum (Sept.), Korean Private Equity and Venture Capital Funds Forum (Nov.) -- to introduce
Invest KOREA Annual Report 2010 ▶ 56
solid Korean tech firms that were having difficulty finding investors due to the global financial crisis, to prospective
financial investors. As a result, $520 million in commitments were made in 2010.
The agency also organized Regional Development Investors Relations (Apr.) and Regional Development Week
Investor Relations (Sept.) to facilitate balanced development between cities. Additionally, it sent Singapore Logistics
Investment Task Force (Jun.) and Europe Logistics Firms Task Force (Jun. and Dec.) and organized the Ministry of
Land, Transport and Maritime Affairs' North America Logistics Investor Relations (Sept.) to attract investments from
global logistics and retail corporations. So, FDI inflows in the high value-added services sector rose by 132 percent
year-on-year to $2.95 billion.
<Table 4-8> FDI Attraction Activities in High Value-Added Services Sector
Sub-sector
Financial
services
Tourism&
leisure and
regional
development
Project Title
North America Financial Sector Investor Relations
(Feb.)
Attracted 76 officials from America's major
private equity funds, venture capital, and banks.
Global Financial Investor Road Show (May)
Attracted 100 investors including American
pension funds.
Singapore Investment Promotion Forum (Sept.)
Attracted 60 officials from Singapore's public
corporations, and venture capital and private equity
funds.
Asia-America Venture Investment Conference
(Sept.)
Consulted 59 venture capital firms in Silicon Valley.
CIO Summit Investor Relations (Oct.)
Attracted 154 fund managers in New York City
and officials from national pension funds.
Korea Private Equity and Venture Capital Funds
Forum (Nov.)
Attracted 280 officials from global venture capital
and private equity funds, and Korea's financial firms.
Regional Development Investor Relations (Apr.)
Attracted 67 officials from Asian development
companies. Induced 2 investment projects.
Regional Development Week Investor Relations
(Sept.)
67 companies visited Korea ($50 M).
North America Regional Development Investor
Relations (Sept.)
Attracted 23 officials from America's
development companies ($4.46 M).
Saemangeum Investment Task Force (Oct.)
Visited 30 Chinese, Middle East, European
companies and organizations.
KOTRA-JDC Follow-up Project
Japan Investor Relations (Feb.), Beijing Investor
Relations (Sept., Nov.),Guangzhou Task Force
(Sept.),
Osaka Task Force (Nov.), Shanghai Investor
Relations (May)
Pyeongtaek Port Investment Road Show (Mar.)
Entered into 2 MOUs.
Visited 10 Southeast Asian logistics companies.
Visited 8 logistics and retail companies.
Induced investment projects ($70 M).
Visited logistics companies.
Induced investment projects ($180 M).
Attracted 120 businessmen in LA's logistics
industry.
Singapore Logistics Investment Task Force (Jun.)
Logistics &
retail
Activity
Europe Logistics Firms Task Force (Jun., Dec.)
Ministry of Land, Transport and Maritime Affairs'
North America Investor Relations (Sept.)
Invest KOREA Annual Report 2010 ▶ 57
Emerging Economies
As investment flows from developed countries had slowed due to a continued economic recession, Invest KOREA
turned to emerging economies for new FDI sources.
In this regard, the agency created China Desk, a Chinese investment promotion team, within headquarters and its
Korea Business Center in Shanghai in May 2010 to promote FDI from China, which has been investing aggressively in
global markets with its $2.4 trillion foreign reserves.
Invest KOREA held investor relations meetings throughout China and created investment promotion task forces, in
collaboration with the China Desk in Shanghai and Korea Business Centers in Beijing and Guangzhou, to explain
Korea's investment climate. As a result, it attracted investments of $380 million from investors in China and Taiwan.
<Table 4-9> FDI Attraction Activities in China
Region
Mid-China
North China
South China
Northeast
China
Midwest
China
Hong Kong
Project Title
Activity
Shanghai Investor Relations at China Desk Launching
Ceremony (May)
Attracted 250 companies in finance, real estate,
and renewable energy sectors.
Shanghai Investor Relations (Sept.)
Attracted 50 financial services and real estate firms
($20 M investment was notified).
Ningbo Investor Relations (Dec.)
Attracted 90 officials from local shipbuilding
equipment manufacturers.
Nanjing Investor Relations (Dec.)
Attracted 70 officials from renewable energy firms
and auto parts manufacturers.
Goyang Investment Task Force (Nov.)
Consulted 7 real estate development firms in Shanghai.
Inner Mongolia Investor Relations (Oct.)
Attracted 60 local businesses.
China Global Investment Fair (Nov.)
Set up a Korea PR booth.
Qingdao Investor Relations (Dec.)
Attracted 50 local businesses.
CCPIT-KOTRA Regular Meeting Investor Relations (Nov.)
Attracted 240 Chinese businessmen
2nd Inner Mongolia Investor Relations (Dec.)
Attracted 30 officials from local businesses.
Investor Relations at China International Fair for
Investment and Trade in Xiamen (Sept.)
Attracted 80 companies.
Set up a Korea booth (130 businesses visited the booth).
Investor Relations at Global Korean Business
Convention in Shenyang (Jul.)
Attracted 50 major local businesses.
Northeast Asia Economic Forum in Changchun
(Sept.)
Explained Korea's investment climate to local
businesses.
7th International Conference for Tourism and Culture
in West China (Oct.)
Explained Korea's tourism industry and investment
projects.
Investor Relations at the Hunan International
Friendship Cities Cooperation Forum (Jun.)
Identified prospective investment projects of $100 M.
Investor Relations at the MIPIM in Hong Kong
(Nov.)
Attracted 41 real estate firms in Hong Kong.
Provided investment consulting for 16 projects.
Invest KOREA Annual Report 2010 ▶ 58
The agency also held the Singapore Investment Forum (Sept.) and Korea-Abu Dhabi Investment Forum (Oct.) to
attract investment from emerging economies, which have been expanding investment in global markets through
sovereign wealth funds. By diversifying investment sources, Invest KOREA induced 250 percent more investment than
in the previous year from China and other emerging markets, registering $1.05 billion.
<Table 4-10> FDI Attraction Activities for Sovereign Wealth Funds
Category
FDI
promotion
Research
Project Title
Activity
Singapore Investment Forum (Sept.)
Attracted 60 officials from private equity and
venture capital firms and sovereign wealth fund
managers.
Korea-Abu Dhabi Investment Forum (Oct.)
Briefed on M&A and real estate development
opportunities for sovereign wealth funds in the
Middle East.
Research on Establishment of International New
Growth Engine Fund
Created an international fund investing in green and
renewable energy with other countries
4. Administrative Services for Investors
As of 2010, 20 officials dispatched from 15 organizations (9 Korean government agencies, 4 local governments, the
Court Administration Office, and other relevant organization) were working at Invest KOREA to attract FDI and reform
regulations. They have facilitated close cooperation between their organizations and Invest KOREA.
Invest KOREA resolved 3,955 grievances filed by foreign investors in 2010. Among them, 3,945 grievances were
addressed through direct administrative services such as confirmation on the completion of investment in kind,
application for business registration and services relating to immigration. As for the remaining 10 cases, Invest KOREA
provided assistance in applying for corporate registration.
<Table 4-11> Administrative Services for Foreign Investors
(number of cases)
Category
Direct services
- Confirmation of the completion of investment in kind
- Nine services regarding immigration
(extended stay permit, re-entry permit, etc.)
- Application for business registration
Corporate registration
Total
2007
2008
2009
2010
3,511
5,629
4,170
3,945
(8)
(4)
(7)
(4)
(3,493)
(5,619)
(4,150)
(3,941)
(10)
(6)
(13)
-
13
4
9
10
3,524
5,633
4,179
3,955
Source: Invest KOREA
Invest KOREA Annual Report 2010 ▶ 59
Invest KOREA has been operating the Investment Notification Statistics Center (INSC) to manage data on FDI
notifications and foreign-invested firms and other statistics. In 2010, 3,108 investments of $13.07 billion in total were
notified, and among them, 362 projects ($8.71 billion) were registered through Invest KOREA.
<Table 4-12> Notified FDI Projects
(number of projects, USD million, %)
2007
2008
2009
2010
Category
No. of cases
Total
Amount
No. of cases
Amount
No. of cases
Amount
No. of cases
Amount
3,559
10,514
3,744
11,705
3,131
11,484
3,108
13,071
IK
399
3,618
328
2,913
339
5,936
362
8,717
Share*
11.2
34.4
8.8
24.9
10.8
51.7
11.6
66.7
Note: Investments registered through Invest KOREA (headquarters and KBCs)
Source: Invest KOREA
As of late 2010, the number of registered foreign-invested companies was 13,780 (including 9,662 juristic persons),
up 6.5 percent year-on-year. This was because many firms had filed registration applications before the minimum
investment amount required for registration increased from ￦50 million to ￦100 million in October, 2010. Data on
more than 1,000 foreign-invested firms that actually had closed its business were deleted ex officio, as of late 2010.
<Table 4-13> Registered Foreign-invested Companies
(number of companies)
Year
All firms*
Registered firms
2007
2008
2009
2010
19,471
(13,873)
21,335
(14,469)
19,150
(13,178)
19,768
(13,620)
14,768
16,429
12,931
13,780
(10,369)
(10,969)
(9,344)
(9,662)
Note: The total number of businesses registered at Invest KOREA and other relevant agencies. The numbers in the parenthesis are
juristic persons.
Note*: "Present" includes companies that notified their investments but are not yet registered as foreign-invested companies.
Note**: Data on over 1,000 companies were removed ex officio on December 31st, 2010.
Source: Invest KOREA
5. Incubating Services for Foreign-Invested Companies
Invest KOREA Plaza (IKP), the only incubation center for foreign investors in Korea, opened in November 2006 to
offer one-stop services for the successful settlement of foreign-invested companies. The nine-story building, which has
two underground levels, houses the offices of foreign-invested companies from the 7th to 9th floors, a business center
consisting of banks, accounting firms, etc., and other relevant organizations such as foreign business associations.
Invest KOREA Annual Report 2010 ▶ 60
From its opening in 2006 to December 2010, IKP has provided 96 companies with office spaces at affordable rates,
and 75 of them moved out of the center. The accumulated notified FDI of these firms amounted to $2.6 billion.
<Table 4-14> IKP Incubating Services
Category
2006
2007
2008
2009
2010
Total
New tenants (No. of companies)
23
20
14
23
16
96
Former tenants (No. of companies)
-
17
19
17
22
75
Notified FDI (USD thousands)
940,187
581,433
66,434
592,671
495,392
2,676,117
Source: Invest KOREA
6. Settlement Assistance for Investors
The Investors Support Center (ISC), which opened in November 2006 within IKP to help foreign investors adapt to
the new environment, was consolidated with Invest KOREA's General Administration Support Team to become the
Investment Consulting Center (ICC) in August, 2010.
ICC provides counseling services in Korean, English, and Japanese on issues such as visa issuance/extension,
housing, education, and medical services. Since the second half of 2008, ICC has also been providing foreign investors
and their families with secretarial services, for example, accompanying them to hospitals or schools.
<Table 4-15> Counseling Services by Category
(number of cases)
Category
2006 (11~12)
2007
2008
2009
2010
Settlement counseling
71
1,809
3,601
3,902
3,193
Secretarial services
-
-
6
22
52
Total
71
1,809
3,607
3,924
3,245
Source: Invest KOREA
7. Foreign-Invested Companies' Resolved Grievances
Resolving grievances foreign-invested companies encounter while doing business in Korea isn’t just about
troubleshooting. It is also about creating a better investment climate.
To that end, the Office of the Foreign Investment Ombudsman addressed 385 grievances filed by foreign investors in
2010, 20 more cases than in 2009. Among them, 13 cases were resolved by system improvement, 38 by administrative
support, and 334 by Home Doctor intervention.
Invest KOREA Annual Report 2010 ▶ 61
<Table 4-16> Foreign-Invested Companies' Grievances by Resolution Method, 2006-2010
(number of cases)
Resolved cases
Method
Year
No. of cases
Growth rate
System
improvement
Administrative
measure
Home Doctor
intervention
2006
353
0.6
19
73
261
2007
370
4.5
12
60
298
2008
353
-4.5
20
64
269
2009
365
3.4
24
62
279
2010
385
5.4
13
38
334
Total
(%)
1,826
(100.0)
-
88
(6.7)
297
(18.3)
1,441
(75.0)
Note: Filed grievances were classified into three categories by resolution method: (1) system improvement, where relevant laws were
revised; (2) administrative measure, where administrative actions were taken under the relevant regulations; and (3) Home
Doctor intervention, where experts at KOTRA advised companies.
Source: KOTRA
Out of all 385 grievances, 50 fell under the category of taxation, 50 in investment incentives, 37 in investment
procedure, 27 in customs and trade, and 24 in labor and personnel. Home Doctors paid visits to 702 companies.
<Table 4-17> Foreign-Invested Companies' Grievances by Category, 2006-2010
(number of cases)
Growth rate
09/10
Category
2006
2007
2008
2009
2010
Taxation
76
62
44
35
50
42.8%
Labor & personnel
38
24
17
37
24
35.1%
Investment procedure
27
37
37
33
37
12.1%
Customs & trade
44
35
28
22
27
22.7%
Investment incentive
30
42
51
39
50
28.2%
Finance &
foreign exchange
21
25
11
13
7
-46.2%
Visa & immigration
21
21
26
24
23
-4.2%
Construction
16
22
12
18
13
-27.8%
Sales & retail
5
13
15
11
14
27.2%
Plant establishment
13
15
24
17
24
41.1%
Civil disputes
5
10
9
9
8
-12.1%
Authentication & examination
8
10
11
22
15
-31.8%
Insurance & welfare
2
3
2
2
2
-
Environment
10
0
0
1
3
200%
Road traffic
1
3
2
0
0
-
Living environment
2
3
5
4
3
-25%
Electricity & water
Discrimination
Other
1
0
33
0
0
45
1
0
58
1
0
77
3
1
81
200%
100%
5.2%
Total
353
370
353
365
385
5.4
Source: KOTRA
Invest KOREA Annual Report 2010 ▶ 62
KOTRA 자료 11-039
Invest KOREA Annual Report 2010
C 2011 by KOTRA
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All rights reserved, No part of this book may be reproduced
in any form or by any electronic or mechanical means,
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permission in writing from the publisher
Printed and bounded in the Republic of Korea by KOTRA
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Tel: 82-2-3460-7114, Fax: 82-2-3460-7777
Homepage: http://www.kotra.or.kr, http://investkorea.org.
Invest KOREA Annual Report 2010 ▶ 63