Q What do you consider to be the highlights of the past year in terms of FDI into South Korea?
A This yea, we were proud to have the 3M corporation start construction on a $140m plant in Gyeonggi Province to make respirators using non-woven fibres for personal safety applications.
We have also had RFI Global, which is a UK company, open a mobile telephone testing laboratory in January this year for the convenience of major clients such as Samsung and LG.
We were also able to attract some significant research and development centres to Korea. One of the most important ones will be built by [US company] Kimberly-Clark, which has agreed to establish its global centre of innovation, the first such centre outside the US, in Korea and to this end has committed to a significant investment.
On a smaller scale dollar-wise, but important technology-wise, is a decision by Google, announced about a month ago, to establish a global R&D centre focusing on engineering. Also, the Battelle Institute, a leading US research institute, is to undertake research in conjunction with Korea University, one of Korea’s leading universities, to develop new technologies in the biotech area.
Q What are your goals for 2007?
A Our goals for next year will remain more or less the same. We will continue to attract investments that have high value and growth potential in activities that Korea needs to continue to develop its economy and technological capability. Included in this list are services, among them logistics and distribution services. We will continue to attract R&D centres and greenfield investment in advanced industries, including IT and electronics and the automobile parts industries. This year, we have had several investments in the auto parts sector, including continued investments by Magna International, a Canada-based multinational auto parts producer.
Q Does China’s massive growth present a challenge for Korea?
A Yes and no. Korea has been one of the primary beneficiaries of economic growth in China. Korea and China are at different stages of economic development so they compete to an extent, but there are also complementary areas where growth in China can encourage advances in Korea. A number of companies have decided to invest in Korea rather than China, even though Korea is a slightly higher cost country in terms of labour, because of its more highly developed technology and its highly skilled and more stable labour force. An ongoing problem in China is high worker turnover that decreases productivity.
Companies are also concerned about loss of trade secrets when employees leave so soon after they start employment. For this reason, companies with sensitive technology and important intellectual property rights to protect choose to invest in Korea and supply goods and services to China from their Korean base. So, yes, we are losing some investments to China but its growth has also benefited many areas of Korean industry, prompting foreign investment to capitalise on this rising demand.
Q How can Korea maintain its technological edge?
A Maintaining a technological edge is not easy. It requires continued investment in human resources as part of our R&D infrastructure. It means, first, investing in education to produce masters and doctorate degree holders in our own institutes of learning, as well as attracting some of the graduates who have obtained such degrees from overseas and trying to repatriate them back to Korea. Second, the Korean government has been increasing its R&D budget steadily in the past 10 years at a growing rate and will continue to do so, while increasing its funding of Korea’s research institutes directly and indirectly to continue to build our research infrastructure and thereby maintain our edge.
Q How is the effort to make Seoul a key north-east Asian hub progressing?
A It’s coming along, but it’s not at the point where either the mayor of Seoul or the president are satisfied. It’s not going to happen overnight.
Seoul, because of its geographical location, because of the proximity to China and Japan, can be a hub for transportation, logistics, tourism and finance. These are the goals that Seoul has set and there has been progress in that regard. In finance, many more international financial institutions have located in Korea in the past five years. And ground was broken in June of this year to construct the International Finance Centre in Seoul, an important complex being built in partnership with AIG. Seoul is also continuing to improve its environment for various other industries other than finance.
Q Mayor Lee Myung-bak made a big effort to improve the quality of life in Seoul. Will we see any changes to economic development policy under the new mayor?
A I attended a meeting of the Seoul International Business Advisory Council last week, the first one held under Mayor Oh Se-Hoon, where he announced that he wants to create jobs by focusing on developing the service sector, including tourism, knowledge-based industry, conventions and fashion design. His is a slightly different focus than that of the previous incumbent but he has clearly decided to base his job creation and economic development programme on nurturing these key service industries in Seoul.
Q Are events in North Korea making investors jittery about South Korea?
A It is certainly not a positive development that North Korea tested a nuclear weapon but so far it has not had a measurable impact in the stock market and the financial markets. Stock prices are higher now than they were just prior to the announcement of the test. Again, last week during Foreign Investment Festival, President Roh Moo-hyun met with representatives of the foreign investor community and made the point specifically that the relationship with North Korea can be managed. The president is confident that it can be managed in a peaceful way and the North Korean test should not result in any materially different calculations on the part of the foreign investor.
Judging from the reaction of the financial markets, as well as all of the investors that Invest Korea has been keeping track of, that seems to be the case. We’re not aware of any companies that are readjusting or cancelling their investment plans in Korea even though in the very short run there is some heightened risk.
Now that North Korea has agreed to return to the six-party talks, I believe there is greater confidence among all concerned that the process can be managed peacefully.
Q How did the recent Foreign Investment Festival go?
A We had an excellent turnout. Many investors – about 120 or so – came from around the world and participated in various programmes, including a gala dinner at which foreign-invested companies that had distinguished themselves were presented with awards.
A prime element of the festival was the sectoral partnering sessions for the automobiles parts and components industry, aerospace industry, IT and electronics, real estate development and social infrastructure projects. These sessions were well attended, and many participating investors were invited to meet with the president in a special session at which he reiterated his support for FDI and the free trade agreement with the US, and later answered questions on topics such as North Korea.
The festival was also marked by the grand opening of Invest Korea Plaza, which is a nine-storey building dedicated to facilitating the incubation of foreign investors.
Q What was the rationale behind the plaza?
A The plaza is an infrastructure that the Korean government felt would be helpful to the foreign investor community. It consists of three floors of office space, a fully furnished business suite that is rented at a big discount to first-time [and repeat] investors in Korea to reduce their initial cost outlay. The building also accommodates the Investor Support Centre, which has representatives from a number of key ministries and agencies including the National Tax Service, immigration office and customs services to deal with issues that often arise at the initial stages of investment so that investors can address them right away. It is like a one-stop shop, a one-stop service centre.
Other floors accommodate offices of business services that are required to get companies off the ground, such as law firms and banks. The representatives of state and local governments that are trying to attract investors occupy other floors. Since it is connected by a skywalk [bridge] to our main building next door, the KOTRA building, investors can come over to KOTRA and receive additional consulting and advice on how to do business in Korea.
The three floors that are available for rent have 38 offices altogether. Prior to the opening day, these were about 75% rented and, by the end of 2006, all will be rented out. The other offices for business service providers and regional governments are also rented out so we are doing pretty well.