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2. 2 Korea’s Development Model FDI Trends and Impact on the Korean Economy FDI Trends and Impact on the Korean Economy Invest Korea Investment Promotion in Practice Concluding Remarks

3. 3 ※ Source: The Bank of Korea, IMF, World Bank, Ministry of Strategy & Finance of KOREA  Area: 100,000km 2 (108 th )  Population: 50 million (24 th )  GDP (nominal): $1.16 trillion* (15 th ) - Per Capita: $23,749* (32 nd )  GDP (ppp): $1.56 trillion* (12 th ) - Per Capita: $31,754* (25 th )  GDP Growth Rate: 3.6% (2011)  Trade (2011): ▶ Export: $557BN ▶ Import: $524BN * Estimate as of Sept. 2011, IMF  Foreign Exchange Reserves: $316 billion (Feb. 2012) * Short-Term External Debt: $136 BN (2011) * Gross External Debt: $398 BN (2011)  Inflation (CPI): 3.1% (Feb. 2012)  Unemployment: 3.5% (Jan. 2012)  Fiscal Deficit (2011) - Excluding social security fund: △ 2.0% of GDP - Overall balance: 0.4% of GDP  National Debt: 35.1% of GDP (2011) 299 307 304 311 305 312 303 311 ※ Foreign Exchange Reserves (US$ bil.) 309 306 311 316

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6. 6 Exports to Overseas Market Exports to Overseas Market Abundant & Educated Labor Force Abundant & Educated Labor Force Foreign Loan

7. 7 Korea’s Development Model FDI Trends and Impact on the Korean Economy FDI Trends and Impact on the Korean Economy Invest Korea Investment Promotion in Practice Concluding Remarks

8. 8 ※ Foreign Investment Promotion Act (FIPA) Type of Investment FDI Portfolio Investment Greenfield M&A Stocks Bonds FDI is an investment made to acquire lasting interest in enterprises operating outside of the investor’s economy. Forms of FDI are equity capital, the reinvestment of earnings and the provision of long- term and short-term intra-company loans. Inbound FDI Outbound FDI

9. 9 “Total FDI for the decade since the Asian Financial Crisis (1998-2010) is 6 times that of 1962-1997.” OECD membership significantly helped attract FDI Recent FDI Movement 2.5 5.0 7.5 10.0 12.5 15.0 17.5 20.0 0 199419951996199719981999200020012002200320042005200620072008 ※ Source: Ministry of Knowledge Economy 20092010 (US$ billion) 2011

10. 10 By Country 1962-2011 (%) 31.60 11.24 Netherlands 73.16 Total 15.09 Japan 5.72 Germany 6.20 UK 3.31 France 26.84 Others By Industry (US$ million) By Type (US$ million) U S A ※ Source: Ministry of Knowledge Economy Service Manufacturing ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 7,270 5,653 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 Greenfield M&A 11,697 1,972

11. 11 ※ Source: Ministry of Knowledge Economy Sector Number of projects (2002-2011) Electronics2,167 Financial services1,394 Real estate1,014 Logistics939 Equipment manufacturing904 Vehicles857 Chemical768 Entertainment474 Metal447 Food270 Textile220 Pharmaceutical & Bio124 Leading sectors for inbound FDI

12. 12 Positive EffectsNegative Effects Factors BasicCapital inflows, employment Inappropriate compensation Advanced Tech transfer, Increase in productivity Demand Conditions SizeMarket enlarge, export increase Unnecessary consumption QualityConsumer sophistication Related Sectors ClusterCluster & spillover on suppliers Cut off existing domestic linkage SynergyLinking global network Business Context RivalryEnhanced competition Crowding-out of domestic firms StructureBest resource allocation Source: Moon & Jung (2008)

13. 13 Source: fDiMarkets.com Year No. of Jobs Created* 201121,401 201014,524 200914,856 200823,338 200728,988 200618,662 200523,167 200424,390 200348,090 Total217,416 Average 24,157

14. 14 Korea’s Free Economic Zones (FEZs) will offer a venue for win-win development in Northeast Asia where people, information and technology converge. They will provide an optimal business environment based on policies of global standards, multicultural and multinational communities, and an innovative and pleasant living environment. IFEZ Incheon FEZ Yellow Sea FEZ Saemangeum-Gunsan FEZ Daegu-Gyeongbuk FEZ Busan-Jinhae FEZ Gwangyang Bay Area FEZ http://ifez.go.kr/ SGFEZ Jeju Free International City Development Center YESFEZ DGFEZ BJFEZ GFEZ JDC http://www.yesfez.go.kr/ http://www.sgfez.com/ http://www.dgfez.go.kr http://gfez.go.kr/ http://jdcenter.com/ http://bjfez.net/

15. 15 Corporate income tax: 100% for 3-5 yrs, 50% for 2 yrs Acquisition tax: 100% Property tax: 100% for 5-15 yrs Tariff, VAT, Special Excise Tax for capital goods: 5 yrs To finance the construction of facilities or the purchase of equipment related to the investment Reduction or exemption of rent Support for building of infrastructure Subsidies for employment and education Help in settling into Korea Criteria Manufacturing – $30 million FDI or more Logistics & SOC – $10 million FDI or more Tourism – $20 million FDI or more R&D – $2 million FDI or more

16. 16 Korea’s Development Model FDI Trends and Impact on the Korean Economy FDI Trends and Impact on the Korean Economy Invest Korea Investment Promotion in Practice Concluding Remarks

17. 17 Invest KOREA: Korea’s National IPA

18. 18 TRADE Promotion INVESTMENT Promotion

19. 19 Investors Formulate investment policies Propose policy suggestions 1. Conduct public relations 2. Coordinate FDI-related administrative activities of government agencies 1. Conduct public relations 2. Provide all FDI-related services including business-location support and consultation on industry information, tax incentives and cash grants 3. Handle investment notifications 1. Conduct public relations 2. Help investors establish businesses Propose policy suggestions

20. 20 Investment Planning Department 3 Teams Investment Promotion Department 3 Teams North America 9 Europe14 Asia & Oceania18 Middle East 1 1 Team

21. 21 Assist in business-site selection Help seek business partners Provide administrative support Resolve investors’ grievances Improve business and living environment Overseas Network of 42 KBCs (Korea Business Centers) Central govt. agencies Local governments Provide information on FDI incentives, markets and industries Arrange meetings w/govt. officials

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23. 23 Cooperation Recommendation Report Grievances Home Doctor: Solution Provision “The Investment Ombudsman has played a valuable role as an advocate in resolving a wide range of management and daily life difficulties on behalf of foreign investors, thus providing an unobstructed path to optimal business performance.” - Wayne Chumley Former Chairman, AmCham

24. 24 Secretarial and reception services and dedicated office space All administrative services related to business consultation & investment Target Tenants: Venture Capital, Private Equity, Hedge Fund Major services Opened in October, 2006 Investment Consulting Center (ICC) * 24-hour hotline 82-1600-7119 Officials from the Ministry of Justice, the National Tax Service, Korea Customs Service, Courts of Law, etc. 40 rooms available at rental rates below market price - Office size: 213-573 square feet (Room size adjustment possible) - Rental rate: $90/square foot

25. 25 Korea’s Development Model FDI Trends and Impact on the Korean Economy FDI Trends and Impact on the Korean Economy Invest Korea Investment Promotion in Practice Concluding Remarks

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27. 27 Trends of Korea’s FDI Effective aftercare service is becoming increasingly important and pointed out as an effective tool for cross-border investment facilitation by the UNCTAD, OECD and APEC Source: MOTIE Re-investment New Investment 27

28. 28 Aftercare ServicesOmbudsman Support for FDI Attraction Investment Ombudsman’s effort in his role of foreign investment promotion, through rationalization & improvement of the investment system, customs and practices of Korea. Role of Investment Ombudsman Role of Investment Ombudsman Contribution to the Sustainable Growth of the Korean Economy Attracting FDI 28

29. 29 http://www.i-ombudsman.or.kr The Ombudsman Office’s “Home Doctor” system delivers one-stop services to resolve a variety of grievances Cooperation Recommendation Cooperation Recommendation Home Doctor: Solution Provision Report Complaint s Foreign Investor The Office of the Investment Ombudsman Blue House, Ministries, Government Agencies Foreign Investment Committee

30. 30 Source: Office of the Foreign Investment Ombudsman Grievance Filing by Category Grievance Resolution Performance Classification 13No. of Cases Type Total System Improvement In-house Resolution Administrative Intervention 63 403 327 (Unit: % of Case, 2009) Recently, taxation and tariffs, and investment incentives replaced labor issues as the most frequently filed grievances, although labor issues still have the biggest impact on Korea’s FDI environment Recently, taxation and tariffs, and investment incentives replaced labor issues as the most frequently filed grievances, although labor issues still have the biggest impact on Korea’s FDI environment (Unit: Number of Case, 2011)

31. 31 Request Positions on Cases and Propose Solutions Report Grievances Home Doctors Suggest Solutions Disclose Positions on Cases and Accept/Reject Proposed Solutions

32. 32 The urban-type, high-tech industries were allowed to stay in the area. Ombudsman underwent a series of joint Ombudsman underwent a series of joint meetings with the relevant government meetings with the relevant government authorities including the Prime Minister, authorities including the Prime Minister, Ministry of Land, Transport and Maritime Affairs Ministry of Land, Transport and Maritime Affairs and Korea Land Corporation. and Korea Land Corporation. Many of the foreign-invested companies in Dongtan City were unexpectedly forced to move their plants due to its new city development plan with enlarged residential area. Most High-tech Firms Remained in a New City Development Most High-tech Firms Remained in a New City Development Investor Complaints in Dongtan New City Ombudsman’s Actions

33. 33 The non-tax payment imposed on the remaining companies was reduced by 89%(April 15 th 2009 by MOSF), which they could pay in installments Ombudsman underwent again a series of joint meetings with the relevant government authorities including the Prime Minister, ministers and senior secretaries to the president to mitigate unexpected tax burden on the part of foreign investors These remaining companies were subjected to non-tax payment due to expected capital gains of factory sites as nearby land becomes high rise residential area Non-tax Payment by Foreign Companies reduced substantially Non-tax Payment by Foreign Companies reduced substantially Additional Investor Complaints in Dongtan New City in Dongtan New City Additional Investor Complaints in Dongtan New City in Dongtan New City Ombudsman’s Actions

34. 34 Fingerprinting Required in Accusation Cases Filed by Labor Unions Fingerprinting Required in Accusation Cases Filed by Labor Unions With the Ombudsman's proposition accepted, now fingerprinting would take place only once. When labor law violation cases are filed by labor unions, non-Korean CEOs are required to have all their fingerprints taken every time they're called in for investigation while Koreans are not. ☞ If a labor union files several cases against its non-Korean employer, abusing this law, the employer would be subject to fingerprinting numerous times, leading to a violation of human rights as well as a negative influence on FDI attraction. The Ombudsman proposed revision of the practice to relevant agencies including the Korean National Policy Agency. Ombudsman’s Actions Company M’s Complaint

35. 35 Difficulties in Importing Food Product Materials Newly Subject to Inspection Difficulties in Importing Food Product Materials Newly Subject to Inspection Pre-pasteurized premix was made an exception to the inspection requirement, allowing the company to obtain its shipment on time. As part of an effort to curb the spread of foot-and- mouth disease, the National Veterinary Research and Quarantine Service (NVRQS) announced all imported food product materials containing egg content would be subject to inspection by the Korean Customs Service upon entry into the country. ⇒ As a result, a foreign-invested company importing premix containing egg flour faced a possible suspension of production due to the lengthy delay in receiving the shipment. Ombudsman brought the issue to the attention of relevant government officials. Ombudsman’s Actions Company A’s Complaint

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37. 37 Overseas Inbound Investment Consulting Division Inbound Investment Consulting Division Promotion Team Strategy & IR Foreign Investment Aftercare Division Foreign Investment Aftercare Division 42 Overseas Offices (KBC) 3 teams 1 Division CEO of KOTRA Foreign Investment Ombudsman as of 2012.10.22 Identification PromotionPromotion Support Planning Aftercare Foreign Investor Support Office Invest KOREA

38. 38 Resolution of investor grievances Improvement of business & living environment Provision of information and administrative services Guidance on investment targeting Seeking of partners Notification of relevant incentives Pre-Investment Consultation Execution Government agencies Local governments Overseas Network 42 Korea Business Centers After-care

39. 39 11 KOTRA staff members (administrative support,etc.) 15 private sector experts 19 government officials

40. 40 Investment consulting HR & labor consultations  Investment procedure, incentives  Consultations by experts  On-site consultations  On-site visits  Seminars  Information on living in Korea  One-day secretary service  Publication of newsletters Settlement support  Visa issuance,  corporate establishment  FDI notification/ registration One-stop service (10 areas) (Services provided in 2011)

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42. 42 Airport pick-up & fast track service through customs, immigration and quarantine (C.I.Q) Transportation, interpretation Free accommodations at a 5-star hotel (up to 3 nights) Meeting arrangement with high-level government officials and/or companies of interest Site visits to Free Economic Zones, industrial zones 42

43. 43 FIW Foreign Investment Conference Foreign Investment Partnering + Foreign Investment Forum - Renewable Energies - Service Industries (Logistics/Regional Development) - IT and R&D Emerging Markets Investment Forum Foreign Investment Press Forum PE & VC Investment Meetings Business Partnering Nov. 2-3, 2011

44. 44 Jan. 26, 2011 20102011 44 January June September

45. 45 June 23, 2011 Oct. 28, 2011

46. 46 Dec. 1, 2011

47. 47 Sept. 29-30, 2011

48. 48 Get to Know Korea (e.g. Korean rice beer tour, visits to IFEZ and Gumi Industrial Complex) Free Korean Language School Apr. 4 - May 19 May 23 - June 30 Sept. 5 - Oct. 20 Oct. 31 - Dec. 15 (Registration deadline is ONE WEEK before class) Information/consultation on life in Korea provided Information/consultation on life in Korea provided: visa, driver’s license, etc. March 12, 2010 March 12, 2010 September 3 48

49. 49 Monthly Magazine facebook.com/investkorea @investinkorea

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51. 51 FDI is a key component of a nation’s economic growth on a sustainable basis.

52. 52 IPAs can get great performance, if accompanied by well-organized structure and extensive support at the state level. I.P & FDI IPA budget & FDI I.P & Job

53. 53 IPAs need facilitation services with a customer-oriented approach and well-preparedness meeting the global standards. Pre-Investment Consultation Execution Government agencies Local governments After-care Overseas Network

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