(EDITORIAL from the Korea Times on Jan. 7)

FDI target for 2010

South Korea plans to attract $14 billion in foreign direct investment (FDI) this
year, up 13.2 percent from last year. This plan is important as FDI will not only
help generate more jobs but also strengthen the industrial foundation of the
nation. But, it won't be easy to lure foreign businesses to the country due to
fierce competition with emerging market economies such as China and India.
Despite the unprecedented global economic crisis, Korea did relatively well to
maintain its FDI amount at the $11-billion level. According to the Ministry of
Knowledge Economy, it stood at $11.48 billion in 2009, down 1.9 percent from
$11.7 billion in 2008. The slight decrease shows that the nation was not severely
affected by the worldwide turmoil because its economy has been rapidly emerging
from the recession.
The U.N. Conference on Trade and Development (UNCTAD) reported that the world's
total FDI contracted 29.4 percent from $1.7 trillion in 2008 to $1.2 trillion
last year. It is not surprising that FDI suffered from a severe setback in the
aftermath of the global financial and economic turbulence. How then did South
Korea manage to minimize fallout and avoid a steep decline?
The nation's relatively good performance was attributable to the weak Korean won
that helped foreign investors reduce their business operation costs considerably.
That is, the sharp depreciation of the local currency against the U.S. dollar
raised Korea's competitiveness in FDI just as it fueled an unusual export boom
for Korean products. Growing expectations about the nation's rapid economic
recovery was also a boon to FDI.
Against this backdrop, it is necessary for the nation to continue to take
advantage of favorable factors, while containing negative elements. One piece of
good news is the UNCTAD prediction that the global FDI volume will rebound 16.7
percent to $1.4 trillion this year. Korea is expected to enjoy robust economic
growth of 4 to 5 percent, emerging as one of the world's fastest-recovering
economies. Other positive factors are the nation's hosting of the G20 summit in
November and a free trade agreement between Korea and the European Union that
would boost the nation's exports and FDI efforts.
The Lee Myung-bak administration has committed to attract foreign investors in
green growth sectors and technology-based industries that will lead the nation's
economy. It also plans to develop an industrial complex for parts and materials
manufacturers in order to draw more investment from Japanese businesses. Besides
this, the government is considering providing tax and financial incentives for
foreign businesses that contribute to creating jobs.
But policymakers cannot be too optimistic about reaching this year's FDI target
because of the strengthening won and anticipated higher growth of emerging
economies that may make multinational firms shun away from Korea. Thus, the
government needs to create a more favorable environment for foreign investment in
Korea. It is time to think over why free economic zones in the nation have so far
failed to draw investors. Most off all, it is urgent to turn the country into a
more attractive destination to do business and live.
(END)