Embaixada da República da Coreia em Portugal

Korea’s Trade Policy

Trade revenues account for more than 80% of the annual GDP of the Republic of Korea. In light of its high dependence on foreign trade, Korea advocates resolute trade policies with major trading partners in order to expand its export markets through reciprocal market openings in the industrial, agricultural, and service areas, and secure stable supplies of energy and natural resources.

In the early stages of its development, Korea pursued export-driven growth strategies primarily based on trade with advanced industrial nations such as the US, Japan, and the EU. More recently, however, Korea has shifted its focus to expanding trade and establishing comprehensive economic cooperation partnerships with major emerging economies such as BRICs, the Association of Southeast Asian Nations (ASEAN), and Central and South American economies.

Moreover, since establishing the basic objective of its trade policy - building “a truly advanced and globalized nation” befitting the multilateral trade framework centered on the World Trade Organization (WTO) - Korea has been seeking regional trade agreements and regional cooperation as complementary measures to enhance the multilateral trade framework.

Aiming to advance free trade in the global economy, Korea has been active in the negotiations of the Doha Development Agenda (DDA), launched in 2001, making constructive contributions to a range of multilateral dialogues such as the G20 Seoul Summit 2010 for the early conclusion of the DDA process.

In addition, Korea is exerting tireless efforts toward the establishment of a network of Free Trade Agreements (FTA). While the global effort to promote free world trade through the WTO DDA has all but stalled in the face of disagreements between the positions of advanced and developing nations since the financial crisis of 2008, an increasing number of regional trade agreements, such as the FTA, have come into force in recent years. In fact, since the launch of General Agreement on Tariffs and Trade (GATT) in 1947, a total of 310 regional trade agreements have entered into effect, and the number has continued to increase since the global financial crisis of 2008. As of September, 2011, Korea has entered into effect seven FTAs encompassing 44 countries, including Chile, Singapore, the European Free Trade Association (EFTA), the ASEAN and India, the EU, and Peru, with the concluded FTA with the US awaiting ratification by the legislative bodies of both the countries. Furthermore, Korea is currently in negotiation with Australia, Colombia, the Gulf Cooperation Council (GCC), Mexico, New Zealand, and Turkey to enter into new FTAs, while seeking even more trade agreements with Japan, China, the Southern Common Market (MERCOSUR), Israel, Vietnam, six Central American countries (Panama, Costa Rica, Guatemala, Honduras, the Dominican Republic, and El Salvador), Malaysia, and Indonesia.

Korean engages in consultations on a regular basis with major trading partners such as the US, China, the EU, and Japan at various levels to discuss the expansion of trade and investments as well as measures to amplify economic cooperation.

Foreign Direct Investment

Foreign Direct Investment (FDI) is defined as foreigners’ acquisition of more than 10% of shares inclusive of voting rights of a local company or exertion of practical influence on the management right of a local company by providing long-term financing with a maturity of longer than five years.

According to the United Nations Conference on Trade and Development (UNCTAD), global FDI in 2008 sharply decreased by 11% year-on-year to USD 1.7441 trillion on the slowdown of the US economy and the tumultuous financial market. The downward trend even accelerated in 2009 as major economies such as the US and EU cut back their investment amidst the global financial crisis before rebounding by approximately 5% to reach USD 1.2436 trillion in 2010.

FDI in Korea showed steady decline from 2000 to 2003, and after a rapid uptick in 2004 again continued its descending trend at a modest pace for about four years. In 2008, the figure soared by 11.3% to USD 11.71 billion, ending the preceding four-year decline.

In 2009, the declared amount of FDI in Korea fell slightly by 1.9% to USD 11.48 billion. But the fact that the figured remained above the USD 11 billion mark for two consecutive years indicated that Korea was successful in attracting and retaining a relatively sizable FDI compared to other major economies in the midst of the global financial crisis. In 2010, the figure again jumped by 13.8% to USD 13.07 billion, the largest infusion of FDI ever in Korea’s history.

The Korean government has launched a pan-governmental effort to attract more FDI through such dedicated bodies as the Foreign Investment Committee and Invest Korea. In particular, the Ministry of Foreign Affairs and Trade is focusing its efforts on three areas: attracting FDI through its overseas diplomatic missions; coping with the difficulties faced by foreign companies operating in Korea; and promoting its enhanced investment status in the global marketplace based on the outcomes of the two aforementioned activities.

The Milieu of Korea’s Investment

Korea boasts a number of advantages as an FDI destination.

First of all, Korea is located at a strategically advantageous position in East Asia, home to two-thirds of the world population. The region produces one-fifth of all products in the world and shows exceptional rates of economic growth. In the long-term, East Asia is widely anticipated to become the largest production base and market, as well as the major growth engine of the global economy. In addition, more than 61 cities with a population exceeding one million lay within the three-hour distance of Seoul by plane, making Seoul a well-located gateway to promising investment destinations in East Asia. It would be a prudent strategy for companies around the world to use Korea as a testing ground before they launch full-scale expansion into the East Asian markets. Indeed, more than half of the Fortune 500 companies already have offices in Korea.

It is no longer news that Korean automakers, steelmakers, shipbuilders, semiconductor and display manufacturers, and IT companies have been wildly successful in the global market, not to mention Korean construction companies, which have won numerous high-value contracts around the world. Asians, meanwhile, have become ardent fans of Korean-made dramas and pop music, and Korea’s online game industry has grown to the second largest in size in the world. Clearly, it is indeed difficult to find a reason not to invest in Korea’s advanced and fast-growing industries.

Korea also offers the advantages of a highly-educated and skilled workforce and a reputable business environment. Widely known for its passion for education, Korea produces more than 100,000 college graduates with natural science and engineering degrees every year. Furthermore, Korea’s ubiquitous high-speed broadband infrastructure enables Korea’s Internet penetration rate to stand at the very top in the world.

※For further information on investing in Korea, please visit www.investkorea.org