Korea’s Trade Policy
Korea has experienced astonishing economic progress in the last few decades. As a result, it has become the world's sixth-largest trading country. Korea’s annual trade volume surpassed the $1 trillion mark for the first time in three years, driven by upbeat exports of memory chips and petrochemical products in 2017. Korean goods traded in the first nine months of 2017 accounted for 3.3 percent of the world’s total trades, already exceeding the previous year’s total of 2.8 percent. In historical context, Korea’s exports broke through a US $500 billion mark in the shortest period since the commencement of trade statistics in 1956. In addition, Korea's credit rating was upgraded. Moody's Investors Service lifted Korea's credit rating from Aa3 to Aa2 in December 2015.
These remarkable achievements were made possible through free trade agreements with a number of nations. In recent years, FTAs with ASEAN (2009), EU (2011), Peru (2011), U.S. (2012), Turkey (2013), Australia (2014), Canada and Vietnam (2015) as well as the Comprehensive Economic Partnership Agreement (CEPA) with India, have come into effect. These trade accords have helped Korea build up its worldwide networks all across the Americas, Europe, and Asia. As a nation that places great emphasis on trade, Korea looks to strengthen cooperation with established and emerging international partners to deepen existing bonds and discover untapped opportunities.
Also, Korea has maintained its support for, and commitment to, trade liberalization and strengthening of multilateral trading system. Trade is significant for South Korea’s economy; the combined value of exports and imports equals 78 percent of GDP. Currently, Korea is the world's 11th largest economy in terms of nominal GDP, the 5th largest exporter and the 9th largest importer. Recognizing its past successes and the future prosperity rest upon vibrant global market economy. Government openness to foreign investment is above average. The financial sector has become more competitive, and the banking sector remains largely stable. The Korean government will continue to fulfill its commitments to free trade in the world.
Korea's Foreign Direct Investment Policy
Foreign direct investment (FDI) is an integral part of the Korean economy. The number of foreign-invested companies in Korea has exponentially increased over the last decade or so.
FDI in Korea ran to US$22.94 billion in 2017, up 7.7% from the previous year. By country, the United States’ FDI in Korea inflated 21.5 percent to US$4.71 billion. FDI flows into South Korea have been more or less constant in recent years—averaging around USD 10 billion. After having reached a record level in 2013 (USD 12.7 billion) and the lowest level since 1998 in 2015 (USD 4.1 billion), the flows stood at USD 10.8 billion in 2016. South Korea's appeal in terms of foreign direct investment (FDI) is the result of the country's rapid economic development and the specialization in new information and communication technologies. There is growing interest by investors in R&D facilities, logistics centers and regional headquarters of multinational corporations. There is also much interest in Korea's highly developed electronics sector from parts and materials companies.
Korea has made tremendous economic gains during the past four decades, transforming itself from a recipient of foreign assistance to a high technology manufacturing powerhouse and middle-income donor country in the span of two generations. South Korea has also made many changes to enhance business climate for foreign investors: Corporate taxes were reduced; a new system was introduced to better protect intellectual property rights; administrative procedures were streamlined, making it easier to establish an industrial complex; the maximum amount of foreign capital that can be lent or borrowed without the need to report the transaction has been increased; and international financial reporting standards were adopted. At the same time, the living environment for expatriates has improved dramatically. The benefits include more educational and healthcare facilities equipped to meet their needs, more convenient processing system at customs for foreign investors living in or visiting Korea as well as expansion of English-friendly services.