FOREIGN DIRECT INVESTMENT INFLUENCE ON THE ECONOMIC DEVELOPMENT OF NEWLY INDUSTRIALIZED COUNTRIES IN ASIA (SOUTH KOREA CASE)
DOI:
https://doi.org/10.17721/1728-2292.2023/1-57/87-94Keywords:
South Korea, foreign capital, foreign direct investment, industrial development, regulation of foreign investment, special economic zones, benefits and requirements for foreign investorsAbstract
South Korea’s economy (hereinafter referred to as “Korea”) has become one of the most diversified and technologically advanced in the world in the past 50 years. Korea began to pursue a broad policy of liberalization towards foreign investments, including foreign direct investment (FDI), and due to well-conducted reforms, governments were able to direct financial flows to the priority areas of economic development of the national economy. FDI began to play an important role in the country’s economy and acted as the main catalyst in the country’s industrial development and technical upgrading of industries. Of particular importance for the development of the country’s national productive capacity is the question of the specific nature of foreign capital penetration forms (contract and contracting forms, creation of joint ventures, although later they gave way to the practice of using mergers and acquisitions) and the establishment of cooperative relations between local companies and foreign subsidiaries of multinational enterprises (MNEs), and this not only increased the productivity of domestic firms, facilitated the transfer of complex management methods and advanced technologies but has also strengthened the industry structure. Cooperation with foreign companies gradually increased the competitiveness of local companies. Korea’s attractiveness in terms of FDI was the result of the country’s rapid economic development and its specialization in new information and communication technologies.
The main factors of the country’s effective economic development were the combination of market mechanisms development and active state regulation in all spheres of the economy. It has become important to protect national development priorities and support national exporters in regulation of the activities of foreign investors. However, the government pursued an active policy of attracting foreign investments. One of the tools for attracting additional capital to the country’s economy was the creation of special economic zones (SEZs), in particular export production zones with a favorable tax regime.
References
ASEAN Investment Report 2020-2021 [Electronic resource] // ASEAN. – 2021. – URL: https://asean.org/wp-content/uploads/2021/09/AIR-2020-2021.pdf (date of access: 15.10.2022)
World investment report 2022 [Electronic resource] // UNCTAD. – 2022. – URL: https://unctad.org/system/files/official-document/wir2022_en.pdf (date of access: 20.10.2022)
FDI:South Korea [Electronic resource] // Worldbank. – 2022. – URL: https://data.worldbank.org/indicator/BN.KLT.PTXL.CD?end=2020&locations=KR&start=1970&view=chart (date of access: 15.10.2022)
Thorbecke W., Salike N. Understanding foreign direct investment in East Asia [Electronic resource] // Willem Thorbecke, Nimesh Salike. ADBInstitute. –2011. – URL: https://core.ac.uk/download/pdf/206767363.pdf. (date of access: 20.10.2022)
Sachwald F. FDI and the Economic Status of Korea: The Hub Strategy in Perspective [Electronic resource] / Frédérique Sachwald. – 2003. – URL: https://www.ifri.org/sites/default/files/atoms/files/fdi_economic_status_korea.pdf. (date of access: 21.10.2022)
Mahembe E. Foreign Direct Investment and Economic Growth: A Theoretical Framework [Electronic resource] / Edmore Mahembe. – 2014. – URL: https://virtusinterpress.org/IMG/pdf/10-22495_jgr_v3_i2_p6.pdf. (date of access: 21.10.2022)
Gestrin M. Trends in foreign direct investment and their implications for development [Electronic resource] / Michael Gestrin. – 2016. – URL: https://www.researchgate.net/publication/305421611_Trends_in_foreign_direct_investment_and_their_implications_for_development (date of access: 15.10.2022)
KOSIS – KOrean Statistical Information Service [Electronic resource] // KOSIS. – URL: https://kosis.kr/eng/ (date of access: 15.10.2022)
FDI financial flows - By partner country, South Korea [Electronic resource] //OECD.– URL: https://stats.oecd.org/Index.aspx?QueryId=64194# (date of access: 15.10.2022)
Moon H.C. Cross-Border Mergers & Case Studies of Korea.; China; and Hong Kong, China Ac Quisitions [Electronic resource] // Hwy-Chang Moon, Hee-Kyung Kim, Dong-Hyun Lee. – 2003. – URL: https://www.apec.org/docs/default-source/Press/NewsRelease/ 2004/03_cti_ieg_merger.pdf (date of access: 20.10.2022)
Korea Automobile Manufacturers Association (KAMA) [Electronic resource]. – URL: http://www.kama.or.kr/BoardController (date of access: 21.10.2022)
Wad P. The Development of Automotive Parts Suppliers in Korea and Malaysia: A Global Value Chain Perspective [Electronic resource] / Peter Wad. – 2008. – URL: https://www.tandfonline.com/doi/abs/10.1080/13602380701661002 (date of access: 21.10.2022)
Ritter L. The Rise and Competitiveness of South Korean Automobile Manufacturers [Electronic resource] / Larissa Ritter. – 2010. – URL: https://openrepository.aut.ac.nz/bitstream/handle/10292/1025/RitterL2.pdf?sequence=4&isAllowed=y (date of access: 03.10.2022)
Korea undertakes more domestic reform as its position in world trade continues to strengthen [Electronic resource] // WTO. – URL: https://www.wto.org/english/tratop_e/tpr_e/tp040_e.htm. (date of access: 03.10.2022)
Republic of Korea. Foreign Investment Promotion Act [Electronic resource] // Republic of Korea. – URL: https://legal.un.org/avl/pdf/ls/Shin_RelDocs.pdf. (date of access: 15.10.2022)
Special Economic Zones: What Can Developing Countries Learn from the Korean Experience? [Electronic resource] // KDI School of Public Policy and Management. - 2016. - URL:http://www.ksp.go.kr/api/file/download/11456?downloadFilename=Special%20Economic%20Zones%3A%20What%20can%20Developing%20Countries%20learn%20from%20the%20Korean%20Experience%3F%20 (English).pdf (date of access: 20.10.2022)
Free Economic Zone of Korea [Electronic resource]. – URL: http://fez.go.kr/global/en/index.do. (date of access: 20.10.2022)
Invest Korea [Electronic resource]. - URL: http://m.investkorea.org/en/index.do (date of access: 21.10.2022)
Investing in South Korea [Electronic resource] // Thomson Reuters Practical Law. – 2018. – URL: https://uk.practicallaw.thomsonreuters.com/0-611-1365?__lrTS=20190106031532329&transitionType=Default&contextData=%28sc.Default%29 (date of access: 03.10.2022)
Special Economic Zones:World practice, experience and alternative concept [Electronic resource] // World Investment Report 2019, UNCTAD. – 2019. – URL: https://unctad.org/system/files/official-document/WIR2019_CH4.pdf (date of access: 03.10.2022)
