The Changing Nature of Foreign Direct Investment in Korea: Challenges to Economic Policy
Arthur J. Alexander, Ph.D., former president of the Japan Economic Institute and a noted economist
Research Luncheon
February 9, 2009
Bernstein-Offit Building, Room 500
1717 Massachusetts Ave., NW
Washington, DC 20036
Foreign direct investment (FDI), defined as sufficient company ownership that provides some degree of managerial control, improves a nation’s productivity and economic growth. Until the 1997 East Asia financial crisis, the Korean government exercised a de facto policy of discouraging inward FDI. However, as part of its acceptance of IMF support to resolve the crisis, the government opened the economy to foreign ownership of domestic business. In the years after the crisis, foreign investment surged. However, despite these changes, Korea still lags other developed and developing countries as a target for FDI. We are investigating the changing nature of FDI into the country, the policy and political responses, and the concerns in the country that may induce a cautious approach by administrators.
In order to understand better the changing nature of Korean inward FDI, we are assembling data broken down by industry, financing method, and type of investor. We will analyze the policy and regulatory implications by considering the domestic industries and companies that may face greater competition; and the government agencies that will be involved together with their regulatory and organizational imperatives. New patterns of FDI create the potential for counterattacks by negatively affected parties. We shall attempt to predict such barriers in advance to alert policymakers and others about possible future problems. We will attempt to understand how the changing nature of FDI into Korea may affect future economic outcomes in ways that may differ from past influences.
Listen to Dr. Alexander's observations and policy recommendations for improving FDI in Korea.
Download the transcript from Dr. Alexander's lecture.
Part 1:
Part 2:
The Changing Nature of Foreign Direct Investment in Korea: Challenges to Economic Policy (a three-part series)
The first report in this series examines the long-term economic perspective of FDI in Korea: Foreign Direct Investment in Korea: Trends, Implications, Obstacles.
The second report takes an in-depth look at the trends of Mergers and Acquisitions (M&A), Korea's leading source of FDI: Mergers and Acquisitions in Korea: The Leading Edge of Foreign Direct Investment.
The third report outlines key economic policy implications of Korea's FDI and M&A trends: Policy Implications of Korea’s Low-Intensity Foreign Direct Investment.
Learn about other on-going research projects at the U.S.-Korea Institute at SAIS.