“The Changing Nature of Foreign Direct Investment in South Korea,”  a three-part series by Arthur Alexander

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.



The first report examines the long-term economic perspective of FDI in Korea: Foreign Direct Investment in Korea: Trends, Implications, Obstacles (July 2008, 19 pgs)

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 (Oct 2008, 19 pgs)

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 (Dec 2008, 27 pgs)

See more USKI publications

Arthur J. Alexander, Ph.D., is the Mitsui adjunct professor on Japan at Georgetown University and a professional lecturer at Johns Hopkins University’s Paul H. Nitze School of Advanced International Studies. His experience includes ten years as president of an internationally recognized research institution specializing in Japanese economics, staff member of a leading think tank, advisor and consultant to a wide range of industry and government clients. He has also taught at major universities and has been published in academic journals, magazines, and newspapers. His book on the Japanese economy, In the Shadow of the Miracle, was published by Lexington Books in 2002; and his most recent book, The Arc of Japan’s Economic Development, was published by Routledge (London) in November 2007.

Dr. Alexander joined the Japan Economic Institute in Washington, DC as its president in 1990. At JEI he conducted research on the Japanese economy, industry, technology, and innovation. JEI, a nonprofit research organization supported in part by Japan’s Ministry of Foreign Affairs, ceased active operations at the end of 2000. In 2001, Dr. Alexander received an award from the Japanese Foreign Ministry for “distinguished service” promoting understanding of Japan. He has conducted research directly for the Japanese government and for private companies. He has testified often before the U.S. congress on Japanese and other economic issues. Although he has focused on Japan studies, Dr. Alexander also has published research on the Korean economy.

Dr. Alexander graduated from the Massachusetts Institute of Technology in 1958 with a BS degree in engineering and industrial management. Following service in the U.S. Army, he worked for the IBM Corp. as a systems analyst. He then received a M.Sc. degree in economics from the London School of Economics in 1966 and a Ph.D. in economics from the Johns Hopkins University in 1968.

From 1968 to 1990, Dr. Alexander was a member of the research staff of the Rand Corporation in Santa Monica, California and was the associate head of its economics department from 1977 to 1985. At Rand, he specialized in a wide range of subjects, including Soviet affairs, research and development, weapons acquisition policies, and defense decision making. Dr. Alexander turned to Japanese issues in the 1980s, including studies on trade in services, legal markets, innovation, and defense industry. In 1976-1977, he was a research associate at the International Institute for Strategic Studies in London. He was a member of the U.S. Army Science Board for five years, chairing studies on policy analysis, weapons acquisition, and labor requirements. Dr. Alexander was also a member of the faculty and advisory board of the Rand Graduate School and a visiting professor at UCLA.