Business Opportunities

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Business Opportunities Investment Environment
in Korea March 1999

• Korea Investment Service Center

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CONTENTS

• Direction and Goal of Economic Reform
• Restructuring of the Korean Economy
• Promotion of Foreign Investment
• Achievements and Prospects for Korean
• Economy

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1. Direction and Goal of Economic Reform
Re-Emerging as an Entirely New Country for the
21st Century

• Parallel Development of Democracy and a Market
• Economy
• Introducing Global Standards in All Areas of
• Economic and Social Activity

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2. Restructuring of Korean Economy
Agreement with the IMF
Political Resolution for Reform
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• Financial Reforms

• Basic Framework

- Stabilize the financial system - Enhance the
soundness and efficiency ? Establishment of
Financial Supervisory Commission
Healthy financial institutions
Assisted by government
Ailing financial institutions
To be liquidated
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• Result of Financial Restructuring

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• Corporate Sector Restructuring

• Enhancing Transparency of Corporate Management
• - Combined financial statement
• Eliminating Cross-debt Guarantees among
• the subsidiaries
• Improving Financial Structure
• - Requirement of 200 debt/equity ratio

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• Streamlining Business Activities
• - Encouraging enterprises to Specialize in
  core
• business units where they are most
  competitive
• - Business Swaps among Top 5 Conglomerates
• Strengthening Accountability
• - Holding majority shareholders and management
  more
• accountable for how they run their business
• - Rights of minority shareholders were
  strengthened

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Enhancing Labor Market Flexibility

• Labor disputes have declined in the 1990s

• Enforcement of New Labor Standards
• - allowing layoffs due to managerial
  difficulties
• - Introduction of Manpower Dispatching System
• Strengthening Social Safety Net

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Public Sector Reforms

• Government downsizing
• Privatization of state -owned companies

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3. Promotion of Foreign Investment
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• Creating an Investor-Friendly
• Environment

FDI Liberalization
Increased Incentives
Investor-friendly Environment
One-Stop Service
MA - Land Acquisition Liberalized
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Liberalization of FDI
open to foreign investment ( 99 )

• Restricted business ( 7 sectors)
• - Farming of Cattle, Inshore Fishing, Coastal
  Fishing, Radio
• Broadcasting, Television Broadcasting, News
  Agency
• Activities, Wholesaling of Meat
• Partially Restricted Business (16 sectors)
• - Publishing of Newspapers, Electric Power
  Generation,
• Cable broadcasting, Trust Companies etc.

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Capital Market Liberalization

• Foreign equity ownership ceilings eliminated
• local bonds and short-term money money market
  instrument allowed
• Full liberalization of Foreign Exchange
  Transactions

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Liberalization in Mergers and Acquisitions

• Hostile takeovers allowed (May 1988)

• Recent Major MAs

- Volvo Korea Holding A.B of Sweden (180 mil.) -
Interbrew Intl B.V of Nether land (250 mil.) -
Degussa A.G of Germany (130 mil.) - BT Holding
B.V of Nether land (396 mil.)
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• Liberalization of land acquisition

before
improvement
Foreign companies
Restriction on land use and size of land
abolished
MAs
Ban on acquisition of non-business purpose land
allowed
Foreigners
Restriction based on the period of stay, and size
of land
abolished
Acquisition procedure
Report after signing contract
Approval before signing contract
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Incentives for foreign investment

• Augmentation of tax incentives
• - Advanced-technology businesses (265 ? 436)
• - Service businesses supporting other
  industries (0 ? 97)
• - Businesses located in Foreign Investment
  Zone

period of tax breaks
- national taxes 8 years 10
years - local taxes 8 years
8-15 years

• Rent reduction at industrial complexes for
  foreigners

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Tax Incentives for Foreign Investment
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Establishing Investor-Oriented System

• Simplification of Procedures
• Establishment of the Korea Investment Service
  Center (KISC)
• - Full-service window for foreign investment
• - Provides comprehensive administrative
  support and
• consulting services
• - Staffed by Government officials , KOTRA
  personnel,
• and Specialists in MA, law, accounting, tax
  and
• financial product areas

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4. Achievements and Prospects for the Korean
Economy
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Signs of Recovery

• Foreign exchange reserves
• - 2 bill. (Dec.,97) ? 52 bill. (Mar. 99)
• Trade surplus
• - ? 8.4 bill. (97) ? 39.9 bill. (98)
• Exchange rates (won/dollar)
• - 1,962 (Dec.,97) ? 1,222 (Feb. 99)
• Interest rate (company bond)
• - 29 (Dec.,97) ? 8.7 (Feb.,99)
• Sovereign credit rating
• - Non-investment level ( 98) ? Investment
  level (99)

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FDI Trends in Korea
US million
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Analysis of Recent FDI Trends

()
Others
Japan
EU
USA
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Prospects for the Korean economy

• From 1999 Recover and expand

• Expected GDP growth rate

KDI OECD IMF
1999 1.8 4 4.3 2000
4.9 - 5.6

• Long-Term Prospects
• - Reemerge as a new country upon successful
• completion of structural reforms

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• Advantages of Doing Business in Korea

Dynamic Domestic Market
Strategic Location for Global Business
Widely open business environment
Favorable Business Environment
Cost Saving Economy
Highly Productive , Educated Work Force
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