Korea opens doors wider to attract foreign companies
The deregulation at the eight zones includes allowing foreign companies to hire more foreign employees, increasing the maximum amount of financial transactions allowed without government registration and extending the number of maximum working years for dispatched foreign employees.
The new policies could be implemented as early as the end of this year.
The Ministry of Trade, Industry and Energy on Wednesday unveiled its list of policies, which encompasses various tax breaks and document process simplifications, in line with free trade agreements. The goal is to turn the nation’s free economic zones into East Asia’s business hub with foreign investment of $20 billion.
“Korea has become an even more attractive investment destination for foreign businesses in the past few years, thanks to free trade pacts with the United States and European Union … and with China soon,” said Trade Minister Yoon Sang-jick at a ministerial meeting on the economy held in Seoul on Wednesday. “The government hopes to further bring up the foreign investment to $20 billion by the end of this year.”
According to the Trade Ministry, foreign investment in Korea steadily increased to a record $19 billion last year. The nation’s largest investors were countries and regions in free trade pact relationships, such as the United States, which invested $2.1 billion in the first half of this year, and EU countries, with $1.3 billion during the same period.
Although foreign investments fell sharply at the start of the year compared to the same period a year ago, it has recovered to the same level as last year. In fact, the accumulated foreign investment in the first half of the year was the second largest on record. The largest record investment was recorded in the first six months of 2014.
To further boost investment, the deregulation package will allow foreigners to make up 30 percent of total staff in foreign companies, up from the current limit of 20 percent. The rest of the staff must be Korean citizens.
Foreigners working at medical and pharmaceutical companies with R&D centers, hospitals or universities inside the free economic zones will be allowed a visa for five years, up from three years.
All foreign companies in free economic zones will be able to make payment transactions with their clients of up to $20,000 without registering with the Korean government, an increase from the current $10,000 to every payment transaction.
The requirement of an environment impact assessment for foreign companies to open factories larger than 150,000 square meters (37 acres) at free economic zones has also been lifted. The eased rule is expected to save a processing cost of at least 300 million won ($252,700) per company and shorten processing time by at least a year.
China and Middle Eastern countries, the new emerging large-scale investors, are another reason why the Korean government has pushed deregulation. Chinese companies have steadily raised investment in Korea in expectation for a recently signed Korea-China FTA to go into effect by the end of the year. Foreign direct investment from the Middle East in the first half came as the United Arab Emirates and Saudi Arabia acquired shares of Korean construction companies.
The deregulation package will offer breaks on tax payments for companies with good tax payment records.
The package also allows additional special investment areas for companies that build a logistics center near Incheon International Airport, in a bid to promote foreign companies to invest in logistics and shipping involving e-commerce. It will also shorten the customs process on all registered e-commerce companies that have their center in Korea and sell products to China.
In Korea, there are eight free economic zones: Busan, Incheon, Daegu, Gunsan in North Jeolla, Cheongju in North Jeolla, Dangjin in South Jeolla, Donghae in Gangwon and Gwangyang in South Jeolla.
BY KIM JI-YOON [firstname.lastname@example.org]
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