New Investors
03
Company
Nation
Sector
HANSE KIM
Australia
Food, accommodations
KIM HAN SU
Canada
Paper, lumber
PEOPLES DAILY ONLINE LTD
China
Business service
YANTAI YONGWEN INT’L TRADING CO., LTD
China
Manufacturing
HUIJIE WENHUA CHUANBO YOUXIAN GONSI
China
Wholesale, retail (distribution)
SHANGHAI SHICOH TECHNOLOGY & DEVELOPMENT LIMITED
China
Machinery, equipment
DANONE DAIRY ASIA SAS
France
Food product
TRIPLE FIVE WORLDWIDE DEVELOPMENT COMPANY LIMITED
Hong Kong
Real estate
SBI HONG KONG HOLDINGS CO., LIMITED
Hong Kong
Business service
HYCON HOLDINGS LIMITED
Hong Kong
Chemical engineering
ICARUS TECHNOLOGY INSTITUTE LIMITED
Hong Kong
Manufacturing
YAZAKI CORPORATION
Japan
Electricity, electronics
ASICS CORPORATION
Japan
Textile, fabric, clothing
SMS CO., LTD.
Japan
Business service
KC CARD CO., LTD.
Japan
Financials, insurance
NISSAN SCREW CO., LTD
Japan
Metal
KAWAMOTO ARIMITSU
Japan
Special trade construction
SANWA CINE EQUIPMENT RENTAL CO., LTD
Japan
Wholesale, retail (distribution)
RIKEN TECHNOS CORP.
Japan
Wholesale, retail (distribution)
NAKAGAWA BUSSAN CO LTD
Japan
Transportation, warehouse (logistics)
USTREAM ASIA INC.
Japan
Business service
SKYLARK ASSET HOLDINGS B.V.
Netherlands
Financials, insurance
BOSCH REXROTH PNEUMATICS HOLDING B.V.
Netherlands
Wholesale, retail (distribution)
NEWAYS KOREA PARENT B.V.
Netherlands
Wholesale, retail (distribution)
H.P. VALVES OLDENZAAL B.V.
Netherlands
Electricity, electronics
GROUP SEVEN PRIVATE LIMITED
Singapore
Culture, entertainment
CLOUGH PROJECTS SINGAPORE PTE. LTD.
Singapore
Mining
IBIDEN ASIA HOLDINGS PTE. LTD.
Singapore
Nonmetallic mineral
SEOICHEON (KOREA) PTE. LTD.
Singapore
Real estate
WEINGROW PARTNERS PTE. LTD
Singapore
Real estate
MASTERS TECHRON TAIWAN CO., LTD
Thailand
Electricity, electronics
BNY MELLON ASSET MANAGEMENT INTERNATIONAL LIMITED
UK
Financials, insurance
CARLYLE GROWTH KOREA III, L.L.C.
USA
Chemical engineering
ARMSTRONG GLOBAL HOLDINGS, INC.
USA
Machinery, equipment
WELLS ENERGY CORPORATION
USA
Electricity, electronics
CHOI HANG RAK
USA
Real estate
August 2013
FOREIGN COMPANY NEWS
IK NEWS
Fairchild Korea’s Semiconductor Plant Begins Operations
Friends of Invest KOREA Visit ForeignInvested Companies
Courtesy of Fairchild Korea
02
Fairchild Korea has begun operations in an expanded production line at its Bucheon plant following a construction-completion ceremony last month. The new 8-inch semiconductor line will produce 700,000 wafers annually. Gyeonggi Province and Fairchild signed an agreement in 2010 for the installation of the line. According to Fairchild Semiconductor CEO Mark Thompson, the company saw the need to enhance its production and research and development (R&D) capabilities to meet increasing demand in Asia. The newly expanded production line is expected to create jobs in the area and enable technology transfer. Fairchild Korea, which specializes in TV, LCD and mobile semiconductors, is a major business in Bucheon and has 1,600 employees.
Denso Poongsung Electronics Breaks Ground for New Plant Denso Poongsung Electronics broke ground last month for a new plant in an urban high-tech industrial complex exclusively for Denso. The City of Changwon and Denso Group jointly held the groundbreaking ceremony at the complex, located in Woosan-dong, Changwon-si. Denso Poongsung Electronics will build an electronic auto parts plant and R&D center on 82,803 m2 of land by June of 2014 and hire 500 new employees. More than 400 people attended the groundbreaking ceremony, including Denso Group President Nobuaki Katoh, Denso Poongsung Electronics Representative Director Kim KyungSub, Changwon Mayor Park Wan-su, Gyeongsangnam-do Provincial Council Chairman Kim Ohyoung and local citizens. Kim KyungSub vowed to establish a high-tech plant using Denso Group’s advanced technology and build an eco-friendly plant. He also expressed Denso’s determination to contribute to Korea’s auto industry as a respected and exemplary company.
The Friends of Invest KOREA visited an Air Liquide Korea plant in Dangjin and 3M’s Customer Technical Center in Hwaseong last month as a part of their third workshop. Organized by Invest KOREA, Friends of Invest KOREA is a program through which 34 foreign students from universities and graduate programs serve as ambassadors of Korea. Through visits to foreign-invested companies and various online activities, they promote Korea’s investment environment. The young ambassadors learned about the Korean journey and success of the France-based Air Liquide, a world leader in gases for industry, health and the environment that invested in Korea for the growth potential of its dynamic market. Air Liquide Korea aims to create synergy for R&D, production and technology in Korea, a leader in the semiconductor market. The group then visited 3M Korea’s Customer Technical Center, where they learned about the United States-based 3M’s work as a manufacturer of 55,000 products. 3M collaborated with Korea’s Doosan Group in 1977 to establish 3M Korea, with 3M acquiring all shares in 1996. Last year, 3M Korea recorded total sales of KRW 1.35 trillion (USD 1.2 billion), operating profit of KRW 170.1 billion and exports of KRW 350 billion. With its global sourcing capacity, 3M Korea plans to outsource safety gear and tape for industrial use.
Invest KOREA Hosts Investment Consultation Session for Mobile Content Start-ups Invest KOREA’s Service & Financial Industry Investment Promotion Team hosted an investment consultation session for top Korean mobile content start-ups at the InterContinental Seoul COEX last month. Participants included 45 top Korean mobile game and application start-ups, eight teams awarded at Start-up Battle Korea 2013 and 21 digital content investors from the United States, Europe and Asia, including Tech Coast Angels, the largest angel investment organization in Southern California; Soft-World, Taiwan’s No.1 game and application
August 2013
Monthly News
05 opening of the North Pole Route and lead efforts to relocate the logistics network in the West and South Seas to the East Sea. To be completed by 2023, the FEZ is expected to generate economic benefits worth KRW 20 trillion.
REGIONAL FDI NEWS Gyeonggi Province Draws Investment From Scania
Global M&A Center Holds Korea PE Insight 2013
Gyeonggi Province recently attracted a USD 20 million investment from Scania for the next five years. The leading Swedish truck manufacturer last year signed a contract to move in to the Dongtan Industrial Complex. According to Governor Kim Moon-soo of Gyeonggi Province, the establishment of Scania Korea’s headquarters in the Dongtan Industrial Complex and the building of a new shop there could lead to synergistic effects with vehicle makers including Hyundai, Kia and Volvo. The new facility is expected to create 195 jobs in the province, and Scania’s use of locally made parts is predicted to boost the regional economy.
East Sea FEZ Opens for Business
As part of its foreign investment promotion efforts, the Global M&A Center at the Korea Trade-Investment Promotion Agency (KOTRA), of which Invest KOREA is a part, held Korea PE Insight 2013 in London and New York City in June. The event brought together representatives from Korea’s leading private equity and venture capital firms, giving participants an opportunity to learn about Korea’s private equity industry, meet with fund managers and investors and make connections with industry professionals. Korea PE Insight 2013 featured panel discussions by Korean fund managers who shared strategies and talked about recent issues relevant to the industry. In 1:1 meetings, Korean managers and investors candidly discussed their individual investment strategies and insights. Both events featured networking luncheons as well. Participating firms included Korea’s National Pension Service, Korea Investment Corporation, Aju IB Investment, KTB Private Equity and Q Capital Partners.
August 2013
Courtesy of Amkor Technology Korea
developer; GamePot, a Sony subsidiary; and Gamewave, China’s No. 1 web game maker. A total of 203 consulting sessions were held at the event.
Incheon Welcomes High-Tech Semiconductor R&D Center
Courtesy of Gyeonggi Province
04
The East Sea free economic zone (FEZ) held an opening ceremony last month at its office in Donghae-si, Gangwon Province and officially began operations. More than 300 people attended the opening ceremony, including Governor of Gangwon Province Choi Moon-soon, the Ministry of Trade, Industry and Energy’s Vice Minister for Energy and Industry, Kim Jae-hong, Commissioner of the FEZ Kim Dong-soo and local citizens. “It takes much more effort to successfully operate an FEZ than to obtain designation as an FEZ,” said Choi at the ceremony. “We will utilize all resources to ensure the success of the FEZ and to get the local economy back on track.” Vice Minister Kim said, “The Ministry will foster FEZs as the highest-priority economic zone and one where the widest range of corporate activities is guaranteed. We plan to complete every development project within all FEZs by 2022.” The East Sea FEZ will be in charge of the development of four zones — the Bukpyeong international compound industry zone (advanced materials, logistics business), Mangsang Flora City (tourism), Okgye advanced materials convergence industry zone (new growth driver) and Gujeong zero-carbon city (settlement for foreigners) — that measure a total of 8.25 km2. Also, the FEZ will prepare for the
A large-scale high-tech semiconductor R&D center and manufacturing facility will be established in Songdo International City in Incheon by 2019. Amkor Technology Korea recently held a groundbreaking ceremony for its global R&D Center and K5 Songdo facility that was attended by more than 300 people, including Incheon Free Economic Zone Commissioner Lee Jong Cheol, other government officials and Amkor Technology’s management, including Executive Chairman James J. Kim and President Stephen D. Kelley. Amkor Korea’s global high-tech semiconductor R&D Center and K5 manufacturing facility will be established in the High-tech Industrial Cluster (Zone 5) in Songdo, with a phase 1 investment of KRW 1.5 trillion from U.S. parent company Amkor Technology.
The survey found that the value of Korea’s national brand increased by 4.4 percent as K-pop and other elements of Korean culture entered Europe. The economic value of the Korean Wave on Korean products was calculated at KRW 665.6 billion based on Korea’s exports to Europe, the percentage of consumables in Korea’s exports, an increase in the values of Korean products and effects on Korea’s national brand between 2010 and 2012. The effect of the Korea-EU FTA was calculated based on experts’ answers to the survey. The growth potential of Korean cell phones, cuisine, movies and dramas was found to be high when awareness and preference for Korean appliances, cell phones, automobiles, clothing, music, movies, dramas and cuisine, which are seven main consumables from Korea, were studied. Regarding Korean cell phones, 61.8 percent of the respondents said they recognize the products and 67.8 percent said they prefer them. Preference for Korean cuisine (61.5 percent) was higher than awareness (33 percent), showing large growth potential. Preference for Korean movies and dramas (49.2 percent) was also higher than awareness (24.5 percent).
Korea Sees Trade Surplus in June Korea reached a trade surplus for the 17th consecutive month in June, according to the Korea Customs Service. Exports totaled USD 46.7 billion that month, down 1 percent on-year, while imports dropped 3 percent on-year to USD 40.7 billion, leading to a trade surplus of USD 6 billion. Total trade volume for the first half of 2013 reached USD 533.2 billion, which is 1.1 percent less than it was for the same period last year. Korea’s cumulative trade surplus for the January-June period reached USD 20 billion, marking a significant increase from the USD 10.9 billion from the same period in 2012.
The K5 Songdo facility will be Amkor Korea’s 5th manufacturing facility, following those in Seoul, Bucheon, Incheon (Gyeyang) and Gwangju.
GOVERNMENT & POLICY
The new facility will be completed by the end of 2014 and start production in the first half of 2015.
Foreign Investment Incentives to Focus on Employment Effects
KOREA NEWS Korean Wave Creates Economic Effect of KRW 665.6 BN in 3 Years The economic effect in Europe of the Korean Wave was KRW 665.6 billion and the Korea-EU free trade agreement (FTA) was KRW 392.1 billion, respectively, according to a survey conducted by KOTRA on the Korean Wave. Respondents comprised 249 individuals from the general public and 232 experts in seven European cities, plus 41 Korean entrepreneurs, for a total of 522.
The Korean government will focus on employment effects while drafting a new set of foreign investment incentive improvements within the year. Thus far, employment effects, the introduction of high technology, investment size and more had been granted equal consideration. “The current incentive system for foreign investment was established in the aftermath of the Asian financial crisis, and has since been modified several times,” said a source from the Ministry of Trade, Industry and Energy. “Although the government does not intend to ignore the effects of high technology and investment scale, it will shift the focus to how many good quality jobs a foreign investment can create when granting incentives.”
August 2013
06
The Market
07 Recent Trends of Korea’s Pharmaceutical Industry
Becoming a Pharmaceutical Powerhouse With growing domestic players and a supportive government, Korea’s pharmaceutical industry is poised for more growth and innovation
YOY Growth Average Annual Growth
2007
2008
2009
2010
2011
12,598,208
13,893,810
14,788,387
15,569,588
15,440,251
-0.8
5.2
Exports
946,868
1,255,891
1,772,242
1,770,059
1,943,493
9.8
19.7
Imports
3,410,753
4,319,756
4,953,881
5,108,911
5,447,053
6.6
12.4
Domestic Market Size 15,062,093
16,957,675
17,970,026
18,908,439
18,943,812
0.2
5.9
Output
Source: 2012 Pharmaceutical Industry Fact Sheet, Korea Health Industry Development Institute
K
orea’s Ministry of Health and Welfare last month announced the first five-year plan to support the country’s pharmaceutical industry. Part of the plan is to establish a KRW 500 billion (USD 448.7 million) fund by 2017 to foster not only a global pharmaceutical industry in Korea, but the world’s 7th largest pharmaceutical powerhouse by 2020. The global pharmaceutical market is one of the world’s most rapidly growing markets, standing at USD 942.2 billion as of 2011 and expected to reach USD 1.2 trillion by 2016. It recorded an annual average growth rate of 6.1 percent between 2007 and 2011 despite a global economic downturn. The industry is showing strong performance in emerging markets in particular, including Latin America and Asia. This trend is expected to continue thanks to a rapidly aging society, longer life expectancy and growing interest in healthy living. Considering the fact that Korea’s pharmaceutical market grew 5.9 percent annually on average from 2007 to 2011, accounting for 1.8 percent of the global market at KRW 18.94 trillion, Korea is well on its way to achieving its goal by 2020. Though the growth of Korea’s pharmaceutical market did slow in 2011, with the output of the domestic pharmaceutical industry decreasing slightly from the previous year, average output for the past five years has stood at 5.2 percent. And though the output of finished drugs dropped 0.88 percent compared to the previous year, at KRW 14.11 trillion, that of drug substances rose 0.83 percent, reaching KRW 1.49 trillion. Also, exports of the pharmaceutical industry increased by 9.8 percent in 2011 compared to the previous year, reaching KRW 1.94 trillion. Over the past five years, they have shown a relatively high growth rate of 19.7 percent.
Size / Growth Rate of Global Market
In terms of companies, Korea’s domestic players showed strong growth in 2011 compared to the top 20 global pharmaceutical companies. Looking at the average annual sales growth rate for the past five years, global pharmaceutical companies posted 6.2 percent. However, Korean pharmaceutical companies did better, with 10.1 percent, and KOSDAQ-listed companies performed even better, with 19.1 percent. Korean companies have been showcasing their growth potential in the development of new drugs and orphan drugs. In 2012, 12 new drugs were developed in Korea, and their output reached KRW 82.4 billion, increasing 26 percent compared to the previous year. In addition, the output of new drugs developed more recently is jumping more rapidly, illustrating the huge potential of locally developed drugs. These trends are proven also by the increased number of approvals for new drugs. In 2012, two new drugs were approved, pushing the number of approved new drugs to 19. Remsima, an antibody biosimilar newly developed in Korea, was approved for the first time in the world (Korea: July 2012, Europe: June 2013); and Cartistem, a cell therapy product for degenerative arthritis, and Cupistem, treatment for Crohn’s disease, have been approved as well. Moreover, orphan drugs, namely Hunterase (Hunter syndrome) and Abcertin (Gaucher’s disease), were granted approvals for the first time. This is especially remarkable considering local companies have depended solely on imports for orphan drugs.
LOOKING AT THE AVERAGE ANNUAL SALES GROWTH RATE FOR THE PAST FIVE YEARS, GLOBAL PHARMACEUTICAL COMPANIES POSTED 6.2 PERCENT. HOWEVER, KOREAN PHARMACEUTICAL COMPANIES DID BETTER, WITH 10.1 PERCENT, AND KOSDAQLISTED COMPANIES PERFORMED EVEN BETTER, WITH 19.1 PERCENT.
It is also noteworthy that part of the government’s five-year plan is to increase the overseas exports of new medicine and new products,
which are to serve as a new growth engine. The plan includes the following five core initiatives: To achieve open innovation with enhanced research and development, to integrate pharmaceuticals with finance, to foster specialized talents, to provide strategic export support and to establish advanced infrastructure. With the global pharmaceutical industry expected to be more focused on biologics and more consumer-centered, Korean businesses will be able to take advantage of more opportunities in the future, especially considering their great potential for new and innovative drugs tailored to niche markets. By Moon Hye-seon Associate Research Fellow Growth Engine Industry Research Division Korea Institute for Industrial Economics and Trade
Market Size and Prospects of Pharmaceutical Industry (2011-2016) Spending by Geography
Global Biologics Spending
These developments show that while government policies, including the reduction of drug prices, seem to have had a negative impact on the industry in the short term, they ultimately improve the fundamentals of local companies so they can concentrate on new drug development and raise their global competitiveness. And with the support of the Korean government, technological developments and investment in biosimilars will continue to grow.
Size / Growth Rate of Korean Market
Source: The Global Use of Medicine: Outlook Through 2016, May 2012, IMS
Largest Global Pharmaceutical Companies and Strongest Products (2012) Pharmaceuticals Name Sales
August 2013
Generics
Small-molecule drugs
Biologics
Pfizer - USA
Teva - Israel
Seretide - Asthma treatment
Humira - Arthritis treatment
'12
USD 59 billion
USD 20.3 billion
USD 8.1 billion
USD 9.6 billion
'11
USD 65.2 billion
USD 18.3 billion
USD 8.2 billion
USD 8.2 billion
August 2013
08
Successful Investors
Successful Investors
Opportunities in the Air
Investing in a Business Base
Air Liquide Korea, a provider of gases for industry, health and the environment, has experienced consistent growth
A longtime partner of Korea, Siemens will soon establish the regional headquarters of its Energy Solutions Business in Seoul
H I
n its 17 years, Air Liquide Korea (ALK) has established multiple production plants on 12 sites in Korea. As numbers go, that’s pretty impressive. Then again, considering the founders of Air Liquide invented the air-separation process at the turn of the 20th century, it’s no surprise their successors are still innovating worldwide today. ALK, part of Air Liquide Group, a world leader in the manufacture of industrial gases, was established in Korea in 1996. The France-based Air Liquide was drawn to the growth potential of Korea’s industries and made its first investment in Gumi, to supply products to a local electronics manufacturing company. ALK has since invested in new facilities every year, with its flagship plants being in Dangjin and Yeosu. The company recorded sales of KRW 438 billion (USD 383 million) in 2012. Their largest customers are in the electronics, chemicals and steel markets, three of Korea’s largest and fastest-growing.
Christopher Clark, President and Representative Director of Air Liquide Korea
Through an affiliate called Vitalaire Korea, Air Liquide also provides respiratory care products and services to more than 3,000 patients in the home healthcare market. This service is particularly important considering Korea’s rapidly aging population.
for the electronics market. New production facilities are also slated for startup in 2013. At its Dangjin plant, ALK supplies gaseous products to an adjacent major steel company customer and also makes liquid oxygen, liquid nitrogen and liquid argon. These liquid gases are distributed to customers ranging from the medical and pharmaceutical to construction industries.
“If you can think of an industry in Korea or anywhere globally, chances are you’re going to find at least one of our products is used to support those industries,” said Christopher Clark, President and Representative Director of ALK. “So there are very diverse applications for our products.”
At its Yeosu facility, ALK makes and supplies hydrogen, carbon monoxide and steam for various industries in a local industrial complex. The company constructed pipelines for these gases that run throughout the Yeosu basin.
In the last couple years, ALK has seen significant new developments. The company last year opened its first research facility in Korea. Located on the Yonsei University campus, the center will focus on the development of advanced precursors (innovative molecules used in the manufacture of semiconductors)
“The fact is, the products that we make, with few exceptions, really don’t travel very far. We can’t make our products let’s say, in China, and ship them to Korea for steel or petrochemical companies to use. We generally have to build the plant near the customer site,” said Clark.
August 2013
Major customers for ALK include BASF Korea, KPX Fine Chemical, Samsung, SK Hynix, LG Chem, GS Caltex, Kumho Mitsui Chemicals, Dongbu Steel and YK Steel.
By providing a reliable supply of gases and diverse services, ALK has helped customers enhance their competitiveness in the global market, said the president. Of course, the company has also helped create jobs in Korea, especially for engineers. “We still see a lot of dynamic growth in Korea, and we’re very pleased to be able to help our customers in Korea develop, because when our customers grow, we expand with them,” said Clark. By Young Chang young.chang@kotra.or.kr
Did you know? - Air Liquide Korea has factories in 12 cities: Bucheon, Icheon, Cheonan, Dangjin, Sangju, Gimcheon, Gumi, Busan, Gunsan, Iksan, Jeonju and Yeosu. - Air Liquide Group posted €15.3 billion (USD 19.7 billion) in revenue in 2012. - Air Liquide Group has 50,000 employees in 80 countries.
ome to 40 regional headquarters and 150 research and development (R&D) centers of top foreigninvested companies, Korea is a lucrative business hub for Asia and beyond. In May, Siemens became the latest company to establish a regional headquarters for one of its major business units in Korea, proving once again, in the words of Siemens Ltd. Seoul Chairman and CEO Kim Jong Kap, that “Korea can do it.”
Kim Jong Kap, Chairman and CEO of Siemens Ltd. Seoul
The decision to establish the regional headquarters in Korea comes in the year of the 130th anniversary of diplomatic ties between Korea and Germany. The goal of Siemens Seoul is to continue to partner with Korean businesses both domestically and abroad. With programs like Siemens Seoul’s Northeast Asia Business Integrity School, in which Siemens Seoul introduces its compliance practices to Korean companies, collaborations also extend beyond business projects.
Indeed, since the 1950s, when Siemens participated in reconstruction projects here after the Korean War, the Korea operations of the Germany-based Siemens has shown it is one of the electrical engineering and electronics powerhouse's most important markets. Last year, Siemens Ltd. Seoul ranked 7th in terms of new international business orders among Siemens’ 193 global operations and recorded KRW 1.6 trillion (USD 1.4 billion) in revenue. Having invested a total of USD 200 million in Korea, Siemens has continuously increased its presence in the country and has 18 facilities nationwide today. Its greatest milestone to date is the pending establishment of the regional headquarters of Siemens’ Energy Solutions Business in Korea. Scheduled to open in October in Siemens Seoul’s Seodaemun location, the regional headquarters will be responsible for providing comprehensive solutions for the supply of power plants, including complete turnkey solutions, throughout Asia and the Middle East. Siemens Ltd. Seoul provides state-of-the art products, solutions and services in the areas of industry, infrastructure & cities, healthcare and energy, the largest area in Korea. The company offers a wide variety of products, solutions and services for the energy sector, enabling customers to generate, transmit and distribute electrical power and to produce, convert and transport oil and gas. The Energy Solutions Business’ Asia headquarters, which is Siemens’ second regional headquarters, the first being in the United
from Korean suppliers, and we will continue to work very closely with other Korean partners,” said Kim, adding that the company, which has maintained double digit growth in recent years, purchases about KRW 2.5 trillion annually in Korean-made goods and services.
Looking ahead, the chairman says Korea may draw more regional headquarters of Siemens’ business units in the future.
States, is expected to create more than 500 jobs by 2017 and to draw the eco-friendly power plant design knowhow of experts from Germany and elsewhere. The business is expected to have considerable ripple effects on domestic manufacturing, design and construction companies in terms of job creation and revenue generation. “We are becoming more important for our headquarters,” said Kim. Korea was chosen to host the regional headquarters for its expansive free trade agreement network, which includes trade pacts with the United States and European Union; excellent human resources, including the 60,000 new engineers who come out of Korea annually; commitment to R&D, which Siemens was drawn to, having invested 5.4 percent of its total revenue in R&D in fiscal year 2012; policies by the Park Geun-hye administration that aim to improve the business environment; and collaborations with Korean engineering, procurement and construction companies. “I think we are going to purchase more
“I think Siemens Korea will continue to become an important location for Siemens’ operations worldwide,” said Kim. By Young Chang young.chang@kotra.or.kr
Did you know? - Kim Jong Kap, Chairman and CEO of Siemens Ltd. Seoul, is Chairman of the Global Investment Forum, sponsored by the Ministry of Trade, Industry and Energy, and a member of the Special Committee on Creative Economy of the Federation of Korean Industry. - The Siemens Environmental Portfolio, which consists of energy-efficient products and systems, enabled customers to cut their CO2 emissions by 332 million tons in 2012. - Siemens was established in 1847, when founder Werner von Siemens invented the pointer telegraph to allow longdistance message delivery.
August 2013
09
10
Ombudsman’s Office
Laws & Taxes
Championing an Ombudsman System Worldwide Russia recently celebrated the 1-year anniversary of its ombudsman system, which benchmarks Korea’s
Preventing Bribery of Foreign Public Officials in Korea: China Eastern Airlines Case
Courtesy of International Economic Forum
I K
orea’s Foreign Investment Ombudsman system has drawn global attention as a benchmarking target. UNCTAD-WAIPA presented the WAIPA Award to KOTRA in 2007 for excellence in providing post-investment care services through the ombudsman system. Officials from countries around the world have visited Invest KOREA to learn about it. Among them has been Russia.
In 2009, a benchmarking delegation of representatives from 11 countries and led by a Russian representative visited Korea for a week to learn about our Foreign Investment Ombudsman and Home Doctor mechanism mainly through grievance resolution cases. In June of 2012, benchmarking Korea’s ombudsman system, the president of Russia appointed the first Commissioner for Entrepreneurs’ Rights Protection, a supporter of both domestic and foreign companies operating in Russia. In June, Russia hosted the International Economic Forum in Saint Petersburg, which included a roundtable meeting themed “Commissioner for Entrepreneurs’ Rights Protection — Results of the First Year” to celebrate the first anniversary of the system’s introduction. Russia, the chair of the upcoming 2013 G-20 Summit, held the forum as a sideline event to the G-20. Dr. Ahn Choong Yong, the Foreign Investment Ombudsman of Korea, was the only foreign participant invited to the meeting by the Russian government.
August 2013
Dr. Ahn attended a panel discussion to present on investors’ rights protection and on Korea’s grievance resolution body and its activities. The roundtable was moderated by Mr. Dimitry Afanasiev, Co-Founder and Chairman of Egorov Puginsky Afanasiev & Partners, and participated in by many highlevel Russian officials including Mr. Boris Titov, Presidential Commissioner on the Entrepreneur’s Rights, and Mr. Igor Zubov, Deputy Minister of Internal Affairs of the Russian Federation. Dr. Ahn was the only foreign attendee to deliver on overseas cases.
Protection, where they agreed on the need to form a private-level investment consultative forum between Korea and Russia, an idea that had been informally suggested by the Korean government. The Russian Commissioner acknowledged that he should continuously promote mutual cooperation and exchange with the ombudsman of Korea, as Korea’s case will serve as a stimulus for the Russian government to pursue more business-friendly policies. The meeting concluded with Russia’s promise to propose a cooperative initiative with Korea in the near future.
Introducing Korea’s Foreign Investment Ombudsman system, Dr. Ahn said that the Foreign Investment Ombudsman must think and act from foreign investors’ point of view in line with global best practices and do his/her best to continuously improve transparency in terms of investment conditions and incentives. He also introduced the Home Doctor system and the investment aftercare activities that have proven highly effective in preventing investor-state disputes, which occur frequently when making cross-border investments. He emphasized the need to build formal and informal dialogue channels with foreign-invested companies to identify their grievances and provide meaningful support. Dr. Ahn also addressed why grievances continue to be raised by foreign businesses despite such aftercare efforts.
Recently, the Russian government has been implementing special policies to facilitate domestic and foreign corporate investments, pushing ahead with various initiatives to encourage entrepreneurship, and carrying out large-scale projects to build infrastructure such as railroads to boost the economy. In order to induce foreign direct investment, the Russian government has designated special and free economic zones.
After the presentation, the ombudsman held a separate luncheon meeting with the Russian Commissioner for Entrepreneurs’ Rights
By Ahn Choong Yong, Ph.D. Foreign Investment Ombudsman Distinguished Professor, Chung-Ang University
Dr. Ahn stressed that the ombudsman’s role is to be a candid and trustworthy dialogue partner of foreign investors, one who listens to them from their perspective, works to resolve their grievances and improve the business environment in the process. He expressed his wish for the ombudsman system to take root in Russia and succeed as it has in Korea.
n February 2013, the Seoul High Court affirmed the lower court’s decision, finding two individuals who had bribed the CEO of the Korean subsidiary of China Eastern Airlines (the “Company”) not guilty in Korea’s first-ever trial under the Act on Preventing Bribery of Foreign Public Officials in International Business Transactions (FBPA). This case is noteworthy for addressing the scope of “foreign public official” for purposes of the FBPA. Article 2 of the FBPA defines “foreign public official” similarly with the OECD Convention on Bribery, encompassing not only government officials but also individuals performing a public function such as employees of government-controlled companies or state-owned enterprises. Specifically, the FBPA defines “foreign public official” to include:
[A]n executive or employee of a company in which a foreign government contributed more than 50% of the paid-in-capital or with respect to which a foreign government exercises de facto control over its overall management including major business decisions and the appointment or dismissal of its executives (however, this sub-paragraph shall not be applicable if a company conducts business on a competitive basis with other private-sector companies without receiving preferential subsidies or other benefits from the government).
whether Haiti’s national telecommunications company (H-Telco), which received illegal payments from a U.S. company, was a “government instrumentality” under the FCPA, the trial court instructed jurors to consider the following factors, among others: 1. Whether H-Telco’s key officers and directors are government officials or are appointed by government officials; and Chinese government exercises de facto control over the Company on the grounds that (i) a company wholly owned by the Chinese government owns more than 50 percent of the Company’s capital and (ii) the Chinese government appoints and dismisses the CEO of the Company. The prosecution also presented facts to show that the Company does not conduct business on a competitive basis with private-sector companies. Notwithstanding the above, the appellate court affirmed the lower court’s holding without providing any additional reasoning on the issue. This case reveals an interesting parallel between the FBPA and the United States’ Foreign Corrupt Practices Act (FCPA), which defines “foreign official” to include, inter alia, “any officer or employee of a foreign government or any department, agency, or instrumentality thereof ...”
The lower court found that even though there is some evidence to show that the CEO would fall within the definition of a “foreign public official” under the FBPA, the evidence presented did not meet the burden of proof.
The FCPA does not define “instrumentalit [ies]” of a foreign government. Specifically, uncertainty remains as to the exact percentage of government ownership or voting rights required for state-owned/controlled enterprises to constitute an instrumentality within the meaning of the FCPA.
On appeal, the prosecution sought to prove that the CEO is a foreign public official for purposes of the FBPA by arguing that the
With regard to this issue, United States v. Esquenazi, a recent FCPA case currently on appeal, sheds some light. In determining
2. The extent of Haiti’s ownership of HTelco, including whether the government owns a majority of the company’s shares or provides financial support, including subsidies and tax breaks. As seen from above, the exact definition and scope of foreign public official is yet to be delineated in both countries. Needless to say, the standards should be clarified so that companies that engage in business transactions with foreign counterparties can do so without fear of prosecution. In the case of Korea, it should be noted that the courts in the China Eastern Airlines case ruled against the prosecution not because the CEO does not constitute a “foreign public official” but because the prosecution had not met its evidentiary burden of proof. Furthermore, as the courts acknowledged that “there is some evidence that the Company might be an enterprise within the meaning of the FBPA,” it remains to be seen how the Supreme Court of Korea will decide on this issue. Taek Rim (Terry) Oh, Shin & Kim, troh@shinkim.com Myong-Hyon (Brandon) Ryu, Shin & Kim, mhryu@shinkim.com Seungmin Lee, Shin & Kim, smilee@shinkim.com Suh-Young (Claire) Shin, Shin & Kim, syoshin@shinkim.com
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Meet the Teams
FDI Q&A
Social Insurance, Retirement Allowance & Statutory Holidays
An Introduction to the Investment Administration Team
Q. What are the types of social insurance an employer must provide employees? A. A company employing more than one employee should offer national pension, health insurance, employment insurance and industrial accident compensation insurance.
I
nvest KOREA’s Investment Administration Team is where the administrative and planning-related heavy lifting happens.
The two main goals of the team are to devise foreign direct investment (FDI) strategies and to govern general Invest KOREA affairs. This means they are responsible for Invest KOREA’s annual plan, the budget, human resources and everything else required to run the organization. And that’s only one component of their work. The team is also responsible for the annual Foreign Investment Week (FIW), one of KOTRA and Invest KOREA’s largest annual events. Last year it attracted about 355 investors, which resulted in investment notification of over USD 800 million. The event included industrial seminars covering green energy, the parts and materials industry, regional development projects, etc. and one-on-one business meetings where investors were able to meet with local Korean companies and business partners. Last year, the Private Equity and Venture Capital Forum was held during FIW and the two events will be held in conjunction this year as well. The team is currently in the planning stage for the 9th annual FIW, to be held Oct. 29-31 in Seoul.
Of course, on a more everyday level, this is the team you want to contact if you are an investor or from a government or organization needing information on FDI in Korea. The staff is ready to serve as a liaison for your business needs. By Noh Chul cnoh@kotra.or.kr
Noh Chul is the Director General of the Investment Administration Team. He has worked at KOTRA’s Korea Business Centers worldwide, including in the United States (1991-1994, 20042006) and Egypt (2010-2013).
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for every year of consecutive service. As there is no limit on the qualifying reasons for retirement, the retirement pay shall be given in any case when the employment contract is terminated due to the employee’s resignation or death, arrival of the retirement age or the company’s extinction.
Additional information * Retirement benefit scheme With the introduction of the retirement benefit scheme on Dec. 1, 2005, all employers are required to adopt either retirement annuity6 or a lump-sum
retirement benefit. If any employer intends to decide on a type of retirement benefit scheme, the employer shall, if a majority trade union exists at the business concerned, obtain the consent of the union, and if no such trade union exists, obtain the consent of a majority of workers.
Q. What are the statutory holidays for employees? A. Under the Labor Standards Act, the statutory holidays are weekly holidays and Labor Day (May 1). Additional information * Weekly holidays An employer shall grant a weekly holiday with pay at least once a week on average, provided that the employee concerned has worked all of the contractual working days (as determined in the rules of employment, etc.) for the preceding week. An employee who has worked on a weekly holiday shall be paid an additional 50 percent of the ordinary wage rate for the hours worked.
Another service the team provides is the Red Carpet Service for foreign investors. The service focuses on “star” projects, which are considered tangible within six months to one year. Last year, 32 projects were selected by the project evaluation committee for the service. Since 2011, the investment notification has been USD 160 million from projects selected to be recipients of the Red Carpet Service.
With the relatively new Park Geun-hye administration in office, the Investment Administration Team aims to focus on the government’s plans and policies. Job creation and the development of local governments using FDI are two important areas of focus this year.
wage3 X 1.1% (Employer’s contribution: 0.55%). The employer shall make additional contributions for employment security and vocational skill development programs, with an insurance premium rate of 0.25% for businesses employing less than 150 employees4. * Industrial accident compensation insurance: Average monthly wage X 0.006 - 0.34 (contribution rate differs by business sector)
Q. Should an employer pay retirement allowance to a retiring employee? A. An employer should provide a retiring employee with 30 days’ average wage
While the largest event of the year, it isn’t the only one the Investment Administration Team is responsible for. The team also hosts and participates in various events, expositions and seminars designed to promote the investment promotion activities of local governments. The team provides Korea’s 25 local governments with information regarding investors. They set up investment missions, send project management professionals and evaluate local governments’ investment promotion activities. In addition, they hold an IK Local Government Workshop each quarter designed to update local governments on the investment situation at home and overseas, following up on investment projects and providing advice as well as assistance.
All of the activities, projects, events and tasks listed above are conducted by half of the Investment Administration Team. The other half of the team works at Invest Korea Plaza (IKP). These team members focus on managing IKP and supporting the tenants.
Additional information The employer should make monthly contributions to the four types of insurance as follows. Employees’ contributions shall be deducted from their wages. * National pension: Standard monthly income1 X 9% (Employer’s contribution: 4.5%) * Health insurance: Monthly wage2 X 5.89% (Employer’s contribution: 2.945%) * Employment insurance: Average monthly
* Contractual holidays Contractual holidays refer to holidays other than the statutory holidays provided by the employer specified in a collective agreement or rules of employment. Examples are company foundation day or public holidays. Whether the additional holidays will be paid or unpaid will be determined by an agreement between the employer and employees.
By Sunny Lee, Executive Consultant amorfati@kotra.or.kr +82-2-3497-1740
Contact the Investment Administration Team Mr. Chang-Yun Han / Director hancy@kotra.or.kr / +82-2-3460-7515 Mr. Jun-Sung Kim / Deputy Director kimjunsung@kotra.or.kr / +82-2-3460-7538
Sunny Lee is a labor consultant at the Investment Consulting Center, part of the one-stop service offered foreign investors by Invest KOREA. 1 Standard monthly income: [monthly wage X 12 months/365 days (366 days) X 30 days] 2 Monthly wage: Earned income that is taxable under the Income Tax Act 3 An individual employee’s average monthly wage for a taxable year is calculated based on the aggregate wage of the previous year. 4 Premium rate for employment security and vocational skill development programs: 0.25% for businesses with less than 150 employees; 0.65% for businesses with 150 - 999 employees; 0.85% for businesses with 1,000 employees or more 5 Average wage: The amount calculated by dividing the total amount of wage paid to a relevant worker during three months immediately before the day on which a cause for calculating his/her average wage occurred by the total number of days during those three months 6 Under the retirement annuity scheme, retirement allowance funds are managed by a financial company and retirement benefits are paid either in installments or lump-sum at the time of retirement.
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Invest Here
Economic Indicators
North Jeolla Province: A Business Hub of Asia
I
n the southwestern part of the Korean peninsula, North Jeolla Province is located in such a way that you can reach any part of the country from it in just half a day. It is also home to Gunsan Port, which is geographically nearest Qingdao Port in China.
With the Saemangeum reclamation project, which aims to secure 40,100ha of new land, North Jeolla Province is poised to lead Korea’s industries in the near future. The area offers attractive incentives for foreign-invested companies, low industrial costs and wages and a healthy labor-management culture that contributes to the growth of enterprises. The province also boasts advanced traffic infrastructure and excellent research and development infrastructure. In short, with our population of 2 million people, breathtaking landscapes and wonderful flavors, North Jeolla Province offers an ideal living and business environment. Here are some of our highlights:
123
In 2012, we attracted 123 new companies, and our business environment is constantly improving.
4.7%
We are the Korean province with the nation’s third-highest real growth rate, at 4.7 percent.
GDP Nominal (USD million) PPP (USD million) GDP Growth Rate (Y-o-Y) (%)
2008
2009
2010
2011
2012
930,900
834,400
1,014,700
1,114,700
1,129,200
1,306,387
1,312,165
1,413,760
1,482,726
1,540,151
2.3
0.3
6.3
3.7
2.0
Source: The Bank of Korea, May 2013
60
(Unit: USD)
2008
2009
2010
2011
Nominal
19,028
16,958
20,540
22,424
PPP
27,513
27,709
29,717
31,220
GDP Per Capita
From North Jeolla Province, you can reach 60 cities with a population of over 2 million within a 2-hour flight.
Source: International Monetary Fund, April 2013
4
(Unit: USD million)
Foreign Trade
We have four industrial complexes for foreigners. - Saemangeum Industrial Complex - Gimje Free Trade Zone - Iksan Industrial Complex - Wanju Techno Valley Industrial Complex Investment Promotion Division #225, Hyoja-ro, Wansan-Gu, Jeonju-Si, Jeollabuk-Do, 560-761 Republic of Korea Tel: +82-63-280-2753 Fax: +82-63-280-2759 Email: purecare777@korea.kr
2008
2009
2010
2011
2012
June 2013
Exports
422,007
363,533
466,384
555,214
547,870
46,710
Imports
435,275
323,085
425,212
524,413
519,584
40,716
Trade Balance
-13,267
40,449
41,172
30,801
28,286
5,994
2008
2009
2010
2011
2012
June 2013
1,102.6
1,276.4
1,156.3
1,108.1
1,126.9
1,135.2
2008
2009
2010
2011
2012
May 2013
3,197.5
32,790.5
29,393.5
26,068.2
43,138.5
8,638.8
(Unit: KRW)
KRW-USD Foreign Exchange Rate
(Unit: USD million)
Balance of Current Account
(Unit: USD million)
Foreign Exchange Reserves
2008
2009
2010
2011
2012
June 2013
201,223
269,995
291,571
306,402
326,968
326,440 (Unit: USD million)
Gross External Debt
2008
2009
2010
2011
2012
317,370
345,677
359,757
398,724
413,573 (Unit: %)
34%
Unemployment Rate
The Asia-Pacific region holds a 34 percent share of global logistics.
2008
2009
2010
2011
2012
May 2013
3.2
3.6
3.7
3.4
3.2
3.0
2008
2009
2010
2011
2012
June 2013
94.5
97.1
100.0
104.0
106.3
107.2
(Scale: Year 2010 = 100)
Consumer Price Index Source: The Bank of Korea
Korea by the Numbers
120
August 2013
With the opening last month of the Korea Business Center in Ulaanbaatar, Mongolia, KOTRA now has 120 overseas branches.
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